Sunday, December 09, 2018

I Bet the National Energy Program is Looking Pretty Good Right Now

The National Energy Program or NEP is a four letter word in Alberta.  It was an attempt by the government of Pierre Trudeau to make certain the exploitation of Alberta's oil wealth benefitted the largest number of Canadians.

This all came to my mind when it was announced last week that the government of Alberta was imposing mandatory production cuts on the oil industry as a result of the exceedingly low price for bitumen. It is causing all sorts of problems for the companies that produce it.  The blame for this situation is the glut of easier to exploit and cleaner oil on the market.  This has forced down the price of all oil, not just bitumen.  But with bitumen not really being oil, requiring a very expensive process to convert it into something that can actually be refined into a finished petroleum product, it took a particularly big hit in the world markets.  The blame also lies at the feet of a succession of Alberta governments, including the current one, who did not plan for the inevitable busts that always happen after booms.  They did not save for a rainy day or attempt to diversify their economy when oil was selling at a high price so when the price of oil collapsed they were left holding an empty bag.

Of course, no one in Alberta is going to take any responsibility for their situation.  Instead they are going to blame everybody but themselves.  The Federal government is a handy scapegoat because it has always been a handy scapegoat for provincial governments that have shit the bed.  The conventional wisdom is if the Federal government would have done what was needed, earlier, to have a pipeline built to the BC coast all of this would have been prevented.  That is wrong of course.  Bitumen is not in high demand because there are cheaper alternatives out there.  Having an additional pipeline would not change that fact.

This brings me back to the NEP.  Essentially the NEP was designed to assist Alberta to exploit its oil wealth, including its vast reserves of Tar Sands oil, process and refine it and then get it to market.  The Federal government put together a program that provided Federal funds to develop the technology to develop Tar Sands oil and convert it into something that could be refined.  It included funds and fast track approvals for refineries so that the processed bitumen could be refined in Canada.  It included funds and fast track approvals for pipelines heading East, South and WEST so that the refined products could be sent to market.  Canada being what it is all of this would have started in Alberta but eventually other provinces would get their cut, which would have made the oil industry in this country a national industry instead of just a provincial one.  That would have given Canadians in all regions of the country a stake in the health of the industry, which could only have benefitted Albertans.

The only catch for all of this was the program required oil companies to sell to Canadians at a price lower than the market price.  Not so low that they could not make a profit and not so low that Alberta would not be able to make money on the exploitation of their resources but low enough to make certain that all Canadians could catch a break on the price of the petroleum products that they consumed.  And this only applied to oil being sold to fellow Canadians.  Any oil being exported could be sold at the world price.

The response of Albertans.  "Let those f$%*&!#g Easteners freeze to death in the dark".  They went crazy, voted out Mr. Trudeau Sr. and voted in Brian Mulroney who immediately canceled the NEP when he attained power.  They then went on to squander two opportunities to leverage their oil wealth into improving and diversifying their economy.

Looking at the current troubles in the Alberta oil industry and the causes of it has to be said that if the NEP would have been implemented as envisioned the Alberta government probably would not have had to interfere in the oil market last week.

But they did and now I am an Easterner who is nice and warm typing away in a well lit room, watching the troubles of Albertans, who just cannot find any sympathy for their troubles, no matter how much a try to find it.  This all could have been prevented by Albertans over 30 years ago but for their continuing shortsightedness and greed.  They gave into both and are now paying the price and I am fine with that.

Friday, November 30, 2018

First Rate Country with a Fourth Rate Business Class

A few times in this space I have made the statement in the title of this post when describing Canada.  I go into detail of what I mean here.

This was brought back to my mind again in the past couple of weeks because of the ongoing "crisis" in Alberta and the announced closure of GM plant in Oshawa.  Both are situations that demonstrate the lack of vision, courage and business acumen of the Canadian business class.

The situation in both places has been well documented in other spaces so I will not go into great detail about them here.

The business community and many conservative commentators in this country look longingly at the dynamic US economy and would like to be able to create such an economy here.  They point to the low personal and business taxes and less regulation in the US and state that if Canada were to follow that path Canada could have an economy like theirs.

The situation in Alberta and Oshawa puts paid to that assertion.

First, the Tar Sands were only developed because the Federal government of Pierre Trudeau spent a tremendous amount of federal money to move the development along.  No private business in Canada would take the risk in attempting to develop it themselves.  Contrast that with the US.  The rise of shale oil in the US market, which has contributed to the depression of the price of Alberta oil, was exploited by private businesses with private money.  Little or no public funds were used.  I dare say that if the Tar Sands had been located just a couple of hundred kilometres below the 49th parallel they would have been exploited by private industry, without any public funds, and the companies that exploited it would be pulling the stuff from the ground and shipping it for processing at processing plants and refineries that they owned, not to establishments in another country that they did not own.

Second, it is more than even money that nothing developed in Canada will replace the GM plant after it closes.  Maybe another car company, from another foreign country will decide it is a good space to build their cars, but if that does not happen that site will be largely abandoned.  No Canadian company will have the vision or the courage to take advantage of that space. 

The US economy is the way it is because entrepeneurs who are not adverse to taking risks are pervasive in the economy.  Many more fail than succeed but enough succeed to sustain that economy and help it grow.  Contrast that with the Canada, where the business class is the exact opposite of their American counterparts.  Canada could eliminate all taxes and regulations and the Canadian economy would still not be as dynamic as the US economy because the Canadian business class would not have the courage and motivation to take advantage of it to leverage the windfall into increased economic activity and greater wealth.

As I have stated in this state before if the Canadian business class had any kind of business acumen Canada would be punching well above its weight in the international economy.  We are blessed with a tremendous bounty of natural resources and an educated and capable work force.  A business class that could actually live up to that name would have taken full advantage of these two facts long ago to make themselves and Canada much wealthier than they already are.  They would have allowed the Canadian economy to realize its full potential and we would all be much better off as a result.

Alberta and Oshawa further proves that this is a pipe dream.  

Sunday, November 25, 2018

We have not seen as much progress as we thought

I few nights ago I watched the movie "Selma" on TV.  I originally saw it when it came out in theatres a few years ago but this second watching made realize something.

In the movie the open depiction of racism and bigotry is prevalent, as it was in many parts of the United States in the 1960s.  So it seemed to accurately depict that period in time.

Since then it has been accepted wisdom that the level of racism and bigotry that we saw during that period has been greatly reduced.  We have come along way from then and only a few pockets of the US still hold those views and most of them are in the most backward parts of the South.  The rest of the people in the US have become much more tolerant of people of colour.

Watching the US, and Canada for that matter, it would seem that the accepted wisdom is wrong.  Racism and bigotry has raised its ugly head again with a vengeance.  For almost 50 years social convention has forced those who are racist and bigoted to keep their opinions to themselves.  However, with an openly racist and bigoted President these people have been released to spout their hate and vitriol again.  As well, if you look where this is coming from it is much more widespread than just a few pockets in the most backward parts of the South.

Although the situation in Canada is not a extreme is in the US the same forces are at work.  If anybody thinks that the general acceptance of Faith Goldy running for mayor of Toronto, using an opening racist election platform, is not similar to what we are seeing in the US they are not paying attention.

Fifty years ago governments made great efforts to suppress the black vote and blacks were in great danger of being killed because of the colour of their skin.  Fast forward to 2018 and several state governments in the US enacted harsh election laws which were designed to suppress the black vote and it is almost a weekly occurrence that a black man is killed by a white police officer.

The so called progress that we have seen since the 1960s, with regard to race relations in North America, is a mirage, a fantasy.  It does not exist.  The same attitudes that plagued that sad decade never went away.  They were just hidden and they are now coming out of hiding.

Thursday, November 08, 2018

It is not really about the Carbon Tax

In a previous post I wrote about the breakdown of the current economic orthodoxy that has informed economic and political debate in the Western world for over three decades.  I call it the Conservative Consensus.

In Canada that Consensus was set in stone in 1993 when the Progressive Conservative government of Kim Campbell/Brian Mulroney was destroyed at the polls.  One of the contributing factors to that destruction was the introduction of the GST.  Ironically, the Liberals would be the greatest benefactor to this but it had a lasting chilling effect on effective fiscal policy until 2015.

In Canada, I would say that election was the one that cemented the Conservative Consensus in place.  From that point conservatives framed the debate on what were the acceptable fiscal tools and their position that lowering taxes and decreasing government spending become the default and only suitable position of all governments, regardless of their political stripe.

As I stated in that previous post conservative elements of our societies took full advantage of this situation to eventually land at the position that tax cuts for the wealthy and big business, at the expense of ordinary people, was the best fiscal policy.  Their position was essentially that ordinary people needed to make these sacrifices for the greater good.  And these ordinary people at it up.

Then along came Mr. Trudeau who campaigned in the last election on a platform that included increasing taxes for the wealthy and the introduction of a Carbon Tax.  He won that election and he kept both of those promises.

So for the first time in three decades a political party has strayed from the Conservative economic orthodoxy and they have been rewarded for it.  That will not do for conservatives who desperately want to maintain the Conservative Consensus.

People ask what the Conservatives would do about climate change.  They point out that they do not have a plan.  They point out that a Carbon Tax is a conservative idea and a market based solution to the need to reduce greenhouse gas emissions.  

These same people miss the point.  It is not about Climate Change.  It is about maintaining the current economic orthodoxy.  It is about maintaining the Conservative Consensus.  I stated in a previous post that there are signs of the Conservative Consensus beginning to break down.  Conservatives see it and they know that in order to maintain it they need to stop any progress away from the Consensus, now, before it develops a momentum that will make it unstoppable.

That is the overarching goal of Conservatives in this country right now.  Everything else is secondary.

Sunday, November 04, 2018

Why the Sudden Rush Mr. Singh?

It made the news last week that the leader of the Federal NDP is now ready to run for a seat in Parliament, after more than a year of being the leader and after passing on four by-elections since he won the NDP leadership.  The seat he has chosen is in Surrey BC, which is available and for which a by-election has to be called by March 2019.

The Prime Minister has decided to wait to call that by-election and the NDP in general and Mr. Singh in particular are up in arms about it.

I have been watching Mr. Singh for the past few months and it strikes me that he is not enjoying his job.  It strikes me that maybe he would like to leave it.  Unfortunately, a whole host of reasons would prevent him from resigning at the moment so he is stuck.

However, if he were to lose the by-election, which would be very possible since the Surrey seat is by no means a safe NDP riding, he would have his excuse.  Unfortunately, in order for that excuse to work he would have to lose that by-election sooner rather than later.  His resignation as a result of that loss would have to be early enough to allow the NDP some time to pick up the pieces.  

Losing in March would be bad for both him and the NDP.  If he sticks around the NDP would be saddled with a wounded leader, perhaps a mortally wounded leader and the 2019 election would be an NDP bloodbath.  If he left then the NDP would only have about six months to find a new leader and develop an election platform.  Again, that would be a recipe for an electoral bloodbath for the NDP.

This is all speculation of course and I could be completely wrong in my assessment of what I am seeing.  However, my political gut is telling me that there is more to Mr. Singh's sudden urgency to win a seat in the House of Commons than what we are hearing from him and the NDP.

Thursday, October 25, 2018

The Breakdown of the Conservative Consensus

For the past 30 years or so the prevailing economic consensus amongst the political classes of the Western world, particularly the English speaking world, has been a conservative one.

It all began around the late 1970's when the then prevailing liberal consensus, which had lasted since the latter years of the Great Depression, began to break down.  It came into full force in the 1980's with the elections of Ronald Reagan and Margaret Thatcher.  In Canada it came into full force with the election of Brian Mulroney and the findings of the MacDonald Commission on the Canadian economy, which were released soon after his election.

The conservative consensus was:


  • The uncritical belief in free trade.
  • Government regulation was a bad thing.
  • Taxes were too high and needed to be reduced.
  • Government spending was too high and needed to be reduced.
  • Social programs were ineffective and reduced economic activity.
  • Deficit financing was bad and should be eliminated.  (This one was mainly given lip service.)
  • Unions and organized labour was too powerful leading to a reduction in competitiveness and economic activity.  That power had to be curtailed.
It took more than a decade for this consensus to solidify.  Politicians, conservative academics and the media began a concerted effort to convince ordinary people that they would be much better off following the conservative consensus.  They claimed that following it would lead to greater economic success for everyone and not following it would lead to more of the economic upheaval that characterized much of the 1970's.  They were successful.  By the end of the 1980's the conservative consensus was pretty well set and any government, even progressive governments, that proposed going back to the liberal economic policies of the 1970's did not enjoy lasting success.

For that first decade conservatives were more circumspect about pushing their agenda too hard.  They had to bring people along slowly and they still had to deal with the Soviet Union appearing to be a viable alternative to capitalism.

That all changed in the 1990's.  The consensus was set and the Soviet Union collapsed leaving capitalism as the only game in town.  That lead to the proponents of the Conservative consensus to begin pushing the boundaries of their ideology.  That lead to the election of the first neo-conservatives, including our very own Michael Harris, who pushed deep tax cuts and deep government spending cuts.  They sold this by stating that the tax cuts would increase economic activity enough to offset the cuts in government spending.  Their sell job worked although their claims were proven to be completely false.  

Eventually, the neo-conservatives began to ignore the ordinary person claiming that tax cuts for the wealthy and business along with the government cuts was the way to go.  Again, for a time their sell job worked.

However, under the surface things were not going very well for ordinary people in the West.  Free trade lead to globalization, which lead to massive job losses.  Reductions in government spending lead to their inability to assist those who lost their jobs in a meaningful way.  Reduction in taxes to the wealthy and the neutering of organized labour has lead to unprecedented inequality in the West.

This has been going on for two decades and it is finally coming to a head.  Brexit and the election of Donald Trump are the results of this situation.  Both happened because "populist" politicians managed to tap into the anger and and deep uncertainty that living under more than 30 years of the conservative consensus has created.  Of course, those politicians are just pushing more to the same while stoking hatred of the "other" to "explain" the plight being experienced by these ordinary people.

That will only work for so long.  You can only promise to fix a problem and then do the exact opposite of fixing it for so long before people begin to direct their anger at you.  Inevitably it will lead to change, not just of government, but of a new way of governing.

We may already be seeing the beginning of the breakdown of the conservative consensus.  

In 2016, Bernie Sanders was a credible candidate for the President of the United States despite the fact he admitted he was a socialist, a democratic socialist to be certain but still a socialist.  If he would have attempted to run as a socialist in 2008 he would have been creamed.  

Here in Canada, in 2015, our very own Liberal government ran on a political platform that included running deficits, while their two main opponents ran on promises of balanced budgets, and they won handily.  That is significant.  Governments routinely broke their promises of balanced budgets but they at least promised it.  No government in recent memory has realized any success by promising to run deficits.  The government also ran on introducing a carbon tax, a new tax.  Again that has been unheard of for decades but they were still successful.  As well, both of these promises have been kept and the most probable outcome of the next election is still a Liberal majority.  Two policies that go against the prevailing economic orthodoxy and they are still realizing success.

In 2018, more and more candidates running in the mid-term elections in the United States are versions of Bernie Sanders.  Despite this the consensus amongst the political classes in the US is they will be successful in at least retaking the House of Representatives, perhaps retaking the Senate and taking their fair share of governors' mansions in the States.  We will have to wait and see if that really comes to pass.

There is a change in the economic consensus taking place.  We are seeing the beginning of the end of the conservative consensus, which will be replaced by a progressive consensus in due time.  It is early yet and the proponents of the conservative consensus may be able to mount a rear guard action effective enough to slow down the transition but that is all they are going to be able to do, slow it down.  Their lack of effective policies to actually help ordinary people, to mitigate the impact of technology on the nature of work and to mitigate the impacts of climate change will lead to the conservative consensus being cast aside, probably within the next decade.

Sunday, October 07, 2018

The New NAFTA

I have had a chance to review the new USMCA agreement and my greatest response is "Is that it?"  Is that all we got from over a year of negotiations?

I realize this all started because of the ego and stupidity of the current occupant of the White House so I guess it is probably a bit of a blessing that things have not been changed drastically but I am still kind of surprised at just how much it has not been changed.

Then again, since we were dealing with a bloviating windbag it is impressive that the Canadian negotiating team did not have to make significant and potentially detrimental concessions in order to secure the new agreement.  

As I stated here I am not a true believer in free trade agreements in general and the NAFTA in particular.  It has done some good but it has also done alot of bad for the Canadian economy since its implementation.

All that being said there are a couple of changes in the new agreement that I believe make it somewhat better than the original.  The first is the virtual elimination of Chapter 11.  The idea that a company can no longer sue a government for taking actions to protect the environment, food and water supply and labour standards is an improvement.  The second is the change in the energy provisions that used to force Canada to sell its energy resources to the United States even during shortages, potentially leaving Canada short of these resources for its own use.  Brian Mulroney essentially sold Canada out on that provision in the original Canada/US FTA and it is significant that when the US asked Mexico to do the same thing in order to join NAFTA the Mexicans told the Americans to get bent (diplomatically of course).  This provision was one reason for the discount that Canadian firms had to sell their energy products to American firms so maybe the elimination of this provision will help improve that situation in the future.

The media and the other political parties are being their usual obtuse selves.  The other parties because the agreement is a win for the government, albeit a limited one, and they cannot have that.  They have to find some fault with it so they have focused on dairy.  It is true that the dairy industry has to allow more access to its markets but the amount is not that great.  It can easily be absorbed by the industry on its own and with the promised compensation the government has indicated they will give them no one in the dairy industry is going to lose their shirt.

The Globe and Mail had another angle yesterday in their Saturday paper editorial.  There is a provision of the new agreement that states that none of the signatories can enter into a free trade agreement with another country without approval from the other signatories.  This provision is aimed directly China.  The Globe and Mail seems to believe that this is a somewhat unreasonable infringement of Canadian sovereignty, which is silly.  Free trade agreements by their very nature are huge infringements on the sovereignty of the signatories and they have always been that way.  There is a reason why the Liberals ran a political advertizement showing a guy erasing the border between Canada and the US during the Free Trade election of 1988.  Everybody knew that the new FTA would reduce the sovereignty of both Canada and the US.  That did not seem to bother the Globe and Mail in 1988 or since.  Now they seemed to be bothered by this one provision.  Is this an indication that the Globe and Mail has a limit to how much an agreement can impact Canadian sovereignty or is this just the Globe and Mail quibbling because they believe they have to find something to criticise the government with in this treaty?  My guess is it is the latter.

The new USMCA is a slight improvement on the old NAFTA but it is still a flawed agreement like the NAFTA.  I doubt its will change how the three partners deal with each other in a significant fashion which kind of makes the whole past 13 months kind of pointless.  The government was forced into this situation by a sociopath so I guess we can be satisfied that the agreement that was finally signed should not do significant harm to the Canadian economy and society.

Populism is here to stay

So says none other than Stephen Harper in an op-ed piece in yesterday's Globe and Mail.

I do not totally disagree with this assertion but I do not believe that it will have as much of an impact on our political system as some believe.  Many believe the recent success of some populist politicians in Canada is a harbinger of their takeover of the political system.  This belief is based on a very superficial analyses of these successes and if you look a little deeper into them you will find that maybe other factors than just populism lead to their success.

The other assumption of Mr. Harper is he seems to believe that right-wing populism is the only kind around.  The problem with that assertion is right-wing populist politicians are just spouting more of the same conservative dogma that we have been seeing from the Canadian political establishment for the last 30 or so years.  They are just being more in-your-face about it.  Those policies have failed to improve the lives of Canadians.  In fact, they have made them worse off and the political establishment knows this.  That is why they are doubling down on them while attempting to distract people with debates about niqabs, immigrants, asylum seekers and terrorists.  The time of the conservative consensus in Canada is coming to a close and they know it and are terrified by that fact.

It is only a matter to time before some left-wing populist begins to take advantage of this situation.  It may take another few years but the swing of the pendulum back to the left will begin in a relatively short period of time.

So Mr. Harper may be correct but it will probably not play out as he currently assumes.

Fahrenheit 11/9

My wife and I went to see the latest Michael Moore film last night.  It was what I expected, being typical Michael Moore fare.  I liked the film.  It was entertaining and in many places it was enlightening.  However, there were a couple places where I thought he missed the mark somewhat.

In general he did a very good job of describing an America where those that would govern have completely lost touch with those that they would govern.  This is not a situation unique to the United States.  All of the Western countries are going through a period where the ruling elites have almost completely lost touch with their citizens.  The problem is made worse in the US, however, by the prevelence of money in their political system.  Ms. Clinton raised and spent more money on her failed bid to win the US Presidency than the Canadian federal government and all of the Federal Parties spent on the 2015 election combined.  And by a huge margin I would add.  Power corrupts but money greases the wheels for that corruption and that is what is happening in the United States right now.  The segment in the movie describing the Flint, Michigan water crisis and how it came about is a great demonstration of that.

There were a couple of arguments in the film where I believe he is off base.  He spent a fair amount of the film describing how the Democratic Party establishment was and is undermining left wing candidates in the Party, from Bernie Sanders to many candidates currently running as Democrats in the mid-term elections.  He puts this effort down to the fact that the Democratic Party takes money from many of the same donors as the Republican Party.  Although there is some truth to that it is probably not the whole picture.  The Tea Party movement in the United States is an extreme conservative movement that rose up around two decades ago.  In that time it took over the Republican Party and Donald Trump is its progeny.  I am no fan of Mr. Trump for many reasons but one big one is the historian in me knows that extremism breeds extremism and history has demonstrated that nothing good comes from extremists battling each other.  It invariably leads to hardship, injustice and authoritarianism.  And it sometimes leads to war.  The current crop of very left-leaning candidates in the Democratic Party could be the beginnings of left-wing "Tea Party" movement and as with the real Tea Party movement it will continue moving farther to the extreme left, which will inevitably lead to a left-wing version of Donald Trump.  Preventing that from happening is in the best interests of society so any attempt to impede the movement towards extremism is a necessity.  The Republican Party completely failed in doing that and the United States is living with the consequences.  If the Democratic Party fails to keep a lid on its extremists then the situation in the US will become much worse.

The second argument where he was off base was to compare the situation in the US with with the fall of the Weimer Republic, to Adolf Hitler, in the 1930s.  Mr. Moore's comparison, in the film, is compelling but it was superficial and somewhat misleading.  To compare the two situations is to compare apples to elephants.  The Weimer Republic came into existance in Germany in 1919, after centuries of Germany being lead by autocrats.  There was no democratic tradition in Germany before 1919.  The democratic institutions of the Weimer Republic were weak and ineffective because of that.  So when Adolf Hitler managed to win enough votes to become Chancellor (Prime Minister) of Germany just 14 years after the establishment of the Republic he had no problem subverting the new democracy.  The United States has more than two centuries of democratic tradition to fall back on.  Its democratic institutions are effective and robust.  If any US politician had designs to do what Hitler did in Germany he would find it impossible to pull off.  The price of freedom and democracy is eternal vigilence and Michael Moore effectively reminds us of this fact but he let himself go too far by inferring that the US was on the verge of going the way of Germany of the 1930s.

Other than those two quibbles I would say Fahrenheit 11/9 is a good film and I would highly recommend going to see it.