Mulcair’s Dutch Disease warning supported by OECD report


mentalfloss
#1



Thomas Mulcair’s Dutch Disease warning supported by OECD report

A new OECD report supports controversial claims by NDP leader Thomas Mulcair that Canada is suffering from an economic condition known as Dutch Disease.

The Organization for Economic Co-operation and Development warns in a report released Wednesday that the run-up in commodity prices is leading to an uneven economy in Canada.

As well, it says the country needs to do more to develop non-resource aspects of the economy so as to maintain high levels of employment and an equitable distribution of wealth across regions.

Resource-rich provinces such as Alberta, Saskatchewan and Newfoundland have prospered, while others have fallen behind, in part because a commodity boom has strengthened the Canadian dollar.

The analysis mirrors that of Mulcair, who has been accused of pitting regions against each other for political purposes.

A similar problem occurred in the Netherlands after its North Sea oil fields created a new source of resource wealth, hence the term Dutch Disease.

“I don’t think you can really deny it,” said Peter Jarrett, one of the report’s authors, in an interview.

“You can’t explain the entire pattern of the history of manufacturing just by exchange rates, that goes too far, but anyone who argues it has no effect is clearly not looking at the data."

“The export-oriented manufacturing sector had by 2011 shrunk sharply to only 12.6% of total value added, down from a peak of 18.6% in 2000. Its share of employment has also fallen substantially over the past decade from 15.2% to 10.2%, and somewhat more than in the United States,” it notes.

“Both outcomes have been clearly correlated with exchange-rate developments.”

Meanwhile, it adds: “Alberta remains the most affluent province, thanks to its energy wealth.”

The fact that Canadian manufacturing has fallen further and faster than the United States, where resources play a smaller role in the economy, can be partly explained due to exchange rate movements, Jarrett said.

Last month, the Pembina Institute said what it called “oil sands fever” spread benefits unevenly across the country and could be hiding economic turmoil down the road.

Alberta’s deputy premier, Thomas Lukaszuk, met with Mulcair during the NDP leader’s recent trip to the oil sands. “As Albertans, we are proud of our record,” Lukaszuk said in response to Mulcair’s criticisms. “That we do what we can do to extract our resources in an environmentally responsible manner, and that any attacks against this province relative to our economic impact in the country, and our environment relative to the rest of the country, will not be accepted and are not welcome in this province,” he said.

The OECD report says there’s no question the decline in central Canada’s manufacturing base is correlated to the appreciation in the dollar.

Economists from the organization were to hold a press conference Wednesday morning in Ottawa on their findings.

The report does not call for a slowing down of resource development, particularly in Alberta’s oilsands, although it continues to push for a carbon tax.

Instead, it advocates that Canada boost innovation and invest in churning out skilled workers. That will lead to higher productivity, which should benefit the non-resource sectors.

The OECD calls sluggish productivity growth “the main long-term challenge facing Canada’s economy.”

The report touches on a wide range of economic issues impacting Canada, including interest rates, debt, government fiscal health and immigration.

It gives the most space, however, to why Canada is unable to capitalize on its highly-educated human capital to commercialize ideas and innovate.

The country’s productivity has actually fallen since 2002, the OECD notes with alarm, while in the U.S. it has increased by 30% over the past two decades.

This is apparently not a unique Canadian problem. Other resource-rich countries, like New Zealand and Norway also underperform when it comes to innovation, the report states.

Many of the solutions for the innovation deficiency advocated by the OECD have been advanced before, including that businesses spend more on research and development, and that governments devote resources to post-secondary schools that turn out highly-skilled workers.

But the report takes issue with some of changes to R&D funding proposed by Finance Minister Jim Flaherty in his March 29 budget. The report says Flaherty should have followed more closely the Jenkins report recommendations he commissioned by narrowing the tax credit gap between small and big companies, rather than increasing it, and by not being afraid to “pick winners” as long as firms also contribute to their own research.

On the current state of the economy, the OECD says Canada has weathered the global crisis comparatively well and should grow by about 2.2% this year and 2.6% in 2013.

But, as it has noted before, Canada faces a potential future risk over the high levels of household debt and real estate prices.

“Low interest rates are for now keeping mortgage and debt-servicing affordable for most, but the share of indebted households spending more than 40% of their income on interest payments remains about the 2000-2010 average,” it warns.

Thomas Mulcair’s Dutch Disease warning supported by OECD report | News | National Post
Last edited by mentalfloss; Jun 14th, 2012 at 07:13 AM..
 
JLM
No Party Affiliation
+1
#2  Top Rated Post
Quote: Originally Posted by mentalfloss View Post




Thomas Mulcair’s Dutch Disease warning supported by OECD report

A new OECD report supports controversial claims by NDP leader Thomas Mulcair that Canada is suffering from an economic condition known as Dutch Disease.

The Organization for Economic Co-operation and Development warns in a report released Wednesday that the run-up in commodity prices is leading to an uneven economy in Canada.

Run up in commodity prices? I don't think so, oil has dropped from $100 recently to the low $80s, gold has tapered off. I think Tommy Boy has things backwards. If I'm producing something the higher the value the better off I am. Maybe Tommy could use a refresher course in Economics 2.
 
mentalfloss
#3
Quote: Originally Posted by JLM View Post

Run up in commodity prices? I don't think so, oil has dropped from $100 recently to the low $80s, gold has tapered off. I think Tommy Boy has things backwards. If I'm producing something the higher the value the better off I am. Maybe Tommy could use a refresher course in Economics 2.

The OECD needs a refresher in Economics?
 
captain morgan
Bloc Québécois
#4
Quote: Originally Posted by mentalfloss View Post






The Organization for Economic Co-operation and Development warns in a report released Wednesday that the run-up in commodity prices is leading to an uneven economy in Canada.

... And depressing the commodities trade through punitive taxation schemes will create an uneven situation just the same.
 
MapleDog
Free Thinker
+1
#5
Comment kinda related to this.

One thing i think should not be traded on the stock market "wall street and other financial places"
FOOD it should not be a thing to play with for creeps who want to screw the people,many people can't afford a decent meal when they have to pay a freaking lot for beef.
 
mentalfloss
#6
Quote: Originally Posted by captain morgan View Post

... And depressing the commodities trade through punitive taxation schemes will create an uneven situation just the same.

I don't know if I would recommend a carbon tax as a solution to the problem either, but do you have any more information on how that would create an uneven situation?

Also, Mulcair gives me beard envy.
 
MapleDog
Free Thinker
#7
Quote: Originally Posted by mentalfloss View Post

I don't know if I would recommend a carbon tax as a solution to the problem either, but do you have any more information on how that would create an uneven situation?

Also, Mulcair gives me beard envy.

Like any other pollution tax idea pitched before,the industries,will shove this tax on the consumers,so again its "we the people" who are gonna pay as usual.
 
mentalfloss
#8
Quote: Originally Posted by MapleDog View Post

Like any other pollution tax idea pitched before,the industries,will shove this tax on the consumers,so again its "we the people" who are gonna pay as usual.

That's when a competitor arises and provides a better rate.

Hooray for capitalism.
 
captain morgan
Bloc Québécois
#9
Quote: Originally Posted by mentalfloss View Post

I don't know if I would recommend a carbon tax as a solution to the problem either, but do you have any more information on how that would create an uneven situation?

Herein lies the problem... Exactly how is it possible to 'regulate' the (national) price of a commodity that is traded on global markets?

Quote: Originally Posted by mentalfloss View Post

Also, Mulcair gives me beard envy.


I can't do beards - makes me want to scratch my face clean off
 
petros
+1
#10
Quote: Originally Posted by captain morgan View Post

Herein lies the problem... Exactly how is it possible to 'regulate' the (national) price of a commodity that is traded on global markets?

Subsidies!


Hooray for Communism!

 
mentalfloss
#11
Quote: Originally Posted by captain morgan View Post

Herein lies the problem... Exactly how is it possible to 'regulate' the (national) price of a commodity that is traded on global markets?

I wouldn't call it regulating as the price isn't fixed, they just want to ensure it is within a reasonable range so that we can have a sustainable economy.

Anyway, if you want to balk at regulation, just look at what the CPC have done with interest rates.

Makes Tommy the Commie look like Uncle Sam.

Quote: Originally Posted by captain morgan View Post

I can't do beards - makes me want to scratch my face clean off

That's cause you're not a REAL man.
 
MapleDog
Free Thinker
#12
Quote: Originally Posted by petros View Post

Subsidies!


Hooray for Communism!

Here's the line to get one roll of toilet paper,if you can't wait buy Pravda.
 
The Old Medic
Conservative
#13
It would appear that the authors of this report are unaware that there is a world wide depression going on. That China is putting massive tariffs on virtually all manufactured goods, to protect their own industries. That Europe is in financial meltdown. And that Canada primarily exports to those countries that are the most affected by the financial downturn.
 
mentalfloss
#14
Quote: Originally Posted by The Old Medic View Post

It would appear that the authors of this report are unaware that there is a world wide depression going on. That China is putting massive tariffs on virtually all manufactured goods, to protect their own industries. That Europe is in financial meltdown. And that Canada primarily exports to those countries that are the most affected by the financial downturn.

Apparently you have a problem with making manufacturing more competitive.

Makes sense.

Why would we want to compete?

 
petros
#15
Quote: Originally Posted by mentalfloss View Post

I wouldn't call it regulating as the price isn't fixed, they just want to ensure it is within a reasonable range so that we can have a sustainable economy.

Anyway, if you want to balk at regulation, just look at what the CPC have done with interest rates.

Makes Tommy the Commie look like Uncle Sam.



That's cause you're not a REAL man.

Commies at work..... What would happen to the CDN dollar if China stopped undervaluing the RMB?
 
captain morgan
Bloc Québécois
#16
Quote: Originally Posted by mentalfloss View Post

I wouldn't call it regulating as the price isn't fixed, they just want to ensure it is within a reasonable range so that we can have a sustainable economy.

A 'reasonable range' is still fixing

Quote: Originally Posted by mentalfloss View Post

Anyway, if you want to balk at regulation, just look at what the CPC have done with interest rates.

Serious?

Quote: Originally Posted by mentalfloss View Post

Makes Tommy the Commie look like Uncle Sam.

Uncle Stalin is more appropriate.

Quote: Originally Posted by mentalfloss View Post

That's cause you're not a REAL man.

 
mentalfloss
#17
Quote: Originally Posted by petros View Post

Then why are you so hopped up on taxation to solve problems?

I am?

Is that why I said:

Quote: Originally Posted by mentalfloss View Post

I don't know if I would recommend a carbon tax as a solution to the problem either...

 
petros
#18
What would happen to the CDN dollar if China stopped undervaluing the RMB?
 
DurkaDurka
No Party Affiliation
#19
Quote: Originally Posted by petros View Post

What would happen to the CDN dollar if China stopped undervaluing the RMB?

Can we slap tariffs on Chinese imports or would that put us in violation of some WTO edict?
 
petros
#20
And use the tarriffs to pay off the Action Plan loans we owe them?
 
mentalfloss
#21
Ex-PM Paul Martin says Mulcair's Dutch disease comments simplistic, unhelpful

EDMONTON - Former prime minister Paul Martin added his name Monday to the list of leaders unhappy with recent remarks by federal NDP Leader Tom Mulcair about Alberta's oilsands.

Martin says it's overly simplistic for Mulcair to blame Canada's prosperous oilsands for artificially elevating the dollar and hurting manufacturing exports.

"To simplify what is a really important issue like that really does nobody a service," Martin told reporters Monday.

The 74-year-old former Liberal party leader was in Edmonton to receive an honorary doctorate of laws from the University of Alberta.

Mulcair has been sharply criticized in recent weeks by western premiers, including Alberta's Alison Redford, for saying that Canada is afflicted with the so-called "Dutch disease" phenomenon.

The theory is that the roaring oilsands economy is pumping up the dollar, making manufacturing exports from central Canada less attractive and thereby driving away business.

The premiers have called the remarks divisive and ill-informed. Martin — a former federal finance minister — agreed.

"The reason our dollar is high is we have a good balance sheet, and we want that," he said.

He said the ebbs and flows of finances depend on a number of intertwined factors and can't be blamed on any one industry.

Another ex-prime minister, Brian Mulroney, has also taken a run at Mulcair. He recently called the remarks divisive and unworthy of a man who aspires to govern from coast to coast to coast.

Mulcair has already taken steps to mend fences with the West, making a trip to the oilsands two weeks ago.

Martin was also asked Monday about a recent poll suggesting many in his Liberal party would like to merge with the NDP to present a winnable alternative to Prime Minister Stephen Harper's Conservatives.

Martin wouldn't comment on the issue directly, but said the Liberals are the only party to offer both fiscal competency and a social conscience.

"You've got to be faithful to your philosophy," he said.

"If your philosophy is in order to have a strong country you have got to have both a good balance sheet and strong social programs, (then) we are the only political party that advocates that.

"We are not a party of the extremes of either the right or the left, and I think that that's what Canadians ultimately will be looking for."

Martin declined to weigh in on a pending decision from the party executive on whether to allow interim leader Bob Rae to run for the job on a permanent basis.

When Rae was handed the interim job in May 2011, he pledged not to run for the permanent post, a move that would give him a head-start on his opponents.

Martin said it's out of his hands.

"There is an executive and the executive will deal with that issue."

Martin was at the helm as prime minister for a tumultuous two years that ended in January 2006, when Harper's Conservatives defeated his minority Liberal government in a general election.

Martin's administration was undone by the ongoing sponsorship scandal, which saw cash earmarked for federal programs directed instead to party friends and functionaries.

Prior to being Canada's 21st prime minister, the former Montreal-area MP won international accolades as finance minister under then-premier Jean Chretien.

Under Martin, Canada reduced its chronic fiscal deficit and cut its debt-to-GDP ratio while making strides in pension reform.

Ex-PM Paul Martin says Mulcair's Dutch disease comments simplistic, unhelpful - Winnipeg Free Press
 
petros
#22
What would happen to the CDN dollar if China stopped undervaluing the RMB?
 
mentalfloss
#23
Quote: Originally Posted by petros View Post

What would happen to the CDN dollar if China stopped undervaluing the RMB?

Who cares?
 
petros
#24
It the root of the Dutch disease problem. Didn't Mulcair tell you that?
 
mentalfloss
#25
Quote: Originally Posted by petros View Post

It the root of the Dutch disease problem. Didn't Mulcair tell you that?

You think it's real now?
 
lone wolf
Free Thinker
#26
I guess if a simple term all all the dirt y'all can dig up on Mulcair, y'all really need lives and smaller blinders
 
petros
#27
Quote: Originally Posted by mentalfloss View Post

You think it's real now?

Chinese undervaluing the RMB is very real.