Sustainable economy: Salvation gets cheap

Paul Krugman wrote an important column on the economy and environmental sustainability titled, Salvation gets cheap.

This is based on the IPCC’s recent report that suggests a green technological revolution is happening, especially in solar energy which has dropped 75% since 2008.

Sustainable market economy

Krugman debunks the fallacy that economic growth is tied to pollution and resource extraction.

Fact is, it’s possible to have an economy that is based 100% on renewable energy and recyclable materials. We just need to develop the right government regulations.

Under such an economy, we can have indefinite economic growth (increasing individual wealth) without any adverse effects.

Centrist system

What’s required is the centrist, Keynesian economic system we used in the post-WW2 era.

It works in two ways: first “big government” spending on infrastructure projects and social programs creates jobs and redistributes wealth so all segments of society benefit from GDP growth (wealth creation) and productivity growth (machines doing more of the work.)

Second, strong regulations and infrastructure spending on green energy projects and mass transit make the economy increasingly sustainable.

Free-market nihilism

The real threat to humanity is the right-wing, free-market ideology that has plagued us over the past 30 years. It’s based on economic anarchy: that is, people acting on greed and self-interest somehow balances itself out. This nihilist philosophy is not only self-serving, it’s self-destructive.

Conclusion

In order for society to act responsibly we need the right economic system to govern our mass behaviors. The centrist Keynesian system gives us the right tools to clean up our act while preserving our democratic freedoms.

Krugman

Other things equal, more G.D.P. [economic growth] tends to mean more pollution. ... But other things don’t have to be equal. There’s no necessary one-to-one relationship between growth and pollution.

People on both the left and the right often fail to understand this point. ... On the left, you sometimes find environmentalists asserting that to save the planet we must give up on the idea of an ever-growing economy; on the right, you often find assertions that any attempt to limit pollution will have devastating impacts on growth. But there’s no reason we can’t become richer while reducing our impact on the environment. ...

The sensible position ... has always been that ... if we give corporations and individuals an incentive to reduce greenhouse gas emissions, they will respond.

So is the climate threat solved? Well, it should be. The science is solid; the technology is there; the economics look far more favorable than anyone expected. All that stands in the way of saving the planet is a combination of ignorance, prejudice and vested interests.

In 2015, let’s make Canada Harper-proof!

Most Canadians appalled by the Harper Government don’t realize that this is just the beginning. Since 1935, the only times the conservative vote was united was during the reigns of Mulroney and Harper.

Before Mulroney, the conservative vote was split between the PC and Social Credit parties; after Mulroney and before Harper, between PC and Reform.

Natural governing party

So unless the Wildrose party goes federal, the Conservative party is Canada’s natural governing party.

And while Harper had a hard time getting moderate conservatives to vote for him, if Jim Prentice becomes leader, he could easily put together back-to-back majorities like Mulroney. The fact is the total conservative vote is 40%, and a fake majority is only 39%.

Small window of opportunity

In 2015, we will have a small window of opportunity to fix our broken voting system. Odds are the opposition will form a minority government. If we fail to take action, the Cons will likely be back in power for another decade as early as 2017.

Two kinds of voting reform

There are two ways to reform our voting system.

1. Proportional Representation: ensures parties get the same percent of seats they got in votes.

2. Ranked ballot voting: makes MPs earn their seats with a majority. This stops vote splitting and guarantees “Anyone But Con” voting.

If we had either system, odds are Harper never would’ve came to power.

Let Canadians choose

The only way to succeed in voting reform is to let Canadians decide: that is, with a three-way referendum.

We need to put all three options on the ballot — PR, RBV and our existing system First-Past-the-Post. Then hold a runoff vote (with the top two options) to ensure one option is chosen by a majority of Canadians.

(We can also put all three PR systems on the ballot to be chosen the same way: party list, Mixed-Member Proportional and Single Transferable Vote.)

Failed two-option referendums

If we let a citizens’ assembly choose for us, the choice is certain to be rejected by voters like it was in 4 provincial PR referendums.

It takes democracy, to get democracy. It is self-defeating attempting to foist one’s preferred voting system on Canadians.

Leading party means nothing in a democracy

Canadians tend to view elections like horse races. The leading horse wins the race and has the right to power.

Of course, what this impression leaves out is the fact that political parties arbitrarily divide the political spectrum.

So should a united left-leaning party have an advantage over a divided right? Should a united right-leaning party have an advantage over a divided left? Either way is senseless.

Majority rule — real and imagined

The next thing to take into consideration is that democracy means rule by the people. The will of the people is determined by a majority vote.

In Canada we often dole out 4-year dictatorships to 40% minority parties and call it a “majority.” But in reality, it is the opposite of a majority and the opposite of democracy — because the actual majority gets excluded from government.

No special privilege

In the rest of the developed world, the party that represents the largest block of voters gets no unearned advantage or special privilege.

In Australia, for example, there is one left-leaning party and 4 right-leaning parties. If they used our primitive voting system, First-Past-the-Post, the left-leaning party would win perpetual “majority” governments.

But they upgraded their voting system — actually a century ago — so voters would decide which party (or parties) govern, not foolishness.

Voting reform or bust

So unless you want the Conservative party to have a huge unearned advantage and change Canada beyond recognition, voting reform should be your top priority.

Unless we fix our mess of a democracy in 2015, that’s exactly what’s going to happen.

Latest polling results

According to ThreeHundredEight.com:

Based on these seat projections, if Canada was a democracy, the Liberals and NDP would form a multi-party majority government that would serve out the entire 4-year term.

But because we have a horse race instead of a democracy, the Cons would get the first shot at forming the government. If they failed, the Liberals could try to hobble together an unstable “minority” government that would fall apart in 2 to 3 years.

It’s time to chose real democracy. Either proportional representation or ranked ballot voting will put an end to the foolishness. It will also stop the Cons from winning dozens of opposition ridings due to vote splitting.

Canada's senate completes the perfect farce

Most people’s understanding of the senate is second-hand knowledge. They believe it plays an important role in the legislative process providing much-needed “sober second thought.” But nothing could be further from the truth.

Aristocratic veto

When John A MacDonald coined the phrase back in the 19th century, democracy was still in its infancy. (Check our Lincoln’s Gettysburg Address written around the same time.) What most people don’t realize is that he was saying upper-class aristocrats should have a veto over democratic legislation — to keep the unruly masses from getting too unruly.

That’s why senators were appointed, instead of being elected. (Why people think appointing senators is a good idea today is anyone’s guess…)

From aristocrats to partisan hacks

But after WW2 — a war where many Canadians gave their lives fighting for democracy — an aristocratic senate no longer had a place. That’s when the senate took on its modern form: an institution polluted with partisan patronage appointments, making it the most corrupt democratic institution in the developed world.

Real work of reviewing legislation

The real work of reviewing legislation is done in Commons committees by politicians put there by voters. The only thing wrong with this process is that we absurdly dole 4-year dictatorships to arbitrary minority parties who can bully and overrule committees.

This is because we still have a primitive 19th century voting system — where as developed countries ensure an actual majority of voters is represented in government (i.e., literal democracy.)

Broken watch

The senate, of course, does not remedy this situation any (unless you think a broken watch is useful because it tells the right time twice a day.) It is arbitrary itself.

Liberal and Conservative prime ministers stack the senate back and forth to majorities in their party’s favor. This makes the senate either an ornate rubber stamp or a hallowed hindrance to democratic government.

Supreme Court completes the perfect farce

The senate was never a democratic institution. So the Supreme Court ruling makes perfect sense in that virtually no amount of democratic will can get rid of the absurdity now.

If insanity is the criteria, it’s perfectly logical that all 10 provinces must agree to abolish the undemocratic senate, when all 10 provinces weren’t required to sign onto the 1982 Constitution Act.

The senate completes the perfect farce that is our loony-tunes version of democracy:

• We are the only developed country with unelected senators.

• We are a bilingual, multicultural county stuck with some other country’s monarch as our head of state.

• We dole out absolute power to minority parties shutting the actual majority out of government.

• People get hysterical about amending the constitution eliminating a very important function of our “constitutional democracy.”

Tar sands terrible for environment and economy

Both Stephen Harper and Justin Trudeau believe that getting Alberta’s bitumen to the US Gulf Coast and China is in our “national interest” and is the “Canadian economy’s future.”

Not only is this idea terrible for the environment — Alberta plans on tripling tar-sands development — it is terrible for the economy.

Alberta gets most of the benefits

As the Globe and Mail pointed out, the tar sands are hardly in our “national interest.” Alberta gets 94% of the benefit:

While provinces other than Alberta are projected to benefit, modelling by the Canadian Energy Research Institute projects that 94 per cent of the GDP impact of oil sands development will occur within Alberta. With so much benefit concentrated in one province, one can hardly call fast-tracking oil sands expansion a nation-building project.

Dutch Disease

The tar sands boom has caused the value of the dollar to skyrocket: a 60% increase from 2003 to 2008. Although this might seem like a good thing, fact is Canadians never benefited from lower prices. According to the Globe and Mail:

A decade ago, a product that cost $1 (U.S.) in the United States cost, on average, $1.20 (Canadian) in Canada. A decade later, there has been little change.

But the overvalued dollar made labor costs and exports much more expensive and therefore less competitive. This resulted in many companies packing up shop and moving south of the border — which caused the loss of 500,000 manufacturing jobs.

Terrible job creation

According to the Alberta government’s website, the tar sands employ a total of 112,000 people nation wide. Clearly it was not a good trade off losing 500,000 jobs across the country for far less open-pit mining jobs in remote locations.

Tripling tar-sands development will turn many Canadians into migrant workers who get separated from their families for months at a time to work in remote areas and send their paychecks back home. This is few people’s idea of good job creation.

Low productivity

Canada is suffering from dismal productivity growth. According to the Conference Board of Canada, low productivity growth “hits every Canadian in the wallet.” It says, “productivity growth and innovation must remain a national priority if we hope to maintain our high living standards.”

According to the Financial Post, the overvalued bitumen dollar and focus on the tar sands is hurting Canada’s productivity growth:

“You look at the energy sector and its productivity is just falling apart,” Mr. Cross said. “ The oil sands is a tough way to extract oil. But that just goes hand in hand with the increase in prices. We have found all the easy-to-find cheap oil and the oil you’re going to exploit now is the more expensive stuff.”

That tradeoff may simply be inherent in an economy with strength in resources. High commodity prices, which have pushed up the value of the Canadian dollar, may also provoke a deterioration in competitiveness, Mr. Lascelles said.

Inflated wages

The Conservative party is bragging that “Canada has the richest middle class in the world” based on a recent report from the New York Times.

All propaganda aside, Statistics Canada showed a steep rise in real hourly wages from 2003 to 2010 which is largely founded on two economic shocks: “a strong construction sector, and an increase in the world prices of oil and other commodities produced in Canada. ”

In short, rising wages were caused by a construction boom based on a housing bubble; and rapid tar-sands development fueled by a resource boom — not productivity growth which would make wage growth sustainable.

But the flip side of rising wages is that it makes Canada less competitive. According to the Globe and Mail:

Canadian unit labour costs rose by 67.6 per cent in U.S. dollar terms between 2002 and 2010, while south of the border, they fell by 10.8 per cent. Needless to say, this puts Canada at a huge competitive disadvantage and illustrates the dilemma our country is facing.

Although Harper brags of inflated wages, he is actually using the Temporary Foreign Worker program to drive wages down!

Carbon Bubble

The carbon bubble is another reason it’s bad economic policy to put most of our economic eggs in the tar-sands basket.

Tar-sands proponent Andrew Leach writes how quickly the oil sands can become unviable from carbon policies set outside of Canada (that effect 80% of total emissions from tar-sands oil,) and Canadian carbon pricing as low as $16 a ton (of which oil corporations would pay $3.20.)

The Globe and Mail sums up the carbon bubble conundrum:

Oil sands growth and falling CO2 output are incompatible. … In 50, even 25, years, Canadians will wonder why Alberta and the federal government devoted so much financial, political and regulatory capital to one industry, and a highly polluting one at that, while so much of corporate and industrial Canada received the B-list treatment.

The wonder will intensify when the oil bust comes, and one will surely come.

Conclusion

Rapid tar-sands development is terrible economic policy that threatens our living standards. It’s also terrible for the environment making it impossible to reduce greenhouse gas emissions according to international standards and treaties.

We need real leadership willing to stand up to Alberta, not go “all in” on their dirty, unethical oil.

Can Trudeau be trusted to legalize marijuana?

Justin Trudeau made a bold move by coming out in favor of legalizing marijuana. But is he bold enough to follow through if elected?

Mandatory minimums

Although Trudeau said he smoked up while an MP in 2008, the fact is he voted in favor of mandatory minimum sentences for people growing a few plants back in 2009. You would think if he felt strongly about the issue, he would’ve, at least, abstained from voting.

Bold promises — quietly abandoned

Another thing voters should consider is the tendency of the federal Liberals to make big promises before an election, then abandon them right after getting elected.

In 1993 the Red Book was full of big promises, like national daycare. Although the Liberals were in power for 13 years, for some strange reason they let the daycare promise die. It certainly wasn’t for a lack of funding: they handed Harper a $14-billion surplus.

Fool me once...

Trudeau wouldn’t be the first Liberal leader to campaign on liberalizing marijuana laws. In 2004, Paul Martin ran on decriminalization. When he got elected: thanks for the votes, but…

Distraction

Last, voters should consider if this legalization promise is just a distraction. Trudeau recently rolled out his economic platform which is big on tar-sands development, Chinese foreign investment in the tar sands and exporting resources to Asia: what Trudeau calls “the Canadian economy’s future.”

Trudeau has also ruled out fair taxation. He has vowed not to undo a single one of Harper’s $44-billion/yr in “starve the beast” tax cuts for the rich. He said, “the federal government is taking in enough taxes.”

Conclusion

Trudeau is trying to portray himself as modern and progressive by showcasing marijuana legalization. But not only does this intentionally distract from his right-wing economic and environmental agenda, Canadians might not even get legalization if he gets elected.

Trudeau says the Liberal party is the party of free trade. So what if, like Paul Martin, Trudeau does the “moderate” thing and backs down on the faulty premise legalization threatens trade with the US? Would that be at all surprising?

Only the NDP and Green parties have been consistent in their long-held opposition to marijuana prohibition.

Mulroney and Trudeau need to stop lying about prosperity that never happened

Recently, both Brian Mulroney and Justin Trudeau claimed free-market reforms brought great prosperity to Canada.

Mulroney said his tax reforms (that primarily benefited the wealthy) and trade initiatives were the “pillars of record prosperity for Canada.” Justin Trudeau said this free-market “growth agenda” had the only shortcoming of benefiting the rich more than the middle class.

Growth didn't happen

But the fact is both of them are full of it. The free-market reforms of the past 30 years amounted to an anti-growth agenda. Both economic and productivity growth fell sharply over the past 3 decades:

Clearly the centrist, Keynesian economic policies of the post-war era brought real “record prosperity” to Canada.

The free-market reforms of the past 30 years caused prosperity to wither, culminating in the 2008 global economic meltdown we have yet to recover from.

Lopsided economy

The reason the centrist system worked is because it ensured all segments of society benefited from economic and productivity growth. The free-market reforms let the rich hog up all the gains:

Government debt

Not only did inequality skyrocket, but so did government debt (which we paid down during the centrist era):

Why conservatives lie

Free-market ideologues like Mulroney believe that self-interest is a virtue: if everyone acts in their own self-interest, an “invisible hand” will magically balance everything out producing the most prosperity.

So clearly it's in the self-interest of rich people and businessmen to create economic policy that's entirely self-serving. It's also in their self-interest to use rhetoric — or even lie — to promote their self-serving agenda. And when their one-sided ideology inevitably fails to work, it's in their self-interest to lie about the results.

Conclusion

So normal people have to understand where these free-market con men are coming from. If they have no problem exploiting child labor in sweatshops to make a buck, lying and cheating to get their way is no biggie.

If Canadians want a real growth agenda we will have to return to the centrist policies that created modern living standards and ditch the free-market reforms that are destroying them.

Notes

I got GDP and productivity numbers from the Conference Board's: Total Economy Database (Growth Accounting and Total Factor Productivity, 1990 - 2013.) I arbitrarily chose the "EKS" series on GDP and labor productivity. To calculate annualized growth I used the formula: "a = (e - s)^(1 / y) - 1" where, a: annualized growth; e: end amount; s: start amount; y: number of years. So for the 1950s, the end amount is from 1959, the start amount from 1950, and the number of years is 10.

For the history of top 1% income shares I referenced The World Top Incomes Database. For the Canada's total gross net debt burden I used the IMF's Historical Public Debt Database.

Little progressive about Trudeau's economic platform

Justin Trudeau has rolled out his economic platform in a speech to Vancouver's Board of Trade. It's a 5-point plan that focuses mainly on trade with Asia and exporting resources.

Given the speech is very similar to Brian Mulroney's recent speech to Canada 2020, this bolsters my theory that the Liberal party has become the Brian Mulroney party. If you believe Mulroney was a “progressive conservative,” I guess you could say Trudeau's vision is “progressive.”

I transcribed most of Trudeau's speech so activists can take a look at what he's really planning.

In order to get government that represents Canadians, we will need a rigorous policy debate over the next year or so leading up to the next election. If Canadians want real change, we must demand it.

The speech:

Excerpts from the speech:

Free-market “growth agenda” (9:44)

Middle class Canadians voted, over the past decades, for a growth agenda because they were told that growth would benefit them. If it doesn't they will withdraw their support.

And we are already seeing the evidence of the start of this. Protectionism is rising in some quarters. While in others we hear doubts about the value of resource development.

At the ballot box, we're seeing people vote for leaders who offer stories about who to blame for our problems, rather than ideas on how to solve them. It's a very windy world view.

First: Post-secondary education and immigration (11:30)

There are five things, in particular, that need our attention.

First, we have to remember that Canada's greatest strength is Canadians.

I used to teach here in Vancouver, so this is a special interest of mine.

But if we can raise our post-secondary education attainment rate to 70%, we will have a workforce ready to meet Canada's future job market needs.

If we better support Canadian students through loan payments geared to income, personal RESPs and public-private not-for-profit partnerships we will improve opportunities for all Canadians.

We also have to remember that Canada has flourished because of people coming here from every corner of the world. And choosing to work hard to build success for themselves, their families and their communities.

Immigration has always played and will always play a central role in our economy. We need to welcome nation builders. Help them thrive. And encourage their entrepreneurial spirits. Not just hire workers or employees.

Second: Trade (12:52)

We need to be more strategic about foreign direct investment and trade.

I don't need to tell you that. You're here in BC. You're facing the Canadian economy's future.

The US will always be important to us. But the present and future of global growth is in Asia.

No place in the world is better positioned to take advantage of that growth than Vancouver and BC. We need smart policy to help you do that. And for all Canadians trade is a good thing. An essential thing.

Jobs in competitive export sectors pay 50% higher wages than in industries that are not trade intensive.

That's good news for the middle class. And the communities they call home.

That's why we chose not to play politics with the recently announced free trade agreement with South Korea. As well as the agreement in principle with the European Union.

We're broadly supportive of those agreements as a party. And I said so to Mr. Harper on the floor of the House of Commons.

Third: Resource development (13:56)

A third opportunity, and one that is also of special interest to British Columbians, has to do with Canada's natural resources. How to reconcile economic growth with environmental stewardship.

Because, let's be perfectly clear, pretending in the 21st century that we have to choose between one or the other is not only wrong, it's actually harmful.

But this challenge is made even more difficult when the government's preferred way of dealing with its detractors is to demonize them. Dismissing those with genuine concerns as foreign radicals or terrorists.

Building partnerships between industry, First Nations and civil society as has been done with great success in the BC forest industry — well that takes hard work. It demands real courageous leadership. Pipelines and LNG [liquid natural gas] projects call for that same hard work.

The federal government's role is to create a framework, that helps Canadians grow the economy and protect the environment.

It's not the government's role to put its thumb on the scale of any particular project in favor of the proponent or opponent. If it does, as Mr. Harper's government has done far too often, it compromises the integrity of the process and prevents proponents from getting the social license they need to build the project and create the jobs. But it also undermines the public confidence that the environment is getting the protection that it needs.

And let's be very clear on this point: governments issue permits but communities grant permission.

Last October I surprised a lot of people by going to Washington D.C. and telling a room full of American Democrats that this Canadian Liberal supports the Keystone XL pipeline. I do. But I also understand their issues with it. If Canada had stronger more credible environmental policies in place the Americans would've approved Keystone XL a long time ago.

It's increasingly clear to everyone but Mr. Harper, consensus building is the only responsible way to turn resource opportunities into economic realities.

We need to draw on our intelligence, on our abilities and willingness to solve problems as much as we draw on the resources themselves.

As prime minister, I would see it as one of my core responsibilities to facilitate this kind of engagement. Over the long term, that is the only way we can leverage our natural resources in a way that is sustainable, maximizes economic opportunity, and strengthens the middle class.

Fourth: Innovation (17:10)

Fourth, we need to take a hard look at what we can do to foster innovation. We spend billions on research but lag behind our competitors on productivity.

I'm proud that Wilfred Laurier shares space with Canada Arm II and Dexter on our new five dollar bill. But I'm also eager to find out what technology might be featured there 10 years from now, 20 years from now. Those new ideas and the high-paying skilled jobs that come with them will be critical to our future growth.

Fifth: Infrastructure (17:46)

And finally we need new leadership when it comes to infrastructure investment.

At a time when our cities are starved for capital, the government cut its core infrastructure program by nearly 90% to spend more down the road, but I think you'll understand my multiple levels of skepticism on a promise Mr. Harper won't need to keep for 5 or 6 years.

I believe it's unrealistic for the federal government to ask our towns and cities to wait another half decade to repair crumbling bridges and make other necessary upgrades to roads, water and transit systems.

Infrastructure investments do more than create good jobs. They improve our quality of life.

Look at the dividends from the Pacific Gateway. Look at the Canada Line.

Flaherty: Not-so nice guys finish last

A couple days ago, I wrote a blog on Jim Flaherty that took the politically correct position: Flaherty was a good person, but not-so-good finance minister.

Today that got me thinking how political correctness tends to make hard-right conservatives, like Flaherty was, want to puke.

Therefore, I thought, why not walk a mile in the shoes of your typical angry, white, male conservative and take the politically irreverent position that Jim Flaherty was actually a mean, nasty son-of-bitch?

Not-so nice

I base this on an article written by fellow Progressive Blogger Warren Kinsella which was published in the Toronto Sun three weeks ago: Not-so nice guys finish last.

Here’s an excerpt (taken without the author’s permission, of course — like any ranting and raving blogger is going to bother with that!):

In federal Conservative circles, stories about Flaherty’s temper and temperament are legion. Just before his sudden resignation last week, in fact, one Conservative very close to Prime Minister Stephen Harper told this writer about how disliked Flaherty was by Hill staff and many of his colleagues.

Flaherty had a bad temper, the Harper loyalist said, and he did not ever hesitate to rain opprobrium on those below his station. He could be, and frequently was, “very nasty to those with less power,” said this veteran Conservative.

Bonus indignity

While Canadians take pause to remember Jim Flaherty on this solemn day, let us not forget last December when Flaherty — on the floor of the House of Commons — screamed “Shut the fuck up!” at Jason Kenney for daring to suggest Rob Ford should resign.

Happy ranting! And just remember: being conservative means never having to say your sorry — or ever believe you did anything wrong!

Proportional Representation: beginning of real majority government

Although I probably disagree with everything Andrew Coyne has to say on economic issues, he has great insight on Proportional Representation:

“It’s true, as opponents point out, that PR would make majority governments unlikely, given how rarely a party wins more than 50 per cent of the vote. But would it really? It would certainly make one-party majorities less likely.

“But nothing would prevent the formation of stable multi-party majorities—real majorities, that is, not the phoney ones we have today—as is the norm in the dozens of countries around the world that use some form of PR. In this sense, PR would not mean the end of majority government, but the beginning of it.”

Minority majority fallacy

FPP supporters say PR is flawed because it makes majority governments improbable. Of course the fallacy is they believe minority parties should get majority power — specifically, their minority party.

But when we dole out absolute power to a minority party, it leaves the actual majority of voters out in the cold — which is the literal opposite of democracy.

In the rest of the developed world — 29 of 34 developed countries use PR — multi-party coalitions are the norm. They form stable majority governments that usually serve out the entire election term.

Better government with PR

PR puts an end to the cutthroat, hyper-partisan politics that plague Canada under FPP. It ends frequent minority government elections. And it fosters inter-party cooperation and compromise, ensuring true democracy and real majority rule.

Flaherty: good person, not-so-good finance minister

Jim Flaherty is being remembered by Canadians across the country as a kind, decent person and dedicated public servant.

But some pundits are taking things too far. In a shallow attempt to promote the Conservatives’ agenda, some are claiming he was one of the best finance ministers in our country’s history.

If one looks into the facts, however, it becomes clear he was anything but.

Starve the beast

Flaherty implemented a neo-conservative “starve the beast” agenda with massive, reckless tax cuts that primarily benefited the rich. That blew a whopping $44-billion hole in the budget. The purpose of this “tax relief” was to cripple future governments and bankrupt the social safety net.

He brought in phone-book-sized omnibus budgets that amended dozens of pieces of legislation to bypass scrutiny and neuter the democratic process. He withheld public budget documents from the Budget Office his government created.

Cuts, cuts, cuts

He unilaterally gutted health transfers by $36-billion; slashed EI benefits after raiding a $54-billion EI surplus; he dismantled social programs built over generations. According to the Budget Office, he balanced a budget mess — he created — on the backs of the provinces.

Housing bubble

Then there was his mortgage deregulation scheme that caused the Canadian housing bubble. He nationalized over $150-billion of banks’ mortgage debt by deregulating the CMHC. So if the housing bubble bursts, taxpayers could be on the hook for hundreds of billions of dollars.

After doing all that, he had the gall to say the CMHC — whose original mandate was to help first-time home buyers — should be dismantled.

Financial crisis

Flaherty is given a lot of credit for his handling of the 2008 financial crisis. But this is really a case of being born on third base saying he hit a triple.

As The Economist pointed out in 2010, “Much of the country’s resilience stems from policies—such as bank regulation and sound public finances—which predate” Flaherty.

In the fall of 2008, Flaherty planned austerity measures that would’ve made the recession worse. He was forced to adopt a stimulus package by opposition parties who nearly voted his government down.

Conclusion

The destruction Flaherty caused with his neo-con wrecking-ball agenda shows Canada desperately needs a democratic voting system.

If we had government that represented an actual majority of voters — instead of a dictatorship controlled by a 40% minority party — none of this would’ve happened.

It’s time to ditch our corrupt voting system First-Past-the-Post as most develoed countries have done. Either proportional representation or ranked ballot voting will bring real democracy to Canada.

First-Past-the-Post: Government by the 30%, for the 30%

According to ThreeHundredEight.com, the Harper Conservatives have averaged just under 30% in the polls over the past year.

That’s about as low as Harper can go. The 30% makes up the hard-core Cons who will vote for the party no matter what.

When the Reform and PC parties united under the Conservative banner in 2004, the new party came to represent the 30%’s hard-core values. Moderate conservatives were marginalized, many forced to vote for the Liberal party.

What’s worse is that the 30% — which controls the Conservative party — now controls the entire country!

Broken voting system

Thanks to our distorted voting system, First-Past-the-Post, the Cons were able to win 54% of the seats on 40% of the vote — giving them 100% of the power.

If we modernize our corrupt voting system — with either proportional representation or ranked ballot voting — the 30% will represent the 30%. No more, no less.

In 2015, we need to bring real democracy to Canada. What we have now is a farce.

Fascist approach to voting reform self-defeating

Fair Vote Canada has decided to take, what I call, the fascist approach to voting reform.

They are proportional representation zealots who think they’ll win by waging a war against the other option, ranked ballot voting. They even delete posts on their Facebook page that mention RBV.

Not only is this approach ethically bankrupt, it’s self-defeating.

Anti-democratic

For one, this scheme is anti-democratic. Canadians are split between PR and RBV. So in order to represent Canadians on voting reform, both systems should promoted. This will get more Canadians involved in the cause.

We need a rigorous debate so voters can make the right choice. It’s arrogant to tell RBV supporters their position is wrong. In a democracy, it’s up to voters to decide how we should vote.

Invisible-option vote splitting

Second, two-way referendums are deadly producing First-Past-the-Post false majorities. Over the past decade, 5 two-way referendums have gone down in flames in Canada and the UK.

This is because of invisible-option vote splitting. In a PR referendum, RBV voters think PR goes too far and opt for the status quo. In a RBV referendum, PR supporters feel RBV is a false reform and opt for the status quo.

Fair referendum

The only way to have a fair, winnable referendum is to put all three options on the ballot: PR, RBV and FPP.

If one option doesn’t win with a majority, a runoff vote is held to ensure the choice of Canadians is respected. Given most people feel our voting system is broken, odds are FPP is not going to win.

Conclusion

The fascist approach to electoral reform will end up cementing corrupt FPP as the democratic choice of Canadians — which is the opposite of the truth.

In order to bring real democracy to Canada, electoral reformers must be principled and cooperate for the greater good.

Developing a sustainable, democratic economy

The purpose of economics is to find a system that allocates resources in the most effective way for the greatest benefit of society.

Even right-wing, free-market ideologues like Ronald Reagan said they had a better way of creating prosperity for all. But considering 30 years of free-market reforms have created a lopsided economy where only the wealthy benefit — at the expense of everyone else — his vision was an obvious failure.

Let’s explore the main economic systems and the results they produced. We’ll discover that we don’t have to reinvent the wheel to create a responsible, sustainable system that benefits all segments of society.

Three economic systems

No matter which way you slice it, there are only three kinds of economic systems. They are defined along the left/right political spectrum.

On the furthest left is communism. This means full government control over the economy.

On the furthest right is free-market capitalism. This means minimal government involvement in the economy.

In the center is the mixed-market system. It’s a compromise between the other two: half-way government control over a market-based economy.

Failure of communism

Since communism means government takes control over the entire economy, individual freedom is threatened. Historically, communist governments produced what George Orwell called a “full-circle revolution.” Egalitarian goals fell by the wayside as the new ruling class exerted totalitarian control over the populace.

Communism is also very inefficient. A centralized bureaucracy is not capable of meeting or anticipating the needs and wants of society. Inherit political corruption stands in the way of talent and creativity.

Failure of free-market capitalism

Free-market ideology tends to produce a pyramidal society where most of the wealth accumulates at the top. Although, theoretically, this boundless freedom should allow people be the most they can be, the real-world outcome is that poverty and oppression deprive most people of real opportunity.

To get a picture of how a free-market system allocates resources, think of an untended garden. Big weeds emerge hogging up most of the resources that could be put to better use with a little upkeep.

Historically, the chaotic nature of “boom-to-bust” free-market capitalism caused the system to collapse twice in two global economic meltdowns. The first was in 1929 — a stock-market collapse which produced the Great Depression. The second happened in 2008 — a financial-market collapse which caused the Great Recession we have yet to recover from 6 years later.

Success of centrist economics

In the midst of the Great Depression, John Maynard Keynes created the centrist, mixed-market system. This was founded on “demand-side” economics.

When people don’t have enough money to spend, this kills jobs and wealth in a deflationary spiral (“paradox of thrift”.) But with “big government” spending on infrastructure projects and social programs — funded by progressive taxation — wealth is created in a virtuous circle through a multiplier effect.

The centrist system has been the most successful in history — hands down. It created modern living standards in the post-WW2 era. During this time, economic and productivity growth were at their highest; inequality at its lowest; living standards were constantly on the rise for all; and governments paid down most of their debts.

Too much of a good thing

The centrist system actually worked too well. By the 1970s, labor became too powerful and inflated wages caused high inflation and stagflation. That set the stage for Reagan’s free-market counter-revolution that caused all the economic problems we face today.

Conclusion

The only way to develop a responsible, sustainable, green economy — that relies 100% on renewable energy and recyclable materials — is with strong government control (centrist regulations.) The only way to put everyone’s talents to use — while maximizing wealth creation, innovation and individual freedom — is with a centrist market economy.

Therefore we don’t have to reinvent the wheel to provide a solution to the economic crisis we’re in. We just need to improve upon the centrist system which worked wonders in the post-war era.

A centrist economy is a democratic economy that serves the people. It allows a society to stop destructive behaviors, forge its own destiny and evolve without limit.

Support hope not fear

One of the lines of persuasion Liberal supporters like to use on voters is what I call electoral blackmail: either vote Liberal or Harper will win a majority!

Well that's not exactly how our election system works. If the Liberals win the election, but don't win a majority, they will be forced to work with the NDP — which certainly isn't a bad thing if you're a progressive voter.

Ontario example

In Ontario, the McGuinty Liberals were leaning towards austerity measures and corporate tax cuts. But when he failed to win a majority, and was replaced by Kathleen Wynne, the Liberal party needed NDP support and all-of-sudden became centrist again.

This pissed off right-leaning Liberals among their ranks who leaked the latest Liberal budget to the neo-con party because it included $5.7-billion in new spending measures. (For shame! For shame!)

Best government in history

If one looks back to the best government in Canada's history — which was an informal coalition between Lester B Pearson and Tommy Douglas — Liberal-NDP cooperation was a wonderful thing for Canadians. It brought about universal health care, the Canada Pension Plan, Canada Student Loans, the 40-hour work week and two weeks paid vacation.

If Pearson had won his coveted majority, Canada would probably be a very different country today.

Trudeau not exactly progressive

Given Justin Trudeau has vowed not to reverse any of Harper's $44-billion/yr in "starve the beast" tax cuts and is writing Alberta a blank check on tar-sands development, the NDP is sorely needed to keep the Liberals honest if they form the next government.

Conclusion

To quote Jack Layton, hope is better than fear. With real hope we can bring real change to Canada and undo the damage Harper has caused. Don't let them tell you it can't be done.

The Stephen Harper story we may never have heard

Maclean's author Paul Wells won a political-writing prize for his book on Stephen Harper, The longer I'm Prime Minister.

As a person who likes to curl up with an e-book on my Android tablet, I can say this is a book I have absolutely no interest in experiencing. It's painful enough having to read about Harper every day in the online media.

Story of Canada

Maclean's ran a story with Wells' acceptance speech titled with an excerpt, ‘Each of us writes the story of Canada every day’.

That got me thinking: how many Canadians are enamored with the Stephen Harper story we get to hear about every day in the news? I imagine not many. After 8 long years, polls suggest Canadians are sick of Harper and his disgusting story.

If Canada was a real democracy, like most developed countries, the Stephen Harper story is one that may never have been inflicted on Canadians.

Story of democracy

Democracy means rule by the people. Since people can't agree on everything, matters are decided by a majority vote. That means government is supposed to represent an actual majority of voters.

But in Canada (and the UK) we indulge in the bizarre practice of doling out 4-year dictatorships to minority parties.

In the rest of the developed world, however, multi-party coalition governments are the norm. The party with the biggest block of voters means nothing since parties arbitrarily divide the political spectrum.

Unlikely Harper coalition

Given Harper's US-Republican vision of Canada, it's unlikely he would've been able to put together a coalition in 2006 on 36% of the vote.

Even when Harper got 40% of the vote in 2011, he would've been ousted by an NDP-Liberal coalition if we had a democratic voting system.

So if Canada was a real democracy, odds are Harper never would've came to power.

Conclusion

In order to save ourselves and future generations from experiencing another wretched Stephen Harper story, we must embrace the story of democracy.

Either proportional representation or ranked ballot voting will tell the real story of Canada.

How hard would a ‘soft landing’ be in Canada's housing market?

Some Canadian economists are saying we don't have to worry about a housing bubble. For example, Stephen Gordon from Maclean's blogs, “Odds are on a soft landing for the Canadian housing market”.

But one very important number these economists are leaving out is real house prices. (Real prices are corrected for inflation.)

Real house prices dangerously high

Last year, Nobel Laureate Paul Krugman looked at real Canadian house prices and concluded the Canadian economy is susceptible to a “deleveraging shock.”

This graph shows the trouble:

Over the long term, real house prices tend to stay around 100%. Today they are higher than 200%.

US comparison

Canada has no chance of suffering a US-style housing collapse. Theirs was founded on predatory, sub-prime, mortgage lending. These fraudulent mortgages started off with affordable payments that skyrocketed after a few years — that's why the market collapsed so fast.

Japan offers a better model

The Japanese experience offers a better comparison. The following (descriptive) graph on real home prices shows a housing bubble that took 15 years to form — and 15 years to deflate:

Hard soft landing

But Japan's “soft landing” was anything but soft. It created an economic catastrophe the country is still reeling from today. They have suffered a shocking 20 years of near-zero interest rates, deflation and anemic economic growth.

Conclusion

Japan shows it doesn't matter how soft the landing is, it's how far down the ground is that really counts. Considering Canada is now as high as Japan got, it's a long way down.

Will real house prices fall back down to 100% in Canada 15 years from now? No economist can say squat about that. But if Canada suffers a hard soft-landing, we'll know who's to blame: Stephen Harper.

Harper to blame for Canada's housing bubble

Jim Flaherty tried pawning himself off as a prudent manager of Canadian banks and diligent tamer of the housing bubble. But in reality, he was trying to undo damage the Harper Government caused in the first place.

US banking-deregulation catastrophe

While in opposition, Harper demanded the Liberal government get in on the red-hot action of America's financial sector by importing US banking deregulation.

Thankfully, the Liberals did not. In 2008, financial-market meltdowns crippled the US and many other countries, requiring massive bailouts.

Harper's banking deregulation

In 2006, when Harper came to power, he implemented his own deregulation scheme by loosening rules governing mortgages and the CMHC (federal mortgage insurance agency.)

According to the Globe and Mail these measures acted

like rocket fuel for the real estate market in a low-rate environment. They triggered a rapid expansion of risk-free mortgage credit, and, arguably, drove the rapid runup in house prices in the past decade.

Summary

Here's a summary of Harper's actions:

• Maximum mortgage periods raised from 25 years to 40.

• Minimum down payment reduced from 5% to 0.

• CMHC insurance provided for 40-year no-money-down mortgages.

• CMHC insurance cap raised from $250,000 to unlimited.

• Banks allowed to offload risk by buying insurance on homes with more than 20% down-payment (which the owners, themselves, don't require.)

CHMC train wreck

The CMHC was originally created to help first-time home buyers. Under Harper's “steady hand,” banks were permitted to offload risk from inflated house prices onto taxpayers:

CMHC Insurance

Kind	2005	2006	2007	2008	2009	2010	2011	2012
(Billions of $)
Home owner			219	232	246	271	286	290
Bank			103	148	196	209	243	230
Multi-unit			23	28	31	34	38	46
Total	274	291	345	408	473	514	567	566

Under Harper, the CMHC's total liabilities more than doubled.

From 2007 to 2012 (where data is available,) home-owner insurance increased a modest 32%.

But the amount of bulk insurance banks bought — on homes that didn't require it because owners paid a large down payment — increased a whopping 123%!

Conclusion

As the Financial Post points out, the Harper Government

has been creating a housing bubble in Canada with taxpayer money, which is why residential real estate prices rise in defiance of high unemployment and recession.

Before stepping down, Jim Flaherty said the CMHC should be privatized. That's rich coming from him. Under his watch, the CMHC nationalized over $150-billion of private-sector risk.

Canadians have yet to discover the true cost of this moral hazard. But we should know that Harper has involved us in a contemptible bet: heads, banks win; tails, taxpayers lose.