Category Archives: economy

Let us unite against a common enemy

Look out, Texas Triangle, we’ve got our eye on your jobs. Putting the “unity” back in Community Editorial Board:

If we want to start making this region better, we need to stop fighting amongst ourselves and start devoting our energies to competing against other regions. We are in the age of globalization and we need to start putting Niagara in the same sentences as Kitchener/Waterloo and the Greater Toronto Area provincially, and next to Greater Paris and the Texas Triangle globally.

I take no issue with the call for Regional cooperation, but we shouldn’t throw out small-r regional cooperation at the same time. Whether it’s St Catharines versus Niagara Falls or Niagara versus Waterloo, the competition shouldn’t be destructive.

Realistically, we’re all part of a larger Toronto-centred region anyway.

Good death

“Euthanasia” come from the Greek for “good death.”

If worst comes to worst, letting the Big Detroit Three fail gently might not be catastrophic.

Stephen Gordon put job hiring and job loses in a handy graph which shows the context in which possible job losses exist. He writes:

The most credible worst-case scenario of a collapse of the Detroit Three involve job losses of the order of 150k. (The estimate of 500k from the Ontario Manufacturing Council that made so many headlines is not credible.) Losing 150,000 jobs is certainly not good news, but in the context of an economy in which almost a quarter of a million jobs are lost every month, it’s fair to wonder just how big of a deal that is. If those losses were spread across a few months, they would hardly show up in that graph.

Having said that,

I don’t want to be misunderstood here: notwithstanding these considerations, the short-term consequences of an immediate, catastrophic collapse are severe enough to justify spending public money in order to prevent it. Hiring rates are not yet strong enough to absorb that kind of shock.

Frankly, I’m not sure I should even be allowed to have an opinion on the auto bailout. (What do I know?) But for what it’s worth, I’m not comfortable with propping up the automakers any more than is necessary to reasonably contain their collapse. I’m not rooting for the death of GM or Ford, but it’s not as if they were healthy during good times.

Also, have I professed lately my love for Worthwhile Canadian Initiative?

Feeling guilty about buying Chinese?

Don’t feel bad! From the Economist’s Free Exchange:

[…] what good is innovation in America if it merely creates jobs for China?

Greg Linden, Jason Dedrick and Kenneth Kraemer answer that very question by looking at iPods. They tally the number of jobs and wages associated with the production, development and distribution of all Apple iPods in 2006. Apple (an American company) invented the iPod, but they, and the intermediate goods they require, are mainly manufactured abroad. So other than enjoying more music, have Americans benefited from the creation of iPods?

The answer is yes. The authors found iPods employed 41,170 people worldwide. About 27,000 of those jobs went overseas, but most of those were the low-wage and low-skill jobs involved in production. Only 30 Americans had jobs involved in iPod production. But 13,890 jobs were created in the engineering or retail sector. These Americans earned $753m from iPods, while overeases employees earned $318m. Americans earned more because Apple kept the high-skill jobs (the R&D side) at home and sent its manufacturing abroad. But America’s lower-skill workers also benefited, mainly in the retail, non-professional sector. These jobs earned American workers more than $220m.

The moral of this story? You’re better off selling iPods than trying to compete with Chinese manufacturers (and better off still if you come up with new things for the Chinese to manufacture).

And you thought the culture wars were protracted

A call to remake the South in the North’s image – for the third time.

517,000 Ontario jobs at risk

That was the Toronto Star’s headline Tuesday. In a moment of weakness, stunned by the sheer numbers, I was ready to take drastic measures.

Throw billions at them! Nationalize GM! NAFTA be damned!

Thankfully, Andrew Coyne knocked some sense back into me. Go read this debunking. For those too lazy for links (what are you doing on the Internet?), the most enormous flaw of the study behind the headline was that it assumed the highly unlikely total collapse of GM, Chrysler, and Ford. All at once. Leaving behind a vacuum of economic misery, never to be filled by other companies.

Yikes.

Posted without judgement…

… because I am wholly unqualified. But it’s fun to try to keep up.

And the money I’m saving for my down payment in a year or two? If we decide that inflation is a great thing, I might as well kiss it goodbye. Maybe the government should just requisition it, like foodstuffs for an army in time of war. My fault for not blowing it on consumer goods.

Posted by: Adam | December 16, 2008 at 07:06 PM

Adam: and that is exactly the sort of belief that I want to create. I want people to fear inflation more than deflation, so they will dump money, and safe government bonds, and safe little bank accounts, and buy real assets like stocks, refrigerators, even cans of beans! The proximate cause (not the original cause, but that horse has bolted) of the financial crisis is that everybody wants to hold the very safest, shortest, and most liquid assets: money and government bonds. The solution lies in making those assets undesirable enough that people will want to get rid of them.

Posted by: Nick Rowe | December 16, 2008 at 07:30 PM

From the comments at Worthwhile Canadian Initiative. If you follow only one Canadian economics blog (is there more than one?) let this be it.

China: one great big subprime mortgage?

A metaphorical subprime mortgage, of course.

From The Economist:

India has a big advantage over China in coping with an economic slowdown. It has all-too extensive experience in it; and it has a political system that can cope with disgruntlement without suffering existential doubts. India pays an economic price for its democracy. Decision-making is cumbersome. And as in China, unrest and even insurgency are widespread. But the political system has a resilience and flexibility that China’s own leaders, it seems, believe they lack. They are worrying about how to cope with protests. India’s have their eyes on a looming election.

China has been outperforming India during the boom years, but perhaps India will weather this recession with less pain.

Democracy: muddling through good times and bad, since 500 BC.

No bailout for you

OK, I’m convinced. Auto bailout = hopeless.

It’s time for bankruptcy. If we’re going to have a recession, we might as well make the most of it.

The dynamic economic engine of Canada

Oil money makes people stupid.

Exhibit A:

Alberta will implement renewable fuel standards as part of a provincial energy strategy, the government introduced yesterday.

Premier Ed Stelmach used the occasion to once again press Ottawa for an agreement about emission targets and a seat at the table should the federal government and president-elect Barack Obama negotiate North American environmental standards.

Starting in 2010, Alberta will require regular fuel to contain 5% ethanol and diesel to contain 2% renewable diesel.

Ethanol? Someone should tell the Premier that is fashionable these days to be skeptical of ethanol’s greenness.

All that money and they go with ethanol. It makes me shake my head.

Stimulus II

Alex Tabarrok suggests “smart grid” technologies:

Consider that in 2003 a massive, widespread, power outage threw 50 million people in the Northeastern states and Ontario, Canada out of power – disrupting lives and the economy.  Why did this happen?  Because of a failure to “trim trees” in Eastlake, Ohio – now that’s a dumb grid.  And remember that only a few years earlier, the most innovative, high-tech industries in the world were shut down by blackouts caused by our primitive electricity grid.  Overall, blackouts cost the U.S. on the order of $100 billion a year.

The smart gird is a not one idea but many technologies such as real-time pricing (smart meters), superconductive smart cable, and plug-n-play architecture that combine to produce a grid that is decentralized, self-healing, robust, and smart for both producers and consumers.  Decentralized power, for example, makes it easier to isolate problems, “route” power to different areas, and maintain robustness in the face of falling trees and other problems.  Plug and play architecture means that new technologies such as electric cars can be automatically used as both consumers and producers (via storage) of electricity, as needed, on the fly.  Plug-n-play, the open-source of electricity infrastructure, will also open the field of electricity generation and storage to far greater innovation than is possible now.

I can’t say I know much about electricity delivery, but this certainly sounds like a good idea. Our transmission capacity in Ontario is pretty tight anyway – there’s so little capacity to bring more power into downtown Toronto they’re building a generating station in the port lands, and a new nuclear facility in Bruce County would require another high-voltage line. Might as well build the good stuff if we have to build anyway.

(photo credit)