China’s not buying our oil; it’s buying the reliable flow of Canadian corporate profits and our stable economic outlook.
Is it a national security risk to Canada?
No, again. It is true that, according to CSIS, the Chinese government represents the largest espionage threat to Canada, stealing the equivalent of $1-billion a month from our country in industrial secrets. (That’s more than our annual exports to China.)
But that espionage is done illegally by Chinese students, expats and other sympathizers, not through the legal ownership of share certificates. No doubt our high-tech energy secrets are being stolen and will continue to be stolen, but that is not happening because of a Wall Street deal. The central strategic value of the oil sands is not at risk.
Ezra Levant, “Pipeline to Asia”, National Post, 2010-04-15
April 15, 2010
QotD: Chinese espionage in Canada
Properly defining what are “public goods”
Milena Popova, guest-blogging while Charles Stross is out experiencing Japan, has a long discussion up about public goods and why content (digitally speaking) is a classic example:
There’s a theory in economics about things called “public goods”. To understand the distinction between private goods, public goods and the couple of shades of grey in between, you first need to get your head around two concepts: rival and excludable.
Rival: (Wikipedia seems to call this “rivalrous”, but when I were a young economist lass we used to call it rival so I’ll stick with that.) A good is rival if my consumption of it diminishes the amount of the good that you can consume. Say we had 10 apples, and I ate one. There would now be 9 apples left which you could eat. If we had one apple and I ate all of it, tough luck, no apples for you. Knowing whether a good is rival or not tells you whether you want to use the market (if I were a good economist that would possibly be capital-M Market 😉 to allocate access to that good. If it’s rival, then the market is an efficient way of allocating the good; if it’s not, then you might want to think about other ways of getting your good to people. Remember that scary anti-piracy clip at the start of your DVDs which says “You wouldn’t steal a handbag”? Hold that thought for a minute.
Excludable: A good is excludable if you physically have a way of stopping people from consuming it. Back to the apples: if they’re in my fridge, inside my locked house and you don’t have a key, you can’t have my apples. (Yes, yes, you could break in. The law provides additional protection here, but ultimately there’s probably a better way for you to obtain an apple than breaking into my house, right?) Knowing whether a good is excludable tells you whether you can use the market to distribute the good. If your good is excludable, go ahead and sell it on the open market; if it’s not — you might struggle because you can’t stop people from just taking it for free.
So. Most of the goods you deal with in your day-to-day life are both rival and excludable. We call them pure private goods. But there’s a few things here and there that aren’t as clear-cut, and this is where it gets a little messy.
April 12, 2010
New “green” jobs to pay over $300K
Oh, wait. Sorry, that should be will cost over $300K:
The Government of Ontario recently signed a $7 billion no-bid contract with two Korean companies to supply wind and solar power to the province. Officials claim the backroom deal will boost “green” industry and job creation. But it’s hard to fathom how the additional employment can possibly be beneficial when each new manufacturing job will cost taxpayers a whopping $303,472. Nor do dramatic increases in electricity rates constitute much of a bargain.
Having failed on his pledge to shutter all coal-fired plants in the province by 2007, Ontario Premier Dalton McGuinty evidently has sought a grand green gesture that would appease the global warming alarmists. Executives of Samsung C&T Corp., in concert with the Korean Electric Power Corporation, were understandably eager to cooperate.
The agreement commits the province to buy wind and solar energy from the two companies at artificially high rates. It also extends to Samsung and Korean Power preferential access to the transmission network at the expense of independent wind power producers. As if either provision won’t adequately punish Ontarians, McGuinty also has pledged to override local zoning laws in locating new wind farms and transmission corridors.
Update, 12 February 2011: Even Premier McGuinty can only deny financial reality for so long:
Times of international turmoil are great moments for domestic governments to make important announcements they don’t want to be noticed. Especially if the announcement involves a sudden reversal in policy that could seriously embarrass the government.
So Friday afternoon was an ideal time for Ontario’s Liberal government to take a big chunk of its alternative energy program and chuck it overboard. Attention was riveted on Egypt, where spectacular events were unfolding. The perfect opportunity for Premier Dalton McGuinty to engineer yet another major reversal, while paying a minimal price among voters.
After years of touting wind projects as a critical piece of the alternative energy puzzle, the government let slip — very quietly — that offshore wind projects are no longer part of the game plan. Turns out there just isn’t enough scientific evidence that offshore wind projects do a lick of good, said Brad Duguid, the energy minister.
April 6, 2010
Recommended to your attention
A link from the latest Reason Online mailing led to this article, which is quite worth reading, if only for the pro-Canadian/anti-Soviet-Canuckistan comments:
The Hate-America-First outfit Heritage Foundation says the U.S. of A. may be a tad freer when it comes to economics than trans-fat-free Denmark, land of free speech for Islamo-dumbkopfs, but is less free than Canada, a country whose greatest export remains a former pitchman for Molson Export and one of
both ofthe stars of the original Star Trek series
And some of the amusing comments:
¢: I’ll assume they say Canada’s freer because it’s much, much whiter. White supremacists always rank Hong Kong at the top of things.
Ken Shultz: I don’t have the stats handy, but I think the notion of Canada being remarkably “white” is a bit of a misconception . . . especially if by “white” you mean some sort of uniform ethnicity.
From aboriginals and metis to the francophones in Quebec, and from the ethnic Chinese in Vancouver to the “Newfies”, I think Canada’s a lot more diverse than most Americans give them credit for.
It’s almost an American conceit, I guess, that when we look at the rest of the world, we don’t think it’s diverse unless more than 10% of the population is of African ancestry? [. . .]
dr duncan druhl: If you lived near Francophones, Francophiles, or just the French in general, trust me, you’d buy that they are a very distinct group. The ones in Canada are strange because they can’t stand the French because the France-French look down their nose at them for their strange dialect, which is probably as close to common street French from the 16th and 17th century as we’ll likely find anywhere.
creech: Canadians are too modest to start bragging about this. Canadian tax rates are such that the boss is starting to jigger intercompany pricing to move profit from the U.S. to Canada. Used to be the other way around.
Force shits upon Reason’s back: Canadians are too modest
Have you ever met a Canadian? They have many fine traits; modesty is not among them.
March 31, 2010
More on the growth in public sector employment
March 30, 2010
I guess I can’t complain
According to the latest figures, my commute is only a bit longer than average for Toronto:
After more than six years of enlightened, environmentally-conscious left-wing government under a pro-transit mayor with a compliant anti-auto city council, Toronto has been told its gridlock is among ther worst in the world.
The Toronto Board of Trade surveyed 19 cities and found that commuting times in Toronto are the longest of the lot. Worse than London. Worse than New York. Worse than Los Angeles. Worse than Berlin or Milan. The average beleaguered Torontonian spends 80 minutes a day trying to get to and from work.
Imagine what it would be like without an enlightened, activist, pro-transit city government.
Well over half of my commuting time is spent inside the city boundaries, even though it constitutes a bit less than half the total distance. I’m fortunate that I don’t have to do my commute every day of the week . . .
March 29, 2010
Americans to lose privacy in offshore banking
Of course, the headline assumes that they had any such privilege in the past . . .
Samuel Taliaferro is disturbed by provisions in a new law which will extend US government intervention into foreign bank business:
The name of the bill is the Hiring Incentives to Restore Employment Act (H.R. 2487) commonly known as the HIRE Act. This is the jobs incentive bill that was signed by the President on March 18th amid little fanfare.
Relatively small by Washington standards (“just” an $18 billion stimulus package) the bill was drafted to provide incentives to employers to hire more people but contains some very disturbing language concerning the ownership and transference of money to any overseas account. The truly galling part of the bill is that it attempts to require “foreign financial and non-financial institutions to withhold 30% of payments made to such institutions by U.S. individuals unless such institutions agree to disclose the identity of such individuals and report on the bank transactions”. Think about this — the U.S. government is attempting to strong arm foreign financial and non-financial institutions (think banks and law firms) to either withhold 30% of the transactions in a U.S. individual’s account (and presumably remit this to the U.S. Treasury) or disclose the account details to the U.S.. The language of the bill addresses both bank accounts and any foreign trusts (ie- Private Interest Foundations).
In other words, the US government is afraid more Americans are going to be worried about the security of their money and will look to offshore institutions to preserve their savings. The government is moving pre-emptively to deter that flow of money away from their direct control. You’d almost think they didn’t trust their own citizenry.
Costs continue to rise for F-35B aircraft
Strategy Page has more on the increasing spendiness of the F-35 program, especially the part the Navy is most concerned about:
Denmark has decided to wait, until 2014, to decide what to replace its elderly F-16 fleet with. Meanwhile, 18 of the F-16s will be retired. But the other 30 will be refurbished so that they can continue to operate for the rest of the decade. Denmark had wanted to replace the F-16s with F-35s. But the F-35s keeps getting delayed (now more than two years behind schedule), and is becoming more expensive (nearly a hundred percent over budget). The Danish F-35 buy is no longer a sure thing. The delays have lots of users concerned. The U.S. Navy has been nervously watching as the costs of the new F-35C and F-35B carrier aircraft versions go up.
It comes down to this. Currently, it costs the navy, on average, $19,000 an hour to operate its AV-8 vertical takeoff and F-18C fighter aircraft. It costs 63 percent more to operate the F-35C (which will replace the F-18C) and the F-35B (which will replace the AV-8). These costs include buying the aircraft, training and maintaining the pilots, the aircraft and purchasing expendable items (fuel, spare parts, munitions.) Like the F-22, which recently had production capped at less than 200 aircraft, the capabilities, as superior as they were, did not justify the much higher costs. The F-35, at least for the navy, is headed in the same direction. The navy can go ahead with the more recent F-18E, and keep refurbishing, or even building, the AV-8. Politics, and lobbying by the F-35 manufacturer, will probably keep the F-35 headed for fleet service, no matter what the cost.
Another ally watching the F-35B costs rise with trepidation is the Royal Navy, whose aircraft carriers are not able to handle conventional aircraft (even the two large carriers under construction won’t have catapults for launching non-STOL planes). Earlier posts on the Royal Navy’s carrier worries here and here.
March 26, 2010
Times to go pay-for-access in June
The editors of the Telegraph, Guardian, and Daily Mail rub their hands in glee, anticipating more page views from former casual Times readers:
The Times and The Sunday Times will become the first British newspapers to charge readers to access the titles online from June, Rupert Murdoch’s News International announced on Friday.
Customers will have to pay one pound for one day’s access and two pounds for a week’s subscription, in a move that will be closely watched in a newspaper industry suffering steadily dropping sales.
Both Times titles will launch new websites in early May, replacing the existing combined site, Times Online.
I rarely link to Times articles as it is, so their decision to pull everything behind a paywall won’t have much direct effect on my reading habits. If it’s a success (for varying values of “success”), other newspapers may follow suit. That might start to impact me, as I do link to articles from other British newspapers on a more regular basis.
Personally, I think this move won’t work, but it’ll be interesting watching the experiment happen.
March 24, 2010
Using carbon dating to detect fake vintage wines
Jon, my former virtual landlord, sent me this link on a subject I’ve blogged about before: detecting fakery and fraud in the fine and vintage wine market:
Up to 5% of fine wines are not from the year the label indicates, according to Australian researchers who have carbon dated some top dollar wines.
The team of researchers think “vintage fraud” is widespread, and have come up with a test that uses radioactive carbon isotopes left in the atmosphere by atomic bomb tests last century and a method used to date prehistoric objects to determine what year a wine comes from — its vintage.
[. . .]
“The problem goes beyond ordinary consumers being overcharged for a bottle of expensive wine from a famous winery with a great year listed on the label, that isn’t the right vintage year,” Jones said.
“Connoisseurs collect vintage wines and prices have soared with ‘investment wines’ selling for hundreds of thousands of dollars a case at auction,” he said.
I read Benjamin Wallace’s The Billionaire’s Vinegar which was rather an eye-opener about both the rare wine trade and the potential for fraud in that market (posts here and here). It’s nice to see that technology is coming to the rescue in cases where this kind of fraud is suspected.
March 23, 2010
Stimulus did little, private sector did much more
Despite all the expensive ads (especially noticeable during the Vancouver Olympic coverage), it wasn’t the federal government’s stimulus package that has been creating jobs: it was the private sector:
Canada’s economic fortunes have seen a dramatic turnaround in the last year, but according to a new study by one of the country’s leading think-tanks, it had little to do with the federal government’s $47.2-billion Economic Action Plan.
The Fraser Institute released a study Tuesday that found that government stimulus packages contributed only 0.2 percentage points to the rise in GDP between the second and third quarter of 2009 and nothing between the third and fourth quarter.
The group found that it was private-sector investment and increased exports that were the driving forces behind the change in GDP growth.
“Although the federal government has repeatedly claimed credit for Canada’s improved economic performance in the second half of 2009, Statistics Canada data show that government spending and investment in infrastructure had a negligible effect on the country’s improved economic growth,” said the Fraser Institute’s senior economist, Niels Veldhuis.
Here is the news release from the Fraser Institute.
This shouldn’t be a surprise: the stimulus was, and continues to be, a media exercise much more than it was an economic plan. As with any outcry in the mass media, the government had to be seen to be doing something, regardless of the likely success. The illusion of positive motion was necessary, and the federal government knows it has little wiggle room as far as the mainstream media is concerned — doing nothing was not going to be an acceptable choice, even if doing nothing was the “correct” response.
The government can’t really “create” jobs — although it certainly can destroy ’em — most of the jobs “created” in response to government funding are going to go away as soon as that funding dries up. There’s no economic justification for them to exist, absent the stimulus money. If there was an economic justification, private employers would have created them (where not hindered by government action of one form or another, that is).
The increase in public sector employment is unsustainable: the money to pay salaries and benefits (ahem), training, equipment, and facilities all has to be taxed from individuals and companies. The more public sector jobs, the greater the drain on the private sector. The greater the burden placed on the private sector, the slower the growth of the economy. As you approach the “break even” point, where the private sector can no longer fund all the demands from the public sector, the economy gets more and more sluggish — no sane private employer is going to expand business if there’s no profit to be made. No expansion means no new jobs.
It might be possible for us all to live by “taking in one another’s laundry”, but it’s not possible for us all to live by approving permission forms, having meetings, and bureaucratic empire-building.
March 22, 2010
After MPAC?
Lorne Cutler looks at one of the proposals to replace the Municipal Property Tax Corporation (MPAC), which sets the property tax levels for Ontario towns and cities:
As the Ontario government grapples with ways of cutting their $25-billion deficit, they should note that there is one agency that that could be virtually eliminated overnight and few would shed a tear. It is the vast Orwellian bureaucracy known as the Municipal Property Tax Corporation (MPAC), which has the role of determining the value of Ontarians’ property every four years so that municipal taxes can either increase or decrease depending on how MPAC’s valuation of the property has changed relative to other properties in your municipality.
If MPAC determines that a property’s value went up less than the average for the community, the municipal taxes will drop (before any tax increases implemented by the municipality) and if the property went up more than the average, the taxes will increase. It is a capital gains tax without the capital gains!
Not content to actually use the market to determine property values, every few years, MPAC’s army of 1,500 civil servants assesses what they think each property is worth. Even if you just bought your house last year, MPAC can decide you really didn’t pay the true value. In order to determine the value of over 4 million properties and fight assessment challenges, the agency spent over $180-million in 2008, an 11% increase from 2007. This cost doesn’t even include the millions in subsidies that the government has to provide to seniors so they don’t lose their homes because of rising property taxes due to MPAC.
Elizabeth and I had our day in “court” with MPAC back in 2004, when we were handed an assessment claiming that our house was worth (for tax purposes) 25% more than we paid for it — in the same month we took it over from the builder:
Now it was our turn, and we already knew that our ace had been trumped: we couldn’t use the builder’s sale price as part of our evidence. We tried anyway, and to our astonishment, it was allowed. In fact, we seem to have unwittingly wrong-footed the representative from MPAC, because we mentioned that we’d received two separate assessment notices for different values (the first was about 5% more than we’d paid, the second nearly 25% more).
Because we’re in a pretty fast-moving market area, we could certainly believe that the house would be worth 5% more within a couple of months of buying it, but 25%? Come on. There was no way that we could have sold the house for 125% of list price that quickly. After a few years, sure, that’d be possible, but not that soon.
We were treated to a long-ish lecture about how our builder had owned the land for such a long time that they weren’t selling the houses for what they would really be worth on the open market, because they didn’t need to make a profit on the land . . . or something equally economically unlikely. I rather lost the thread at that point. Anyway, during our respective summations, it became clear that he didn’t think we had a leg to stand on (he wasn’t openly gloating, but it was edging in that direction).
The final act was a bit of a Scrooge-to-Bob-Cratchit moment, as the adjudicator turned to us and said “. . . and in summary, I will be lowering your assessment to $XXX,XXX” — about 5% less than the lowest assessment figure we’d got. I was so sure that I’d misheard him that it was only as the MPAC rep started whining that I believed what I’d heard. The observer from the town suddenly went into a huddle with the MPAC guy, because the lowered assessment for us might have a domino effect in our entire subdivision.
They’ll get away with it ’cause of their cute mascot
James Delingpole realizes that the Scooby Gang probably won’t be cracking this case, and it’s all because the villians chose a cute mascot:
Today in the Sunday Telegraph my colleague Christopher Booker breaks possibly the most important environmental story since Climategate: a devious plan, truly Blofeldian in its scope and menace, by a hard-left-leaning activist body to gain massive global political leverage and earn stupendous sums of money by exploiting and manipulating the world carbon trading market.
My cynical prediction is that this vitally important story will gain little traction in the wider media, especially not with organisations like the BBC. Why? Because the activist body in question has a lovely, cuddly panda as its motif, and a reputation — brainwashed into children from an early age — for truly caring about the state of our planet. What’s more, this latest campaign by the WWF (formerly the World Wildlife Fund) is very easy to spin as something unimpeachably noble and right. After all, what kind of fascistic, Gaia-hating sicko would you have to be NOT to applaud a delightful heartwarming scheme to buy up whole swathes of the beauteous, diversity-rich, Na’avi-style, Truffula-tree dotted Amazon rainforest to preserve it for all time from the depredations of evil loggers, cattleranchers and other such profiteering scum?
March 17, 2010
Superbubble?
Jon, my former virtual landlord, sent me this link, suggesting that it “gives you an opportunity to round up all of your ‘as I said about China earlier…’ [posts]”.
The world looks at China with envy. China’s economy grew 8.7 percent last year, while the world economy contracted by 2.2 percent. It seems that Chinese “Confucian capitalism” — a market economy powered by 1.3 billion people and guided by an authoritarian regime that can pull levers at will — is superior to our touchy-feely democracy and capitalism. But the grass on China’s side of the fence is not as green as it appears.
In fact, China’s defiance of the global recession is not a miracle — it’s a superbubble. When it deflates, it will spell big trouble for all of us.
I don’t want to give the impression that I’m anti-Chinese, because that isn’t why I post this sort of material. I think the Chinese miracle has been to raise literally hundreds of millions out of poverty, but it hasn’t been a purely positive thing: hundreds of millions of others are supporting the uplift but being deprived of similar opportunities. It’s a fantastic achievement, but it has involved — and continues to involve — injustice and repression.
It also requires continued state control over media, and not just BBC/CBC/PBS type state funding, but actual state censorship and worse:
During the crisis, Chinese exports were down more than 25 percent, tonnage of goods shipped through railroads was down by double digits, and electricity use plummeted.
Yet Beijing insisted that China had magically sustained 6 to 8 percent growth.
China lies. It goes to great lengths to maintain appearances, including censoring media and jailing those who write antigovernment articles. That’s why we have to rely on hard data instead.
Those lies will compound the impact when the lies can’t be maintained any more:
What happens in China doesn’t stay in China. A meltdown there — or even a slowdown — would have severe consequences for the rest of the world.
It will tank the commodity markets. Demand for industrial goods will fall off the cliff. Finally, Chinese appetite for our fine currency will diminish, driving the dollar lower against the renminbi and boosting our interest rates higher. No more 5 percent mortgages and 6 percent car loans.
It will be bad for the US and the rest of the world’s economies, but it could well be catastrophic (in the full meaning of that word) for China. As the US economy contracted over the last couple of years, it revealed lots of malinvestments . . . and the companies which were most exposed to the risks took huge hits to their balance sheets and their business models. A similar shock to the Chinese economy could topple the government or raise the already-high chances of massive unrest and corresponding increased repression.
Interesting times, indeed.
As Jon suggested, you can see my previous concerns about the Chinese economy here.
March 16, 2010
Trudeau’s part in Cuba’s economic non-liberation
William Watson mentions, in a review of Just Watch Me, volume 2 of a Pierre Trudeau biography:
But to me the strangest and most alarming passage was this one, on page 617. Referring to the optimal speed of transition for countries exiting communism, English writes: “Trudeau’s concerns about making haste too quickly, with potentially disastrous results for the health of any society, were apparent in the mid-Nineties, when Castro’s Cuba, reeling from the impact of the abrupt end of financial support from the Soviet Union, considered opening up its rigid state socialist system. Because of its historic economic ties with Cuba, Canada became involved in discussions with the Cuban government. James Bartleman, then the chief foreign policy advisor to prime minister Jean Chrétien, later indicated that Castro abandoned his plan to loosen socialist restraints after a conversation with Trudeau, who cautioned him about its impact on the social health of his country. No record of Trudeau’s conversation is available, but Bartleman’s account rings true because of Trudeau’s friendship with Castro and his respect for the gains achieved by Cuba in the areas of health and education.”
Fidel must have been deeply grateful for Trudeau’s advice; the Cuban people, not so much.
It must be said that Castro probably welcomed Trudeau’s advice partly because it aligned closely with his preferences anyway . . .
