Do not Mention the War: Investment, Debt, Employment and the Current Account in Canada

The supply side logic says that all good things flow from Rome. And Rome would be the investment rates of private enterprises (aka capitalist firms). Corporate and small business tax cuts are justified on this logic, so too is deregulation and the litany. Problem is the logic is faulty. Faulty in the sense of Fawlty Towers.

The problem is of course Employment. Unemployed citizens do not consume, nor do they produce; they are, economically speaking, a wasted resource. We all know this intuitively: the unemployed get by; they do not consume much and by definition they are not producing. If they were to be gainfully employed they would consume more because they would be producing. The existence of unemployed workers is thus a loss to society as whole: if they were working more, they could be consuming more and more would be being produced. Not to mention the employed pay taxes rather than drain down tax revenue.

Unemployment is thus a scourge on both the private and public sectors. In the supply side story the solution to unemployment is a basket of prescriptions: lower corporate taxes, reduced labour market rigidities, smaller government, yada yada fish paste.

The War.

In this case the war is the fact that employment leads investment. This not a controversial fact as all stripes of economists from liberal (conservative) to Keynesian (progressive) to Marxists (radical) agree on this fact. Anticipated demand for the output of enterprises is what drives enterprises to invest. The level of employment is one of the best barometers of demand because all things being equal the higher the employment ratio the higher is aggregate consumption which = anticipated demand.

Here then is a paradox. If at the aggregate level demand drives investment but at the micro level investment drives employment how can employment at the macro level drive investment?

In absence of government intervention which directly stimulates demand the economy will remain in a low employment equilibrium. The only other sources of exogenous demand growth are domestic credit and export growth. What we know about domestic credit growth is that Canadian families are already running very high debt to income ratios. So forget about domestic consumer credit growth driving demand. What we also should know is that Canada is running a rather large current account deficit. In fact the last time the current account looked so bad was the 1980s which just happened to be a decade of dismal employment.

Thus Rosy’s declaration of mission accomplished looks exceedingly optimistic. It is quite sad that there is a collective blog dedicated to the Canadian economy in which none attempt to connect the dots of the implications their individual analyses.

Collegiality at the expense of truth: not the first car crash I have seen.

One thought on “Do not Mention the War: Investment, Debt, Employment and the Current Account in Canada

  1. I like to make things simple. I avoid the corporate-friendly, dribble that is aired nightly on mainstream television newscasts. However, I have found that the internet has served as an avenue for certain credible whistleblowers to reach the common layman.

    I compiled a blog titled: “How The World Works – Two Videos” by Bill Woollam
    If you Google search that phrase the material will come up with hyperlinks.

    Confessions of an Economic Hit-Man
    Here is a two minute cartoon explanation narrated by John Perkins, author of “Confessions of an Economic Hit-Man”

    Here is a short interview with John Perkins who discusses his history as an economic hit-man, how the IMF and World Bank control and manipulate the economics of developing nations, how U.S. agents organize revolutions or assassinations of world leaders, and how U.S. corporations and IMF actually run the whole show.

    How it Works
    The recent bank bail-out process reminds me of something I saw in my wife’s Philippine farming community. A group of local businessmen got together and formed a ‘Farm Savings Co-operative’. They encouraged the local farmers to deposit their money in the ‘Savings Co-operative’. Unbeknownst to the hard-working and trusting farmers, the ‘directors of the board’ then proceeded to take out large loans for themselves from the Farm Co-operative bank. These loans were never paid back. These business shysters never intended to pay those debts back. And within four years the ‘Farm Savings Co-operative’, once holding local farmers’ earnings, went bankrupt and closed its doors.

    These global banking shysters seem to have all the angles covered; where profits, loans, and bonuses are personally obtained at the expense of the common taxpayer and working class.

    Chew on the following definition of the International Monetary Fund for awhile.

    “The International Monetary Fund was created in 1944, with a goal to stabilize exchange rates and supervise the reconstruction of the world’s international payment system. Countries contributed to a pool, which could be borrowed from, on a temporary basis, by countries with payment imbalances. (Condon, 2007)”

    I can not help but see the similarities between the local Philippine “Farm Savings Co-operative” and the International Monetary Fund. The Filipino ‘ board of directors’ loaned themselves huge sums of farmer’s monies….just as the IMF board of directors loan ‘friendly’ dictatorships billions of dollars which will never be paid back…monies which are on the shoulders of the citizens of ‘contributing IMF countries’…monies which incur untold debt on unsuspecting citizens of said dictatorships. These monies are extreme debt that has been given the rubber-stamp by the IMF Board of Executives…monies which will be used to build IMF and World Bank affiliated business enterprises – enterprises which displace and disemploy hundreds of thousands of local citizens. The trade off is a handful of industrial, manufacturing, and construction jobs at the cost of a nation’s domestic farming and market industries. All under the misleading term ‘competing globally’. As though global competiveness justifies exploitation of global citizenry and global banking fraud.

    According to John Perkins, former IMF Economic Hit-man; leaders of ‘non-member’ and IMF rubber-stamped dictatorships, who neither need the IMF loans nor wish to accede to World Bank terms, are first economically coerced, then threatened or assassinated, and if that doesn’t work, the US instigates revolution and/or ‘military intervention’.

    At the time dictatorships agree to accept huge IMF loans, they are bound by certain trade conditions. They must agree to these specific conditions or face economic coercion and/or military intervention by NATO or US forces. It is these specific trade conditions which leave the country beholding to World Bank and World Trade Organization policies – policies which bring the country economically to its knees. Local working citizens are then faced with underpriced, imported goods flooding their marketplace. Former local manufacturing and farming industries are replaced with a handful of corporate enterprises. Local citizens soon face increasing taxation where none existed before. Thus, while corporate profits leave the country, hundreds of thousands of locals are left unemployed and exploited.

    How I see ”Mutant Capitalism” has affected Canada.

    Here in Canada, where have the domestic manufacturing, ship-building, value-added lumber mills, and provincial government-owned and operated “Crown” businesses gone in the last 25 years?
    All those enterprises brought high-paying jobs to dedicated Canadian workers. We have either out-sourced the jobs to developing nations, or ‘contracted-out’ those ‘Crown corporations’, thus witnessing lowered wages and exported profits to international CEOs. ‘Competing globally’ has brought unemployment where none existed before. This is what I witness as off-the-grid unemployment. Unemployment that is not reported by Stats Canada. Once unemployment insurance benefits end, the former working class citizen is off-the-grid. Where are the ‘real’ unemployment statistics?

    So when corporate-friendly, nightly newscasts tell us that Canada is recovering economically….I know it is horse-manure…aired to mislead the public.

    When combined Fed/Provincial corporate tax rates have been reduced by both Conservative and Liberal governments over the last 40 years from 50% to 28%, I understand that government revenues have been reduced by over one hundred billion dollars per year …due to those corporate tax cuts. I understand that education and healthcare no longer has the funding it had 40 years ago.

    And I understand that OECD member nations have been lobbied over the years, one member nation at a time, to lower corporate tax rates….Each lobbied nation told to meet those reduced corporate tax rates of other lobbied nations. I know it is a corporate Con. I know we live in a plutocracy….not a democracy. I know that Conservative and Liberal leaderships have sold out to their corporate paymasters. I know we in the West live in a corporate Dictatorship….

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s