Monday, July 26, 2010

Monday Morning Links

- For those who missed La Presse's brilliant take on the Harper Cons, here's Phillipe Gohier's translation:
The controversy surrounding the terms of the census is typical of the pillaging the conservatives have engaged in since coming to power. Not only is their behaviour dictated by simplistic ideology, the Conservatives impose their politics while displaying a exceptional degree of incompetence.
Before this government does even more harm to the institution that is the government of Canada, the intelligent people within the federal cabinet have a duty to rise up and stop the pillaging. Otherwise, the Harper government may be remembered as one of the most incompetent and harmful governments this country has ever known.
Unfortunately, it's not clear what "intelligent people within the federal cabinet" the editorial could be referring to. Which means that it'll fall to those of us outside Harper's control to bring about the change Canada needs.

- Meanwhile, the Globe and Mail reports that the order to gut the census came from Stephen Harper himself based on nothing more than vintage tea-party anger at the concept of governments having accurate information on which to base decisions. And the observation that Harper considered doing away with a mandatory short form as well raises the question: would he have taken that step too if he didn't hope for population shifts to work to his party's political advantage?

- Rick Salutin nicely encapsulates the conservative view of government by highlighting its affinity for the "fear sector":
The (prison and security sectors) aren’t as cost-beneficial as the military. They don’t make much to sell to the rest of the world, or generate social benefits. But deduct the impact of all three from the U.S. economy, and from its employment stats (including people in the armed forces or jail), and that mighty economic engine would be a holey mess.

The Harper government is clearly impressed. They don’t seem to mind big government, if they can tax and spend in the fear sector. So they’ve expanded our military budget and just announced a $9-billion (or maybe $16-billion) purchase of 65 U.S. jets we’ll have to find some use for. They’re increasing the prison population through U.S.-style sentencing laws and planning “major construction initiatives” that will boost (sorry) corrections costs by 43 per cent. On homeland security, there’s that amazing $1.2-billion spent at the G20.

But it’s a hard sell. Canadians will have to be persuaded to shift more money from a stretched health-care system to the fear sector. The benefits here aren’t as obvious. For buying those jets, all our firms get is the right to bid on U.S contracts. Lotsa luck. Mostly, though, there’s the fear culture that you need for a fear sector.
- Finally, Erin points out that the Bank of Canada's moves to push up interest rates look to be based on a theory that makes the confidence fairy look like a marvel of rational economics:
By my count, the (latest Monetary Policy Report) expresses concern eight separate times about anemic business investment. It acknowledges the point I have been making about capacity utilization, suggesting that business investment “is likely to remain sluggish relative to previous recoveries, owing to high levels of unused industrial capacity”.

But then the MPR’s tune changes: “Nevertheless, business investment is expected to increase to levels consistent with previous recoveries, driven by the need to expand capacity and to increase productivity in a more competitive international environment”. Mark Carney repeated this language in his remarks.

The two statements seem almost contradictory. Don’t the “high levels of unused industrial capacity” obviate “the need to expand capacity”?
The central bank’s mystifying words may simply provide cover for its actions. Two days before the MPR, the Bank of Canada raised interest rates again. This policy encourages cash accumulation and discourages investment in three ways.

First, higher interest rates mean higher returns on cash balances and higher costs on loans to finance investment. Second, higher interest rates diminish the possibility of inflation eroding the value of cash balances and hence the incentive to invest in physical assets as a hedge against inflation. Third, higher interest rates push up the exchange rate, which increases the relative value of Canadian cash holdings but reduces the competitiveness of Canadian production and exports.

The Bank of Canada is serving up anti-investment policy with a side of pro-investment rhetoric.

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