Economy

Recession and Resignation

By Ben Bull
Published November 10, 2008

Well, here we go into another recession. Circuit City has filed for bankruptcy and Nortel is cutting 1,300 more jobs while freezing salaries.

While there appears to be little we can do to forestall the loss of many of these jobs - the retail sector, for one, seems poised to take the brunt - I hope our various levels of government will consider some of the more practical remediation measures being proposed.

Infrastructure Spending

The Star editorialized on the weekend that we should kill two birds with one stone during the downturn:

  1. Invest in our infrastructure because it's falling apart; and
  2. Invest in our infrastructure because it will create jobs and keep our money moving.

Let's hope Harper and Co. can come up with a plan during the Premiers meeting today.

Manufacturing assistance

We've blogged about this recently /blog/1137 – surely there is something we can do to hold onto our Manufacturing base? Dalton McGuinty clearly thinks so.

On top of this, I hope we can, as a society, start producing and buying a lot more of our goods locally. This may sometimes be a little more expensive, but if we are OK with pouring our tax dollars into sustaining the economy, then why not more of our disposable income?

Unemployment Benefits

These days, Employment Insurance (EI) is a little meaner than it used to be. According to the Government of Canada:

The basic benefit rate is 55% of your average insured earnings up to a yearly maximum insurable amount of $41,100. This means you can receive a maximum payment of $435 per week. Your EI payment is a taxable income, meaning federal and provincial or territorial, if it applies, taxes will be deducted.

This seems a little low, especially if you live in a high-cost urban center. Perhaps, as we continue to shed jobs over the next year or so, our government can review their get back to work incentives. Speaking from personal experience, it is not easy to find a job when you're struggling to pay for petrol, cover the mortgage and feed your family.

As for the job searching agencies out there, my own job hunt and career planning experience has not been too encouraging. I recall making one appointment, in Hamilton, to get my resume appraised and updated, only to find the office had closed down by the time I turned up.

It seems that if you want to re-train, or maintain your professional status, you have to rely on the old axiom of 'who you know' and network yourself to death. Our governmental job-placement organizations need to have more access and input and knowledge of the professional job market.

Where are we heading?

During the late 1970s and early '80s, I remember watching the UK nightly news and seeing the little map of Britain light up with red triangles for every factory closed. The attitude at that time seemed to be one of resignation and inevitability: "It's a recession," we reasoned, "there's not much we can do. We just have to let it run its course."

I think we see things differently now. Global markets are complicated, and they rely on many factors to make them work (or not), but they are subject to influence. Many of the potential solutions are beyond the scope of my knowledge but I know they are out there.

What is not acceptable is for us to sit back and ask, "what can we do?" in hopelessness as we watch our economy change and slide away. We have to find ways to re-jig our marketplace and get the country working again.

And we should know better than to simply rely on our "leaders" to show us the way.

Ben Bull lives in downtown Toronto. He's been working on a book of short stories for about 10 years now and hopes to be finished tomorrow. He also has a movie blog.

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By Grassroots are the way forward (registered) | Posted November 10, 2008 at 20:04:10

Yes Ben, I think your right, that we should not depend on our leaders, as our leaders have failed us in many ways. Did you catch the article in the globe and mail yesterday. They are saying that there are workers out there that will not qualify for EI, thus leaving them no option but welfare, which is nothing, so one could find themselves homeless in a very short time.

For those earning minimum wage they would entitled to about $770.00 per month of EI before taxes. This does nothing for the person whose rent maybe around $650.00 per month, how do they eat, job search on next to nothing. Nothing to say about the emotional stress and having to deal with the coldness of the system, while you are struggling, there is no empathy.

Government job centers, well to be honest, most the job search initiates out there are run by the not for profits, of which many of these organizations work within the mandates of Workfare and Elect to Work, of which both policies limit worker rights under employment standards. Go check out the workers action center, many horror stories out there. Many of these places will use threats or intimidation tactics as well.

But this is just not about the poor anymore, it is about those in the middle class with their mortgages on their overprice houses and their credit card debt in the ten's of thousands, that are soon going to find out, just how wonder our social safety is.

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By Soybean Mime (anonymous) | Posted November 10, 2008 at 22:07:58

Trying to qualify for EI nowadays is a game of snakes and ladders. I have worked more than half of the previous year and for half of that time at more than twice the minimum wage, yet if laid off tomorrow, I would get less than $400 per month in benefits. The work I performed 6 to 12 months ago counts for squat.

I really have to wonder, if there are alot of people laid off next year, say during the first few months, what in heck are people like me to do? Even early next year I wouldn't qualify to get enough in benefits to pay for rent and food.

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By A Smith (anonymous) | Posted November 10, 2008 at 22:22:37

Ben, if government spending helps the economy, how do you explain the fact that the economy has been getting worse ever since Harper has been in office?

The conservatives have increased non military spending at rates much faster then economic growth and all we have to show for it are more government employees.

In the mid to late nineties, government spending was restricted in order to shrink the deficit and curiously enough, the economy took off. Why can't we do the same today?

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By Grassroots are the way forward (registered) | Posted November 10, 2008 at 23:14:43

A Smith: Please identify the areas of non miltary increased spending?

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By Rusty (registered) - website | Posted November 11, 2008 at 11:54:08

A Smith,

Why do we have to assume that there is a cause and effect between overall government spending and economic growth? If only life were that simple...

I doubt that any useful analysis has been done to make a correlation between SPECIFIC (you can't juts lump all spending together) forms of government spending and economic growth in related areas. If we want to make this kind of anaysis we have to get specific - i.e. what investments were made in the auto sector for a period, and what returns were made. And even then the analysis of those stats would need to be completed carefully - there are so many factors at play.

As I have written about before (in relation to a government funded career planning course I took), the government does not appear to conduct a lot of research into it's various schemes. Government spending, to the regular Joe Public at least, really is a big black hole. Who knows what has worked and what hasn't?

I think your logic is way too simplistic, and too selective. Does your theory apply to other governments over the years? Does it apply to other countries?

If we want to get into spending versus prosperity analysis then we need to get into the nitty gritty. Some spending works and some doesn't - we just need to work out which is which.

Cheers

Ben

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By A Smith (anonymous) | Posted November 11, 2008 at 15:27:04

Rusty, I can't prove that increasing government spending causes slowdowns (even though the numbers point to a strong correlation), but you can't prove that it brings about recoveries.

We are both going on what we "feel" is the best course of action.

However, I believe everything in life is about balance. Therefore, the more people rely on government to help them, the more the universe counters this intention.

When government treats the people poorly, the universe counters this with a great economy.

How else do you explain the fact that as tax rates have fallen, tax collections have risen. This seems counterintuitive and yet the numbers show this to be the case.

Think about Hong Kong and Singapore, both countries with extremely low import tariffs and yet both have dynamic, fast growing economies.

In fact, even though Singapore's GDP (nominal US dollars) is listed at $162 Billion in 2007, imports come in at $252 Billion, while exports are $303 Billion. By allowing themselves to be weak, Singapore has helped other countries to prosper. The universe recognizes this and returns the favour in kind.

If complexity is the metric we use for proof of concept, then kindness and charity have no place in this world. If you believe this to be the case (which I don't), then nothing any of us does matters anyways, since the answers to our problems are too complex to understand.

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By Ryan (registered) - website | Posted November 11, 2008 at 17:07:02

A Smith wrote:

the more people rely on government to help them, the more the universe counters this intention.

A Smith, your mystical economics never gets old. Step aside, neoclassicalism, and make way for pantheism.

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By A Smith (anonymous) | Posted November 11, 2008 at 23:29:08

Grassroots, in the past year, real GDP has grown by 0.7%, while government expenditure on goods and services has grown 5.1% and government fixed capital investment (infrastructure) has grown by 5.9%.

The government has not released its public accounts for 2008 yet, but from 2006 to 2007, the growth in spending was for transfers and increasing the size of government ministries ( Health, Revenue, Public Works, Public Safety).

If government would limit their spending increases to population growth plus inflation, the country would still have the level of government services it does today, but the private sector would be allowed to take a stronger role in shaping our economy.

I believe that the private sector, because it has to compete, is better at allocating resources and creating the good paying jobs we used to have.

Keep in mind that when the economy was creating the middle class, government's share of the economy was much smaller than it is today.

I guess we can't have it both ways, either we choose growth, which means limiting the role of government in the economy, or we ask government to do everything for us and kiss the good paying jobs goodbye.

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By Grassroots are the way forward (registered) | Posted November 12, 2008 at 08:27:26

A Smith: Question: you are saying that the growth in spending was for transfers and increasing the size of government ministries, could you define what that breakdown would be?

Has the increase in spending due to the grunt jobs or is it the top echelons of government/business?

To be honest I see something else going on but that is my perspective. I believe in a greater role from the grassroots, the people, to challenge the system.

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By A Smith (anonymous) | Posted November 12, 2008 at 12:03:23

Grassroots, transfers reflect OAS benefits, spousal benefits, health and welfare (to the provinces), children's benefits and other (whatever that means).

The children's benefit, as an example, grew 21.7% from Mar 2006 to Mar 2007.

This payment, intended to help low income families, appears completely appropriate for a caring and just nation.

However, what if that money was better left in the hands of the private sector, resulting in higher paying jobs for workers.

I think most people would rather take a high paying , high productivity job over a cheque from the government.

Unfortunately, nobody ever frames the argument in this manner. People seem to think that government can give them money, while not realizing that diminishing the private sector will result in a less robust private sector and reduced job prospects.

Since 2005, public sector employment has grown at 2% per year, double the rate of population growth.

These jobs, which are well paying jobs, take workers from the private sector and have them work at tasks that are not measured by what they produce in output. There is no way of knowing how productive these workers are, because there is no measurable output, since there are no prices for goods the government produces, they are simply given away.

Think about public school teachers for a moment, how much has their productivity increased over the years? I would argue that they have become less productive. If it now takes one teacher for every 25 students, whereas they used to be able to teach 30 or more, something is wrong.

If publicly delivered education was abolished and replaced by education vouchers, parents could choose amongst any number of competing schools. This competition for voucher money would ensure that schools that produced the highest quality education, in the most cost effective manner, would rise to the top.

Moreover, in order to produce more output with less input, schools would likely utilize much more technology than they do today. This is a good thing and it is also the reason why most of us don't live and work on a farm.

If government's job is to ensure that people have a fair chance in life to get ahead, then I can accept that.

However, this does not mean that government needs to monopolize large segments of the economy (health, education. If government truly is doing a great job, as they say they are, then competition should not be an issue.

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By Grassroots are the way forward (registered) | Posted November 12, 2008 at 23:10:21

A Smith: Did not the Harper government set in motion the policy of the $100.00 per month child care cost, instead of a national day care system? Would this be your increase?

Now let's look at the new Ontario Child Benefit, of which I have gone to a couple public forums. With this new child benefit, they will be receiving less in a month, then the old system. So for a single parent, they will see about $6.00 decrease on the OW cheque, and has lost the winter clothing allowance and back to school allowance. The system is telling these people they need to learn how to budget, when in reality you are living on a subsistant amount and a system that does not really help the individual. Look at it this way, for that same single parent, who picks up a minimum wage, parttime job, the worker is penalized by Ontario Works, 100% of earnings for the first three months, after three months it is 50% penalty.

Sure public sector has grown but I think if you really looked at that, you would find that job creation has been more on the top levels. Many of the menial jobs have been outsourced to the not for profits, which surprise, surprise, most of them are covered under union contract. The system has layers and layers, that you do not know about, unless you go through the system.

Today,we see in the spec, that HHS is going to lay off 500 people, of course, it is the frontline workers that lose and not the deadweight at the top.

Education: Yes, well this is an issue isn't it. I think that they are many good people in this field but between the confines of management and union, well, what can one say. I went to a poverty forum where an educator was giving a lecture. This person gave a very good lecture on the perspective of poverty within the education system. I think this perspective goes beyond that but if a child comes from a poor neighbourhood, the current system or attitude is one that well they will not excel, so the curriculum is set to one that does not expect high results. When asked how to change this, the speaker had no answer. Well I think this person knew the answer but the hierarchical system does not allow for freedom of though or expression to make things better. Should education only be based on ensuring that those that will rise to the top or does it ahve a greater social side to teach other skills, more basic, old skills, as well. Lets be realistic, not everyone is meant for higher education, acadenmia.

While technology is good in one sense, I wonder, is not food a number one priority for survival?

I think that you are calling for more privatization of services, yet a lot of the issues are around the lack of accountability to the people. I think some things should not be left in the hands of private markets. From a grassroots perspective, we should be challenging everything right now.

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By A Smith (anonymous) | Posted November 14, 2008 at 00:10:49

Grassroots, I hear what you are saying regarding government's poor attempts at helping poor people, I just don't believe it.

Nobody in this country over the age of 18 is entitled to anything that they have not worked for.

Moreover, the universe is set up in such a way so as to ensure that it is impossible to receive something for free.

As an example, when someone takes drugs to escape their pain, or simply to feel really good, we all know that there are negative consequences that follow.

Conversely, when people exercise, which is a form of work/suffering, their body spits out opiates to help soothe the pain.

However, because the athlete is willing to suffer first, there is zero negative side effects to the body's opiate production. They have earned the right to feel good.

The same rules apply to poor people. If they receive money from the government, but refuse to put in the work that the universe requires to keep the balance, they will suffer negative consequences.

Nothing will stop this, because the rules of balance/karma apply to everyone, at all times.

If all of this sounds like bad news, keep in mind that balance works both ways. Therefore, if poor people want to help themselves, all they have to do is start doing the opposite, help others.

Failure to help other groups, not just other poor people, will guarantee they stay poor. However, if they can spread their goodwill to their enemy, the rich and the evil corporation, they will be rewarded with expanding opportunities.

Like it says in Proverbs 25:21,22...If your enemy is hungry, give him food to eat. And if he is thirsty, give him water to drink; For you will heap burning coals on his head, And the LORD will reward you.

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By Grassroots are the way forward (registered) | Posted November 15, 2008 at 10:43:01

A Smith: What is it that you do not believe? Or is it that you choose not to believe?

Have you ever watched the film, The Corporation? Corporations were initially formed for the public good but after the civil war in the US, and the adoption of the 14th amendment, history shows us that it was corporations that mostly filed under this amendment, thus what we have today, is that a corporation basically has more rights then people do. They are not held accountable for anything that they do.

Your words are inane, as it is that corporate entities that call for the cutbacks in social services, look at the Chamber of Commerce and the article posted in the spec last spring, calling for all kinds of cutbacks.

I find in quite upsetting to have a fee based organziation, whose voice holds more weight then those of the people it directly affects. There is no balance, so yes, it will be karma, that will come back to bit them in the butt.

Too bad you do not practise what you preach, but then what can we expect from those like yourself. So if the enemy is the poor, why not give them food, water, shelter, the means to survive. In your world it is only the poor that must give, not those rich.

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By A Smith (anonymous) | Posted November 15, 2008 at 20:29:51

Grassroots, when did I say the poor was the enemy? Never.

What I actually said was in reference to your comments about the elite in Canada being enemies of the poor. Furthermore, I referenced a passage from the bible that talks about how to deal with your enemy, which differs markedly from the techniques you have been using.

Whereas you feel that leveraging the force of the government is your best tactic to re balance the income gap, I suggest you shower your enemies (the rich) with goodwill, much like they are doing to the poor today.

As soon as you embrace kindness as your weapon of choice, you will begin to help the poor. However, if you insist on attacking the rich, all you will be doing is spinning your wheels.

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By Astonished (anonymous) | Posted November 23, 2008 at 04:17:05

A Smith the rich are the cause of the recession. The rich who took millions in unearned bonuses, who robbed pension plans and travel by Lear jet to hold out their begging cups, what does the Bible say about that. I suggest that you place the Bible on the same bookshelf as Alice in Wonderland and Little Red Riding Hood and then come to terms with rallity. The worker who has spent his life making a company profitable often for a pittance in companies like WAL-MART or in decent paying jobs like Dofasco faces the same misery when their jobs disappear, caused by the greed of others, and compensation must be made available. The real welfare bums are still in the boardrooms, no doubt reading their Bible.

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