Archive

Author Archive

Canada’s Experience Warns of Dangers of Investor-State Dispute Settlement Systems

July 30, 2014 3 comments

The more troubled the global economy becomes, the more insistent do neoclassical economists get with their arguments for still more free trade and globalization — and the more rose-coloured are the gains they predict from the next free trade deal.  Never mind that existing trade liberalization (under neoliberal terms) has produced imbalance, a tendency to stagnation, and a socially destructive race to the bottom in the interests of competitiveness.  The promised gains from trade are always just around the corner, to be unlocked by new twists in trade negotiations (and proselytized with the help of new twists in neoclassical economic modeling). Read more…

Categories: globalization

More Proof: Employment Protection Does Not Affect Employment

July 22, 2013 1 comment

The OECD has just released its 2013 Employment Outlook.  In addition to its usual overview of labour market developments, Chapter 2 of this year’s report reports on a thorough revision and updating of the OECD’s quantitative index of employment protection legislation (EPL). The chapter contains a useful summary of the mainstream literature regarding EPL costs and benefits – although this would have benefited from inclusion of the important heterodox voices who have written about on the employment effects of labour market institutions (such as Baker, Glyn, Howell, and Schmitt).  Chapter 2 also contains a detailed review of the revised methodology behind the OECD index.

The actual country scores for the index do not seem to be reported in the chapter, but they are available through the OECD’s online employment database.

The key findings of Chapter 2 include: Read more…

Categories: Uncategorized

Canadian Central Bankers and Canadian Banking Regulations

November 30, 2012 3 comments

Britain’s Chancellor of the Exchequer made the surprising announcement this week that the next Governor of the Bank of England (replacing the retiring Mervyn King) will be Mark Carney, currently serving as head of the Bank of Canada.

The fact that Canada’s banking system survived the global meltdown in relatively better shape than many other industrialized countries was certainly a factor in Mr. Carney’s selection.  However, as I argue below, if the goal is Canadian-style financial stability, then Britons (and others) need to learn closely from Canadian financial regulations, not just recruit a talented Canadian financial regulator.  A version of this commentary appeared in the Financial Times.   Read more…

Why natural disasters are good for capitalism

November 6, 2012 9 comments

from Jim Stanford

It’s been amusing  to listen to the pundits discuss the economic implications of Hurricane Sandy. Of course, we all know it closed the financial markets in NYC for two days. (That should lead to a sudden spike in productivity, by my reckoning, since millions of people stop looking at pointless charts and do something useful for a change.) Financial analysts worry about the impact on insurance companies. Their shares will surely plunge when the markets reopen. One trader interviewed on Toronto radio put it bluntly: “Shoot first, ask questions later.” In other words, sell them all off, and then buy back any that you later find out may not have been hit so badly by Sandy’s fallout. [Rarely do you get such an honest glimpse into the base mindset of financial brokers!]

The bigger irony, however, is that natural disasters usually lead to a subsequent improvement in the real economy. Read more…

Categories: The Economy

Inflation Targeting and the Crisis

November 19, 2011 3 comments

from Jim Stanford

Many long-held tenets of neoclassical orthodoxy have fallen by the wayside in the past 3 years, but perhaps one of the biggest dominos that is at least teetering precariously (if not fully tipped over) is the consensus that inflation targeting should be the exclusive focus of monetary policy.

The policy was closely associated with the so-called “New Consensus in Macroeconomics” — the premature and presumptuous claim that rational-expectations-augmented analysis had produced the “end of history” in macroeconomics (analogous to Francis Fukuyama’s preposterous claim about global politics).  The idea was that by anchoring inflation expectations at the target, the central bank minimizes the extent to which monetary conditions interfere with the normal efficient operations of the real economy, thus promoting in the long-run stronger real behaviour (including intertemporal behaviour, like savings and investment), which might be affected by fluctuating or inaccurate expectations of future prices. Read more…

Categories: crisis

What do Banks Actually DO? Teach-In for Occupy Toronto

November 7, 2011 5 comments

What do banks actually DO?  Create credit out of thin air.

Were Canadian banks bailed-out?  Absolutely, to the tune of $200 billion.  And they are still protected and subsidized more than any other sector of the economy.

What must be done with these banks?  Tax them, control them, and ultimately take them back.

Those are the “take-aways” from a short talk on the banking system that I was honoured to give as part of an Occupy Toronto rally last weekend at the corner of King and Bay in downtown Toronto. Read more…

Categories: financial crisis

Who’s bailing whom? Challenging the private credit system

October 20, 2011 7 comments

from Jim Stanford

The time since 2008 has been a crucial historical moment for progressive economists to pull back the green curtain that surrounds the operation of the for-profit banking system, and expose that system for what it is: a government-protected, government-subsidized license to print money.

The problem is, as soon as you start saying things like that, people conclude you are some kind of wacked-out conpiracy theorist nut-bar.  It sounds insane to claim that private banks have a license to create money out of thin air.  As John Kenneth Galbraith put it, “The process by which banks create money is so simple that the mind is repelled.” Read more…

New Video Deconstructs CGE Trade Models

July 24, 2011 1 comment

from Jim Stanford

Every time the globalizers come along with a new NAFTA-style free trade agreement, they invoke the findings of yet another high-falutin’ computerized general equilibrium (CGE) model of the projected (and inevitably mutually positive) impacts of the deal.

We’ve seen this time and time again: a numerical simulation model (not based on econometric analysis, but constructed purely by attaching illustrative parameters to a Walrasian general equilibrium framework of simultaneous equations describing market-clearing in all markets) is solved, before and after some sypothesized trade policy liberalization, and the change in outcome is interpreted as the “predicted” impact of freer trade.  As we know, the positive outcome depends on sustained full employment, a lack of international capital mobility (and hence no change in aggregate trade balances), the sharing of gains (or compensation) within each participating country, a lack of cumulative causation in increasing returns industries, and a whole host of other assumptions that are necessary for the model to solve — but which have nothing to do with the real-world economy in which we live. Read more…

Categories: globalization

Excess Corporate Saving and Excess Corporate Tax Cuts

May 18, 2011 2 comments

In the recent Canadian federal election, further reductions in the corporate income tax rate proposed by the minority Conservative government became a major campaign issue.  The federal CIT rate had already been deeply cut in recent years (from 29.2% in 2000 to just 16.5% at present).  The Conservatives wanted to take it to 15%, despite also emphasizing the need for fiscal prudence (ie. spending cuts) to address the large Canadian deficit.  [Note: provincial governments in Canada also levy CITs, which average about 10%, making the combined rate about 26.5% at present — below the weighted OECD average.] Read more…

Categories: Uncategorized

Unions in the Land of Equilibria

March 21, 2011 4 comments

from Jim Stanford

The post-crisis assault on public services and collective bargaining rights (in America and elsewhere) has been justified with a storyline that blames unions (rather than speculators and the recession they caused) for the red ink currently dominating public finance.  This storyline assumes that everything would be fine if only public-sector unions weren’t extorting taxpayers to pay for their supposedly cushy jobs; it exploits the envy of private-sector workers who (on average) are treated even worse.  This fable is told and re-told like a fairy tale: one in which unions kill the goose that laid the golden egg, until taxpaying denizens (starting in Wisconsin) throw off the oppressive yoke imposed on them by overpaid garbage collectors and teachers. Read more…

Categories: Political Economy

Mercantilism Works?

January 8, 2011 2 comments

from Jim Stanford

I have gathered some interesting comparative information on the recent economic performance of the G7 economies.  My immediate goal was to try to puncture the national “triumphalism” which Canada’s ruling Conservative government has been (wrongly) wielding in an effort to deflect any criticism around Canada’s still-dismal labour market and macroeconomic circumstances.  Read more…

Categories: globalization, Recession

NAFTA’s Chapter 11: The Latest Giveaway

August 30, 2010 5 comments

from Jim Stanford

Canada’s federal government made an important announcement this week.  It was kept deliberately quiet: with a news release issued at 4:45 pm on a calm Tuesday in the middle of the late-summer news “dead zone.”  But it should set alarm bells ringing for anyone concerned with the anti-democratic direction of global trade law.   Read more…

Categories: The Economy

Toronto G-20 Meetings, Robin Hood taxes on banks and Canada

June 10, 2010 2 comments

from Jim Stanford

            One of the most controversial topics that will be addressed at this month’s G-20 meetings in Toronto, Canada will be the proposal for new taxes on banks and other financial institutions.  Unfortunately, the host to the summit, Canada’s strongly neoliberal Conservative government, has already expressed strident opposition to any new tax on banks – whether a Robin Hood-style tax as proposed by Oxfam and other progressive groups, or the milder measures being studied by the IMF.

            While the host government certainly does not have any veto power at these summits, Canada’s vocal opposition to any new taxes (or restrictions of any kind) on private banks certainly throws up another roadblock to get something done.  Indeed, with President Obama adopting (for the time being, anyway) a more populist, finance-bashing tone (symbolized by the lawsuit against Goldman Sachs), Canada’s government – led by Finance Minister Jim Flaherty – has become the leading international voice against new bank taxes.  Read more…

Categories: Uncategorized

Why Deleveraging Hurts So Much

May 21, 2010 12 comments

from Jim  Stanford

Last Friday I had the honour of sharing the podium (and a good supper afterward) with Steve Keen, the awesome Australian economist who was recently named the winner of the “Revere Award” for most accurately forewarning of the global financial crisis.  In fact, that award was announced the same day we spoke together to the Politics in the Pub speaker’s series in Sydney.  Here is a link to a report and film clips (by Steve, on his Debtwatch blog site) of the night’s activities:

http://www.debtdeflation.com/blogs/2010/05/15/stanford-and-keen-double-bill/

In his closing remarks to the group, Steve Keen walked through a very interesting arithmetic exercise to reveal the importance of new credit creation to overall aggregate demand conditions (and hence, in a demand-constrained real world, to growth and employment).  The simulation was largely lost on the crowd (which had imbibed heartily throughout the proceedings – that being the whole point of “Politics in the Pub”).  But it did spark my interest in following up.  (For Steve’s original math, check his Debtwatch bulletin #43, at the same blog site noted above.)

Here I recreate, with full credit and thanks to Steve Keen, the logic of his argument, utilizing Canadian data.  Read more…

Categories: The Economy
Follow

Get every new post delivered to your Inbox.

Join 10,763 other followers