Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Sunday, January 08, 2012

The downside to the upside of the U.S. recovery

Canadians should see the benefits of a stronger U.S. economy in the latest monthly merchandise trade report on Friday.

But for Canadian workers, there’s a downside to the upside of the recovery in Canada’s giant trading partner, which could end up taking more of our jobs as well as more of our exports.

“The U.S. economy got a burst of energy in the final quarter of 2011,” says Emanuella Enenajor, economist at CIBC World Markets. “That revved up stateside demand could show up in Canada’s November trade report.” CIBC World Markets projects Canada’s trade balance shifted from a near billion-dollar deficit the previous month to a $500-million surplus.

As such, trade should be less of a drag on Canada’s economy in the final quarter of the year than feared and should help keep the economy out of recession.

Now the scary side of the upside.

“U.S. manufacturing has become increasingly competitive in the past five years as the U.S. dollar has fallen and productivity surged,” notes Sherry Cooper, chief economist at BMO Capital Markets. “With weak productivity growth in Canada and strength in the loonie, we risk losing key manufacturing jobs to the U.S.”

In fact, a news report this weekend suggests President Barack Obama is about to launch a campaign to get U.S. corporate bosses to bring their jobs “home.”

That may already be underway, Cooper suggests, citing recent labour disputes such as at Caterpillar Inc.’s Canadian Electro-Motive plant in London where management locked out 450 workers in a bid to force them to accept deep wage cuts that it argues are twice those of its U.S.-based workers.

“While a rebounding U.S. economy is good news for Canadian exporters, Canadian labour and domestic suppliers of goods and services must rise to the challenge of the newly crowned ‘low-cost producer’ south of the border,” Cooper says.

Ironically, the Canadian government’s relatively sound financial position has added to the competitive challenge that faces Canadian producers and workers.

“It might seem odd that Canada’s status on an increasingly short list of AAA-rated credits can be negative for its workers,” observes CIBC’s Avery Shenfeld.

However, that has generated global demand for Canadian government bonds, helping boost the Canadian dollar, he explains. Now, after years of trading well below the U.S. dollar, the loonie hovers near parity, eliminating an alluring Canadian wage subsidy for U.S. employers.

“Canadian manufacturing workers have turned from a bargain to a luxury item, in terms of their wages relative to those stateside when measured in U.S. dollar terms,” Shenfeld explains. “No wonder then that employers are now taking a tough line at the bargaining table, and waving a threat to relocate.”

And it could get worse, he adds.

“If still more countries fall off the triple-A list, or worse, the U.S. ever loses the bond market’s confidence, Canada might have to look at capital controls of offsetting foreign exchange intervention to keep the loonie from wreaking havoc on our factory sector.”

Still, he and most other business economists argue that Canadian workers will benefit over the longer run because of the government’s relatively healthy financial position.

Shenfeld notes that gold-plated credit rating allows the government to finance its debt at lower interest rates, which allows it to spend more on programs or cut taxes.

However, labour economists warn that with the Canadian economy weakening, governments here should shift from trying to wipe out their remaining deficits to boosting investment spending. “Federal and provincial governments should prioritize employment-supporting public investment over austerity to quickly balance budgets,” says United Steelworkers economist Erin Weir. “Reducing the deficit will not create jobs, but creating jobs would help reduce the deficit.”

The Bank of Canada has warned that government austerity, along with spending restraint by consumers who have also accumulated record levels of debt, will be a drag on the economy during the next few years.

However, it is banking on increased strength in exports and in business investment for needed growth.

Whether businesses have the confidence to step up, as they have been urged to do, will become clearer Monday when the Bank of Canada releases its quarterly Business Outlook Survey.

“Consensus is expecting it to halt the deteriorating trend that has been in place since late 2009 in the key business expectations toward future sales index,” says Scotia Capital economist Derek Holt.

However, the outlook is not bright with a weakening global economy and business investment, despite repeated corporate tax cuts. Confidence among larger firms recently hit a more than two-year low and among smaller firms is rising, but still below year-earlier levels.

Meanwhile, evidence that households won’t be contributing much to the economy in the coming year has been building in the housing market.

Analysts at TD Economics expect a report Tuesday will show that housing construction starts “modestly rebounded” in December from a sharp drop the previous month thanks to “unseasonably warm weather across most of the country” but also “anticipate this activity will fade in the year ahead.”

Original Article
Source: iPolitico 

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