Stapled to the Front Door: Neoliberal Extractivism In Canada

I wrote this article a couple of years ago and it was published in Studies in Political Economy.  The article came out of a conference presentation I made at conference in Ottawa on Canada’s Development Model: Beyond Extraction which was co-organized by MiningWatch and Studies in Political Economy.  A PDF of the slides I used during the presentation can be found here and the audio can be found here (23 min mark).  My sense of it was that Bob Lovelace’s presentation was one of the most powerful presentations that I have seen to date.

Abstract

This article discusses several aspects of the reliance in the Canadian economy on the natural resource extraction (NRE) industries. The NRE sector illustrates the dual nature of Canadian capital in a global context. The intensification of resource extraction is associated with an increase in inequality along several vectors. These increases in inequality, however, cannot be decoupled from the institutionalization of neoliberal policies at both the federal and provincial levels over the last 30 years.

Varieties of Capitalism: A Critique

Abstract

The Varieties of Capitalism (VoC) has become the dominant approach in comparative political economy and enjoys wide application and attention in disciplines outside of political science and sociology. Indeed the VoC approach has enjoyed much attention in comparative industrial/employment relations (IR). This article undertakes a critical evaluation of the importation of the VoC paradigm into comparative IR. Inter alia, it is argued that the VoC approach, as it is presently configured, may have little to teach IR scholars because its basic theoretical concepts and methodological priors militate against accounting for change. This article begins with a summary of the routine problems researchers in comparative political economy and comparative IR have encountered when attempting to account for change within the constraints of the VoC paradigm. Here the focus is on the limitations imposed when privileging the national scale and the problems engendered by a heavy reliance on comparative statics methodology infused with the concepts of equilibrium and exogenous shocks. The article then goes beyond these routinely recognized limitations and argues that the importation of terminology from neoclassical economic theory, of which the original VoC statement makes foundational reference, further serves to constrain and add confusion to the comparative enterprise; namely, comparative advantage, Oliver Williamson’s neoclassical theory of the firm, the use of the distinction made between (im)perfect market competition in neoclassical economics and the fuzzy distinction made between firms, markets and networks.In the concluding section we argue that the VoC’s narrow focus on the firm and its coordination problems serve to legitimate IRs traditional narrow focus on labour management relations and the pride of place that HRM now enjoys in the remaining IR departments. Ultimately, however, the embrace of the VoC paradigm by comparative IR is a net negative normative move.

The full article can be found here

Krugman clarifies: modern Keynesians are no planners.

“I do think it’s useful to read Keynes. But Greg is right: modern Keynesianism is to be understood through the views of modern Keynesians, not by hunting through the original works for hidden meanings.

And modern Keynesians are emphatically not advocates of central planning…“

Uncontroversial and totally right as long as we do not go Austrian and include price setting as central planning. Indeed some version of this is what libertarian critiques of central banking amount to.

Just who are Paul Krugman’s people? And a side dish of MMT

I know Paul thought he was just being relaxed. Moses knows we all have a right to relax de temps en temps but it is a really remarkable slippage. In his latest post he writes:

So: I basically think of asset prices in a Tobin-type stock equilibrium framework (pdf). People make portfolio choices, allocating their wealth among bonds, stocks, etc.. Asset prices – including the famous “q” – rise and fall to match these portfolio choices to the actual asset supplies (emphasis added).

I have never been able to get past the basic misrepresentations of reality that are hard wired into (liberal: both reform and conservative) economists heads. How can a social science do such a violent abstraction? People in general do not allocate their assets into portfolios. I imagine Paul does, as I imagine some retires who do not have retirement plans but nonetheless who have saved must. But these are fleetingly small group of asset allocators. The vast majority of asset allocation is done by a special class of people who work in the FIRE sector for large institutions which in turn attempt to maximize (beat/achieve the average) by any and all means necessary. If there is a mismatch between assets demanded and assets supplied it has nothing much to do with people.

Now none of this really has much to do with Krugman’s post. But it is still incredibly annoying.

At the end of his post Krugman drops this bomb:

Update: Also, if you think that US interest rates are being held down by the fact that in some sense the Treasury hasn’t had to go to the market lately, since the Fed is buying debt — although the Fed isn’t actually buying it direct from Treasury — consider the case of Greeece (sic). Greece isn’t going to the market at all these days, since it’s getting all its funding from the bailout package. That hasn’t stopped the 10-year interest rate on its outstanding debt from reflecting investors’ perception of its underlying solvency:

This is just weird. Paul himself has noted that you just can’t compare Greece to the US–EVER–period. The Greeks do not have currency sovereignty. For all intents and purposes Greece is a province of the EMU. California can go broke the US can’t. Now politically the US federal government can be forced to go marked to market and normally they are but they do not have to as it is a self imposed constraint. That is not to say that there are not consequences to refusing to abide by this solemn constraint it is just to say the US ain’t Greece no matter how many e’s you put in it.

Update: Yes PK is of course right even if the analogy is bad. The point of my post was that loose talk and poorly thought out analogies lead people to think un-rigorously. Specific type of people do asset allocation. California and Greece cand be compared because they are both wards of a larger monetary union. The point is crucial because the discourse on deficits is completely confused at this point and just down right wacky in the US.

The Problem with Africans and Arabs

April update. This blog post was turned into a full article. Published here: http://www.pambazuka.org/en/category/features/71735

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The way the term Arab is being thrown around these days is enough to give a person reason to pause while celebrating the victories of the people of Tunisia, Egypt and Libya. After all, in the present revolutionary context in North Africa there has been a deliberate effort to erase the fact that Libya, Tunisia and Egypt are all continental African countries. Moreover, to call one’s self Black or African or Arab is to use identity markers that are not indigenous to Africans or even the vast majority of people we now call Arab. The question then is who uses these identities and when? No doubt, mobilizing these identities can be useful for making certain kinds of political claims that advance the needs of African and Arab peoples (pan-Africanism, the Arab league etc). But still, we need to always ask for whom is this mobilization happening.

Cutting off the historical ties between so called Arabs and so called Africans (by which we mean black people, as if those kinds of people are easily identifiable) is a trick of Orientalist historiography (in the way Edward Said uses the term). And investigating the problem of Orientalist methodology is not just about raising the bogeyman of identity politics, rather what ends up happening is that Orientalist methods are often blindly adopted to conceal the multiple historical, political, and economic ties that connect so called black people to browner looking people. For example, Yemenie ancient and contemporary history has deep connections with Somalis, Eritreans and Ethiopians across the Red Sea (20 km),  but the way the story gets told you would think Yemen was closer to Libya, and that the West Side of the Red Sea could be skipped in any story about Arabs. I would venture to say this is ridiculous. And I really don’t think we should accept Orientalist methods when thinking about what is an Arab or an African.

In fact niether Arab identity or black identity is self-evident. Instead, the parameters of identity are negotiated and connected to multiple political and economic processes. We need to be vigilant about how identity is produced as a sediment of various political, economic and social processes and not simply assert it as something given. That can only sound defensive and silly. The fact of the matter is that Egypt as a modern nation-state is deeply connected to the developmental ambitions and contradictions set in play by Mohammed Ali and his off spring, who were the first non-western leaders who really tried to catch up with the industrialised West. But because his project was intimately tied to Sudan, chattel slavery, and cotton production, one cannot separate the developmental trajectories of Egypt from its larger continental African connection and questions of race. After all, from the late 19th century until the mid-1950’s Sudan and Egypt were run as one country. It was Nasser’s revolution that really brought an end to Anglo-Egyptian rule in Sudan. In fact Nasser’s regime was an attempt to resolve the contradiction of the developmental trajectories set in place by Mohammed Ali, Ali’s off spring and their Anglo-Egyptian condominium; the promise of nationalism, of course being that you could democratize development on behalf of the nation’s people. But as such, Egyptian independence was always tied to a very ambivalent relationship to Sudan and vice-versa. On the other hand, Sadat and Mubarak are failed attempts at speaking to these very same developmental patterns that have historical roots. So, we need to be cognizant of how those developmental trajectories map onto notions of race, and regionalism, because it tells us much about how social and political contradictions are resolved. Egypt’s African developmental trajectories also need to be seriously thought through if this present revolution is not going to simply sink back into neo-liberal hell. After all the revolution in present day Egypt signals the failure of post-colonial arrangements, but it also signals the failure of a 3rd world project that Nasser articulated in tandem with the Nkrumah(s), and the Tito(s), etc. Partly this project failed because it was elitist, but more importantly that elitism failed to interrogate national developmental trajectories and to build a truly inclusive popular nationalism (as our friend Franz Fanon might say).

In the case of Libya, then, we should be aware that Ghadaffi was a major player in African politics. So much so that he nearly convinced the African Union to move the seat of the organization to Libya. But again his involvement in politics was not just symbolic, Ghadaffi’s money and weapons are involved in nearly every major conflict on the continent from Sierre-Leone (whose rebels were known to consult the Green book) to the conflicts in Chad and Sudan. The political-economy of Libya is also such that it relies on the importation of large amounts of migrant labourers from the African continent as well as South Asia. Historically, of course, Tripoli was also an important destination in the trans-saharan trade routes (whose starting point lie in the forest regions of “darkest” Africa) bringing important trading goods to Libya that were then exported to the Mediterranean world and beyond. These historical ties are what Ghadaffi himself has mobilized in justification for why the AU should be based in Libya. In contrast to this we have been led to believe that there is a yawning gap between “black” mercenaries and the rest of civilized Libya. But, the claim about the use of black African mercenaries should be viewed with caution. After all, the constitution of Libya outside of an African context is an orientalist fallacy (and fantasy) that obscures the real histories of these places and can only play to a violently racist hand.

A few nights ago someone suggested to me that what tied Arabs together was a shared language and culture.  But spoken Arabic is not always intelligible to other Arabic speakers. In Oman, Yemen, Egypt, Sudan, Tunisia other linguistic practices exist which help form the locally spoken Arabic, but also remind us of other kinds of historical and cultural connections that make up these places (too diverse and complicated to get into now). I also remember being schooled by an Egyptian in Cairo, about why Egyptians are not Arabs. So again, I would venture to say things are complicated and this is not just a matter of identity politics. Instead, it seems that the afro-centrics speak a kernel of truth when they state that present historical methods tend to elide the myriad Afro-Arab connections. However, because the Afro-centrics refuse to periodize their claims, and because they make sweeping statements they end up projecting American history on to the rest of the world. Can we really accept the claim that so-called Arabs are inherently racist towards Black people? Yet, just because such a claim seems implausible it should not make it easy for us to dismiss the point that we need to pay attention to the way race has been operationalized in the framing of the present North African revolutions.

Indeed, because I don’t want to go afro-centric, I think it is better if we do some better dialectical thinking. So, while I would suggest that we need to not rewrite the history of the world as a footnote to America’s cultural wars, at the same time, we need to see that the rest of the world has increasingly come to see itself in highly racialised terms. This too needs to be explained (and only political-economy can explain it). But for now we also need to take seriously the kernel of protest and truth that the afro-centric folks speak about and build on it. Race does lie at the heart of many of these so called Arab revolutions in very complicated ways. Let’s not sweep this under the carpet in the name of self-righteous indignation or else we will add one more substantive reason for why these revolutions might come to nought.

Elleni Centime Zeleke
Adjunct Lecturer
African Studies
York University

Two paradoxes. Why?

Why am I thinking about the paradox of thrift and the paradox of production costs?

Big Lie of 2010 No. 9: We are all middle class

Canadians like to think of themselves as middle class. Notice the fan fare attached to the release of Hulchanski’s and co. study on the trend toward the hollowing out of the middle class.

I had always thought the term “middle class” a little pedantic in light conversation and of dubious merit in an academic setting as it was just too broad of a descriptor–a hanging signifier if I may be permitted–a choose your own adventure work of fiction if you will. But its neo-Weberian pedigree with its black mould like grip on the bulk of the Canadian intelligentsia has ensured that it remains the ontological “work-horse”, plotting along in the back of most educated Canadians self understanding. It never fit the facts (that is indeed why term kept on stretching: plumbing lower then floating higher). Like the statue of liberty and its vacant promise of equal refuge to all, the term is above all an ideological and not a scientific category which expands as needs be with the comfort of the academic’s good conscious.

The big lie then (No. 9) is not that somehow we have finally discovered that the last thirty years have been very unequal. Indeed we knew this; and we know this. No the big lie is not about inequality and the crystal meth that neoliberalism is to that trajectory,but, rather, it is the attempt, by otherwise reputable economists, to paper it over by trying to claim that in fact the great divide is not between those who work for capital and capitalists but between age classes of workers; i.e., workers and retired workers, with the latter being conceptualized as the capitalist class. The degree of dishonesty here is on par with the regular reality defying dissembling of the Fraser Institute.

The idea that wealth disparity is largely a function of age is nothing less than an attempt to paper-over the basic divide between those who work for someone else and those that employ others.

It is all fine and dandy if you want to try to paper this reality over with the idea that the real economic cleavage is between workers earning present wages and workers drawing down differed wages. The problem is that to make this argument the case would have to be, to quote myself from elsewhere that:

“All financial assets WERE somewhere around GINI = 0 AND WERE concentrated in the the generational cohort of say 60 +.

I was also thinking that IF air-planes did not fly but rather traversed the earth on round pneumatic devices they might more properly be called buses.”

However, the need of respectable economists to reduce us all to middle class is as much a Weberian as an Austrian hangover which in terms of intellectual history should not be all that surprising. The term middle class has long been a sop to a faux egalitarianism that attempts to sweep away real class divisions by throwing everyone into the same sink and calling everyone a dirty dish.

On this score I will take Conrad Black’s antiquarian hooliganism over earnest but nonetheless dissembling simplifying assumptions.

At least with the Canard I know exactly why I am not invited to the table: in Conrad’s house the Doctors came in through the servants entrance.

How positively upper middle class of him?

David Henderson makes one good point on Canada’s budget triumph

Note, if you are pressed for time just scroll to the last paragraph for the punch-line.

Seems like everyone is picking on poor David Henderson of GMU for his working paper Canada’s budget triumph. The thrust of the paper is that Paul Martin Jr’s 1996 budget proves that through austerity you can spur economic growth. Or simply stated, that austerity = stimulus. As Stephen Gordon–and Stephen is no pinko progressive–pointed out, the paper is disingenuous in two major respects.

First, private sector employment had already recovered by 1996. And second, interest rates had fallen nearly 9% from the onset of the recession prior to the 1995-96 budget. This in and of itself probably helps explain why private sector employment had recovered prior to the 95-96 austerity budget. As Stephen also points out interest rates would fall another 500 basis points after the austerity budget to their lowest level in living memory (exaggeration but close given what counts for memory these days). The culmination of which was a massive depreciation in the CAD dollar such that Canadian exporters got a 10% boost in their competitiveness without having to lift an eyebrow. The bottom line is this: Henderson’s paper is wrong because the austerity budget came after the recovery had well begun in Canada and was further helped along by interest rate cuts and a depreciating dollar.

What Stephen does not explicitly remark on unfortunately–although he does implicitly by including public sector employment in his graph–is that the austerity budget and the cuts to the public sector contained inter alia helped keep labour markets very depressed. Indeed, it would take nearly 8 years for unemployment to drop to its post recession levels.

Paul Krugman picks up on Stephens remarks over at his blog which is fitting given that Henderson specifically tries to link the Canadian experience of 1996 to current American problems. As both Stephen and Paul point out the two simply are not amenable: private employment is not back to its pre-recession levels and the FED has no more room to reduce interest rates. It was a little disheartening that neither Stephen nor Paul chose to ask the question if the 1996 austerity budget nonetheless fit with the Canada of today. That is a more interesting question; namely, will austerity today produce the same results as it did (not) back in the mid 90s. My answer would be no for the following reasons.

Canada has been witness to a steady appreciation of its dollar. This means that much of the capacity in the manufacturing export sector is likely not coming back. To the extent that commodity exports will continue to thrive is of little importance from a labour market point of view because as pointed out in a previous post these sectors are employment lean sectors. That is, you need a 5 % increase in total value added, just to get one percent of growth in employment. So unless agriculture fishing and forestry are driving the commodity exports then resources are not going to make up for the loss of manufacturing jobs.

Second, and related to the first. Commodity markets are relatively strong (that is prices are high). This was not the case back in the 90s. Interest rates are already very low (1%) so there is not much stimulus to be gained there either and the BOC is not talking about funky QE tricks either (which probably would not work anyway). The implication on interest rates is doubly bad news for Canada. Not only is there not much room to cut rates, not much evidence to suggest it would but but there is also thus no instrument (politically viable that is) to depreciate the CDN dollar. The Canadian dollar is thus out of the stimulus picture as well.

The Canadian austerians, from the Federal government (and members of the loyal opposition), to the provincial governments, down to the op-ed pages of the Globe and Mail are busy clamouring for both tax cuts and fiscal austerity. And it looks like the corporate tax cuts are a done deal.

And this brings me to the one thing Henderson got right in his paper (pp17-19) but Stephen and Paul failed to note. Namely, Martin RAISED taxes including corporate and capital gains taxes but not personal income taxes in the 93 and 94 budgets. So I guess you can raise taxes on capital and not retard private sector employment growth. Who knew?

Energy and mining: employment lean and dirty

Now do not get me wrong I am all for job growth especially good jobs that pay above average salaries but is Canada’s current hegemonic accumulation strategy (HAS) of a resource hinterland with a financial hub really the way forward? In the graph below I plot the employment intensity (or employment richness) of the major sectors of the Canadian economy.

Notice that Mining, Energy production, and power and water supply are the least employment intense of the major sectors. For example mining and energy production taken together accounted for nearly 19% of total value added (VA) in the Canadian economy but only a paltry .16% of employment in 2005. In case you are wondering the economy wide average ratio *including* these sectors is 1 %VA = .8 % employment. Exclude these sectors and the economy wide ratio would be even closer to parity.

However there are significant reasons outside of employment to doubt the current HAS. As Marc Lee points out in a recently published paper by the CCPA co written with Ken Carlaw, an economist at UBC-Okanagan, called Climate Justice, Green Jobs and Sustainable Production in BC, not only are mining and energy anaemic job creating sectors they are among the most environmentally unsustainable.

For a brief on Marc and Ken’s paper click here

UPDATE: Tom Walker has pointed out that perhaps the whole conversation on unemployment and the environment should probably shift to an adult conversation on work time reduction. I agree. See the comments section at the link to Marc’s post above.

When youth and enthusiasm defeats old age and tyranny

It was a calm evening. The youth were looking for revenge after untold years of humiliation at the hands of their betters. They assembled on mass with all their gear: ready to go to war. They had thought long and hard about what they hoped would be their night. The professors were given 48 hours notice that the match would take place Monday evening on the hollowed grounds of the Rouge et Or. When the professors took to the field it was clear that their inferiors had out-foxed them. 24 students stood on the opposing side and the professors only numbered 8. The rules of engagement were established: there would be no half time and unlimited substitutions.

The whistle blew and the battle was on. Initially the professors would take the initiate running up the score 4-1 in their favour but as the evening wore on and one relenting wave of fresh legged students replaced the other every 15 minutes youth and enthusiasm would slowly start to dominate old age and tyranny. Psychologically the professors were quite unprepared for the evening: how does one face down one relenting wave after another of fresh legged undergraduates? When the facts set in; namely that you are rock and the opposition is all the natural forces of erosion all one can do is try to absorb force.

After an hour and a half of play the professors would lay fallen 6-5.

Personally I was proud of our students. Knowingly or not, they had finally figured out that inferiors when superior in number and with solidarity can win.

That is when youth and enthusiasm defeats old age and tyranny