Economic Success/Decline and Governments
May. 13th, 2014 10:32 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
jsburbidge"There was, in fact, little the Champagne fair towns could have done to avert either the natural or the geopolitical factors that now worked against them. Throughout history, the core zones of world economies have been displaced successively from one location to another. Cores become peripheries and peripheries are thrust into the core, often through no fault or virtue of their own. And if blame cannot be attributed, so success need not be 'deserved'." -- Janet Abu-Lughod, Before European Hegemony.
I was going to post something about the specifically problematic elements of Hudak's claim that he can cut the province back to prosperity (the more likely result of cuts to both provincial jobs and corporate support programs would be an immediate self-infliicted recession even if (against most recent experience) the ultimate effect of the cuts would be to stimulate private-sector activity) On their own, they make you wonder about how much Hudak has retained of his Masters degree in Economics. However, I realized that that's actually a secondary level of wrongness.
The primary thing that is wrong -- and Hudak is joined by both other party leaders in this, despite the fact that it is in his rhetoric that the claims are both most extreme and most explicit -- is the claim that policies of the provincial government can, on their own, cause a complete turnaround in the provincial economy, or, more generally, that it makes sense to hold the provincial government responsible for economic performance of the province.
Government policies can always make a limited difference, of course: choices between austerity and intervention, or between different policies of intervention, have a real impact (if not on total economic activity, then on the way people experience that activity). And nobody should underestimate the power of really poor policies to thoroughly screw up an economy.
But the shifts that are weakening Ontario's manufacturing sector and strengthening energy/resource-rich provinces such as Alberta, making it a net recipient of equalization funds and reducing the resources the provincial government has to deal with problems are much bigger than the province. Some of them involve the migration of manufacturing to low-wage labour locations; some involve changes in technology; some involve international trade and political patterns. Even in "normal" times most of the determinants of a provincial economy's operation are outside anything more than peripheral control by a provincial government (assuming that they stay in normal sane territory and don't do something really stupid: there's a ceiling on their ability, but not necessarily much of a floor beyond legal constraints (nb. the decisions in the 1930s re Alberta's provincial authority over banking)).
That doesn't mean that policies don't matter. The announced PC policies go against recent experience in their naive faith that freeing up private capital and reducing regulation will create a surge in investment and economic activity that more than counterbalances the negative effects of the policies: I can point in the direction of Piketty, and of any number of other indications that the net effect would be more likely to be greater concentration of wealth and a net reduction in quality of life in the province due to reduced services. And if the government got out of what Hudak calls "corporate welfare" the likelhood that other venture capitalists would happily step up to the plate is not high (a government can reasonably support businesses with a much smaller payback than a VC looks for. If a grant of, say, 50,000 at start-up allows a business to do better to a sufficient degree to function for a few years and employ an extra person for that time, the net return to the government is positive (taxes returned to the government, secondary effects, and removing somebody from unemployment) in a way which would not apply to the private sector.
It does mean, though, that any rhetoric suggesting that all it will take is a change in policy to return Ontario to its place on top of the Canadian economy is likely to be pretty thoroughly mistaken, if it's not dishonest.
I was going to post something about the specifically problematic elements of Hudak's claim that he can cut the province back to prosperity (the more likely result of cuts to both provincial jobs and corporate support programs would be an immediate self-infliicted recession even if (against most recent experience) the ultimate effect of the cuts would be to stimulate private-sector activity) On their own, they make you wonder about how much Hudak has retained of his Masters degree in Economics. However, I realized that that's actually a secondary level of wrongness.
The primary thing that is wrong -- and Hudak is joined by both other party leaders in this, despite the fact that it is in his rhetoric that the claims are both most extreme and most explicit -- is the claim that policies of the provincial government can, on their own, cause a complete turnaround in the provincial economy, or, more generally, that it makes sense to hold the provincial government responsible for economic performance of the province.
Government policies can always make a limited difference, of course: choices between austerity and intervention, or between different policies of intervention, have a real impact (if not on total economic activity, then on the way people experience that activity). And nobody should underestimate the power of really poor policies to thoroughly screw up an economy.
But the shifts that are weakening Ontario's manufacturing sector and strengthening energy/resource-rich provinces such as Alberta, making it a net recipient of equalization funds and reducing the resources the provincial government has to deal with problems are much bigger than the province. Some of them involve the migration of manufacturing to low-wage labour locations; some involve changes in technology; some involve international trade and political patterns. Even in "normal" times most of the determinants of a provincial economy's operation are outside anything more than peripheral control by a provincial government (assuming that they stay in normal sane territory and don't do something really stupid: there's a ceiling on their ability, but not necessarily much of a floor beyond legal constraints (nb. the decisions in the 1930s re Alberta's provincial authority over banking)).
That doesn't mean that policies don't matter. The announced PC policies go against recent experience in their naive faith that freeing up private capital and reducing regulation will create a surge in investment and economic activity that more than counterbalances the negative effects of the policies: I can point in the direction of Piketty, and of any number of other indications that the net effect would be more likely to be greater concentration of wealth and a net reduction in quality of life in the province due to reduced services. And if the government got out of what Hudak calls "corporate welfare" the likelhood that other venture capitalists would happily step up to the plate is not high (a government can reasonably support businesses with a much smaller payback than a VC looks for. If a grant of, say, 50,000 at start-up allows a business to do better to a sufficient degree to function for a few years and employ an extra person for that time, the net return to the government is positive (taxes returned to the government, secondary effects, and removing somebody from unemployment) in a way which would not apply to the private sector.
It does mean, though, that any rhetoric suggesting that all it will take is a change in policy to return Ontario to its place on top of the Canadian economy is likely to be pretty thoroughly mistaken, if it's not dishonest.
