The country is divided when different people take different sides in a debate. The country is really divided when different people are having entirely different debates. That’s what’s happening on economic policy.

Many people on the left are having a one-sided debate about how to deal with a cyclical downturn. The main argument you hear from these cyclicalists is that the economy is operating well below capacity. To get it moving at full speed, the government should borrow and spend more. The federal government is now running deficits of about $1 trillion a year. Some of these cyclicalists believe the deficit should be about $1.4 trillion.

The cyclicalists rail against what they see as American austerity-mongers who resist new borrowing. They really rail against the European ones. They see François Hollande’s victory in France as a sign that, in Europe at least, the pendulum might finally be swinging from austerity to growth.

Other people — some on the left but mostly in the center and on the right — look at the cyclicalists and shrug. It’s not that they are necessarily wrong to bash excessive austerity. They’re simply failing to address the core issues.

The diverse people in this camp — and I’m one of them — believe the core problems are structural, not cyclical. The recession grew out of and exposed long-term flaws in the economy. Fixing these structural problems should be the order of the day, not papering over them with more debt.

There are several overlapping structural problems. First, there are those surrounding globalization and technological change. Hyperefficient globalized companies need fewer workers. As a result, unemployment rises, superstar salaries surge while lower-skilled wages stagnate, the middle gets hollowed out and inequality grows.

Then there are the structural issues surrounding the decline in human capital. The United States, once the world’s educational leader, is falling back in the pack. Unemployment is high, but companies still have trouble finding skilled workers.

Then there is political sclerosis. Over the decades, companies and other entities have implanted a growing number of special-interest deals into the tax and regulatory codes, making it harder for politically unconnected, new competitors, making the economy less dynamic.

These and other structural problems have retarded growth and wages for decades. Consumers tried to compensate by borrowing more. Politicians tried to compensate by reducing the tax bill, increasing deficit spending, ensuring easy credit for homebuyers and by helping workers shift out of the hypercompetitive, globalized part of the economy and into the less productive and more sheltered parts of the economy — mostly into health care, government and education.

But you can only mask structural problems for so long. The whole thing has gone kablooey. The current model, in which we try to compensate for structural economic weakness with tax cuts and an unsustainable welfare state, simply cannot last. The old model is broken. The jig is up.

Unlike the cyclicalists, we structuralists do not believe that the level of government spending is the main factor in determining how fast an economy grows. If that were true, then Greece, Britain and France would have the best economies on earth. (The so-called European austerity is partly mythical.) We believe that the creativity, skill and productivity of the work force matter most, and the openness of the system they inhabit.

Running up huge deficits without fixing the underlying structure will not restore growth. As Raghuram Rajan of the University of Chicago writes in the current issue of Foreign Affairs, “Since the growth before the crisis was distorted in fundamental ways, it is hard to imagine that governments could restore demand quickly — or that doing so would be enough to get the global economy back on track. The status quo ante is not a good place to return to because bloated finance, residential construction and government sectors need to shrink, and workers need to move to more productive work.”

Structuralists face a tension: How much should you reduce the pain the unemployed are feeling now, and how much should you devote your resources to long-term reform? There has to be balance. For my taste, the Germans are a bit too willing to impose short-term pain on the diverse national economies in Europe. But they are absolutely right to insist on the sort of structural reforms they themselves passed in the 1990s.

In the United States, there are almost no politicians willing to embrace the cyclicalist agenda, which would mean much larger deficits. Structuralists don’t have a perfect champion either. President Obama is too minimalist. He doesn’t seem to believe America’s structural problems are that big, making his reform ideas small. Mitt Romney and Representative Paul Ryan understand the size of the structural problems, but their reform plans are constrained by the Republican Party’s single-minded devotion to tax cuts.

Make no mistake, the old economic and welfare state model is unsustainable. The cyclicalists want to preserve the status quo, but structural change is coming.

< http://www.nytimes.com/2012/05/08/opinion/brooks-the-structural-revolution.html >

This is time of great ferment in the non-profit sector. Every week or so a new organization pops up that stretches the boundaries of charity, blends altruism with entrepreneurship or shows that community work can be self-financing.

Toronto is the hotbed of this activity. To those in the vanguard, it is exciting and creative. To those steeped in the tradition of selfless giving, it is unsettling, even threatening. To the rest of the population, it’s a blur.

The social enterprise movement wants to have a voice in the development of the city. It wants to put progressive ideas back on the agenda. And it wants to show political and business leaders that innovation isn’t confined to laboratories, universities and high-tech companies.

To highlight what’s happening and talk about what is possible, the Centre for Social Innovation — the nucleus of the city’s social enterprise culture — is hosting a brainstorming session this month. It will bring together the leaders of the movement — its own executive director, Tonya Surman; Tim Draimin of Social Innovation Generation; Anne Jamieson of the Toronto Enterprise Fund; Assaf Weisz of Venture Deli, and a delegation from a national group called Start-Up Canada — to “create a loud voice for social ventures in Canada’s entrepreneurial landscape.”

Unfortunately, the May 14 event is sold out. All the tickets were snapped up — mostly by insiders — within 12 hours of the announcement.

And there’s really nowhere else for those outside the tent to go for information. The proponents of social enterprise speak in abstruse language. (Here is an example: “Social innovation generation is about intentional exploration of the social innovation dynamic and the possibilities inherent in a deeply generative collaboration with the commitment to action outcomes.”) There are no clear guidebooks or user-friendly websites.

For Torontonians who want to understand what’s going on and why it matters, here is a journalist’s simple primer:

Social enterprises are business-charity hybrids. They aim to do well in the marketplace in order to do good in the community.

The concept is not new. Long before anyone was theorizing about it, Maritimers were doing it. Dairy famers built co-op creameries to cut their costs and stabilize their communities. Fruit growers organized co-operatives to break the grip of exploitative middlemen. Townsfolk pooled their earnings to set up co-op stores. These grassroots initiatives were one of the best anti-poverty programs ever conceived.

In the 1920s, a group of visionary priests at St. Francis Xavier University added adult education to the mix, travelling from village to village teaching people crop management and literacy. Over the next 30 years, the Antigonish movement spread from Nova Scotia to New Brunswick and Prince Edward Island, then moved westward, incorporating the ideas of Quebec’s caisses populaires. In the ’60s, it petered out.

Today’s social enterprise movement is a digital, secular, urban renaissance of that tradition.

It is hard to pinpoint when it began, but the founding of Toronto’s Centre for Social Innovation (CSI) is as good a date as any. In 2004, architect and community activist Margie Zeidler took a 91-year-old plumbing equipment warehouse on Spadina Ave. and transformed it into a headquarters for 85 social fledgling social enterprises. (Two more followed; a CSI annex on Bathurst St. and a third site at Regent Park.)

Although today’s social entrepreneurs follow the same principles as the co-ops and credit unions of yesteryear, they operate differently — in a very different landscape.

• Now, unlike then, governments have primary responsibility for social and economic development. They pay non-profit organizations — there are 160,000 of them employing two million people — to deliver their programs. This has insulated these organizations from the grubby economics of the marketplace, leading many of their leaders to believe they are above that.

• Now, unlike then, social enterprises are hidden and often misunderstood. They talk among themselves and make room in the movement for other progressive people who want to turn their ideas into business, but they don’t reach out to the rest of the population.

• Now, unlike then, there is no crusader like Father Moses Coady of the Antigonish movement to spread the message and cut through “the pessimism that has so benumbed everyone that nothing has been attempted to break the spell.”

His modern-day heirs might have the right formula. But they need an articulate leader who can explain social entrepreneurship to Canadians and give them a stake in its success.

< http://www.thestar.com/opinion/editorialopinion/article/1171357–toronto-incubates-new-brand-of-business-charity-hybrids >

If you’re a smart kid who wants to work hard and do well, one path to success has always been clear. You went to university, then chose a high-status profession and got your ticket punched. Law and medicine were tops. Six-figure incomes, nice houses and private ski clubs were all but guaranteed. If you were less bookish but had good sales skills, you could go into real estate, rack up huge commissions in a booming market and buy yourself a shiny BMW in no time.

Those days are over. The Great Reset has hit the professional classes too. Young professionals are facing a painful double squeeze. The cost of a degree has gone way up, and the economic benefit it confers has gone way down. Think twice before you encourage your daughter to go to law or med school, especially if she’ll have to borrow heavily to do it. On top of that, these young professionals are starting their working lives later than ever before. By the time they are credentialed and hit the work force, they’re in their early 30s.

“There’s a real disconnect between the perception and the reality,” says one senior lawyer. “You have to be pretty creative when you’re thinking of law as a career choice.” Translation: If you think you’re going to land a $100,000 starting job on Bay Street, you’d better have Plan B. It’s more realistic to aim for association or government work – where salaries are a lot lower. (By the way, you’ll have to do your articling in Sudbury.) And even if you start out in the big time, the ladder to partnership is being pulled up. These days, it can take 10 years to become an equity partner in a major firm – if you make it. Most don’t.

Meantime, law-school tuitions have soared (the University of Toronto charges $25,000) and the competition to get in is ferocious. Three years of undergraduate work doesn’t cut it any more. Today, you’d better have an advanced degree (or two) if you want to get into a top school. All this adds up to more time in school and more debt. By the time your daughter is called to the bar, she may have $80,000 or more in debt, with income prospects that are far lower than she expected.

In the United States, where law schools are churning out two graduates for every job, the law-school bubble has become a dramatic bust. The situation is better here, but the big trends are the same. In Ontario, hundreds of articling students can’t find spots. Top earners at top firms are making more than ever, but everybody else is treading water. More and more lawyers are being treated as commodity service providers, and they’re being squeezed for volume discounts. Some are already being forced to compete with legal outsourcing firms (India does it cheaper) and computer technology, which can now perform sophisticated document searches more efficiently than human beings.

You’d think medicine would be better. After all, we can’t outsource brain surgery. And the demand for medicine – unlike the demand for legal services – is booming.

But young doctors face the same squeeze as young lawyers. Like law school, medical school is so competitive that today’s students need advanced training and graduate degrees in order to get in. By the time they qualify as doctors, they’re well into their 30s, with $180,000 in debt. And the expectations of medical students are also disconnected from reality.

The trouble is that doctors have just one big client – government – whose ability and willingness to pay is shrinking fast. The booming consumer demand for medicine doesn’t necessarily translate into jobs. Even though hospitals need extra surgeons, they aren’t hiring them because they can’t afford to expand operating-room time. Of all the general surgeons who finished medical school at the University of Toronto in the past two years, only 15 per cent have found work. The rest are pursuing further training, in hopes that something will eventually open up.

Yet in spite of all this higher training, doctors’ incomes, too, are heading down. Ontario has just announced a freeze on total funding for doctors, which means that new doctors will have to share the pot with existing ones. The Ontario Medical Association figures that over the next four years, the freeze will mean a total pay cut of 16 per cent. Another problem with the job market is that older doctors – like older lawyers – aren’t retiring. Their retirement savings have been hammered. They can’t afford to.

Oh well. There’s always real estate – isn’t there? Don’t count on it. The residential real estate cartel is long overdue for breakup. One of these days, real estate agents will go the way of travel agents and full-service brokers. The only reason they’ve been able to suck such high commissions from the pockets of consumers for so long is their ability to control access to the MLS. That has finally begun to change. Now Power Corp. has bought up a bunch of do-it-yourself real estate services and folded them together into an outfit called ComFree, whose clients can list their houses on MLS. ComFree is barely on the radar screen in most of the country. But it has captured a third of the market in Quebec City.

Old-line real estate agents should enjoy their Beemers while they can. And students who are thinking of becoming doctors or lawyers shouldn’t count on driving one. The professional classes can’t escape the gales of change that are ripping through society. They’ll adapt. But they’ll never be so comfortable again.

< http://www.theglobeandmail.com/news/opinions/margaret-wente/the-professional-class-bubble-is-bursting/article2416390/ >

They’re just whispers in the wind, but they’re getting louder and more frequent.

In the beginning, a few isolated voices — left-wing economists, academics, social activists, labour organizers, church leaders and corporate renegades — warned that Canada was becoming a highly inequitable nation.

They wrote earnest policy papers, produced credible statistics and occasionally attracted media attention. But they were ignored, dismissed or ridiculed in the corridors of power.

The volume went up a couple of notches last fall when thousands of young people took to the streets chanting: “We are the 99 per cent.” With one simple slogan, the protesters crystallized the issue: The top 1 per cent of the population was skimming off most of the economy’s gains, leaving everybody else to scramble for the remains.

The Occupy Movement got the nation — including a few corporate executives and public figures — talking about inequality. It convinced Canadians that something was wrong.

But it had no solutions — not even any suggestions — to offer. Gradually it petered out.

There was another flurry of interest in early April when theBroadbent Institute, an Ottawa think-tank devoted to creating a more equal society, released a poll showing 64 per cent of Canadians were willing to pay higher taxes to preserve social programs and reduce poverty.

But the source — a research body created by New Democratic Party — caused many observers, even those sympathetic to the cause, to question the poll’s credibility.

Last week brought two developments that couldn’t be shrugged off or attributed to left-wing agitation.

The first was a shareholders’ revolt at one of Wall Street’s biggest banks. To the surprise — and dread — of corporate America, shareholders rejected the pay package awarded toVikram Pandit, CEO of Citigroup.

The vote was not binding. But it would be folly for the bank’s board to ignore a rebuff from institutional investors (pension and mutual fund managers) whose clients are fed up with excessive executive compensation.

“This is a shot across the bow of every corporate boardroom in America,” said Robert Reich, former U.S. Secretary of Labor.

The reverberations were felt in Canada, too. Pandit’s $15 million pay package is in the same ballpark as those routinely approved by the boards of Canada’s top banks. Ed Clark, CEO of Toronto-Dominion, for instance, took home $11.3 million for the same period. His Scotiabank counterpart, Richard Waugh, pocketed $10.6 million and Gordon Nixon at the Royal Bank got $10.1 million.

Political strategists got a surprise of their own the next day. A survey of 1,084 Ontarians — with no partisan or ideological links — found 78 per cent backed NDP Leader Andrea Horwath’s call to impose a surtax on individuals with incomes above $500,000. “It’s hugely popular,” said Lorne Bozinoff, president of Forum Research, the country’s largest polling firm.

This undermined the long-standing assumption that voters were dead set against any tax increase and would punish any politician who raised the possibility.

None of this means a change of direction is imminent.

There is still strong resistance at all levels of government to raising taxes. Premier Dalton McGuinty, who acquiesced to Horwath’s demand this week to keep his minority alive, made his reluctance clear. He vowed to get rid of the surtax within five years.

Likewise, there is strong resistance in corporate boardrooms to reining in executive compensation. High-flying CEOs and their hitherto compliant boards will be watching nervously to see what shareholders do at the Bank of America’s annual meeting on May 9.

But restive stirring is in the air. Once-passive investors are beginning to challenge the notion that corporate CEOs deserve 300 times as much pay as the average worker. Once-tractable voters are beginning to question the notion that raising taxes is unthinkable.

The pendulum, stuck at the far right for a decade, is beginning to shift.

< http://www.thestar.com/opinion/editorialopinion/article/1167476–greed-loses-its-glamour-even-on-wall-street >

About a decade ago, Canada’s economy began heading in a distinctly different direction. The extraction and export of largely unprocessed natural resources became, not for the first time in our nation’s history, the primary driving force in our economic, political, and even environmental development.

Traditionally, Canadian policy‑makers were preoccupied with escaping our status as a supplier of natural resources and commodities. A series of proactive policy efforts aimed to allow Canada to overcome its role as a “hewer of wood, drawer of water,” and helping us emerge as a full‑fledged, diversified, industrialized economic power in our own right. And in the first decades after World War II, Canada made considerable progress in this regard. By the turn of the century, well over half of our total exports consisted of an increasingly sophisticated portfolio of value‑added products (including automotive, aerospace, and telecommunications equipment); and Canadian firms and tech‑nology were increasingly recognized around the world.

That historic trend was reversed, however, beginning around the turn of the century. Since then, driven by various factors (some global, some national), resource industries have become ascendant once again in setting Canada’s overall economic and policy direction.  Resource industries have grown (led by enormous expansion in the petroleum sector, centred on Alberta’s oil sands), and most of their output is exported in raw or barely processed form. Other export‑oriented sectors of the economy have contracted in both relative and absolute terms. In part, they have been “squeezed out” by the macroeconomic side‑effects of the resource boom. (Some economists call this “Dutch disease,” named after a similar reorientation that occurred in the Netherlands following the discovery and exploi‑tation of that country’s North Sea petroleum resources in the 1960s and 1970s.)

This structural shift is profoundly remaking Canada’s economy, our role in the world, and indeed our very federation. Yet apart from occasional bursts of rhetoric (such as followed the recent public exchange between the Premiers of Alberta and Ontario), it has been the subject of relatively little careful analysis. Moreover, while powerful market forces have certainly contributed to Canada’s increasing resource‑dependence, this remaking of the national economy is by no means inevitable or “natural.” Canadians should think carefully about the costs and benefits of this historic shift in our national economic direction, and make the most of our ability to influence the course of our own economic destiny.

A number of key economic indicators testify to this conclusion that Canada’s economy has been heading in a very different structural direction:

* Natural resource production and export has expanded strongly ‑ especially petroleum, and especially from Alberta’s oil sands.

* Manufacturing output and employment has sharply declined.  Some 600,000 Canadian manufacturing jobs have disappeared since the turn of the century.

* Canada’s currency has appreciated dramatically, rising 60 percent in value against its U.S. counterpart over the last decade.

* Canada’s overall trade balance has deteriorated. The growth of resource exports has been inadequate to offset the decline in other exports (such as manufacturing, tourism, and services).

* The economy has experienced a broad shift from tradable to non‑tradable sectors, so that exports in general constitute a significantly smaller share of total production than a decade ago.[1]  This both reflects, and reinforces, the deterioration in national trade performance.

* The shift to non‑tradable sectors, the loss of high‑productivity manufacturing jobs, and the structural deterioration in our exports have all contributed to the worst decade of productivity growth in Canada’s postwar history.

* Economic and fiscal gaps within Canada have widened considerably. In 2005, Newfoundland’s GDP per capita exceeded the Canadian average for the first time in history ‑ and the next year, Ontario’s fell below the national average, also for the first time in history. Since 2006, then, there have been three “have” provinces: those which produce oil (Alberta, Saskatchewan, and Newfoundland & Labrador).

All other provinces are “have‑not” provinces, and the erosion of national fiscal federalism (due to simultaneous reductions in federal social programs, transfers, and taxes) has meant that those interprovincial gaps are showing up increasingly in major differences in economic and social conditions.

The appreciation of the currency is both a consequence of this resource‑led reorientation of Canada’s economy, and rein‑forces the broad structural trend. International organizations (like the Organization for Economic Cooperation and Development [2]) estimate that the “fair value” of Canada’s currency is about 81 cents U.S. (according to purchasing power parity, or PPP, standards). In the 1990s, Canada’s currency traded for well under this level, making Canadian costs and the prices of Canadian‑made products and services seem highly attractive to international consumers and investors. As currency traders came to associate Canada’s currency with the price of oil (rightly or wrongly), however, this advantage was lost. The dollar began to rise quickly, shooting through its PPP benchmark, and reached par with the U.S. dollar by 2007, where it has fluctuated since. At that level, our currency trades at about 25% more than its PPP fair value ‑ which means that Canadian‑made products and services seem 25% “too expensive” relative to their actual value. This has negatively impacted manufacturing, but also every other non‑resource traded industry (including tourism, and tradable services like transportation and business servic‑es). Indeed, some non‑manufacturing export‑oriented sectors (like tourism) have been harder‑hit by the dollar’s overvaluation than manufacturing. Claims that the effect of overvaluation will disappear over time as companies ”adjust” (including by investing in more capital equipment) have not been borne out. Only resource industries have been largely insulated from the impacts of the dollar’s overvaluation. The dollar is the most important channel through which “Dutch disease” symptoms are felt, but it is not the only channel.[3]

Obviously, significant economic opportunities have been generated by the surge in resource extraction and export industries in Canada. The petroleum extraction industry directly employed 54,000 Canadians in 2011 ‑ up 18,000 since 2000. Directly, then, the oil and gas sector’s expansion offset only 3 percent of the net jobs lost in manufacturing in the same period. Indirectly, of course, there are other spin‑off opportunities ‑ concentrated most visibly in oil‑producing regions, but some of which are experienced more broadly across the country. Those opportunities, however, must be measured against the costs and consequences of the resource boom, including its economic, social, and environ‑mental side‑effects. Given the overall deterioration in labour market, productivity, and international trade indicators that has been associated with the resource‑driven restructuring of the national economy since the turn of the century, it is hard to avoid the conclusion that this overall trend has been negative for Canada as a whole.

The challenge facing policy‑makers is to maximize the long‑run, sustainable benefits to Canadians of resource development, and minimize its costs. This means leaning into the winds unleashed by powerful and profitable resource extraction op‑portunities, to ensure that these developments are managed in a manner consistent with Canadians’ long‑run economic, social, and environmental well‑being ‑ rather than simply endorsing the present, largely unmanaged trajectory as somehow optimal (and loudly condemning any critics of that trajectory as “unpatriotic”!). Many policy tools are available to tackle this task of managing the structural changes in Canada’s economy, in order to avoid Dutch disease symptoms, maximize the benefits of resource developments, and minimize their costs.

One especially promising set of policy measures includes proactive efforts to support investment, employment, innovation, and exports in targeted high‑value sectors of the economy. This broad policy envelope is best described as “Sector Development Policy.”[4] The purpose of this paper is to consider the sorts of sector development policies that could be invoked in order to reduce the symptoms of Dutch disease which have become increasingly visible over the past, resource‑led decade.

The general goal of sector development policy is to attain a more desirable sectoral mix in the economy, winning a greater share of output and employment in identified high‑value or “strategic” sectors than would otherwise be the case. Sector development policy has been historically important in Canada, given our ongoing national challenge to escape the “staples trap,” and become more than just a resource‑supplier to other countries. We need more industries that add value to our resources (rather than exporting them in raw form); that generate more high‑income, high‑quality jobs; that embody technology and innovation; and that contribute to greater suc‑cess in world markets.

These policies, and the fiscal tools that could fund them, formed part of the 2012 Alternative Federal Budget (published in March by the Canadian Centre for Policy Alternatives). A stand‑alone paper describing the rationale for sector development policy, and the AFB’s proposals in that area, is available at http://www.policyalternatives.ca/publications/reports/cure-dutch-disease.

JS/kvcope343

________________________________

[1] Measured as a share of GDP, total exports of goods and services have declined by about one‑third: from 45 percent in 2000, to under 30 percent ten years later. This is an imperfect measure of export intensity (since exports are a gross measure, and GDP is a value‑added measure, hence exports double‑count the value of imported inputs embodied in them), but it is nevertheless a useful indicator of the broad trend.

[2] “Purchasing power parities for GDP: National Currency Units per U.S. Dollar,” Economics: Key Tables from the OECD, Table 11, January 2012,
< http://www.oecd-ilibrary.org.libaccess.lib.mcmaster.ca/docserver/download/fulltext/190200031x1t004.xls?expires=1331138560&id=id&accname=guest&checksum=F1BF43AD3605C62AF48C80A582B24CC2 >.

[3] Even without a fluctuating currency, a country could experience Dutch disease symptoms resulting from the rapid development of resource exports, through the workings of factor markets, price differentials (especially prices for traded and non‑traded output), and other mechanisms.

[4] In previous times it was called “industrial policy,” but that term implies an undue focus on heavy manufacturing industry, whereas the sorts of policies described here (and the sectors where they can be productively applied) cover a broader range of sectors, including some tradable services industries.

< http://www.caw.ca/en/10869.htm >

Mired in debt and at risk of an election by late May, Ontario’s minority Liberal government took dead aim at teachers and doctors Thursday in a bid for public support to keep their wage hike demands to zero.

Education Minister Laurel Broten warned elementary teachers of 10,000 layoffs unless they accept a pay freeze while Health Minister Deb Matthews told physicians “I am here to stand up for taxpayers.”

There is no room in Premier Dalton McGuinty’s latest budget — which forecasts a $15.2 billion deficit this year — for salary increases, Matthews told a hastily arranged news conference.

“This is a tough time. This is a difficult budget,” she said shortly after Broten delivered her second stern message since Monday, when she slammed the elementary teachers’ union for walking away from provincial bargaining.

Teacher contracts expire in August and the latest OMA agreement was over at the end of March.

The government’s future hangs in the balance over the budget, which goes to a crucial confidence vote in the Legislature by April 25. Defeat would force an election by the end of May.

The 76,000-member Elementary Teachers’ Federation of Ontario and the Ontario Medical Association took quick exception to the two-pronged surprise attack.

Teacher union president Sam Hammond said the government’s “destructive” demands ask “too much of teachers and singles them out” in a bare-knuckled political play that will harm students.

“The number one priority for Ontario’s doctors has and continues to be patients,” added OMA president Dr. Stewart Kennedy.

He had warned in a Wednesday evening memo to his 26,000 members that plans to curtail growth in health spending will limit access to health care as Ontario’s population grows and ages.

Matthews said that note — which raised what she called misleading concerns about “an effective reduction in payments per physician of almost 16 per cent over four years” — prompted her lecture.

“I will not look Ontario patients in the eye and tell them they have to make do with less community care because we are going to put that money in the pockets of doctors who are already earning an average of $362,000 a year,” Matthews said.

Ontario is not getting value for money in some medical procedures — such as cataracts — because new technology has vastly improved how quickly doctors can perform them, so fees should come down, she argued.

Broten’s remarks followed another refusal by ETFO, the only teacher union that has walked away from talks, to return to the province-wide negotiating table after one hour of preliminary work weeks ago.

“It’s through the provincial process that we’re looking to protect the gains we’ve made — specifically the implementation of full-day kindergarten and smaller class sizes,” she said in a statement to the Star.

“If we give up on those gains we would see the loss of 10,000 teaching positions — many of them at the elementary level. I’m not willing to let that happen. I’m surprised ETFO is. I know how hard it is for young teachers to find jobs and those are the teachers whose jobs would be at risk.”

The province has told all teacher unions it wants to freeze their wages as well as their salary grid — which gives additional raises based on seniority and qualifications — and do away with costly sick-day payouts at retirement. The government also wants to limit sick days to six and ban them from being carried over.

Lori Lukinuk of the Ontario Public School Boards’ Association said her group realizes “significant cost savings” must be found given Ontario’s fiscal situation, with the government struggling to balance the budget by spring 2018 and avoid a costly credit downgrade.

However, “the interests of our students must remain the first priority for all parties — there can be no disruption to their education. This is what parents expect of us and what students deserve,” the association added.

The Progressive Conservatives said McGuinty would be better off following their idea of a mandatory public sector wage freeze — not the current course of threatening to legislate one if unions fail to heel.

“If the Liberals were really serious about achieving a wage freeze they would legislate one for the entire public sector immediately, instead of doubling down on the same policies that have failed so miserably in the past,” said Tory finance critic Peter Shurman (Thornhill).

< http://www.thestar.com/news/canada/politics/article/1160752–ontario-budget-liberals-warn-teachers-doctors-over-pay >

Ontario, we’re told, is Canada’s new rust belt. The high dollar is pummelling the province’s exports. Big manufacturers are fleeing. The Liberal government is slashing spending to maintain the province’s credit rating. And to top it off, it’s wasting money promoting green energy. There’s just one problem with this pop wisdom: It’s largely nonsense.

Ontario certainly faces huge challenges. Its main trading partner – the United States – is only now emerging from the economic doldrums that followed the 2008-09 financial crisis. And since that crisis, the world economy has been struggling with depressed consumer demand, wary investors and aggressive deleveraging by households, businesses and governments.

Ontario wasn’t ready for this new reality. From the early 1990s to the mid-2000s, a weak loonie made Ontario’s products artificially competitive outside Canada, so companies deferred investment in new factories and technologies. Then the dollar soared, partly because of Canada’s relative fiscal probity and partly because the world wanted Western Canada’s resources. Ontario’s manufacturers were caught in a low-productivity trap.

Add in an aging population with rising health costs, the flight of talent and capital to the West, and a decline in the skills of immigrants, and who wouldn’t be gloomy about Ontario’s prospects.

But hold on. Isn’t it possible that this challenge is exactly what Ontario needs? Societies and economies never undergo deep change without powerful incentives, and powerful incentives usually come in the guise of crisis.

Ontario has formidable assets. Its population is big, diverse and well-educated. Most of its people live in a relatively compact region that has very good, albeit sometimes tired, infrastructure. This region thrusts downward into the United States, providing close geographic proximity to the giant economic hubs of the U.S. Midwest and Northeast. And the city of Toronto has a phenomenal concentration of business acumen and financial capital. In fact, as a financial centre, it ranks third in North America and ties with Sydney, Australia, for 10th place globally, just behind Zurich and ahead of Frankfurt and Paris.

But in a world in economic turmoil, Ontario’s most important asset – its network of excellent public universities and public colleges – is often overlooked. The province has one of the planet’s densest concentrations of institutions of higher education. If effectively employed, it could help Ontario pivot to confront the global economy’s long-term trends.

The most important of these trends is a multi-decade shift from fossil fuels to carbon-free energy. The shift will accelerate as oil becomes harder to produce and climate change worsens. Once climate change really starts affecting people’s lives – when it cuts world grain production, for instance – people will demand action. The action will come in the form of regulations and taxes that raise the price of carbon fuels.

The shift to carbon-free energy will be akin to what economists call a “general purpose technology” transition. The modern world has seen half a dozen or so transitions in the past 200 years, including those following the introduction of railways, electricity, the internal combustion engine and the computer microchip. Each produced staggering economic upheaval: companies, jobs and whole industries vanished, while new ones exploded onto the scene. These were periods of startling innovation, rapid economic growth and enormous opportunity for entrepreneurial individuals and communities.

The coming energy shift will dwarf all these earlier transitions combined. It won’t arise from just one disruptive technology but from an integrated suite of many, such as advanced batteries, building reskinning, smart grids, cheap super-thin photovoltaic materials, ultra-deep geothermal power, and perhaps thorium nuclear power. It will spur the invention and delivery of a torrent of new technologies, goods and services in every sector of the global economy.

Since the middle of the last century, the communities that have generated such rapid and disruptive innovation have almost always developed around hubs of higher education. In the U.S., Stanford played a key role in the rise of Silicon Valley, MIT and Harvard seeded the biotech industries in Boston, and the University of Texas helped make Austin a high-tech powerhouse. Ontario can build innovation clusters around its universities with a particular focus on inventing, developing and marketing the new energy technologies the world needs.

Commentators on the political right often slam the economics of green energy. They say that renewables are inefficient, that they create jobs in China, not in Canada, that Europe is cutting green-energy subsidies and that, in any case, the world and especially Canada are hopelessly hooked on carbon. Many of these criticisms are factually wrong, and they’re all shortsighted.

Ontario should focus on the long game. While Alberta and the federal Conservatives double down on carbon, Ontario can be in the vanguard of one of the biggest technological revolutions humanity will ever experience. The future is green, not black.

Thomas Homer-Dixon is director of the Waterloo Institute for Complexity and Innovation and CIGI Chair of Global Systems at the Balsillie School of International Affairs in Waterloo, Ont.

< http://www.theglobeandmail.com/news/opinions/opinion/alls-not-lost-ontario-the-future-is-green-not-black/article2393398/ >

As scandalous as Stephen Harper’s fighter jet plan has been (and even more wasteful is his $9 billion expenditure on jails we don’t need) there’s a larger issue: The economy is not growing fast enough to create enough jobs for Canadian workers.

The number of jobless is higher than suggested by the unemployment rate, which does not count those who have quit looking for work. Underemployment there’s aplenty, especially in Ontario and Quebec, particularly among the young and new immigrants. The work they do get is mostly low-paying and temporary, with few or no benefits.

Yet little was said about this national crisis in the recent federal and Ontario budgets, reactions to which ran along narrow ideological lines.

Some said Harper had chickened out — there were no mega-cuts, no blood on the floor. Others said he was out to eviscerate government in the years ahead.

Dalton McGuinty was similarly pilloried in Ontario for either not trimming enough or cutting too much.

While Canada is not Greece, Italy, Spain or the U.S., our slow growth is making governments scramble for revenues and Canadians for jobs.

This is not all Harper’s or McGuinty’s fault, given globalization and the tanking of the American economy.

As far back as 2005, an IT executive in India outlined for me a scary prospect for Canada.

China and India, after denuding our manufacturing base and cutting into our service sector — answering our phones; processing our bank accounts, credit cards, airline and hotel reservations; reading our MRIs; completing our architectural designs; etc. — would go on to take over many more of our corporate functions: payroll, accounting, inventory, marketing, even journalism (editing and laying out pages, doing interviews by phone or Skype, writing commentaries, etc.).

In that case, what would Canadian kids do? I asked.

“The official answer,” he said, “is that they’d do high-end research, create value-added work and invent new products. The unofficial answer is that they’d mostly amuse themselves.”

What?

“They are already amusing themselves — playing games on their mobile phones, watching movies on laptops and so on. They’ll do even more of the same.”

Sure enough, we now play with the gadgets that others make.

When Barack Obama asked Steve Jobs last year why some of his 70 million iPhones, 30 million iPads and 59 million other Apple products could not be manufactured in the U.S., the president was told point blank that that was not economically feasible.

And whereas Arab youth are using social media to bring about democratic revolutions, ours are using it mostly for amusement. And Dwight Duncan wants all Ontarians to amuse themselves more at casinos and the LCBO so he may raise more revenues.

How are we going to grow the economic pie? Where will the jobs come from? What’s our next BlackBerry?

The Harper budget did provide an answer. We go back to the future, as hewers of wood and drawers of water: Dig out as many resources as we can, extract as much oil as possible from the tarsands and lay down as many pipelines as fast as investment permits. Damn the environment and damn the pesky environmentalists.

Lest we sneer, it is at least a strategy. It’s working for Australia. It’s bringing prosperity to western Canada — Alberta, in particular. Some day it might to Ontario and Quebec as well, given McGuinty’s mining plans in the James Bay lowlands and Jean Charest’s Plan Nord to explore northernmost Quebec. An earlier McGuinty plan to create green jobs, similar to Obama’s, has not been a big enough economic engine to drive the growth needed, in Ontario or the U.S.

Economic insecurity breeds tribalism. In central Canada, everyone is out to protect themselves — unions, corporate fat cats, doctors, seniors. Don’t touch my job security, don’t hike my taxes, don’t cut my pension, don’t postpone my retirement, don’t delay my knee replacement.

Canada needs an honest debate on what we can still afford and how.

Ontario could accept its have-not status and feed off the West’s resource-based economy. Toronto is already the world capital for raising mining capital. Perhaps we could create a new manufacturing base making equipment for mining and gas and oil extraction and transportation.

We must find new ways to grow the economy to create the jobs and the revenues we need to fend off the creeping Me-Me-ism that threatens to destroy the Canadian ethos of sharing and lead ultimately to the tribal politics of the Tea Party.

< http://www.thestar.com/opinion/editorialopinion/article/1156886–where-are-our-jobs-going-to-come-from >

How refreshing it was to open Monday’s Globe and Mail and actually see good news from the Canadian manufacturing heartland. Greg Keenan reported on the expansion of Hitachi’s factory in Guelph, Ont., that makes enormous trucks for mining operations; the plant is doubling output and employment.

Ironically, while the Ontario-made trucks are sold to mining operations across the Americas, Europe and Africa, it doesn’t supply trucks to the biggest mining project in the world, right here in Canada: Alberta’s oil sands. Those super-sized trucks, unfortunately, are imported – from companies such as U.S. heavy equipment maker Caterpillar. It’s a lucrative business: Caterpillar’s Alberta distributor, Finning International Inc., reported record Canadian revenue of almost $3-billion last year (up 30 per cent).

But while Caterpillar makes billions from Canadian resources, the company just closed its only Canadian manufacturing facility: a locomotive factory in London, Ont., that it bought in 2010 from Electro-Motive Canada. Caterpillar is shifting the work to plants in Mexico and right-to-work Indiana. Apart from slashing labour costs, another factor in Caterpillar’s location decisions is the “Buy American” policy, which requires high U.S.-made content in federally funded projects (including rail transport).

Now, adding insult to injury, the United States will actually subsidize sales of Caterpillar’s American-made locomotives back to Canada. The U.S. Export-Import Bank (owned by the U.S. government) is providing preferential financing for the purchase of Caterpillar locomotives for an iron ore mine in Labrador.

The irony is painful. Canada is an increasingly important resource producer. Companies such as Caterpillar, which profit immensely from those resource developments, are under no compulsion to manufacture anything here. Fuelled by oil prices, our loonie trades 25 per cent above its fair value in purchasing power terms – making it all the more expensive to buy Canadian-made machinery for our own mines.

Our government, meanwhile, stands idly by while preferential policies in the U.S. and elsewhere reinforce the exodus of manufacturing jobs from Canada – including jobs in the production of high-tech equipment to extract our own resources.

So the faster we develop our resources, the more equipment we import to do the job. Canada’s trade deficit in specialized construction and mining equipment almost doubled over the past two years, reaching $7.3-billion in 2011. Canada should be a leader in mining equipment and technology, given our direct interest in that line of work. But, instead, we let others handle all that innovation and production. The resulting trade deficit represents a massive leakage of income and jobs, squandering much of the value of our non-renewable resources.

We need a national strategy to maximize Canadian content in Canadian resource developments. Canada, for example, could impose a “Buy Canadian” requirement on future mining projects, similar in spirit to the Buy American rules.

Companies wishing to extract Canadian resources would need to give something back to our national productive capacity: through direct purchases of Canadian-made machinery or inputs, or through “offsets” that met equivalent value-added targets. The federal and provincial governments have ample authority to implement such policies, using their powers over development, environment and transportation approvals as leverage. We’d also need a strategy to expand our own machinery industry at the same time.

Would this kind of strategy violate trade rules? That never stops the Americans from supporting their own industries. But, at any rate, trade agreements have loopholes for energy and environmental issues big enough to drive a Hitachi truck through – but only if governments are willing to use them.

If we limit our national economic ambitions to digging stuff out of the ground, all we’ll ultimately have left is a big hole in the ground. But if we’re thoughtful and pro-active about leveraging our resource wealth into all-round economic and industrial development, we’ll have much more to show after the resources are gone.

Jim Stanford is an economist with the Canadian Auto Workers union, which represents both the workers at the Hitachi factory in Guelph and the closed Caterpillar factory in London.

< http://www.theglobeandmail.com/news/opinions/opinion/how-about-buy-canadian-for-resource-projects/article2368348/ >