Sunday Morning Links

This and that for your Sunday reading.

- Andrew Jackson writes about the opportunities missed when governments restrict their economic policy to propping up the corporate sector, rather than seeking to innovate directly in the public interest:

The received wisdom among economists used to be that governments should just set broad “framework” policies such as low taxes, less regulation, and fewer barriers to trade. It was up to the private sector to decide what and where to invest. Anything smacking of hands-on “industrial policy” was to be avoided.

Rejecting this dogma, the influential UK economist Mariana Mazzucato argues that government leadership and public investments are critical to building innovative economies. She has shown that publicly funded research well in advance of immediate commercial opportunities as well as direct support for strategic corporate investments have been central to the growth of innovative capacity.

Here in Canada, traditional hands-off policies have signally failed to boost our weak record of innovation. In that context, an expert business panel appointed by the Harper government called for more public investment in venture capital, and a shift in emphasis from tax measures to direct government support for strategic private sector investments.
...
The government may have listened to Mazzucato on the pivotal role of public investment in boosting innovation, but they have not heeded her advice to consider long term public equity stakes so as to reward taxpayers when these investments pay off, and to anchor footloose investments.

While the federal government is indirectly taking a stake in some new venture capital investments through BDC, the intent is very much to exit early in the game once a company goes public rather than to remain for the long haul. So the government shoulders the risk but does not benefit from the long-term payoff.

To conclude, the innovation agenda marks another incremental turn away from “framework” economic development policies. But the shift is unlikely to be transformational unless it is scaled up and accompanied by a greater role for long-term public investment in the knowledge-based economy.

- Meanwhile, Matt Bruenig examines the alarming level of wealth inequality within the boomer generation - particularly when home equity is set aside. And the Economist discusses how automation is restricting the availability of employment while exacerbating inequality.

- And that represents a problem in multiple policy areas, as Lana Payne highlights the connection between happiness, equality and social trust.

- Chantal Hebert points out how the Trudeau Libs are showing nothing but disdain for the concept of Parliamentary accountability. And the Globe and Mail criticizes Trudeau's plan to eliminate any chance for MPs to respond meaningfully to a majority government's whims.

- Finally, Roy Romanow discusses the how our health care system can be both more efficient and more compassionate by focusing on prevention, rather than responding only to diseases and injuries once they've already arisen.

Saturday Morning Links

Assorted content for your weekend reading.

- Thomas Walkom discusses how Canadian workers are feeling the pain of decades of policy designed to suppress wages - and notes there's plenty more all parties should be doing to change that reality. And Doug Saunders points out what we should want our next federal government to pursue to bring about lasting growth:

Many economists came to realize not only that government intervention bailed many countries out of the post-2008 recession and restored growth and employment, but that the crisis itself may have been caused, in good part, by the disappearance of active government support in the economy – the sort of direct investment and partnership that had existed in earlier decades.
...

Economists began noticing that the great economic boom of the 1990s and 2000s had been a direct product of targeted state investments in specific companies and sectors. The Italian economist Mariana Mazzucato, in her influential book The Entrepreneurial State, chronicled the emergence of the iPhone as a direct product of Washington’s large-scale investments in Silicon Valley – not just through state spending on technology products and tax incentives to high-tech industry, but through the specific choice of Apple, in the 1970s and 1980s, as a company Washington would invest in (though small-business investments that put $2 into Apple for every dollar of private investment). Intel and Compaq were also targets of this active state investment, much as Elon Musk’s Tesla electric-car company is today.

Dr. Mazzucato, in an interview from her University of Sussex office, describes the heavily funded state banks that have allowed Germany, China and the United States to build globally competitive companies – and notes that Canada, despite having earned a fortune in petroleum revenues in the past 15 years that could have created a similar major institution, has nothing substantial of the sort, nor any proposal to create one.

“Canada is interesting,” she said. “It is one of the most skewed countries, not only in terms of sectors – lots of emphasis on the extractive stuff – but also in terms of instruments: It’s very, very indirect. It does most of its government investment through tax incentives. Compare that to the United States or China or Germany, where it’s all direct: If they want to do something, they do it. They directly finance a sector or the most innovative companies, and they create grants or guaranteed loans to do it, not an indirect tax credit. And on top of that, these Canadian investments are not so mission-oriented: At best, there’s a list of sectors to be supported indirectly, but no targeting of specific companies or industries. And then they get surprised when they’re not on the top any more in any of the big innovations.”

- Andrew Coyne rightly argues that we shouldn't spend so much of an election campaign attacking past personal statements from candidates, while noting that part of the problem lies in the vetting authority that's been taken over by the parties' leaders.

- Meanwhile, Kevin Grandia highlights Cheryl Gallant's climate change denialism as a symptom of the Cons' real unfitness for office. And Donald Gutstein comments on Doug Black's role as an oil lobbyist within the Senate.

- Tabatha Southey writes that the Cons are offering nothing but fear, uncertainty and doubt for voters, while Sandy Garossino weighs on that message as it applies to refugees in particular. And Terry Glavin zeroes in on how that strategy involves ignoring the plain facts even of high-profile events such as the tragic deaths in the Kurdi family.

- Finally, Parker Donham sets out why Canada can't afford any more of Stephen Harper. And Fram Dimshaw reports that the veterans who once served as Harper's political cover are joining the cause in demanding more responsible government.

Tuesday Morning Links

This and that for your Tuesday reading.

- John Thornhill talks to Mariana Mazzucato about the importance of public investment in fostering economic growth - along with the need for the public to benefit as a result:

As Mazzucato explains it, the traditional way of framing the debate about wealth creation is to picture the private sector as a magnificent lion caged by the public sector. Remove the bars, and the lion roams and roars. In fact, she argues, private sector companies are rarely lions; far more often they are kittens. Managers tend to be more concerned with cutting costs, buying back their shares and maximising their share prices (and stock options) than they are in investing in research and development and boosting long-term growth.

“As soon as I started looking at these issues, I started realising how much language matters. If you just talk about the state as a facilitator, as a de-risker, as an incentiviser, as a fixer of market failures, it ends up structuring what you do,” she says. But the state plays a far more creative role, she insists, in terms of declaring grand missions (the US ambition to go to the moon, or the German goal of creating nuclear-free energy), and investing in the early-stage development of many industries, including semiconductors, the internet and fracking. “You always require the state to roar.”
...
There is a similar challenge with green technologies: how to create “systems of innovation” that provide a clear, publicly mandated direction and incentivise private-sector companies to jump on board. Mazzucato believes that Steve Jobs’ famous injunction to budding entrepreneurs — “Stay hungry, stay foolish” — should apply to the public sector, too. Why is failure worn as a badge of honour in Silicon Valley but viewed as a source of shame in government?

“We are living in a depressing era in which we no longer have courage. We no longer think governments should have missions. But the market never chooses anything. IT wasn’t chosen by the market. Biotech wasn’t chosen by the market. Nanotech wasn’t chosen by the market. So why should green technology be chosen by the market? It comes back to the austerity craziness that we’re in today where governments are not allowed to dream; and green is a dream.”

- Monia Mazigh slams Stephen Harper for his tiresome fearmongering. And Doug Saunders writes that governments more thoughtful than the Cons are realizing that the main risk lies in people looking for a set of beliefs as an excuse to put destructive tendencies into action - not in people who hold a particular set of beliefs to begin with.

- Amy Dempsey reports on the John Howard Society's findings as to how Ontario's justice system is doing nothing but harm by looking to punish people for mental health problems. And Bill Graveland reports on Kathleen Ganley's recognition that access to justice generally is a serious problem in Alberta (as it is elsewhere).

- Finally, Andre Picard argues that a strong civil service is necessary to building a healthy society. And Ryan Meili offers his take on what we've lost as a result of a decade of the Cons' government by wilful ignorance:

(I)n order to guide policy in ways that will improve our lives the most –that improvement being best measured by improvements in our health and wellbeing – we need to understand what is happening in a wide variety of fields. We need to be gathering new data, interpreting that information, and communicating its implications to decision-makers and the public.

In the last ten years decisions have instead been made to keep Canadians ignorant of the reality of our circumstances. The most obvious and egregious of these has been the cancellation of the long-form census, which has left a glaring gap in our ability to collect the data needed to make smart decisions. Even if a future government should reinstate a proper census, there has already been an irreplaceable loss of essential knowledge.

Dozens of agencies that interpret data and perform original research have been eliminated or deeply cut. These have been in varied fields, including women’s health, Aboriginal health, environmental surveillance and many more, prompting protests from the typically politically reticent scientific community, including the grim Death of Evidence funeral march on parliament, and the birth of organizations like Evidence for Democracy dedicated to highlighting how important scientific information is if citizens are to make well-informed decisions.
...
Along with the decrease in information being gathered or analyzed have come deliberate barriers to communicating what we do know. From muzzling of government scientists to deep cuts to the CBC, the story of science and knowledge is being increasingly silenced. The strategy is simple, and sinister: if there is no data, there is no way to be held accountable. If people don’t see the way in which decisions being made are worsening the quality of their lives, they can be convinced to continue to vote in favour of policies that hurt them.

The war on knowledge is a war on the health of Canadians. We need a government that will embrace the information age and use evidence to improve our lives. We need a government that has the health of Canadians as its greatest priority. Ten years in, it’s clear that that government is not Stephen Harper’s.

Sunday Morning Links

Assorted content for your Sunday reading.

- James Meek writes about the UK's privatization scam, and how it's resulted in citizens paying far more for the basic services which are better provided by a government which actually has the public interest within its mandate:

Privatisation failed to demonstrate the case made by the privatisers that private companies are always more competent than state-owned ones – that private bosses, chasing the carrot of bonuses and dodging the stick of bankruptcy, will always do better than their state-employed counterparts. Through euphemisms such as "wealth creation" and "enjoying the rewards of success" Thatcher and her allies have promoted the notion that greed on the part of a private executive elite is the chief and sufficient engine of prosperity for all. The result has been 35 years of denigration of the concept of duty and public service, as well as a squalid ideal of all work as something that shouldn't be cared about for its own sake, but only for the money it brings. The magic dust of the market was of little use to the bosses of the newly privatised Railtrack in the mid-1990s. They thought they could sack people with impunity – not just signalling and maintenance staff but expert engineers and researchers – and carry out a massive line-upgrade cheaply with the most advanced new technology. Unfortunately the people who could have told them that the new technology didn't exist were the people they had sacked. As a result, the company went bust in 2002, and had to be renationalised.

Privatisation failed to make firms compete or give customers more choice – said to be the canonical virtues of privatisation. Pretty hard, you would think, to privatise water companies, when they are all monopolies, with nobody to compete with, and can't offer customers a choice – neither the choice of which supplier to use nor the choice of whether to take a service or not. And yet the English water companies were privatised, and in such a way that customers have been overcharged ever since. The privatisers loved competition, but the actual privatised competitors hate it. The competitive vision of those who designed Britain's electricity privatisation – a rumbustious, referee-supervised free-for-all between sellers and makers of electricity old and new, large and small – has degenerated into an opaque oligopoly of a handful of giant players.
...
A tax is generally thought of as something that only a government can levy, but this is a semantic distortion that favours the free market belief system. If a payment to an authority, public or private, is compulsory, it's a tax. We can't do without electricity; the electricity bill is an electricity tax. We can't do without water; the water bill is a water tax. Some people can get by without railways, and some can't; they pay the rail tax. Students pay the university tax. The meta-privatisation is the privatisation of the tax system itself; even, it could be said, the privatisation of us, the former citizens of Britain. By packaging British citizens up and selling them, sector by sector, to investors, the government makes it possible to keep traditional taxes low or even cut them. By moving from a system where public services are supported by progressive general taxation to a system where they are supported exclusively by the flat fees people pay to use them, they move from a system where the rich are obliged to help the poor to a system where the less well-off enable services that the rich get for what is, to them, a trifling sum. The commodity that makes water and power cables and airports valuable to an investor, foreign or otherwise, is the people who have no choice but to use them. We have no choice but to pay the price the toll-keepers charge. We are a human revenue stream; we are being made tenants in our own land, defined by the string of private fees we pay to exist here.

- Meanwhile, Paul Watson compares Norway's well-planned savings and use of oil resources for public benefit to Canada's increasingly reckless rush to give away every resource a multinational corporation can rip out of the ground:

They’re succeeding because Norway holds an unshakable principle, one that has survived political shifts to the right and left since huge offshore oil reserves were discovered in 1969.

The canon was set four decades earlier in a national debate over ownership of hydro-electric projects, and it bridged a generation, from waterfalls to oil wells: Norway’s natural resources belong to the people.

“International companies resisted the model very much, but they had no choice. They had to accept it,” says Terje Hagen, an economist at the University of Oslo. “I think the agreement in parliament was quite broad.”

Norway’s current Conservative-led coalition government justifies one of the world’s highest tax rates on oil company profits this way: petroleum and natural gas are finite resources that generate higher profits than other enterprises and therefore command higher taxes.
...
Norway’s government takes 78 per cent of oil company profits in tax, which quickly runs to billions of dollars a year. The fund multiplies through investments in stocks, bonds and property holdings.

It is quickly closing in on $1 trillion, just 18 years after Norway made an initial investment of around $345 million in 1996.

The government spends a portion of the profits each year on improving people’s lives while staying true to the earlier generation who decided it would be wrong to splurge on themselves.

By Norwegian standards, Canada has squandered a lot of its resource riches instead of locking up the royalties and taxes oil companies pay into long-term investments and enjoying the benefits of steadily growing profits.

A small but growing group of policy analysts think Canadians should overcome their history of provinces often jealously guarding resource revenues and do more sharing for the long-term, national good.

- The Vancouver Sun reports on BMO's study into the cycle of debt and stress facing younger Canadians.

- And speaking of gratuitous stress on workers, Don Pittis recognizes the fundamental unfairness of allowing Quebec's government to wriggle out from under agreed pension benefits at the expense of employees who have counted on what they've been promised, while Honour Our Deal has an update on the similar attack on Regina civic pensions. But the CP reports that the New Brunswick NDP is taking a stand to protect needed retirement income from other parties who would gleefully legislate it out of existence.

- Finally, James Surowiecki discusses the economics behind the development of prescription drugs - and how the lack of incentive to develop effective new antibiotics may prove just as deadly for us in the future as the similar neglect in combating Ebola is in the developing world today.

Sunday Morning Links

This and that for your Sunday reading.

- Edward Robinson laments the willingness of European centre-left parties to abandon any attempt to argue against austerity even when the evidence shows that's the right position to take:

Centre-left parties in Europe appear to have completely lost the argument for pragmatic fiscal policy, much in the way that US Democrats seemed to lose their own case precisely at the moment when stimulus was working. Consider again how little financial commitment it would have taken to have shored-up confidence in Greek sovereign debt via Eurobonds. Greek debt in 2010 represented only 3.6% of Eurozone GDP. François Hollande’s government was supposed to be making the case for Eurobonds.

What is worse, the centre-left now appears to have let the very explanation of (or blame for) the crisis slip away from them into the hands of neoliberals. Instead of constantly reminding voters and markets that sovereign debt-to-GDP ratios were falling in the Eurozone (and the UK) before the crisis, they have given up. Voters seem to have forgotten that the massive public debts accrued since 2008 had been private debts before then.

From this analysis flows austerity’s legitimacy. To social democrats, it seems profoundly misguided to be prescribing supply-side medicine to a problem which was fundamentally caused by a huge uptick in private-sector debt, necessitated by steadily falling effective demand for 30 years. Of course, there is always inefficiency or corruption, but these were not the primary causes of the crisis. Nonetheless, centre-left parties are assenting.
...
While elections are on the table we must campaign hard, both within our respective national parties and within the broader argument at European level. But if that cannot shift the balance, then genuine social democrats will soon need to decide whether or not to stand by the fading hope of a return to economic pragmatism in the Eurozone or whether to throw their lot in with those calling for the tried and tested routes out of chronic indebtedness.

Choose the former and we risk being permanently subsumed into European austerity elites, choose the latter and we find ourselves, against the European project, with some unattractive intellectual companions and just as much uncertainty. It is a real dilemma.

But surely the status quo of never-ending internal devaluation is politically unacceptable, damaging to the ideal of a united Europe and harmful to democracy and economic development.

- Meanwhile, Matthew O'Brien writes that plenty of U.S. families with relatively high gross incomes are nonetheless living paycheque to paycheque - meaning that precarious financial situations aren't limited to the lower end of the income scale. And while workers across the board are struggling to get by, Paul Krugman highlights how the right is pushing for ever more giveaways to people who live off of wealth rather than labour:

In my last post I tried to document the extent to which modern Republican rhetoric has already adopted the values of “patrimonial capitalism”, even though America’s top one percent still owes its high incomes largely to compensation rather than wealth. On reflection, I thought I should also document the extent to which the GOP has put its money — or, actually, taxpayers’ money — where its mouth is, with concrete policies that favor wealth over work.

Consider, as Exhibit A, the Bush tax cuts. Bush did cut the top tax rate on earned income from 39.6 to 35 percent, a 12 percent reduction. But he cut the rate on capital gains from 21 to 15, a 28 percent reduction; he cut the rate on dividends from 39.6 (because dividends were previously taxed as ordinary income) to 15, a reduction of more than 60 percent. And he put the estate tax on a path toward zero — a 100 percent reduction.

The estate tax made a partial comeback thanks to the awkward fact that a Democrat was in the White House, and there have been some tax hikes on capital income. The point, however, was that Bush tried to give people living off wealth, inherited wealth in particular, much bigger tax cuts than he gave high earners.

...
Even now, 6 of the 10 wealthiest Americans are heirs rather than self-made entrepreneurs — the Koch brothers plus a bunch of Waltons. There’s every reason to believe that the role of inheritance will only grow over time.

And if it does, half our political system will be cheering it on and offering the ever-more-empowered heirs as much assistance as possible.

- And Alison highlights how the Kochs in particular have used their money to warp Canadian politics in favour of their own interests.

- Mariana Mazzucato reminds us that public policy can set a necessary foundation for innovation, while pointing out that the Cons have preferred to hand free money to entrenched corporate interests and resource extractors rather than encouraging the development of new ideas.

- Finally, Don Lenihan offers a useful set of criteria for open government - while highlighting how far we are from the ideal.