Does Canada have a bad case of "Dutch Disease" AKA "Resource Curse"? And, if so, what can be done about it?

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M. Spector M. Spector's picture

Sorry, the thread diversion is over. You've successfully managed to derail the discussion into arguments over the meaning of "profit", "non-profit", "ownership", "incentive" and other ordinary terms that one can easily look up in a dictionary. Mission accomplished.

socialdemocrati...

Funny, I was going to say the same thing about you. My real issue was your whole proposal to fix the Canadian economy by destroying it.

KenS

We could always try the topic, eh?

 

From the Steelworkers:

 

Oilsands Economics 101

 

USW National Director Ken Neumann and Environmental Defence Executive Director Rick Smith weigh in on debate about the role of Canada's petro-currency and its impact on manufacturing jobs.

 

 

Erik Redburn

M. Spector wrote:

Sorry, the thread diversion is over. You've successfully managed to derail the discussion into arguments over the meaning of "profit", "non-profit", "ownership", "incentive" and other ordinary terms that one can easily look up in a dictionary. Mission accomplished.

 

It migt be easier if you understood the topic.  Profit doesn't have to be used for 'shareholders' or any other particular group claiming ownership, including management.   However if there is no margin above the cost of doing business -profit IOW- it makes it difficult to ride out bad years, expand said business, pay back any start up capital with interest, or adjust to changing markets conditions.  Not unless we attempt to remove market forces entirely, meaning removing choice from the equation entirely, consumer as well as investor.  That too can be hazardous, as experience has shown.  I do I admit also retain a belief that the people managing a company should get a slightly larger slice of the income pie than an entry level rookie, that's where incentives come into it again.  Guess in your eyes that would make me a rightwing Republican.

Erik Redburn

socialdemocraticmiddle wrote:

I'm all for raising taxes to pay for infrastructure, and a select few public companies such as the CBC. In fact, that's what I concluded was the best course of action to combat the dutch disease in post #17.

I also appreciate that when sovereign countries go into huge amounts of debt, bankers end up having de facto power over democratically elected officials. But that's the point: we should balance a budget. They don't have inherent power over government. It only arises if we start borrowing from them. ...

 

I do disagree with you on the second point though.  Balanced budgets are not absolutely necessary, not every year.  That doesn't mean borrowing from bankers or international sources though, as you seem to think.  Government, unlike individual mortgage holders or small businesses, can print its own capital and borrow from itself, or rather from our own future setting its own terms.   Budgets should however be balanced over the entire business cycle, and overruns kept to minimums.  The failure to observe that boom-time rule was one of the reasons that Keynesian economics started failing in 1970's.  Before that it paid for a world war, pulled us out of a depression, and practically built the entire middleclass and the infrastructure it relies on.

socialdemocrati...

I don't disagree, Erik. It shouldn't be some kind of hard line requirement that we always balance a budget, let alone a constitutional amendment as some circles believe. Sometimes you have to borrow to grow, and sometimes you have to borrow to avoid a catastrophe. But as a general rule, we should avoid becoming to indebted to the banking sector.

It's good to see this topic getting more attention in mainstream circles. I've seen at least a few NDP candidates mention it. Now the Steelworkers mention it. The conventional wisdom is we should all be kissing the feet of oil tycoons for making Canada rich off oil, when the reality is oil can be a curse on the broader economy for anything that's not oil.

The Steelworkers point to Norway's stabilization fund. But I think we can be more bold. $100 million in infrastructure is a modest investment, and one we should make even without the tarsands problem.

JKR

It looks like the shale oil boom may drastically alter the world's energy equation. If the shale oil boom in the US drastically increases the supply of North American oil, Alberta's and Saskatchewan's boom could turn into another bust. That in turn would solve our petro-dollar dilemma.

 

The American oil boom and its impact on Canada

Quote:

Two years ago it was believed that oil molecules were too large to extract from shale. But now, new fracking technologies and horizontal drilling has led to the biggest oil boom in many years. After Russia, the U.S. has now become the largest non-OPEC crude oil producer in the world, followed by Canada.

 

What North Dakota Could Teach California

Quote:

All this is thanks to the technological leap forward represented by hydraulic fracking, a process that allows drillers to blast through underground shale rock and pump out oil and natural gas. Projections of how much oil is here seem to grow every year.

In 1995, the U.S. Geological Survey estimated 150 million "technically recoverable barrels of oil" from the Bakken Shale. In April 2008 that number was up to about four billion barrels, and in 2010 geologists at Continental Resources (the major drilling operation in North Dakota) put it at eight billion. This week, given the discovery of a lower shelf of oil, they announced 24 billion barrels. Current technology allows for the extraction of only about 6% of the oil trapped one to two miles beneath the earth's surface, so as the technology advances recoverable oil could eventually exceed 500 billion barrels.

 

 Oil Shale Reserves

Quote:

America’s oil shale reserves are enormous, totaling at least 1.5 trillion barrels of oil. That’s five times the
reserves of Saudi Arabia! And yet, no one is producing commercial quantities of oil from these vast deposits. All that oil is still sitting right where God left it, buried under the vast landscapes of Colorado and Wyoming.

 

 

 Shale oil's promising future

Quote:

And profits alone are not the only reason for rushing to shale oil using fracking technologies. With 3,000 new wells expected to be drilled in the next 12 months, there is the expectation of 2 million new jobs that could be created and a further hope that oil from shale will significantly increase our domestic oil supply.

It’s a drilling home run: more jobs, decreased reliance on foreign oil and technological advances that portend to bring the break-even costs per barrel down from the $60 where it hovers now. Of course, no amount of money could have generated these barrels even a short time ago. With the United States the global leader in shale oil reserves totaling perhaps a billion barrels, it’s full steam ahead.

 

 

 Weir sees shale oil and gas boom spreading 

Quote:

LONDON, Feb 29 (Reuters) - British engineer Weir Group said a boom in the shale oil and gas industry in the United States was spreading to other countries as it posted a 34 percent rise in 2011 profit that was at the top end of expectations.

The pumps and valves maker, which last year twice upgraded its profit guidance due to rapid growth in drilling for rock-trapped hydrocarbon reserves in the United States, said on Wednesday the industry was picking up pace in countries like Poland, Argentina and China.

"We are seeing the internationalisation of shale really starting to move forward. It is probably moving forward a bit quicker than we thought," chief executive Keith Cochrane said.

 

 

 China vigorously promoting shale gas exploration, development 

Quote:

In the first 5 months of 2011, Chinese crude oil import dependence reached 55.2%, according to the Ministry of Industry and Information Technology.

China's shale gas resource is 100 trillion cu m, and the technically recoverable shale gas resource is 36 trillion cu m.1

 

Analysis: Mexico in no rush to exploit shale oil bonanza

 

Quote:

"Even in the most conservative scenarios, exploiting these shale gas resources could and should spark the development of a national industry without precedent," Herrera - who directed Pemex Gas before his current post - said at an event shortly after taking office. He said the industry could attract investment of between $7 billion and $10 billion a year.

 

JKR

New-look oil rush shifting global markets

Quote:

Here's another structural transformation to add to all the others that you have to get your head around: it's the transformation of global energy markets as a result of shale oil and gas.

We've already got the digital revolution and the switch from consumption to savings after the GFC, not to mention the rise of China and India. Now we have the death of peak oil.

...

Forget declining oil, there is a new global oil rush. The US has an estimated 2 trillion barrels of shale oil reserves - about 70 per cent of the world's total and eight times the oil reserves of Saudi Arabia. The gas reserves, in the US, Australia and elsewhere, are vast.

The cost of extracting shale oil ranges from $US95 per barrel down to $US12.

...

The importance of this for the world is hard to exaggerate. The distribution of energy on the planet is shifting: the stranglehold that Middle Eastern dictatorships have over the world's energy supply is loosening and just as the rise of manufacturing in China shifted the world's economic axis, so will the rise of shale energy in North America.

...

If the United States could become self-sufficient in energy, its current account deficit would disappear and the US dollar would start rising again.

 

KenS

Shale oil is another one of those hyped up bubble investments that is supposed to be the real deal that turns around supply. First North America, and then the world.

Last decade it was deepwater Gulf or Mexico. We know where that went. Even before the Horizon blowout, reserve estimates were radicaly scaled back as costs were more realisticaly integrated... costs for which there never is going to be a technological silver bullet.

Shale oil is the same. Not quite as technologicaly challenging, but as dangerous. And where is all that water it sucks up supposed to come from? Alberta has it to waste on the tar sands if they choose. North Dakota doesn't. "Hh, we'll figure that out." Where have we heard that before?

KenS

Those articles linked to on shale oil come primarily from known boosters- let alone that even the non-bossters do not adequately take the claims with a grain of salt.

Here is an example from one of those articles. After [barely] noting that access to water, and contamination from shale oil on the scale being discussed are unresolved issues:

"These are, however, surmountable hurdles and the costs of operations are likely, if not guaranteed, to continue to drop."

There is that famous completely unwarranted confidence. Actually, the costs are guaranteed to go way up. For one thing, drilling rigs are cheap right now. But the bigger cost increase will be from inevitable tighter regulation. But there's the rub. These people BANK on there being no more regulation than there is now. And the talk about improved ways of drilling and production is just that: talk only. The irony is that costs go up way more than their sanguine expecatations even when they mostly get their way about no new regulations.

KenS

So dont wait for oil supply from equally sick oil shale to push down prices below what will fuel the tar sands rush. It isnt going to happen.

And even the people saying it might dont believe it, or want it. Its just a bullshit boosterist thing they can make sound believable.

I sit over a shale gas resource that has had exploratory wells. The industry claimed less then 5 years ago that producing shale gas was actually cheaper than getting gas out of the remaining conventional finds available. I believed that, and it seemed proof we would soon see pressure to move to production.

Turns out to be 100% bullshit- but BS that people believed as they traded up each others prospects. [Sound familiar?] As it turns out we have some years before there is any chance the economics will favour going after the gas under us- time we are using to make sure it doesn't happen.

The economics of gas and oil are totally different. But the bullshit from the industry and traders about the costs is universal. Even the financial costs which they will meet under laissez faire virtual non-'interference'.... let alone taking in the real environmental costs of what they are doing and want to do.

Unfortunately for us with the tar sands, they have more than proven they can absorb all the financial costs that are likely, as long as there is no substantial change in the environmental regulatory regime.

socialdemocrati...

I do think an oil bust is a legitimate risk. Even though it could have some positives in terms of making our other exports more competitive again, the jobs aren't going to come back over night, and the disruptive effect is enough to do a lot of damage. Still points to the need for some kind of energy strategy that doesn't naively see the tar sands as easy money.

KenS

The only way that there is a real prospect of an oil supply bust is if you believe the people whose track record tells you that you should not believe them.

Even if you dont buy into the whole thesis of peak oil- we ARE at the point where the real costs of the technologies required to get new discoveries makes them not financialy sustainable.... even if we do not succeed in making them absorb their real environmental costs.

theleftyinvestor

The shale oil mention does bring to mind the fact that Alberta's oil is only economical when prices are high enough to merit the high cost of extraction. If shale is competitive enough to fight for the same "high price reserves" market, then it could certainly depress the profits Alberta brings in.

Speaking of which - the ever-charming André Boisclair (former PQ leader, former PQ environment minister) was hired this past fall by Questerre to shill for the shale gas industry. Considering how haywire the Quebec political spectrum is, I wouldn't discount the possiblity that Quebec could become a big player. And Quebec doesn't have the same "lack of water" problem as North Dakota.

JKR

Pass the Books. Hold the Oil. - Thomas L. Friedman - New York Times - Published: March 10, 2012

Quote:

Economists have long known about “Dutch disease,” which happens when a country becomes so dependent on exporting natural resources that its currency soars in value and, as a result, its domestic manufacturing gets crushed as cheap imports flood in and exports become too expensive. What the PISA team is revealing is a related disease: societies that get addicted to their natural resources seem to develop parents and young people who lose some of the instincts, habits and incentives for doing homework and honing skills.

...

In sum, says Schleicher, “knowledge and skills have become the global currency of 21st-century economies, but there is no central bank that prints this currency. Everyone has to decide on their own how much they will print.” Sure, it’s great to have oil, gas and diamonds; they can buy jobs. But they’ll weaken your society in the long run unless they’re used to build schools and a culture of lifelong learning. “The thing that will keep you moving forward,” says Schleicher, is always “what you bring to the table yourself.”

socialdemocrati...

Yeah, there are key investments you can make in long term competitiveness. Education is the most obvious, least controversial one. But transportation and communication should be high on the list too, IMO. We're starting to get to the point where the mainstream will talk about government investment in those areas. We need to push that conversation.

RevolutionPlease RevolutionPlease's picture

grrrr!

RevolutionPlease RevolutionPlease's picture

I'd love to fight Doug or Rob Ford. I'm 135 and I'd kick your ass. Bring it!

JKR

Natural Born Drillers - Paul Krugman - New York Times - 15 March 2012 

Quote:

And this tells us that giving the oil companies carte blanche isn’t a serious jobs program. Put it this way: Employment in oil and gas extraction has risen more than 50 percent since the middle of the last decade, but that amounts to only 70,000 jobs, around one-twentieth of 1 percent of total U.S. employment. So the idea that drill, baby, drill can cure our jobs deficit is basically a joke.

Why, then, are Republicans pretending otherwise? Part of the answer is that the party is rewarding its benefactors: the oil and gas industry doesn’t create many jobs, but it does spend a lot of money on lobbying and campaign contributions. The rest of the answer is simply the fact that conservatives have no other job-creation ideas to offer.

And intellectual bankruptcy, I’m sorry to say, is a problem that no amount of drilling and fracking can solve.

The intellectual bankruptcy of conservatives is also alive and well north of the border.

M. Spector M. Spector's picture

Gaian wrote:

"A higher exchange rate forces employers to pay higher wages. Producers that serve the domestic market will generally benefit from the increased demand generated by the increase in Canadian wages and will be able to accommodate pay increases.

"But export-oriented firms outside the expanding sector will be faced with an exchange rate that provides lower prices in terms of the Canadian dollars THEY ARE OBLIGED TO PAY THEIR WORKERS..."

This is what I was saying above. There's no reason we can't have a manufacturing sector that produces for the domestic market only, apart from the built-in drive to expand into foreign markets in order to maintain profit levels. It won't happen under laissez-faire capitalism, but we could make it happen if we had the political will to develop enterprises based on co-operation and need rather than private profit.

M. Spector wrote:

We could have a manufacturing sector that produces goods for our domestic needs. This would reduce our need to import foreign manufactured goods. The reason we don't have manufacturing for domestic consumption is the built-in imperative of growth and expansion of markets that is part of capitalism's DNA. Manufacturers don't make enough profit from looking after the needs of Canadians - they must expand into foreign markets to maintain their profits. 

It's the economic system of production for private profit rather than human need - i.e. capitalism - that makes it impossible for the owners of manufacturing capital to continue producing goods when the Canadian dollar goes up. It's not that we don't need the goods; it just isn't profitable enough to serve only the Canadian market. And profitability trumps need every time.

 

Gaian

Wilf Day wrote:
socialdemocraticmiddle wrote:

I. . . with the center of political power shifting West, I'm not sure how the country gets back on track.

Media myth. In fact, at the 2015 election Ontario gets 15 more MPs, Alberta gets six, and even Quebec gets three. The centre of power is shifting towards Ontario, because Ontario's historic under-representation is finally being corrected. This is counter-intuitive, since the census shows population shifting west. But it's a fact.

Perhaps you are too dependent on a one-to-one relationship between recognition of the problem by top-flight economists and voters acting in the rational fashion assumed in liberal economic theory, a la Stephen Gordon?

Babble's old economist-friend Stephen Gordon, professor of economics at Laval University and fellow of the Centre interuniversitaire sur le risque, les politiques economiques et l'emploi (CIRPEE),says "the 'Dutch disease' story is...good enough for all-too-many politicians and pundits: it sounds plausible, and - perhaps moreimportantly -it can be expressedin one sentence. But if you look more closely at this argument, it fally apart very quickly."

"First, the prospect of fewer Canadians makng things for foreigners is to be welcomed: what matters for Canadian economic welfare is consumptionby Canadians, not making thins that will be consumed by non-Canadians." (Globe and Mail, Report on Business,March 6).

With such arguments, one better understands Stephen's appeal there on the remnants of Groulx's old bailiwick, which must still contain powerful remnants of nationalist authority from the days of survivance. :)

Stephen finishes up his explanation of what's happening - dependent as it is on classic theory demanded by the university - "A higher exchange rate forces employers to pay higher wages. Producers that serve the domestic market will generally benefit from the increased demand generated by the increase in Canadian wages and will be able to accommodate pay increases.

"But export-oriented firms outside the expanding sector will be faced with an exchange rate that provides lower prices in terms of the Canadian dollars THEY ARE OBLIGED TO PAY THEIR WORKERS..."

Someone here once said that Stephen could not be described as a Conservative, and I now believe that is true. He sits on the right hand of early 19th century liberals, where, as Charles Dickens said, in Hard Times, there are always the Gradgrinds available with explanations of human fate from Political Economy.

Gaian

MS, I was assuming that Stephen meant that manufacturing for export would have to pay wages commensurate with what the market would bear. Every statement coming out of the onceo-gig 3 car manugacturers these days is that wages are going to be much lower. Period.

For our classical scholar at Laval, that is not a problem, and he can say "no problem" where every economist worth a pinch of shit says the problem is real.

I am a nationalist, overjoyed with the fact that Quebec's nationalist/social democrats are with us. We have to work out a response to Steve and the folks behind his tar patch firewall that will get us out of this pickle in one piece.

And Jim Stanford has just made an appeal to "Buy Canadian."(G & M) But that's a bent reed, and how do we get folks with the ass out of their jeans to pay what we can import so much more cheaply (the reverse side of the loonie dilemma) from Timbuktu?

Mennonite firniture in the valley of the Grand is expensive as hell. :)

M. Spector M. Spector's picture

Gaian wrote:

And Jim Stanford has just made an appeal to "Buy Canadian."

And you can read my reaction to that column [url=http://rabble.ca/columnists/2012/03/national-buy-canadian-strategy-resou...

 

Gaian

Well done. But this consumate realist has to ask...on what does the average Ontario income earner live? It has to come at some point - and I know, I know, it can't be put off forever = but do you think that this situation of Ontario's now poverty provides the stretegically ideal starting point for the move to a sustainable world (Canada edition).

Great GAia that's a nice thought. But have you discussed it with your neighbour, over the fence, sorta thing?

jerrym

The Current on CBC had a good program on this issue that included towards the last half of the discussion a description of how Norway used the oil revenue to help develop its economy as described by the architect of this approach.

Quote:

All of this brings us to Norway ... a country that seems immune to these problems. It discovered vast oil reserves under the North Sea in the late 1960s. But, unlike other countries that rushed to turn oil into profits, Norway was restrained. The man credited with crafting that restraint is Iraqi geologist Farouk Al Kasim. In 1968, he thought he was emigrating to a country that had little use for his experience in the oil fields of Iraq. And the story of how he became one of Norway's top advisers on oil management is almost as remarkable as the policies he helped put in place. Today Farouk Al Kasim travels the world advising other oil-rich countries on how to manage their industry. He is the President of Petroteam A.S. Farouk Al Kasim joined us from Stavanger, Norway. 

The full broadcast (with Al Kasim's comments in the last half of the broadcast) can be found at 

http://www.cbc.ca/video/news/audioplayer.html?clipid=2210373565  

The interesting thing about Norway's successful approach is that it is the exact opposite of Harper's drill baby drill approach which is contributing greatly to the Dutch disease.

Boom Boom Boom Boom's picture

Doctor Manderly

We need find a way to peg our currency to 60 or 70 cents US...  This is making the Great Depression like unemployment in Ontario much worse....  Harper claims economic expetise....but his Neo classical ideology prevents him from intevening...

 

Layton  was the one who forced the stimulus....things would have been far worse...If the Ontario cuts go through, they would be....

Gaian

Doctor Manderly wrote:

We need find a way to peg our currency to 60 or 70 cents US...  This is making the Great Depression like unemployment in Ontario much worse....  Harper claims economic expetise....but his Neo classical ideology prevents him from intevening...

 

Layton  was the one who forced the stimulus....things would have been far worse...If the Ontario cuts go through, they would be....

I'm having trouble with this one, starting with "Layton was the one who forced the stimulus..."

Care to round that out into something comprehensible/believable?

Doctor Manderly

My point is Harper  was forced by Jack to intevene for job creation....now with a majority all he cares about are severe job  killing cuts...

 

I don"t think that Harper will take money fron Alberta to help Ontario....his lense is  Neo classical Economics, the Free Market solves everything...

 

 

Gaian

Doctor Manderly wrote:

My point is Harper  was forced by Jack to intevene for job creation....now with a majority all he cares about are severe job  killing cuts...

 

I don"t think that Harper will take money fron Alberta to help Ontario....his lense is  Neo classical Economics, the Free Market solves everything...

 

 

Yes, I'm sure that that is all Harper cares about.

You wouuld not want to see all that I care about at this moment.

Doctor Manderly

socialdemocraticmiddle wrote:

Wilf Day wrote:
socialdemocraticmiddle wrote:

I. . . with the center of political power shifting West, I'm not sure how the country gets back on track.

Media myth. In fact, at the 2015 election Ontario gets 15 more MPs, Alberta gets six, and even Quebec gets three. The centre of power is shifting towards Ontario, because Ontario's historic under-representation is finally being corrected. This is counter-intuitive, since the census shows population shifting west. But it's a fact.

That's actually a very good point. I stand corrected.

What are the odds that all the new ridings are not completely and utterly gerrymandered to benefit the Harper Conservatives  ?

Gaian

Love that truck mother shot, Boomer. :) Produced by a farmer, complete in details down to the runt of the litter seeking the hind teat. A wealthy farmer, able to treat a rig in that fashion - even one with a million kilometres on the odometer.

Gaian

A self-professed New Democrat treating others in the fashion of Conservatives?

Fidel

I think Canadians are catching on that their's is a colonial-extractive resource intensive economy. They are traveling the world and noticing that other countries are greening their economies and moving into the future while our corrupt petro state here languishes in the past. 

What can be done about it is that we can follow the leftist social democrat-Liberal-socialist model in Denmark for working toward creating a fossil fuel-free economy of the future.

But we have to first ditch the corrupt stoogeaucracies in Ottawa before Canada can pushed and prodded into the future. Neoliberalism can only really appear to work in resource-rich countries where the financial sector and wealthy people can exist parasitically for long periods. It doesn't work in countries like Iceland or Greece where an economy would have to necessarily invest in its own people and infrastructure in order to live sustainably and with a quality of life worth living.

Doctor Manderly

We need to foster our Knowledge Based Economy again....we have had success there in the past..

. ...we could reinvigorate our manufacturing base with strategic action... 

Some are talking about an urgent need for a Broad based Sector Development strategy...since what happens when the price of oil drops again?

With the balance of power in Ontario could the NDP not push the Libs for action on this in....say a broad based job creation strategy?

Fidel

I think that at some point we have to get away from economic growth based on extracting energy from dead plants. The writing is on the wall for oil-based economies. 

Doctor Manderly

Peak Oil could be pending...

 

But I digress

Gaian

Doctor Manderly wrote:

We need to foster our Knowledge Based Economy again....we have had success there in the past..

. ...we could reinvigorate our manufacturing base with strategic action... 

Some are talking about an urgent need for a Broad based Sector Development strategy...since what happens when the price of oil drops again?

With the balance of power in Ontario could the NDP not push the Libs for action on this in....say a broad based job creation strategy?

This is just bizaare chatter that you would hear from at a Chamber of Commerce convention and without any basis for action in debt-ridden economies. No possibility of activating, politically. You are a Conservative shill.

Doctor Manderly

Debt does not have to be an excuse for inaction.... 

When unemployment is high governments are better to run up big debts to stem the job losses... 

 

The debt issue is an excuse to cut services such as hospitals nurses ....nothing more....

Also, if you are going to make insulting remarks to me....please do not post to me,...thanks

 

 

MegB

Gaian wrote:
Doctor Manderly wrote:

We need to foster our Knowledge Based Economy again....we have had success there in the past..

. ...we could reinvigorate our manufacturing base with strategic action... 

Some are talking about an urgent need for a Broad based Sector Development strategy...since what happens when the price of oil drops again?

With the balance of power in Ontario could the NDP not push the Libs for action on this in....say a broad based job creation strategy?

This is just bizaare chatter that you would hear from at a Chamber of Commerce convention and without any basis for action in debt-ridden economies. No possibility of activating, politically. You are a Conservative shill.

Gaian: no name-calling or accusations.  Our new contributors don't need you attacking them from the moment they arrive.  If you can't politely disagree ...

Gaian

I hope that Boomer can shed some light on the good doctor for you.

Wilf Day

Doctor Manderly wrote:

What are the odds that all the new ridings are not completely and utterly gerrymandered to benefit the Harper Conservatives  ?

Being discussed here:

http://rabble.ca/babble/canadian-politics/more-electoral-maps-3

Gaian

Amazing how easily a thoughtful thread can be corrupted hereabouts by a dilettante from hell.

M. Spector M. Spector's picture

Rebecca West wrote:

Gaian wrote:
Doctor Manderly wrote:

We need to foster our Knowledge Based Economy again....we have had success there in the past..

. ...we could reinvigorate our manufacturing base with strategic action... 

Some are talking about an urgent need for a Broad based Sector Development strategy...since what happens when the price of oil drops again?

With the balance of power in Ontario could the NDP not push the Libs for action on this in....say a broad based job creation strategy?

This is just bizaare chatter that you would hear from at a Chamber of Commerce convention and without any basis for action in debt-ridden economies. No possibility of activating, politically. You are a Conservative shill.

Gaian: no name-calling or accusations.  Our new contributors don't need you attacking them from the moment they arrive.  If you can't politely disagree ...

Gaian wrote:
... a dilettante from hell.

[IMG]http://i28.tinypic.com/2quu6pz.jpg[/IMG]

 

JKR

Excellent Rabble article on Dutch Disease:

Dutch Disease denial: Inflation, politics and tar

Quote:

Dutch Disease

In 1959 natural gas (estimated reserves of over 100 trillion cubic feet) was discovered in the Groningen gas fields in northern Holland. Their exploitation created a huge economic boom, which paradoxically crippled other elements of the economy.

Why? Revenues from the sales of natural gas appreciated the value of the guilder (the Dutch currency), in large measure because the Dutch government spent the money profligately. Between 1959 and 1981 government spending in the Netherlands increased from 10 billion guilders to over 130 billion guilders. Over the same period the value of the guilder increased by 35 per cent in real terms.

The increased value of the currency made exports of goods, particularly manufactured ones, much more expensive leading to a significant decline of the manufacturing sector in Holland. For example, between 1964 and 1986 the number of industrial workers in the Netherlands fell from 1.823 million to 1.381 million, a 25 per cent reduction in the labour force.

The impact of this "disease" was to cause a long period of stagnant growth and unemployment, and major, and to some extent permanent, shifts in economic sectoral structure of the country. This phenomenon, of revenues from a booming resources sector damaging the manufacturing sector, became known as Dutch disease following a 1982 investigation by economists W. Max Corden and J. Peter Neary

Does Canada suffer from Dutch Disease?

The short answer is yes....

Looks like petroleum is causing uphevel in India:

Nationwide strike in India over fuel price hike

Quote:

A nationwide strike called by India's opposition parties threatened to shut down the country over the recent gas price increases announced by the government. The prices were increased to offset growing losses caused by subsidized rates, rise in the international oil price and a plunging rupee.

If India's economic boom ends and their consumption of oil goes down, Canadians might be wise to ask themselves:

- what will happen in Canada if oil prices go down and our current petro boom turns into a bust?

jerrym

Ironically an article in the business-oriented Bloomberg News illustrates the extreme damage that Harper's resources first-and-everytime orientation has done to the Canadian economy, especially to its manufacturing sector, reinvigorating the Dutch Disease debate. In addtion to quoting Statistics Canada evidence on this, the article also cites Tom Mulcair's arguments on the issue. 

Harper "has staked the future of the world’s 11th largest economy on natural resource wealth spreading across the country." On the other hand, many of the workers at closed unionized factories, such as Caterpillar's London Ontario factory, are seeing their wages drop to "far less than the C$20 ($20.24) to C$30 per hour common at the factory -- some just above Ontario’s C$10.25 per hour minimum wage."

Instead of showing concern for such workers, Harper argues "that developing Alberta's oilsands, part of the world’s third largest oil reserves, will bring economic opportunity across the country. Natural Resources Minister Joe Oliver estimates that more than 600 major resource projects may lead to C$650 billion of investment over the next decade. 'A strong resource sector in the west means high-quality manufacturing jobs in the east,' Harper said Jan. 4 at a Ford Motor Co. of Canada Ltd. factory in Oakville, Ontario."

Statistics Canada data shows the exact opposite to be true. While companies "in the mining, quarrying and oil and gas industries have increased payrolls by 11,700, or 4.4 percent over the five years to the end of 2012,over the same period, manufacturing employment has dropped by 182,900, or 9.4 percent, as factories struggle with the impact of a strong currency and weak global demand. Put another way, for every natural resource job that’s been added in Canada since the end of 2007, more than 15 factory jobs have been lost."

UBC economics professor Paul Beaudry describes the "Canadian labor market as two labor markets linked by only partially mobile workers. While there has been substantial migration toward the resource-rich areas, many individuals are reluctant to move for either family reasons or because their skills may not match what is needed.”

This is even reflected in Canada's stock market. The TSX Index only "rose 4 percent in 2012, trailing the performance of markets in every developed nation except Spain and Portugal." 

Canada’s economy is now undergoing slow growth, expanding just "0.1 percent in October, the first gain in three months, while inflation fell to its lowest level in the last three years at 0.8 percent in November, which is usually a sign of a slugish economy. "Unemployment has remained near 8 percent for almost two years in Ontario ... even as oil companies develop the oilsands. While Canada’s jobless rate fell to a four-year low of 7.1 percent in December, unemployment in London, averaged 8.6 percent over the past three months, Statistics Canada said, compared with Calgary’s 4.6 percent and Edmonton’s 4.3 percent."

Furthermore, Harper's government sees no need for an industrial policy. It "has no special policies in place to encourage resource companies to use domestic suppliers. 'Our priority is getting the infrastructure built. Any project that moves forward is a benefit to manufacturers," according to Oliver spokesman Chris McCluskey. Instead Oliver argues that the oilsands have “immense value to the future economic prosperity of all Canadians,” Oliver said in a speech last month. 

However, data from Statistics Canada suggest that "the benefits of the oilsands to Ontario have been limited. Average hourly wages for Alberta workers in the 'other trades' category, which includes welders, machinists and electrical workers, are 25 percent higher than Ontario ones. As recently as 2005, Ontario workers were paid more." Furthermore, "manufacturing jobs have been declining as a share of Canada’s workforce, falling to about 10 percent at the end of 2012 from about 15 percent in 2000. Ontario is home to about 45 percent of those jobs."

Some have even said the investment in natural resources has made the decline in manufacturing worse. The argument, advanced by Tom Mulcair, leader of Canada’s main opposition New Democratic Party, is that capital inflows to the oilsands have artificially boosted the value of the Canadian dollar. A 58 percent rise in the currency over the past 10 years has made Canadian factory goods more expensive abroad, Mulcair says, hobbling an economy that relies on exports for one-third of its output.

Even economist Doug Porter of Toronto's BMO Capital Markets admits that the rise in the Canadian dollar is having an effect on the job market."

For example, "only about 150 of the unionized staff at the closed Electro-Motive Canada plant in London "have found work according to Bob Scott, who runs the job center created after the factory closed. Workers who made between C$20 and C$30 an hour are being offered about C$14 or C$15, he said."

http://www.bloomberg.com/news/2013-01-08/canada-oilsands-boom-bypassing-...

 

 

JKR

Like in many other areas, Canada should try to emulate Norway's polices concerning the development of non-renewable resources.

 

Oil Industry Canada: Norway Offers Lessons On How To Manage Resource Wealth, CCPA Says

 

Quote:

A striking difference between Norway and Alberta is the proportion of their respective oil wealth that has been socked away in savings funds.

Norway set up its Government Pension Fund Global in 1990. It is now the largest sovereign wealth fund in the world at $664 billion and continues to grow.

By contrast, the Alberta Heritage Savings Fund, set up by the Lougheed government in 1976, contains only about $16 billion.

The report calls on the federal government to create a resources saving fund, into which some proceeds from an excess profits tax would be placed. Part of that capital would be invested outside the country as a means to mitigate "Dutch Disease" — when resource development leads to a rise in currency values, harming other parts of the economy that rely on exports.

Campbell sees the returns of that fund being used for public infrastructure and social programs, as they are in Norway.

Jack Mintz, a tax policy expert at the University of Calgary, said Norway is viewed as the "poster child for good governance" and that the public has largely bought into its "disciplined approach."

"The problem with Alberta is it's never really done a good job in managing the natural resource wealth," said Mintz.

...

The CCPA wants Alberta to bring its income and sales taxes into line with other jurisdictions, so that other provinces aren't forced to compete and weaken their own ability to provide public goods and services.

If Canada taxed its citizens the way Norway does, Campbell figures there would be another $200 billion annually flowing into government coffers.

Norway, the report says, has one of the lowest levels of income inequality in the world. On the flip side, the gap between rich and poor is growing among Canadians, especially in Alberta.

And fiscal disparities have also widened between provinces, something the CCPA wants to see addressed through strengthening the federal equalization program.

 

Secrets to Norway's Petro-Wealth: Lessons for Canada? - The Tyee

 

The Petro-Path Not Taken Comparing Norway with Canada and Alberta’s Management of Petroleum Wealth - CCPA

jerrym

Here are some other articles pointing out the dangers of the fossil fuel resource boom bringing about the Dutch Disease for Canada.

http://www.cbc.ca/video/news/audioplayer.html?clipid=2210373565

http://www.thestar.com/news/canada/article/1136578--ottawa-s-focus-on-al...

jerrym

The June employment statistics provide strong evidence that Canada is suffering from the Dutch disease. While employment in Alberta climbed at approximately 4% during June and during the last year in Alberta, employment dropped by 9,400 jobs in the rest of the country between May and June. Furthermore, while Alberta gained 72,300 jobs during the last year, the rest of the country had no gain in employment over this period.

Firewall Harper (who promised in a letter to build a firewall around Alberta to protect the oil and gas industry which he once worked in) now has a major problem if this continues. Although this problem has been going on for years, the public has not paid much attention to it. The release of these statistics during the summer, when Canadians tend to pay little attention to politics, means not much damage has been done to the Cons yet. However, if this pattern continues into the fall, this is likely to become a major problem for them, both because of the slack economy and unemployment destroying the Con myth that they are the best choice for the economy, and because there will be growing questions about whether the Con focus on the fossil fuel sector is a major part of the reason the rest of the economy is in trouble. In other words, because the Canadian economy is suffering from the Dutch disease. 

The loss of jobs, especially the middle-class jobs of the manufacturing sector, in Ontario is particularly problematic for the Cons because this province was so critical in giving them a majority.

 

Quote:

Alberta has once again bucked the national trend and led the nation in job creation in June, according to Statistics Canada. ...

Between May and June, employment in Edmonton dropped by just 200 on a monthly basis, but is up 31,000, or 4.3 per cent year-over-year, in the Edmonton CMA, the federal agency said on Friday. In Alberta, employment was up 0.4 per cent or 9,400 jobs from May, while it climbed by 3.7 per cent, or 81,800 jobs, from last year.

Alberta’s unemployment rate rose to 4.9 per cent in June from 4.6 per cent in May, while Edmonton saw its unemployment rate edge up to 5.5 per cent, slightly higher than Calgary’s which remained the same at 5.4 per cent.

“There’s no doubt Alberta’s job market is operating in a different realm from the rest of the country,” said Richard Truscott, Alberta director for the Canadian Federation of Independent Business.

“A big part of the reason is the impact of big resource projects, like oilsands, that continue to prime the pump. Add the fact that Alberta has many of its economic fundamentals properly aligned, and it’s making for a near perfect storm for job creation now and in the foreseeable future. Clearly, one of the main challenges will be finding enough qualified people to fill all the job opportunities.”

Nationally, the unemployment rate rose from 7.0 per cent to 7.1 per cent as there were 9,400 fewer jobs than in May, a drop of 0.1 per cent. The major sore spot in the country was Ontario where the province lost 33,900 jobs. Year-over-year, employment is up by 72,300 positions or 0.4 per cent across the country.

“This was the lowest year-over-year growth rate since February 2010, when year-over-year employment growth resumed following the 2008-09 labour market downturn,” said Statistics Canada. ...

Douglas Porter, chief economist with BMO Capital Markets, said Alberta continued to outperform in June as annual employment growth is “miles above” the national rate.

“In fact, if Alberta is stripped out of the national total, there would have been no job growth in the past year,” he said.

“The Canadian job market remains mired deep in a mid-cycle funk, with precious little employment growth over the past year. While there is much sound and fury surrounding monthly Canadian job tallies, often signifying very little, the underlying trend is unquestionably squishy soft. Simply, this gives the Bank of Canada all the justification it needs to still sound quite dovish in next week’s interest rate decision and quarterly Monetary Policy Report, even with the recent uptick in prices.”

The numbers may also be starting to create problems for the federal Conservative government. Since the recovery began in 2009, federal ministers have stressed that while the economy is fragile, Canada is doing better than practically everyone else and that the country has led the industrialized world in job creation.

But the latter boast is wearing thin, particularly as Statistics Canada calculates a mere 72,000 jobs have been added over the past year. Take Alberta out of the picture and the rest of the country would actually show a loss of 10,000 jobs in the last year.

Derek Burleton, deputy chief economist with TD Economics, said Canada’s job market ended the first half of 2014 on a disappointing note despite the fact that Alberta remained a standout atop the growth leaderboard. ...

http://www.edmontonjournal.com/Alberta+leads+country+creation+thanks+per...

 

 

jerrym

"Canada's rising dollar hampered its manufacturing sector beginning in the 2000s and continues today due to foreign demand for natural resources, with the Athabaska tar sands becoming increasingly dominant" is cited as an example of Dutch disease in Wikipedia's article on the subject.

http://en.wikipedia.org/wiki/Dutch_disease

 

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