All Things Considered: Decembr 2010
It’s become all but impossible to predict or forecast anything. Start with the economy – or should I say economies. This year (2010) was supposed to be – and maybe it was – the beginning of a worldwide recovery.
Maybe we’re at a tipping point, but then again maybe we’re not.
It’s become all but impossible to predict or forecast anything. Start with the economy – or should I say economies.
This year (2010) was supposed to be – and maybe it was – the beginning of a worldwide recovery. Some expected economies to come roaring back after almost two years of recession. This had been the recent pattern. Economies would fall steeply and come back fast and strong.
But not this time. Except for China, India and a handful of other less developed nations the recovery is painfully slow, particularly in Europe and the U.S.
Canada avoided the worst of it. The national unemployment rate never soared as it did in the U.S. We don’t have a foreclosure crisis. Our banks are comparatively sound. And our federal debt and deficits, while high, are manageable and pale in comparison to those of the U.S. and Britain.
But it hasn’t been and won’t be a bed of roses – unless you include the thorns with the petals. For example, unemployment in the federal finance minister’s home area of Oshawa was above 10 per cent in October. In the area in which I live – along the Lake Erie shoreline – and what I call outback Ontario the unemployment rate has recently dropped below 10 per cent but remains above nine per cent.
We also learned recently that the fourth largest employer in the county – a food processor – will be pulling up stakes next year and shuttering its plant. Just down the road a pharmaceutical manufacturer that exports to the U.S. has warned its 200 employees that it may have to close next year.
The Bank of Canada also warned in October that the recovery is much slower than it had forecast earlier in the year and it froze interest rates for the time being.
To our south, I think it is fair to say that the U.S. hasn’t a clue on how it is going to get out of its mess.
At the highest levels there appears to be a great economic debate between the neoclassicists and the Keynesians over what type of recession they are in and what the remedy should be. One school seems to argue in favour of creative destruction so the U.S. economy can remake itself. This could involve tax cuts, smaller government and letting the chips fall where they may. People may suffer in the short run, but things would better in the long run.
The other side argues, as Keynes did, that in the long run we’re all dead and the best way to get out of a quagmire is for someone to reach out and pull you out. They are arguing for additional government stimuli to get the economic engine running.
Neither side has a particularly coherent plan to deal with long-term debts.
The political debate in the U.S. is, worse. It seems to consist of blaming the Chinese and deciding whether to do nothing at all or little of consequence. Eventually reality will intervene.
Part of this reality is already visible. The U.S. dollar has been losing value against most other currencies. In theory this should stimulate U.S. exports, curtail imports and create jobs.
So far, it hasn’t worked out that way. China and others can still produce many manufactured goods much more cheaply than the U.S. or Canada. And even if they couldn’t, so many North American and European factories have been closed and so much manufacturing has shifted to Asia that rebuilding the infrastructure would take a lot of time and money.
The Americans blame China’s policy of keeping the value of its currency low for many of the problems. Some economists are arguing that we’re now at the beginning of a worldwide currency war. It would be a war fought with low interest rates, devalued currencies and various forms of government intervention. It would end, they say, with rampant inflation and rapidly escalating interest rates.
Another factor in all of this is world trade. The WTO’s Doha round, which is of great concern to anyone in a supply-managed industry, went nowhere in 2010. Some in Geneva seem to believe progress and maybe even an agreement will come in 2011. But divisions between the developing and developed world remain broad and deep and the U.S., with its big domestic issues, remains less than fully engaged.
Meanwhile, countries are busy negotiating bilateral deals. India, for example, recently signed a deal with Singapore and is negotiating one with Malaysia.
In Canada’s case, the biggest one currently on the table is with the European Union.
Proponents say the deal could increase Canada’s GDP by $12 billion. Opponents worry that supply management could be undercut and that provincial and municipal governments’ ability to favour local suppliers in their procurements could be restricted or banned.
Before we enter 2011, perhaps someone should erect one of those traffic signs that says: “Proceed with caution.” ■
It’s become all but impossible to predict or forecast anything. Start with the economy – or should I say economies.
This year (2010) was supposed to be – and maybe it was – the beginning of a worldwide recovery. Some expected economies to come roaring back after almost two years of recession. This had been the recent pattern. Economies would fall steeply and come back fast and strong.
But not this time. Except for China, India and a handful of other less developed nations the recovery is painfully slow, particularly in Europe and the U.S.
Canada avoided the worst of it. The national unemployment rate never soared as it did in the U.S. We don’t have a foreclosure crisis. Our banks are comparatively sound. And our federal debt and deficits, while high, are manageable and pale in comparison to those of the U.S. and Britain.
But it hasn’t been and won’t be a bed of roses – unless you include the thorns with the petals. For example, unemployment in the federal finance minister’s home area of Oshawa was above 10 per cent in October. In the area in which I live – along the Lake Erie shoreline – and what I call outback Ontario the unemployment rate has recently dropped below 10 per cent but remains above nine per cent.
We also learned recently that the fourth largest employer in the county – a food processor – will be pulling up stakes next year and shuttering its plant. Just down the road a pharmaceutical manufacturer that exports to the U.S. has warned its 200 employees that it may have to close next year.
The Bank of Canada also warned in October that the recovery is much slower than it had forecast earlier in the year and it froze interest rates for the time being.
To our south, I think it is fair to say that the U.S. hasn’t a clue on how it is going to get out of its mess.
At the highest levels there appears to be a great economic debate between the neoclassicists and the Keynesians over what type of recession they are in and what the remedy should be. One school seems to argue in favour of creative destruction so the U.S. economy can remake itself. This could involve tax cuts, smaller government and letting the chips fall where they may. People may suffer in the short run, but things would better in the long run.
The other side argues, as Keynes did, that in the long run we’re all dead and the best way to get out of a quagmire is for someone to reach out and pull you out. They are arguing for additional government stimuli to get the economic engine running.
Neither side has a particularly coherent plan to deal with long-term debts.
The political debate in the U.S. is, worse. It seems to consist of blaming the Chinese and deciding whether to do nothing at all or little of consequence. Eventually reality will intervene.
Part of this reality is already visible. The U.S. dollar has been losing value against most other currencies. In theory this should stimulate U.S. exports, curtail imports and create jobs.
So far, it hasn’t worked out that way. China and others can still produce many manufactured goods much more cheaply than the U.S. or Canada. And even if they couldn’t, so many North American and European factories have been closed and so much manufacturing has shifted to Asia that rebuilding the infrastructure would take a lot of time and money.
The Americans blame China’s policy of keeping the value of its currency low for many of the problems. Some economists are arguing that we’re now at the beginning of a worldwide currency war. It would be a war fought with low interest rates, devalued currencies and various forms of government intervention. It would end, they say, with rampant inflation and rapidly escalating interest rates.
Another factor in all of this is world trade. The WTO’s Doha round, which is of great concern to anyone in a supply-managed industry, went nowhere in 2010. Some in Geneva seem to believe progress and maybe even an agreement will come in 2011. But divisions between the developing and developed world remain broad and deep and the U.S., with its big domestic issues, remains less than fully engaged.
Meanwhile, countries are busy negotiating bilateral deals. India, for example, recently signed a deal with Singapore and is negotiating one with Malaysia.
In Canada’s case, the biggest one currently on the table is with the European Union.
Proponents say the deal could increase Canada’s GDP by $12 billion. Opponents worry that supply management could be undercut and that provincial and municipal governments’ ability to favour local suppliers in their procurements could be restricted or banned.
Before we enter 2011, perhaps someone should erect one of those traffic signs that says: “Proceed with caution.” ■