Saturday Morning Links

Assorted content for your weekend reading.

- Eric Reguly highlights the growing possibility of a global revolt against corporate-centred trade agreements:

(A) funny thing happened on the way to the free trade free-for-all: A lot of people were becoming less rich and more angry, to the point that globalization seems set to go into reverse.

Maybe it should. The shocks unleashed by globalization have yet to be absorbed. The senseless deregulation of financial services and the globalization that went with it set the stage for the 2008 financial crisis, whose damage remains. Real average wages for low and middle-income earners have stagnated for decades in North America and Europe. Jobs continue to shift to countries, notably China, where costs are lower and industries are moving up the value chain. Disinflation is turning into outright deflation – falling prices – in some regions.
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Western governments did virtually nothing constructive to manage the worst effects of globalization on their populations, such as the loss of millions of jobs.

No wonder more and more Europeans and North Americans are not buying the free-trade hype any more. The marginal trade gains could be more than offset by greater pressure on working-class jobs or laxer regulations on, say, food quality. Europeans also fear that both TTIP and CETA are essentially undemocratic. They were negotiated almost entirely behind closed doors, and both have dispute resolution mechanisms that would allow companies to sue governments for damages if profits are hit because of changes in government policy or regulations. In effect, the provisions would rob their governments of their sovereignty.

- Ed Finn reminds us of the role citizens need to play in shaping our own future. And Cheryl Santa Maria examines the flip side to misplaced anger about leaving oil in the ground by discussing the climate chaos that would result if (for whatever perverse reason) all available fossil fuels were actually burned.

- Chris Havergal reports on Christopher Martin's advocacy for a post-secondary education based on making further learning available to facilitate social involvement, rather than on the accumulation of massive debt which narrows students' future opportunities.

- Trevor Hancock discusses the policy choices around different retirement ages - and particularly the need to take into account an individual's type of employment and life expectancy, rather than raising an overall retirement age based on unequally increased lifespans.

- Finally, the Star makes the case for a review of Canada's tax code to make sure we're not bleeding needed revenues without some important policy purpose. 

Thursday Morning Links

This and that for your Thursday reading.

- Michal Rozworski responds to idealized views of Canadian equality with the reality that we fall well short of the Scandinavian model:

Canada appears on many accounts much closer to the US than Sweden, the stand-in for a more robust social democratic and redistributive state. Indeed, looking at the three top rows of the table, there is a clear link between the higher share of income going to the top (inequality) and the higher share of taxes paid for by those at the top (redistribution a la Vox authors Martin and Hertel-Fernandez). On both of these measures Canada is roughly in the middle between the US and Sweden and slightly above the OECD-24 average.

Looking lower, however, it is clear that Sweden still easily beats both the US and Canada in terms of tax rates on the highest earners. While Sweden “recycles” more of its income through the state (total tax revenue as percentage of GDP), it does not do it without soaking the rich in the process. Sweden does not lack of high taxes but, rather, it lacks more extreme inequality. Canada, more akin to the US, gets more of its total tax income from the rich only because the rich are richer – indeed despite taxing each individual rich person less. In fact, if we take into account an interesting recent study on how Canada’s wealthiest use private corporations to avoid paying tax, it turns out that our system is even less redistributive: the official data has Canada’s top 10% taking in 32.7% of after-tax income, they are actually getting 36.5% adjusting for the effect of tax-dodging via private corporations.

The final three lines of the table show a common way to measure redistribution and these confirm that Canada is no Sweden. The Gini is a (convenient and imperfect) way to measure inequality in a single number on a scale from 0 to 1, where 0 is perfect equality and 1 is perfect inequality. The difference between the Gini of market incomes and the Gini of after-tax-and-transfer incomes shows how much redistribution is decreasing inequality. While even Sweden has a high inequality of market incomes, it redistributes quite a lot; Canada, on the other hand, is right behind the US and its comparatively paltry level of redistribution.

- Eric Reguly points out that we're seeing the inevitable side effects of overreliance on a commodity economy - as predictable price drops can lead to fiscal disaster when public planning is based on nothing but the bare hope that prices and associated revenues will rise in perpetuity. And Jason Fekete confirms that the Cons' destructive environmental choices are based solely on the desire to let Alberta oil operators dictate public policy.

- Meanwhile, Justine Hunter reports that the choice to tie social funding to public approval of controversial resource projects is rather a losing proposition from a political perspective as well.

- Deirdre Fulton writes about the Center for Media and Democracy's study (PDF) into the harm done by ideological privatization of public services. And Jacob Swenson observes that in order to ensure that the public interest is protected, we need to see government as a solution (and indeed a prize) rather than a problem.

- Finally, Frances Russell laments the state of Canada's non-responsible Parliament - and the Prime Minister who's determined to make the problem worse:

The most corrosive and dangerous development in Canada’s fully Americanized parliamentary system is the highly centralized power of the PMO and cabinet with a majority government. Add the now-complete stifling of the rights of ordinary MPs to say or do anything on their own, and Canada has degenerated into a virtual dictatorship.

And that’s without including the ability of the prime minister to prorogue, recess and dissolve parliament at whim.
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The dysfunction of the current parliament has its origins in the authoritarian mindset of the prime minister and the 100 or so individuals who staff his office. Rathgeber is merciless when it comes to describing the culture that has sprung up within it.

“The socialization and indoctrination effects of the PMO sub-culture cannot be overstated,” he writes. I have witnessed young, seemingly normal and well-adjusted college graduates enter the PMO and within six months, morph into arrogant, self-absorbed zealots, with an inflated sense of importance and ability.”

Sunday Morning Links

Assorted content for your Sunday reading.

- Eric Reguly examines Apple as a prime example of how supposed market successes actually reflect the private capture of public investments - and suggests the public should benefit financially from its investments which facilitate corporate growth:

Apple is such a runaway success that its profits pile up like snowdrifts in the Rockies. At last count, Apple was sitting on $165-billion (U.S.) in cash and securities. That’s more than the GDP of Hungary.

What to do with the windfall?
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Here’s another idea: Give the surplus cash back to the taxpayer.

It will never happen, but if you believe that the stakeholders who are responsible for Apple’s success should be rewarded, taxpayers would certainly take precedence over the hedgies. Greenlight and its ilk had absolutely nothing to do with Apple’s journey from garage start-up in 1976 to the world’s most valuable tech company. They did not provide any of the capital. Apple has tapped the public markets only once, in 1980, when its initial public offering raised $97-million (U.S.). In fact, taxpayers provided the lion’s share of the funding for many of the key inventions that are built into every Apple device.
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(W)hat powers the iPad, iPhone and iPod? Lithium-ion batteries developed by the U.S. Department of Energy. How about the devices’ liquid-crystal display? That came from the National Institutes of Health, the National Science Foundation and the Department of Defense. The Internet, GPS, SIRI (the intelligent personal assistant used in Apple's operating system) and DRAM cache did not start life as Jobs’s back-of-the-envelope doodles. They came out of the U.S. Defense Advanced Research Projects Agency and other government bodies.

Governments also supplied much of Apple’s brainpower. Thousands of its engineers and technicians have been recruited from the finest U.S. (and Canadian and British) universities. “Operating in the United States, Apple should recognize that the knowledge base on which its success has been built can be traced back to government investments,” said academics William Lazonick, Mariana Mazzucato and Öner Tulum in a 2013 paper titled “Apple’s Changing Business Model: What Should the World’s Richest Company Do with All Those Profits?”

The concept of imposing a special fat-profits tax on a single company is legally absurd and morally dubious, but the concept of imposing taxes on the supernormal profits of companies that benefit the most from government spending (such as those in the technology and defence industries) is not.

- Kev points out how employers see even their own employees as disposable tools rather than people worthy of human dignity. And Yvonne Roberts discusses what economy built on that assumption means for far too many workers:

Entrepreneurship is the pulse of a thriving economy but, according to the thinktank the Resolution Foundation, one in four who, like Almond, became self-employed in the last five years would rather work for a boss; their situation is involuntary. As employers use ever more aggressive tactics to reduce labour costs and restrict  collective action, productivity is suffering and patterns of employment initially viewed as temporary are becoming permanent. The gap between the richest and the rest widens. This is not unique to the UK.
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This story of wage stagflation and the working poor is just as applicable in Britain. Beyond chancellor George Osborne's talk of economic recovery, the stories are legion of families and communities across the whole of Britain who are only just managing to keep afloat.  No matter how often Osborne says it, it doesn't make it true. Large numbers of Britons are not in recovery. The gulf between those getting by and those getting on grows each month.

In the UK, as elsewhere, underemployment, a lack of investment in training and low pay are rife. Forty per cent of part-timers, mainly women, would like longer hours, according to one survey. At the same time, for many on low pay the last several years have seen the cost of living soar as their wage packet has shrunk.
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 Huge income disparities and increased casualisation of the workforce also means higher costs for the taxpayer subsidising low wages. Research last year by Landman Economics showed that the cost to the exchequer of millions of workers paid less than the living wage – "wage dodging", as the GMB calls it – is £3.23bn a year in social security spending and lower tax receipts. In a paper published last month, academics Dr Lydia Hayes and Professor Tonia Novitz considered how the cake could be sliced more fairly. They say economic inequality was at its lowest when 58% of workers were in trade unions and 82% of wages were set by collective bargaining. By 2012, 26% of the workforce was in trade unions and only 23% covered by collective bargaining, while the gap between top earners and the lowest is higher than at any time since records began.

Among the recommendations Hayes and Novitz make is sectoral bargaining to set terms and conditions across particular industries, and the right for employees to join a union without repercussions. Other proposals from the High Pay Centre include worker representation on company boards, remuneration committees, a maximum pay ratio and a legally binding target for the reduction of inequality.

- In a similar vein, Elise Gould and Frances O'Grady make the case for wage growth (and political and economic environments which put workers in a position to demand it) in the U.S. and the U.K. respectively.

- Nicholas Kristof discusses the appalling link between race and wealth inequality in the U.S. Josh Fullan and Josh Lorinc report on a program encouraging Toronto students to see how different their city looks at varying income levels. And the AP reports that 40 per cent of Michigan's households lack enough income to meet basic needs. (Which most of us see as a problem to be solved, with the notable exception of the Fraser Institute which claims that Michigan's anti-worker policies and consequent impoverishment of its citizens make for a goal to be pursued.)

- Finally, Jeffrey Simpson highlights the absurdity of Stephen Harper making yet another publicity tour of Canada's North while refusing to so much as acknowledge climate change which is radically altering the region.

Thursday Morning Links

This and that for your Thursday reading.

 - Joseph Heath responds to Andrew Coyne in noting that an while there's plenty of room (and need) to better tax high personal incomes, there's also a need to complement that with meaningful corporate taxes:

(A) crucial part of the Boadway and Tremblay proposal is to increase the personal income tax rate on dividends and capital gains. That’s where the “soak the rich” part comes in. The argument — and it is an interesting argument — is that dividends are currently taxed at a lower rate in the hands of individuals, in order to avoid “double taxation,” once in the hands of the firm, again in the hands of the beneficiary. However, if the corporation is able to shift the tax on profits to other constituencies, then the tax paid by corporations isn’t really being paid by shareholders. So by taxing corporations less, and taxing individual investment income more, the Boadway/Tremblay policy makes it more difficult for the rich to shift their tax liabilities onto others.

I can see the argument for this. However, there always the danger of equivocation when talking about “the rich” or “inequality.” There is broad-based economic inequality, of the sort captured by a GINI coefficient, and then there is the specific problem of the very rich (whom we can refer to, for simplicity, as the 1%). While it is true that most Canadians are already able to exempt the entirety of their investment income from taxation (through home ownership, RRSPs, TFSAs), this is manifestly not the case with the 1%, who continue to use corporate ownership as a vehicle for tax avoidance.

Shortly after writing about this, I came across the following working paper, by Michael Wolfson, Mike Veall and Neil Brooks, “Piercing the Veil – Private Corporations and the Income of the Affluent.” It seems to me that before we talk about “soaking the rich,” or about the distributive effect of corporate taxes generally, the issues raised by this paper need to be addressed.

- And Eric Reguly discusses the role of executive pay and stock options in exacerbating inequality:

The rich and the super-rich are getting richer. We all know that. The question is why? Every economist on the planet has a theory. Some blame waning productivity gains or workers' losing their war with the robots. Others argue that the "offshoring" of jobs has suppressed wages, still others that lower taxes on capital gains have benefited the investing class. Thomas Piketty, the suddenly famous French economist whose bestselling book, Capital in the Twenty-First Century, has fired up the wealth-gap debate around the world, argues that the inequalities in income distribution have risen sharply because of enormous corporate pay packages. He's generally right (even though the Financial Times found fault with some of his historical data) but what he does not do in any detail is break down those packages into their component parts. He and his research colleague, Emmanuel Saez, use U.S. Internal Revenue Service data, which lumps all pay together as "salaries." But salaries make up only a tiny portion of the haul for top executives. The biggest single component is stock-based pay: the realized gains from exercising stock options and the vesting of stock awards.

How did stock-based pay turn into a monster? The simple answer is that no one--not shareholders, not employees, not regulators--has been able to stop the executives from rigging the game in their favour. What seemingly started out as a reasonable idea--handing executives some shares so they would have an extra incentive to boost shareholder value--has tipped so far into the executives' favour that the richest bosses are gaining oligarch status. Through the repricing of options and ever-rising stock awards, many executives have been able to ratchet up their pay even when their company's share price falls.
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The executive pay system is so well organized, and so sublimely immoral, that it has taken on a racketeering flavour, all in the slick guise of aligning the interests of management and shareholders. Executives pad their boards with yes-men and -women who wouldn't dare suggest their boss is overpaid; compensation consultants are happy to recommend that the CEO's pay should fall in the peer group's top quartile; and the regulatory climate has been benign, thanks to the lobbying power of the companies.

- Alison highlights yet another set of foreign-funded corporate mercenaries complaining that we shouldn't listen to environmental and social groups because they might be foreign-funded. And Kayle Hatt calls out the Canadian Taxpayers Federation's attacks on humanities research and other evidence-based analysis.

- James Moore's latest push toward a national corporate-privilege agreement has apparently given up on identifying more than a single trade barrier in favour of labelling the fictitious as "extraordinarily stupid" in the hope that will make up for the lack of actual examples.

- Finally, Seumas Milne writes that a reversal of privatization is one of the essential building blocks of long-term growth and stability:

Privatisation isn't working. We were promised a shareholding democracy, competition, falling costs and better services. A generation on, most people's experience has been the opposite. From energy to water, rail to public services, the reality has been private monopolies, perverse subsidies, exorbitant prices, woeful under-investment, profiteering and corporate capture.

Private cartels run rings round the regulators. Consumers and politicians are bamboozled by commercial secrecy and contractual complexity. Workforces have their pay and conditions slashed. Control of essential services has not only passed to corporate giants based overseas, but those companies are themselves often state-owned – they're just owned by another state.

Report after report has shown privatised services to be more expensive and inefficient than their publicly owned counterparts. It's scarcely surprising that a large majority of the public, who have never supported a single privatisation, neither trust the privateers nor want them running their services.

Sunday Morning Links

Assorted content for your Sunday reading.

- It's bad enough that what's passing for climate change discussion is an agreement to keep meeting for years on end that doesn't really advance matters any from the early '90s.

- But lest there be any doubt, the Cons aren't quite happy enough with the results of their obstructionism to be willing to live up to even the deal they describe as "fair and balanced":

"Canada has been clear that we would not undertake a second Kyoto commitment period. Nor will we devote scarce dollars to capitalize the new Green Climate Fund - part of the Durban agreement - until all major emitters accept legally binding reduction targets and transparent accounting of greenhouse gas inventory.

Anybody who can see the slightest difference between that direct statement that the Cons will ignore the Durban agreement and the Libs' lack of interest in living up to Kyoto from day one is invited to start spinning now.

- NPR tests whether anybody within the Republicans' much-touted group of "millionaire job creators" is willing to go on record saying that their taxes shouldn't be raised. And not surprisingly, nobody seems to want to take up the offer - while at least a few are entirely happy to pitch in a fairer share.

- Meanwhile, Eric Reguly highlights how Europe's embrace of gratuitous austerity is only making matters worse.

- Finally, Martin Regg Cohn has some valuable advice for Dalton McGuinty - which could well do wonders on the economic front as well as the political one:

The NDP’s suggestion: rather than give corporations a blank cheque, let’s reward them with specific tax credits for creating jobs. Boss, you were just saying the other day that setting targets is the best way to get results, so this is right down your alley.

You’re always saying, “there’s never a wrong time to do the right thing.” This is the right time to recalibrate, because we’re hemorrhaging revenues with the depressed economic outlook. And we can truthfully tell business they’re still getting a good deal: “You have to talk about the entire bargain you’re getting.”

This is about fairness and optics, tactics and timing. And surviving. Enjoy the holiday, it won’t last long.

Friday Morning Links

Some light reading to end your work week...

- Andrew Potter highlights the obvious response to the Cons' determination to eliminate reasoned discussion by focusing on gut-level politics instead:

(T)he ultimately more effective instrument is the control of language itself. The Tories have spent the past year rolling out a few slogans, most of them aimed at framing the terms of debate for the next election. And so we’ve heard the Prime Minister repeatedly tell us that “losers don’t get to form governments,” that the Liberals will form a coalition with “socialists and separatists,” and, now, that anyone who supports the long-gun registry is a member of an urban elite. It’s a straight-up appeal to the gut, aimed at short-circuiting more sophisticated thinking.

As the Tories’ resilience at the polls suggests, gut-level politics is incredibly effective, which is why George Lakoff suggested that the only real option for the Democrats would be to engage to Republicans on their own terms—take back the White House by taking back the dictionary. It is increasingly clear that you can’t win in modern politics by having evidence or good ideas on your side, and so it might be time for the opposition in Canada to take their cue from the Democrats down south, start fighting the Tories on their own turf. For example, Stéphane Dion would have had an easier time selling his Green Shift plan if the phrase “tax bads, not goods” had even once passed his lips. More radically, the opposition might want to try reframing the anti-gun registry crowd as the “death lobby.”

- I've spent plenty of time discussing the "coalition" angle on the Cons' scare tactics. Now, Chris Selley takes on the "separatist" side and finds it equally unreasonable:

It’s often said that until Quebecers decide they want to participate in the governance of Canada — i.e., by voting Liberal, Conservative or NDP — we’ll just have to live with the appalling consequences of officially separatist MPs infesting the House of Commons. I have no time for the argument. The Quebecers who don’t want to participate in federal governance don’t vote in federal elections. If we were willing to swallow our dusty, antiquated hardcore federalist pride, we could make the system work better — which is to say, as it’s supposed to work — right now.

Never mind the fact the Bloc’s MPs often seem more honestly concerned for Canadian democracy than the other parties‚ (even if they’re only concerned insofar as it benefits Quebec). The Canadian Alliance was perfectly willing to negotiate with the Bloc in 2000 if the Liberals hadn’t won their third consecutive majority. In 2006 the House of Commons voted 266 to 16 to declare that les Québécois “form a nation within a united Canada.” On Wednesday night, the House went further — voting unanimously to censure Maclean’s magazine for having “denigrate[d] the Quebec nation” (my emphasis). The federalist high road was demolished years ago. The October Crisis was four decades ago. As Mme. Jean’s tenure as governor-general proves yet again, the federalist/separatist divide is not nearly as wide or as bitter as politicians like us to think. There’s no point continuing the charade.

- Eric Reguly comments on the wider implications of BHP Billiton's bid for PCS:

So should the Canadian government prevent BHP from scooping Potash Corp. into its voracious maw? Ignoring the fact that potash is a strategic, irreplaceable resource that prevents mass starvation, why should Canada allow companies that are actually or effectively takeover-proof to buy homegrown corporate hotties?
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Most subsidiaries, regardless or their size, have no say in the company’s important financial, legal, human resources and financing decisions. That, in turn, means that the spinoff benefits, such as the use of local lenders, legal teams and the like, are nil to negative. Tax, or lack thereof, is another big consideration. Typically, foreign buyers load up their new foreign subsidiaries with debt, all the better to minimize the local tax hit. Is that what BHP has in mind for Potash Corp.? If Investment Canada isn’t asking that question, there’s something wrong. If it isn’t legally allowed to ask that question, there’s something even more wrong.

BHP may be a fine owner of Potash Corp. Then again, it may not. If Investment Canada won’t block the takeover of a company that doesn’t need taking over, it has to ensure “net benefit” means as much. BHP can afford to deliver what the agency demands. It’s just that its demands for the last quarter century have been laughable. As a result, Canada is turning into a branch plant, A Mari usque ad Mare.

- Finally, it's well worth highlighting the Harper Cons' hiring of more and more executive staff even as they tell everybody else in the country to cut back. But can somebody ask Brian Lilley to either explain the building management implications of hiring increased numbers of "guys in the corner offices", or use language that actually describes the executive's function rather than burying the facts under a pile of inaccurate descriptions?