Saturday Afternoon Links

Assorted material for your weekend reading.

- Declan's summary of a paper on the structural causes of inequality by Michael Kumhof and Romain Ranciere is well worth a read:

(The authors) posit a shift in bargaining power (think decline in unionization rates, offshoring of jobs, etc.) from a working class (95% of the population that earns its money from wages) to an investor class (5% of the population that owns most of the capital) and then assume that the extra revenue coming to the investor class as a result of their improved bargaining power is lent back to the workers. This allows the workers to maintain their relative share of consumption, and provides an additional source of income for the investor class.

Over time, the debt level of the working class increases and the vulnerability of the system to a debt crisis increases along with it.

The authors find that widespread defaults during a crisis will help by reducing debt levels of the workers, but because the underlying cause is left unaddressed (the lack of bargaining power for the workers), this is a weak and short-lived solution, with crises repeating regularly. The quicker, more sustainable solution is measures to restore the bargaining power of the workers so that the incentive for workers to borrow and investors to lend is removed or at least reduced.

- And Ralph Surette joins the crowd looking to get started in rebalancing the relative power of the public and the corporate elite:

(M)any a credulous, manipulated or ideologically driven government has ruined its public finances by chowing down on neo-con propaganda about tax cuts that date back to the Reagan-Thatcher era. New Brunswick is one. So are the U.S and Ireland, to name a few. Need we all go over the cliff?

But this is not just about the best way to stimulate the economy. It’s about whom our governments serve — the public interest of democratic nations, or that of a swiftly rising global aristocracy of money. This new nobility’s power and reach was revealed in the U.S. recently as even the outrageous Bush tax cuts couldn’t be allowed to expire, thanks to a "grassroots" political movement actually funded by right-wing billionaires.
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In terms of the dynamics of the upcoming budget and whether the opposition should or will defeat the government on it, that falls into the ambiguous muddle of our minority politics. The best solution for the moment would be for the Harper government to back off and suspend the cuts. But good luck with that. According to the latest news, the Conservatives are gearing up to spend $6.5 million to promote their tax cuts.

The polls tell us that as many as nine in 10 Canadians believe these cuts have gone far enough, if not too far. However, if this view does not move relative support for the parties, leaving the likelihood of a result much as we have now, we have a failure of public will, and the fractured opposition will have no choice but to muddle through as usual. If Harper and his new world order are allowed a free romp on this one, it will be another sad note attached to the state of our democracy.

- And even one of the contributors to Worthwhile Canadian Initiative notes the role corporate taxes can play in minimizing some of the disconnect between corporate interests and public ones.

- Interestingly, the latest Canada/U.S. border security agreement (or at least the council on regulatory issues to the extent it actually turns out as advertised) seems to be more reasonable than most similar announcements, as it actually involves addressing specific identified trade irritants rather than simply assuming that all government measures ought to be outlawed to the extent they might affect profit-making opportunities. But Thomas Walkom rightly notes why it may mean less than the Cons want us to believe - even if he probably overstates the case:

Integrated production — indeed, globalization itself — depends on the ability of companies to ship commodities cheaply over long distances.

In the heyday of NAFTA, energy prices were low enough to allow this. As long as oil was relatively cheap, it made economic sense to truck auto parts from all over North America for assembly in Windsor.

But as economist Jeff Rubin and others have pointed out, in a world of permanently high oil prices this logic no longer holds.

In this new world, it makes more sense to grow food close to where it is eaten and to produce commodities near their end users.

Countries where labour costs are strikingly low, such as China, will still be able to overcome the energy cost barrier.

But in those like Canada and the U.S., where labour costs are roughly similar, long-distance, integrated production is destined to become a thing of the past.

- And finally, Tabatha Southey provides the definitive take on usage based billing:

Overage charges amount to a disincentive to using the Internet. The charges that would been levied once the user surpassed his or her 25-gigabyte data-transfer cap are essentially a “sin tax” on Internet usage – and the problem with that is we’re all about to become big-time sinners.

We all need to become big sinners and e-gluttons at home and in our business, in fact, or other countries without these sin taxes will trounce us while we’re “only checking our e-mail” like Internet puritans. If we really don’t have the infrastructure to support more sinning, then we need to get on that right now.

Telecoms, I don’t think the answer is scapegoating independent ISPs, with their 3-per-cent market share, for your apparent inability to deliver the product you sell. The number of people checking their e-mail and walking away is dwindling. Soon, just using the Internet to check your e-mail will be like turning on the radio only to catch the time signal, as if you were saving up radio for a rainy day.

Either the major telecoms think that Canadians must sharply curtail their Internet use because it’s “everyone panic!” time in Canada – in which case we’re essentially telling the world that we have the equivalent of tech breadlines – or we’re right to be going back to the drawing board.

[Edit: fixed wording.]