Quotulatiousness

May 1, 2014

Rethinking Canadian broadcast regulation

Filed under: Bureaucracy, Business, Cancon, Media — Tags: , , , , , — Nicholas Russon @ 07:27

On Google+, Michael Geist posted a few thoughts on hitting the reset button in Canadian broadcast regulation:

The Broadcasting Act is a complex statute that lists more than twenty broadcasting policy goals. Yet for decades, Canadian policy has largely boiled down to a single objective: Maximizing the benefits from the broadcasting system for creators, broadcasters, and broadcast distributors such as cable and satellite companies.

Consumers were nowhere to be found in that objective and it showed. Creators benefited from Canadian content requirements and financial contributions that guaranteed the creation of Canadian broadcast content. Broadcasters flourished in a market that permitted simultaneous substitution (thereby enabling big profits from licensing U.S. content) and that kept U.S. giants such as HBO, ESPN, and MTV out of the market for years in favour of Canadian alternatives. Cable and satellite companies became dominant media companies by requiring consumers to purchase large packages filled with channels they did not want in order to access the few they did.

As I mentioned in a conversation last night, the Canadian market for broadcast, telecommunications, and internet providers has been carefully managed by the government to minimize the whole messy “competition” thing and ensure quasi-monopoly conditions in various regions across the country. The regulators prefer a small number of players in the market: it makes it easier to do the “regulation” thing when you can fit all the regulated players around a small table, and it also provides post-civil service career opportunities for former regulators. Having a larger number of competing organizations makes the regulation game much more difficult and reduces the revolving door opportunities for former regulators.

April 9, 2014

Being “pro-business” does not mean the same as being “pro-market”

Filed under: Business, Economics, Politics, USA — Tags: , , , , — Nicholas Russon @ 07:32

It’s a common misunderstanding (especially with people who don’t know what laissez faire actually means):

For years, Republicans benefited from economic growth. So did pretty much everyone else, of course. But I have something specific in mind. Politically, when the economy is booming — or merely improving at a satisfactory clip — the distinction between being pro-business and pro-market is blurry. The distinction is also fuzzy when the economy is shrinking or imploding.

But when the economy is simply limping along — not good, not disastrous — like it is now, the line is easier to see. And GOP politicians typically don’t want to admit they see it.

Just to clarify, the difference between being pro-business and pro-market is categorical. A politician who is a “friend of business” is exactly that, a guy who does favors for his friends. A politician who is pro-market is a referee who will refuse to help protect his friends (or anyone else) from competition unless the competitors have broken the rules. The friend of business supports industry-specific or even business-specific loans, grants, tariffs, or tax breaks. The pro-market referee opposes special treatment for anyone.

[...]

GOP politicians can’t have it both ways anymore. An economic system that simply doles out favors to established stakeholders becomes less dynamic and makes job growth less likely. (Most jobs are created by new businesses.) Politically, the longer we’re in a “new normal” of lousy growth, the more the focus of politics turns to wealth redistribution. That’s bad for the country and just awful politics for Republicans. In that environment, being the party of less — less entitlement spending, less redistribution — is a losing proposition.

Also, for the first time in years, there’s an organized — or mostly organized — grassroots constituency for the market. Historically, the advantage of the pro-business crowd is that its members pick up the phone and call when politicians shaft them. The market, meanwhile, was like a bad Jewish son; it never called and never wrote. Now, there’s an infrastructure of tea-party-affiliated and other free-market groups forcing Republicans to stop fudging.

A big test will be on the Export-Import Bank, which is up for reauthorization this year. A bank in name only, the taxpayer-backed agency rewards big businesses in the name of maximizing exports that often don’t need the help (hence its nickname, “Boeing’s Bank”). In 2008, even then-senator Barack Obama said it was “little more than a fund for corporate welfare.” The bank, however, has thrived on Obama’s watch. It’s even subsidizing the sale of private jets. Remember when Obama hated tax breaks for corporate jets?

February 5, 2014

Battlefield mobility for Canadian infantry in the Cold War

Filed under: Business, Cancon, Military — Tags: , , , — Nicholas Russon @ 12:43

An interesting post by Frank Maas at the LCMSDS website looks at the story of the Canadian army’s attempts during the 1980s to get modern armoured vehicles for infantry support and battlefield mobility:

The Militia, the traditional mobilization base for the Canadian army, withered during the Cold War. Its ranks were flushed with Second World War veterans in the 1950s and there was money for new tanks and vehicles, but morale declined as the Militia’s role became civil defence in the late 1950s, and it languished in the 1960s and 1970s as defence budgets shrank. The Militia reached a nadir of 15,000 by the late 1970s, but ironically, there was a false dawn at the end of the Cold War. In the 1987 Defence White Paper, Challenge and Commitment, the Mulroney government announced that the strength of the Reserves would skyrocket to 90,000, and would complement Regular units and allow Canada to better meet commitments to NATO and continental defence. This increase in strength would be complemented by a package of improvements to bases and new equipment purchases. One of these was for a purchase of 200 armoured personnel carriers, and here the story begins.

Back then, Colonel Romeo Dallaire was head of the army’s department for assessing armoured vehicles. Dallaire was intent on purchasing the venerable and ubiquitous M113, which first entered service in the 1960s, and is one of the most numerous armoured vehicles in the world. (The Canadian army had purchased more than 900 in the 1960s, and fielded up-armoured M113s in Afghanistan). The original plan was to buy 200 M113s from the American manufacturer and have some components licence-built in Canada to fulfill requirements for Canadian content.

At the same time, however, Canada’s only manufacturer of armoured vehicles, Diesel Division General Motors (DDGM), in London Ontario, was nearly out of work. It was approaching completion of a United States Marine Corps order for 758 vehicles, and although some sales to Saudi Arabia were on the horizon for the early 1990s, the company was facing a year with empty production lines. Some salesmen and engineers at DDGM began to think they could scoop up the contract for two hundred APCs by substituting their vehicle, the Piranha Light Armoured Vehicle (LAV), and bridge the gap between the contracts.

Comparing the interiors of the LAV-25 (left) and M113 (right)

Comparing the interiors of the LAV-25 (left) and M113 (right)

There were some significant differences between the Piranha LAV and the M113 that would complicate DDGM’s plan. First, the LAV was wheeled, and the M113 was tracked. Wheeled vehicles were easier to maintain, but tracked vehicles had better off-road mobility. Second, the sides of the LAV’s troop compartment sloped sharply inward, which improved ballistic protection, but reduced internal space. Finally, the LAV had doors at the back for soldiers to deploy from, while the M113 had a ramp which made it much easier for soldiers to run out of the back of the vehicle. DDGM’s engineers could not do much about putting tracks on the LAV-25, although a wheeled vehicle would be better-suited for service with the Reserves because it would be cheaper to operate and soldiers could drive it on roads. (There are prohibitions against driving tracked vehicles on roads). DDGM could reconfigure its vehicle to look more like a M113 from the back to convince the army to accept the LAV-25 as a substitute, but this would require a significant reconfiguration of the vehicle.

Back in the late 1970s, my militia unit got some familiarization training with the then-new Grizzly AVGP, which was based on an earlier model than the LAV. While it was neat to be given the chance to try working with (and in) new equipment, we found that getting in and out of the back of the vehicle was awkward and much slower than we (well, actually our NCOs) had hoped. Practicing a dismount with a full infantry section on board was … less than tactically brilliant. The small doors tended to snag any of our equipment as we squeezed through, so you had to move more slowly to get through successfully.

Here’s a look at the rear of the Cougar AVGP from the same vehicle family as the Grizzly:

A right rear view of a Canadian army Cougar wheeled fire support vehicle that is being used as an observation post by soldiers standing watch during the combined U.S./Canadian NATO Exercise Rendezvous '83. Location: Camp Wainright, AB

A right rear view of a Canadian army Cougar wheeled fire support vehicle that is being used as an observation post by soldiers standing watch during the combined U.S./Canadian NATO Exercise Rendezvous ’83. Location: Camp Wainright, AB

January 15, 2014

QotD: Early 20th century American imperialism

Filed under: Americas, History, Military, USA — Tags: , , , — Nicholas Russon @ 00:02

I spent thirty-three years and four months in active military service as a member of this country’s most agile military force, the Marine Corps. I served in all commissioned ranks from Second Lieutenant to Major-General. And during that period, I spent most of my time being a high class muscle-man for Big Business, for Wall Street and for the Bankers. In short, I was a racketeer, a gangster for capitalism.

I suspected I was just part of a racket at the time. Now I am sure of it. Like all the members of the military profession, I never had a thought of my own until I left the service. My mental faculties remained in suspended animation while I obeyed the orders of higher-ups. This is typical with everyone in the military service.

I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested.

Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.

Major General Smedley Darlington Butler, USMC (1881–1940), War is a racket, 1935.

December 24, 2013

Indian gold bugs go home

Filed under: Bureaucracy, Business, India, Middle East — Tags: , , , , — Nicholas Russon @ 09:19

The Indian government has been attempting to restrict the domestic gold market, but there’s a big loophole in the rules that many travellers are taking advantage of while they can:

Faced with curbs on gold imports and crash in international prices leaving it cheaper in other countries, gold houses and smugglers are turning to NRIs to bring in the yellow metal legally after paying duty. Any NRI, who has stayed abroad for more than six months, is allowed to bring in 1kg gold.

It was evident last week when almost every passenger on a flight from Dubai to Calicut was found carrying 1kg of gold, totalling up to 80kg (worth about Rs 24 crore). At Chennai airport, 13 passengers brought the legally permitted quantity of gold in the past one week.

“It’s not illegal. But the 80kg gold that landed in Calicut surprised us. We soon got information that two smugglers in Dubai and their links in Calicut were behind this operation, offering free tickets to several passengers,” said an official. The passengers were mostly Indian labourers in Dubai, used as carriers by people who were otherwise looking at illegal means, he said. “We have started tracing the origin and route of gold after intelligence pointed to the role of smugglers,” he said.

Reports from Kerala said passengers from Dubai have brought more than 1,000kg of gold in the last three weeks. People who pay a duty of Rs 2.7 lakh per kg in Dubai still stand to gain at least Rs 75,000 per kg, owing to the price difference in the two countries. Gold dealers in Kerala say most of this gold goes to jewellery makers in Tamil Nadu and Andhra Pradesh.

August 4, 2013

Ben Klass responds to Bell Canada CEO’s open letter

Filed under: Business, Cancon, Government, History — Tags: , , — Nicholas Russon @ 11:26

An excellent response:

You begin the “unusual step of writing to all Canadians” (Strange, isn’t it, that “Canada’s Top Communication Company” should find it unusual to communicate with its customers?) with a history lesson, ostensibly in the interest of helping us “understand a critical situation” now facing the wireless industry: the potential entrance of an American company into the Canadian market.

You inform us that, since Parliament granted Bell its charter in 1880, Bell has spent 133 years “investing in delivering world-class communications services to Canadians.” An impressive track record!

You must, however, be aware that Bell’s permission to operate in Canada was initially obtained by agents acting in the interest of the (American) National Bell Telephone Company and that, after securing a favourable charter, three top-level executives from National Bell were appointed to Bell Canada’s board of directors (Babe, 1990, pg 68-69). Or how about how American Bell initially owned 50% of your company, only fully divesting its interest 43 years ago, in 1970 (Winseck, 1998, pg 119)?

Bell began its life in Canada as a branch plant of an American company. (In a strange twist of fate, it’s now a descendant of National Bell Telephone — Verizon — which is contemplating (re)entering the Canadian market.) And they leveraged this relationship to get an early leg up on the competition — using patents owned by its American parent, Bell quickly monopolized the market for Canadian telephone services, a monopoly it used to funnel profits back to the States. (Smythe, 1981, pg 141)

You suggest that “US giants don’t need special help from the Canadian government,” but that’s exactly how Bell got to where it is today!

That’s all ancient history, however, and in the here and now, BCE is a Canadian company who “welcomes any competitor,” so long as they “compete on a level playing field.” Right?

You’re calling on the Federal government to close “loopholes” that are intended to promote competition in your industry — rules that your company has forced the government to create.

Read the whole thing.

August 2, 2013

The self-inflicted wounds of Britain’s post-war auto industry

Filed under: Britain, Business, Europe, History — Tags: , , , — Nicholas Russon @ 09:09

Dominic Sandbrook contrasts the rise of the German auto industry from the literal rubble of the post-war world with the slow decline of Britain’s once-mighty car makers:

If you want to know why Angela Merkel calls the shots in Europe, Germany’s car factories are a pretty good place to start.

By contrast, Britain’s car industry is a shadow of its former self. We do still make almost one and a half million cars a year, which is good news for thousands of British engineers. But these days, we make them for other people.

The iconic Mini plant at Cowley, for example, is celebrating its centenary this year. It was founded in 1913 by the entrepreneur William Morris as the home for his legendary Morris Oxford.

Today it still makes thousands of cars — but it makes them for BMW.

It’s a similar story at Crewe, the home of another great British icon, Bentley – which actually belongs to Volkswagen.

Half a century ago, let alone when Morris was at his peak, this would have seemed unimaginable. But the sad truth is that Britain’s car firms only have themselves to blame.

Seventy years ago, at the end of World War II, Germany was on its knees. After the fall of Hitler’s empire, its car industry lay in ruins.

In August 1945 the British Army sent a major called Ivan Hirst to take control of the giant Volkswagen plant in Wolfsburg, which had been built under the Nazis to produce ‘people’s cars’ for the German masses.

Ignoring his sceptical superiors, Hirst could see the potential amid the shattered debris of the Wolfsburg factory.

Rebuilding Volkswagen, he thought, would be a step towards rehabilitating Germany as a prosperous, peaceful European ally. And of course he was right.

In the next few years, Hirst restarted production of a car we know today as the Beetle. And from then on, VW was flying.

July 26, 2013

BC Premier highlights antiquated inter-provincial trade rules with wine

Filed under: Cancon, Law, Wine — Tags: , , , — Nicholas Russon @ 08:22

The rules governing inter-provincial trade in wine date back to the Prohibition era. BC’s Christy Clark would like to see the rules brought into this century:

British Columbia Premier Christy Clark brought a case of her province’s wine to the heart of Ontario’s vine land.

Clark presented the vintages to her dozen provincial and territorial colleagues in a bid to lower trade barriers.

Even though Ottawa eased interprovincial rules surrounding wine last year, it is still illegal for Ontarians to buy wine in bulk directly from B.C. vineyards.

To get around that, Clark’s six-person entourage brought two bottles apiece to have a full case for the premiers at their annual Council of the Federation gathering.

I linked to an item on this issue by Michael Pinkus earlier this year.

July 21, 2013

Real competition? In our mobile phone market? It’s less likely than you think

Filed under: Business, Cancon, Government, Technology — Tags: , , , — Nicholas Russon @ 09:31

Canada’s mobile telephone market is a rigged oligopoly of three major companies and a few minor players. One of the big three, Telus, has opened a new campaign against the federal government’s tentative gestures towards allowing a more competitive mobile phone market for Canadians. Michael Geist has the details:

Yesterday, Telus CEO Darren Entwistle was campaigning at the Globe and Mail and National Post, warning of a “bloodbath” if the government sticks with its commitment to allow for a set-aside of spectrum for new entrants such as Verizon. Telus is concerned that a set-aside would allow Verizon to purchase two of the four available blocks, leaving the big three to fight it out over the remaining two blocks. Telus emphasized its prior investments in arguing for a “level playing field” in the auction.

Yet to borrow Telus’ phrase — “scratch the surface of their arguments and get to the facts” — and it becomes clear the fight is not about level playing fields since new entrants have been at a huge disadvantage for years in Canada. Indeed, even with a spectrum set-aside, there would not be a level playing field as companies such as Telus would have big advantages that include restrictions on foreign ownership for broadcast distribution (thereby blocking Verizon from offering similar bundled services), millions of subscribers locked into long term contracts, far more spectrum than Verizon would own, and its shared network with Bell that has saved both companies millions of dollars.

While the companies frame their arguments around level playing fields, the real goal is simply to keep competition out of the country. For Verizon (or any major new entrants), a spectrum set-aside will be crucial since it is the only way to obtain sufficient spectrum (when combined with the existing spectrum from Wind Mobile and Mobilicity) to establish a viable fourth wireless network that could compete directly with the big three incumbents. If Telus gets their way, the removal of the set-aside would kill the government’s stated goal of a viable fourth carrier since there would be little reason for Verizon to enter the country only to face many of the same disadvantages that has hamstrung the smaller new entrants.

[...]

Make no mistake: the Telus lobbying campaign will be joined by Bell and Rogers as the three companies spend millions of dollars in advertising and lobbying to keep the Canadian market free from much needed competition (the Wire Report reports that ten board members each from Telus and BCE have registered to lobby the government on spectrum). The government has insisted that it will do whatever is necessary to ensure greater competition and consumer choice in the wireless sector. The potential Verizon entry into Canada — undoubtedly conditioned on a spectrum set-aside — is precisely what is needed. In this case, sticking with its policy by siding with consumers and greater competition has the dual advantage of being both good policy and good politics.

July 19, 2013

Protectionist law from 1920 strangling economies of Hawaii and Puerto Rico

Filed under: Economics, Politics, USA — Tags: , , , , — Nicholas Russon @ 00:01

Keli’i Akina wants the US government to amend or (better) repeal the 1920 Jones Act:

What’s the best way to destroy the economy of an island or largely coastal region? From the Peloponnesian War to the 1960s confrontation between Cuba and the United States, the answer has been to impose an embargo. In effect, that’s what the United States has been doing for decades to its non-contiguous regions such as Hawaii and Puerto Rico as well as Alaska and much of the East and West Coasts. The culprit in this economically self-defeating practice is a little-understood federal statute called the Jones Act. The 1920 maritime cabotage law specifies that ships carrying cargo between two American ports must: 1) be built in the United States, 2) be 75% owned by U.S. citizens, 3) be largely manned by a United States citizen crew, and 4) fly the United States’ flag.

In 2012, the Federal Reserve Board of New York issued a warning to the federal government that, unless Puerto Rico is granted an exemption from these Jones Act rules, its economy would likely tank. Following suit, the World Bank released a statement announcing that it will cut back its financing of projects in Puerto Rico and begin encouraging investors to look to Jamaica as a new international shipping hub. Puerto Rico’s legislature, governor, and resident commissioner in Congress have voiced loud objections. They join a growing chorus of outrage which includes Alaska, whose legislature has passed a law (Sec. 44.19.035) requiring the governor lobby Congress for reprieve from the Jones Act.

The Jones Act creates an artificial scarcity of ships due to the inefficiency and the extraordinary cost of U.S. ship construction, driving up cargo costs and limiting domestic commerce. Through World War II the United States was a leading producer of merchant ships. Today we build less than one percent of the world’s deep draft tonnage, and the ships produced domestically for the commercial market come at a hefty price.

May 26, 2013

Putting the Gibson Guitar raids into context

Filed under: Bureaucracy, Law, Politics, USA — Tags: , , , , — Nicholas Russon @ 11:06

Remember back in 2011 when the US government raided Gibson Guitars for alleged violations of Indian law? (Posts here, here, here, here, and here.) Now that we’re learning much more about the IRS witch hunt for Tea Party organizations, Investor’s Business Daily points out that the Gibson raids now make sense:

Grossly underreported at the time was the fact that Gibson’s chief executive, Henry Juszkiewicz, contributed to Republican politicians. Recent donations have included $2,000 to Rep. Marsha Blackburn, R-Tenn., and $1,500 to Sen. Lamar Alexander, R-Tenn.

By contrast, Chris Martin IV, the Martin & Co. CEO, is a long-time Democratic supporter, with $35,400 in contributions to Democratic candidates and the Democratic National Committee over the past couple of election cycles.

“We feel that Gibson was inappropriately targeted,” Juszkiewicz said at the time, adding the matter “could have been addressed with a simple contact (from) a caring human being representing the government. Instead, the government used violent and hostile means.”

That includes what Gibson described as “two hostile raids on its factories by agents carrying weapons and attired in SWAT gear where employees were forced out of the premises, production was shut down, goods were seized as contraband and threats were made that would have forced the business to close.”

Gibson, fearing a bankrupting legal battle, settled and agreed to pay a $300,000 penalty to the U.S. Government. It also agreed to make a “community service payment” of $50,000 to the National Fish and Wildlife Foundation — to be used on research projects or tree-conservation activities.

Update, 31 January 2014: Gibson releases a new guitar to celebrate the end of the case.

Great Gibson electric guitars have long been a means of fighting the establishment, so when the powers that be confiscated stocks of tonewoods from the Gibson factory in Nashville — only to return them once there was a resolution and the investigation ended — it was an event worth celebrating. Introducing the Government Series II Les Paul, a striking new guitar from Gibson USA for 2014 that suitably marks this infamous time in Gibson’s history.

From its solid mahogany body with modern weight relief for enhance resonance and playing comfort, to its carved maple top, the Government Series II Les Paul follows the tradition of the great Les Paul Standards—but also makes a superb statement with its unique appointments. A distinctive vintage-gloss Government Tan finish, complemented by black-chrome hardware and black plastics and trim, is topped by a pickguard that’s hot-stamped in gold with the Government Series graphic—a bald eagle hoisting a Gibson guitar neck. Each Government Series II Les Paul also includes a genuine piece of Gibson USA history in its solid rosewood fingerboard, which is made from wood returned to Gibson by the US government after the resolution.

[...]

The Government Series II Les Paul is crafted in the image of the original Les Paul Standard, with a carved maple top and solid mahogany back with modern weight relief for improved playing comfort and enhanced resonance. The glued-in mahogany neck features a comfortably rounded late-’50s profile, while the unbound fingerboard — with a Corian™ nut, 22 frets and traditional trapezoid inlays just like the very first Gibson Les Pauls — is made from solid rosewood returned to Gibson by the US government. And, the guitar looks superb with its unique Government Tan finish in vintage-gloss nitrocellulose lacquer.

May 6, 2013

A Canadian criminal innovation – cheese smuggling

Filed under: Cancon, Economics, USA — Tags: , , , — Nicholas Russon @ 09:58

The CBC reports on a breathtaking news item … imported mozzarella cheese is being removed from the clutches of the supply management system, which will reduce prices by a significant amount:

Pizza lovers could soon be paying less for their favourite pies.

A ruling made this week by the Canadian Dairy Commission could soon allow Canadian restaurants to buy deeply discounted mozzarella cheese.

The commission changed the rules used to classify mozzarella cheese, putting the milk product in its own class and essentially removing it from supply-management pricing. Before the ruling, the price for mozzarella cheese in Canada was artificially high when compared to the world market.

The new class, to take effect June 1, is expected to result in lower costs for Canadian-made mozzarella for restaurants that prepare and cook pizzas on site.

Bob Abumeeiz, who owns Arcata Pizzeria in Windsor, Ont., said the ruling could drop the price of a large pizza by as much as 10 per cent.

Oh, and the cheese smuggling?

High prices are part of the reason some pizzeria owners were turning to contraband cheese, smuggled into Canada from the U.S.

Last fall CBC News learned three men, including one current and one former police officer from the Niagara Falls area, were charged in connection with an international cheese-smuggling network.

The men are accused of smuggling caseloads of cheap cheese from the U.S. to sell to Canadian pizzerias and restaurants.

April 16, 2013

Six political talking points on international trade that are myths

Filed under: Cancon, Economics, Media, Politics — Tags: , , , — Nicholas Russon @ 11:32

In Maclean’s, Stephen Gordon collects six of the most common myths politicians use to justify trade distorting policies:

1) Exports are good. Not true; exports are the costs we pay for engaging in international trade. Diverting domestic productive resources to producing more things for foreigners doesn’t increase our standards of living.

2) Imports are bad. This is point one restated: imports are the benefits from trade. The reason we engage in international trade is to obtain goods and services more cheaply than we can produce them for ourselves.

3) Trade deficits are bad. I went though this at length in this post: noting that a country has a trade deficit (or, more properly, a current account deficit) is the same thing as noting that domestic investment is larger than domestic savings. It’s not obvious why this is necessarily a bad thing.

4) Trade deficits are a sign of a slowing economy. The Canadian trade balance is generally counter-cyclical: falling during expansions and rising during recessions. A trade deficit is standard fare for Canadian expansions, not something to get concerned about.

5) Liberalized trade increases employment. Again, this is point one restated. Liberalized trade may increase the number of workers in certain export-oriented sectors. But the effect on total employment in the economy is zero.

6) Liberalized trade reduces employment. Again, this is point two restated. Liberalized trade may reduce the number of workers in certain sectors vulnerable to foreign competition. But the effect on total employment in the economy is still zero.

March 25, 2013

Budget Day was also apparently opposite day

Filed under: Cancon, Economics, Politics — Tags: , , , — Nicholas Russon @ 10:51

In Maclean’s, Stephen Gordon give props to the spinmeisters in the employ of the federal government:

Full credit to the government’s communications strategists: they managed to produce budget-day headlines that said the exact opposite of what was in the budget.

The first thing I read on the morning of budget day was the National Post story about cutting tariffs on hockey gear. There was also a matching A1 story in the Globe and Mail and I walked to the budget lockup in a cheerful mood. Even though the numbers involved were tiny, I couldn’t help but feel encouraged about how the measure was being marketed. Almost without exception, trade liberalisation is presented as a concession to the demands of foreign exporters, but the real gains from trade are those obtained from being able to purchase cheaper imports. These gains can be obtained by reducing tariffs unilaterally – the most famous example is the repeal of the the UK Corn Laws in 1849. There was no drawn-out process of negotiations with corn (wheat) exporters in other countries: the UK government simply eliminated tariffs so that the population could have cheaper food. The morning headlines led me to believe that our government was going to implement a unilateral tariff reduction for the simplest and best reason: because it increased consumers’ purchasing power.

I was wrong, of course. Yes, there were those 37 tariff reductions, but there was also the measure to ‘modernize’ Canada’s General Preferential Tariff (GPT) regime by ‘graduating’ 72 countries from the GPT; imports from these countries will now face higher tariffs. Mike Moffatt estimates that those 37 tariff reductions will be accompanied by 1290 tariff increases. [. . .]

So instead of a unilateral reduction in tariffs, the government is planning a unilateral increase. This is not how a pro-trade government behaves.

March 10, 2013

Do they have to destroy the Republican Party to save it?

Filed under: Media, Politics, USA — Tags: , , , , , — Nicholas Russon @ 10:00

The defeat of the Republicans in the last US federal election has a lot of them starting to consider radical changes to the party in order to attract new voters. Some of these proposed changes are so radical that it’s hard to believe they wouldn’t rupture the party and drive away nearly as many as they hope to bring in. The farcical notion of a “conservative welfare state“, for example, would likely jettison any last vestiges of reducing the size of government:

[Matthew] Continetti is not the first conservative to argue — falsely as I note in an upcoming piece for Reason magazine — that courting new constituencies such as Hispanics, Asian Americans and other minorities will require the party to give up even its pretense of limited government. Still, Continetti’s basic point that the GOP does not have a coherent ideology that will allow it to court new constituencies while hanging on to its old ones is well taken. After all, how does the party appeal to the “millennial generation” that includes gays, young foodies and indie-music listening hipsters without losing the meat-and-potato social conservatives in, say, Charleston, South Carolina?

Continetti’s answer, dusted off from a 1975 essay by Irving Kristol, is that what the GOP needs is an authentically conservative version of the liberal welfare state. To fashion such a state, Continetti argues, would require:

    Republicans to revisit some of the assumptions they have held since the end of the Cold War. Maybe the foremost concern of most Americans is not the top marginal income tax rate. Maybe you can’t seriously lower health care costs without radically overhauling the way we pay for health care. Maybe a political party can’t address adequately such middle-class concerns as school quality and transportation without using the power of government. Maybe the globalization of capital and products and labor hasn’t been an unimpeachable good.

I am all for rethinking post-Cold War assumptions, but do we have to throw globalization and trade liberalization under the bus in the process? After all, hostility to trade has become passé even among Third World anti-trade activists such as Vandana Shiva — the last ones holding their finger in the dyke to stop globalization. This is in no small part due to the debunking done by economists such as Jagdish Bhagwati who have shown that even the immediate losers of trade liberalization win in the long run. So what is the point of reviving this animus especially since Continetti offers no new (or even old) evidence of trade’s downside?

[. . .]

In short, the ideal conservative welfare state would be a libertarian dystopia of even bigger proportions than the liberal welfare state. There is less welfare and more state in it.

But what is deeply ironic is that a magazine that accuses libertarians of isolationism because they oppose American military interventionism has no qualms about recommending a restrictionist immigration policy to keep foreigners out and a protectionist trade policy to keep foreign goods out. If I had to pick a term for this foreign policy, I’d call it neo-isolationism. And maybe I lack imagination, but it is hard to see how a party that wants to engage the world through its “fearsome military” — rather than through voluntary exchange and mutual cooperation — could gain enough moral high ground to craft a winning political message, especially in a war-weary country.

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