Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Economics Page 2 of 90

Trump’s Doing Everyone A Favor With His Tariffs (Emphasis on Canada)

By

On January 28, 2025

Comments

(Keyboard fixed, at least for now, so let’s get on with it.)

Trump has threatened blanket tariffs on multiple nations, including most of Europe, Canada and Mexico. This is an effective threat. The Bank of Canada estimated the effect of such tariffs on Canada at six percent of GDP, and I’ve seen an estimate for Germany of about one percent of GDP, after previous losses due to anti-Russia sanction effects on energy costs.

But what this tells us is that many nations are over-dependent on trade with America. Our economies are too intertwined with America’s economy, especially Canada’s. America’s massive and persistent trade deficits also indicate that America isn’t competitive. This isn’t a surprise, the American economy is controlled by oligopolies and monopolies with middlemen taking unearned profits and the overall cost structure, from housing to medical care to everything else is high, especially with respect to asset prices, which have been deliberately inflated since about 1979.

What we should do, all of us who are being threatened, is tell the US to fuck itself, slap retaliatory tariffs on the US, add in export tariffs so the US really hurts, and reorient trade towards each other—form a trade bloc without the US.

It’s worth pointing out that many of Trump’s tariffs are essentially illegal under various trade agreements the US has signed. Yet no one doubts that Trump can impose these tariffs despite their illegality. Remember that a signed treaty has the force of law in the US.

The US is, and has been a rogue nation for a long time and the rule of law means nothing in America.

I’m going to talk primarily about Canada because I know the situation here best. We’ll start with a little history.

For most of Canadian history, we exported mostly raw and refined resources to America. Minerals, oil, fish, lumber and so on. Often it was illegal to export them without doing at least primary processing: no raw logs, fish were canned in Canada and so on.

The original sin of over-integration with the US was the US-Canada auto-pact. We got a lot of jobs and factories out of it, but it was used as leverage over us. When Canada’s world-leading aviation industry of the 50s produced a jet, the Avro Arrow, which was much better than any American jet, the US threatened to take away the auto-pact unless we ended the program. And by end, I mean we disbanded Avro and we sunk the jets in a lake. Male engineers were hired by US firms, the female engineers got to be housewives, since the US in the 50s was 100% a patriarchal society. (As an aside, this was a post-war thing, the 30s were not as patriarchal.)

This story is so flaming hot in Canada that the original classification was renewed when it was due to end. Even now Canadians are angry about the Avro Arrow, something which happened 7 decades ago.

In the 80s, Prime Minister Brian Mulroney wanted a free trade pact with the US to ensure market access. Most Canadians were against it and the 88 election was fought about the FTA. Mulroney won because the anti-FTA vote was split between the Liberal and NDP parties. He rammed thru the FTA, which was later rolled into NAFTA and is now called the USMCA.

The deal included a lot more than just trade, it had IP laws and reduced the ability of Canada to use tariffs and subsidies itself and including nasty taking laws which made it nearly impossible to regulate foreign companies in Canada. Because our nation sells so many resources, the Canadian dollar tends to fluctuate a lot. When it’s high (it was higher than the US dollar for a couple years around 2015, for example) it’s devastating to our industry.

The old policy, which started around 1880 or so was called the Canadian mixed economy. When the dollar was high because of high resource prices, we’d subsidize manufacturing. When it was low, we’d subsidize resource producers and gave generous unemployment benefits to laid off resource workers.

That policy created one of the best and most prosperous economies in world history. But the condition which allowed it was that we had strong ties to both the British Empire/Commonwealth and to the US. In the 70s, the Brits, under intense US pressure since the end of WWII had their economy basically collapse. They had to go to the IMF for help and joined the EU, which bailed them out. The result of that was that their trade became very oriented towards the EU and the Commonwealth countries were left on their own.

Without a counterweight against the US, Canada felt weak. It didn’t stop Pierre Trudeau (the current PMs father) from telling the US to suck it when necessary, he even closed the border at one point, but Mulroney didn’t have the balls and he was right that our hand had become a lot weaker.

So Mulroney rammed thru the FTA. He was repaid by the Progressive Conservative party being essentially wiped out in the next election. Canadians really didn’t want the FTA/NAFTA. But once it was in, no successor government got rid of it.

The result was that Canada lost most of its industrial base. Ironically we even lost a lot of those auto-pact jobs, as American auto companies got their pants beaten off them by Japan and South Korea.

Pre-FTA about 30% of our exports to the US were autos and auto parts, 20% were petroleum, and miscellaneous machinery was about 15%.

Fast forward to today, 30% of our exports are petroleum, 13% are automobiles (the pact), and miscellaneous machinery is about 8%.

Can you say Dutch disease? Sure you can.

We’ve become a much more one note exporter, which is why Alberta and Saskatchewan are betraying our united front. They do most of the exporting, after all.

But the larger point is general de-industrialization and over-dependence on American markets. This has become enhanced over the last 8 years as our relations with China have degraded, due to Trudeau’s stupidity and pandering to America.

If this anti-China pandering worked, if it made it so America wouldn’t pull shit like tariffs, maybe it could be justified, but all its done is hurt our relationship with a potential trade partner and counter-weight to America’s influence on our economy.

So, what to do?

To start, leave the USMCA. The US has never obeyed NAFTA or the USMCA when it didn’t want to. Back in the 00s they slapped tariffs on timber, and ignored repeated rulings against them. We should have left then, but better later than never.

Second, start rebuilding our own industrial base. We still have plenty of scientists and engineers and vibrant universities. We can still bring in more scientists and engineers if we need to. This will require tariffs and subsidies, so institute them.

Third, bribe the resource workers who will be hurt. Just straight up find a way to give them a big chunk of change.

Fourth, re-institute Canadian ownership laws which require companies to be 51% Canadian owned, including foreign subsidiaries. Have the government take an additional 10%, and promise that all dividends from that 10% will be shared with Canadian citizens as direct deposits every year. Make it clear that we are willing to trade, but that trade no longer includes the right of foreigners to buy up our economy.

Fifth, form trade deals with countries other than the US. These should be bilateral or small multilateral in most cases with tariffs and subsidies allowed on both sides for key industries. We should pick a few industry sectors to concentrate on, and trade with other countries in the other sectors: that way they get something in exchange for the deal.

Sixth, go back to the old cyclical subsidization system: industry when our currency is high, resources when it’s low. Make it so that ordinary workers (and voters) are protected from the cyclical effects of a dual economy.

Seventh, put a lot of the resource profits into a sovereign wealth fund, to reduce the cyclical effects and provide the inevitable busts and for the inevitable and ongoing movement away from petrochemicals. Like it or not, alternative energy is coming on strong and the days of the petrol economy are drawing down. We’ve still got a couple decades to go, but the role of government is to make these long term plans. The fund should prioritize investments in petroleum regions, both to get them onside and to prepare them for the drawdown.

There’s plenty more details, of course, but these are the fundamentals. We’ll talk more, soon, about how trade should actually work if it’s to be for the benefit of all countries. Needless to say, such a regime would have princicples almost directly in opposition to those that have existed under GATT and its successor, the WTO.

This blog runs on donations and subscriptions from readers. It’s free, but not free to produce. If you value it, please give.

If You Really Hate DEI & Actually Want Merit, There Is A Way

By

On January 23, 2025

Comments

There’s a lot of pushback on DEI these days, with some major companies ending their DEI programs. This has been tied into the competence crisis, which is bullshit.

Let’s put the idea that there isn’t massive discrimination to rest. There have been many studies. One found that identical resumes from people with black names vs. people with white names had half the interview requests. A meta-study found the effect less overall: 24%.

Now I don’t know if DEI overcomes that, but modern studies don’t find any less of a gap, so I’m guessing “no”, though the effect on promotion may be more significant.

The obvious solution is to do something similar to the how orchestras evaluate musicians: they place them behind a screen, and they play their music. The evaluators don’t know who’s playing, or anything about them.

Modern technology makes this viable: wipe the resume of any identifying remarks and do the same with any testing. Have the interview with an avatar with a computer masked voice. If you really want to evaluate entirely on merit: their record and their abilities, that would be the way to do it.

The counter-argument is “cultural fit” and I’m not going to say that there’s nothing to it. The evidence is that diverse teams improve quality at the cost of speed and increased conflict but the benefits don’t accrue for teams which don’t work together much. If you’re doing something you already know how to do, where quality isn’t much of a factor, speed is and team members don’t interact much anyway, then there’s a case for “cultural fit” teams. But if you’re dealing with uncertainty, or quality is more important than speed, then a diverse team is probably better.

(Amusingly the evidence is that startup funds perform less well without diversity, but silicon valley hates diversity and prioritizes fit, which is one reason for their under-performance the last couple decades since the tech-bros took charge.)

I’m not a huge fan of DEI. It introduces a variable that shouldn’t matter. Problem is that variable already matters, and DEI is an effort to counter people hiring less competent people because of prejudice.

But there is another solution: one that prioritizes merit, at least for hiring (and it could be extended to some types of promotion decisions). Decisions based on blinding out gender and race.

If the real issue is merit and not something else, this is the obvious way to go. Strange how rarely it is suggested.

This blog runs on donations and subscriptions from readers. It’s free, but not free to produce. If you value it, please give.

The Competency Crisis Is Not About DEI

By

On January 15, 2025

Comments

That DEI (women and brown people) are responsible is a constant right wing cry.

The competency crisis is a result of an economy where making money without making a product is easier than making something. We prioritized financial profits—multi generational rises in asset prices that were faster than inflation. Housing went up. Stocks went up. Private equity earned money buy buying companies, larding them up with debt, and running them into the ground. Profits were juiced by moving production offshore and engaging in regulatory and labor arbitrage.

The best profit came from playing financial games and rentierism. You didn’t have to make anything or delivery anything, you just had to find a way to squeeze money out of something by making it go up faster than inflation, or by destroying something which was already built, taking all the future value now and giving it to yourself. Even the (old) Middle Class got in on this, by buying houses when they were cheap, watching them appreciate faster than wages, then selling them when old and moving south to be have their bums wiped in cheaper southern states by brown immigrants.

Everyone wanted to make money without having to create to get it. Mostly they either wanted to get unearned money from appreciation, to destroy what others had built, or to capture a market in an oligopoly or monopoly so they could juice prices.

Meanwhile, the manufacturing floor moved to China and elsewhere. The people who knew how to make things retired, moved to other jobs, retired and eventually died.

We can’t build most things because we haven’t prioritized building things, or getting better at building things since the 70s. The eighties are where predatory capitalism took hold, and since then the whole game has been rentierism, unearned gains, predation and arbitrage.

DEI doesn’t much matter in comparison. The people running the economy for the last 45 years have been mostly white males, and that doesn’t matter either. Women or brown people would have done the same thing. Margaret Thatcher was a woman, and one of the founders of this mindset.

No one’s competent at actually doing things, except profit extraction, because our societies haven’t prioritized doing anything but extracting profit for over 45 years. Everyone who lived in a society that was about really delivering products and making things is dead or retired.

if you want a competent society again, make it so that no one can get wealthy, let alone rich, without really making something or improving people’s lives. And no, Facebook and Google and so on don’t count, because they were started as good, and made shitty to increase profits. That’s the opposite of what’s needed. (AI in the US will be the same.)

SUBSCRIBE OR DONATE

Elon Musk Threatens Congress Successfully

By

On December 20, 2024

Comments

This is some amazing shit:

Congress was about to vote on a bill called a “Continuing Resolution”, which would fund the operations of the federal government. But yesterday, Musk started tweeting around the clock about how he hated the bill and that he would fund the campaigns of politicians who ran against Congress members who supported it.

….Shortly after Musk decided he was against the Continuing Resolution, Trump and JD Vance issued a statement saying they were against it, too. The politicians in Congress fell in line, and now it looks like the government funding plan is dead.

Here’s the thing. Being rich only means you’re good at making money in a specific way. It doesn’t mean anything else. Gates, for example, pushed the “Common Core” education changes, and there’s no evidence they did any good and some reason to think they were harmful.

We have a rich man (maybe a billionaire) as President. We have Musk, the world’s richest man, who spent a lot money helping Trump win as one of the most important people in the new administration, who has said he wants to cut Social Security and Medicare.

Money is the ability to tell people what do. It let’s you control their actions, either directly or indirectly.

FDR defined fascism as:

Ownership of Government by an individual, by a group, or by any other controlling private power

The US has been trending towards oligarchy for ages. The final victory for oligarchy was probably “Citizen’s United”, which made money the same as speech and thus protected under the first amendment.

The famous Princeton oligarchy study, which used data from 1981-2002, which is to say from back when the rich weren’t nearly as powerful as they are now, found that:

…when one holds constant net interest-group alignments and the preferences of affluent Americans, it makes very little difference what the general public thinks. The probability of policy change is nearly the same (around 0.3) whether a tiny minority or a large majority of average citizens favor a proposed policy change (refer to the top panel of figure 1).

By contrast—again with other actors held constant—a proposed policy change with low support among economically-elite Americans (one out of five in favor) is adopted only about 18 percent of the time, while a proposed change with high support (four out of five in favor) is adopted about 45 percent of the time. Similarly, when support for policy change is low among interest groups (with five groups strongly opposed and none in favor) the probability of that policy change occurring is only .16, but the probability rises to .47 when interest groups are strongly favorable (refer to the bottom two panels of figure 1). Footnote 41

Musk is the world’s richest man. He threatened members of Congress using his money, and they caved.

It’s always amusing when Americans call Russia an oligarchy. It isn’t. Russia’s oligarchs have very little power compared to Putin. If they cross him, he destroys them. They do what he wants, when he wants or they go to jail or have to flee the country, giving up any wealth in Russia.

America, on the other hand, is sickeningly an oligarchy and it’s going from indirect to direct oligarchical control.

SUBSCRIBE OR DONATE

France Is Being Kicked Out of YET Another French Country

By

On November 29, 2024

Comments

Recently French troops have had to leave Mali, Niger and Burkina Faso. Now it’s Chad booting them.

Update: Senegal has now announced it intends to seek the withdrawal of French troops.

The first three countries have Russian troops in them now. Wonder how long it’ll be before Chad joins the crowd?

France has been the most important country in a lot of its ex-colonies in Africa, but it’s losing its place, not just militarily but economically. Countries are turning to China for imported goods and development at the same time as they turn to Russia for security. Chinese goods, development and loans are cheaper, and neither Russia nor China interfere nearly as much in domestic politics.

It’s just a better deal. For a long time you HAD to go to the West, but now Russia and China can supply pretty much everything you need.

 

As regular readers know I’ve been following Europe’s collapse for a few years now. It’s practically a freefall. In Germany Volkswagon, for example, is planning on closing factories for the first time.

Europe’s well on its way to being what it was for most of history: a backwards and irrelevant peninsula, with the main action and most important civilizations elsewhere in Asia.

SUBSCRIBE OR DONATE TO OUR 2024 FUNDRAISER

Why Assisted Suicide Bills Will Proliferate & Deaths Will Increase

By

On November 25, 2024

Comments

Nothing saves money on people who are old, disabled and unable to work like just killing them.

Covid killed mostly old people. That saved the government money in the long run, although in the short run it was expensive, except for Sweden where they just euthanized their old people with Covid instead of treating them. (Gave them opiods even when they had enough oxygen and drugs.)

Since Covid, however, there’s been an unfortunate increase in people who can’t work because they’re chronically ill.

This isn’t hard to understand. Britain is massively importing young people who can work, or older people who have lots of money, but at the same time the number of people who are liabilities, financially speaking, is exploding. If you have a liability the easiest way to get rid of it is to… get rid of it.

Canada’s in the same boat, and these bills will spread.

Assisted suicide isn’t automatically a bad thing, mind you. If people were properly supported and cared for I’d support it. People who are in a ton of pain and won’t get better ought to have the option.

But when the government is whining about benefits and cutting them, as in Britain, one doesn’t expect this is being done from a humanitarian impulse. And the medical and social workers, in hospitals and palliative care centers that are overstretched and don’t have enough nurses or doctors or beds, well, convincing someone who’s taking up time or a bed to just die already will have to be pretty tempting, sometimes even with somewhat good motives: to free up resources for people who can be cared for.

But, of course, what will often happen is that chronically ill people or homeless types who could live for quite a long time and with proper care could be fairly happy will wind up dead because in Britain and Canada we don’t help them enough: to get enough housing, food, help and pain meds (given the way we’re so scared of opiates.)

Wikipedia lists some known cases of abuse of the law:

  • In 2017, a mother of a young woman with cerebral palsy was told by a doctor that not applying for MAID was “selfish”. Her daughter was in the room when the conversation took place and described the experience as traumatic.[71]
  • In 2018, Roger Foley was being treated for cerebellar ataxia at an Ontario hospital. Foley alleged that his only options were to be forcibly discharged from the hospital and then treated by an organization that had previously failed to provide him adequate care or apply for MAID. Foley hired a lawyer for a charter challenge.[72]
  • In 2019, Alan Nichols successfully applied for MAID while being hospitalized for suicide ideation. The reason given on his application was hearing loss.[1]
  • In September 2021, Rosina Kamis, a 41-year-old Malaysian woman, applied for MAID citing fibromyalgia as the reason. However, in conversations and recordings shared with friends, she mentioned financial hardship and social isolation as additional factors influencing her decision.[73]
  • In February 2022, an anonymous Torontonian suffering from extreme chemical sensitivity syndrome with the pseudonym Sophia had a medically assisted death after failing to find affordable housing that was free from tobacco smoke and other chemicals.[74] This case was addressed by her health care provider in testimony provided to the Special Joint Committee on MAID, and was referenced in their final report.[75]

One can safely assume there are many, many more. The fact is that even doctors and social workers think some lives are worth more than others. No one who’s spent time in the medical system believes otherwise.

The West is in decline. Our elites are wedded to austerity as a “solution”. They often, probably usually, feel that people who are non-productive are useless eaters and a burden on the state.

That combination is going to lead to a truly vast expansion of measures intended to get people off benefit rolls.

In a way assisted suicide, or euthanasia, is the most honest of those policies and maybe even the most merciful. There’s nothing honest about deliberate policies which make people homeless, leading to most of their deaths, after all. Politicians know that winding up on the street long term is essentially a death sentence, they know that policies like mass immigration without increasing the housing supply to match will cause homelessness, so they know their policies cause homelessness and death but they can pretend it’s an unintended side effect.

Just killing people is at least not hypocritical.

***

Close to the end of the annual fundraiser, which has been weaker than normal despite increased traffic. Given how much I write about the economy, I understand, but if you can afford it and value my writing, I’d appreciate it if you subscribe or donate.

What Is A Communist?

By

On November 11, 2024

Comments

One annoying tendency in modern political discourse is right wingers and centrists calling people communist.

They don’t know what the word means.

A communist believes that the means of production should be owned and controlled by the proletariat: the workers.

If you don’t believe this, you aren’t a communist. Wanting universal healthcare doesn’t mean you’re a communist unless you think the health workers themselves (or, just perhaps, the party or government) should control the healthcare providers.

Wanting universal healthcare, in the modern context, makes you a socialist.

Now there’s a lot of argument around what it means for the proletariat to control the means of production. If the “Party” controls it, like in the USSR or pre-Deng China, is that communism, or is it just old fashioned government authoritarianism?

Is modern China communist? About half the economy isn’t controlled by the Party, and worker co-ops are minor players. There’s clearly a capitalist class controlling vast amounts of the means of production, though government is very willing to intervene. The Chinese Communist party says this is still communism but that seems like a stretch to me. The same is true in Vietnam: the Communist party is in charge, but the economy isn’t communist.

Note that you could have a market economy which IS communist. If workers co-ops or something similar control most of the organizations, that would be communism, and it’s something that a lot of intellectuals in America and Europe during the 50s pushed for: a sort of “best of both worlds.”

Centralized control economies like the USSR, from this point of view can’t really be communist, because the workers aren’t really controlling capital.

For myself, I’d say moving away from stock companies and towards a mix of worker owned organizations and perhaps mutual companies (or mixed versions) would be the best way to move towards something that might both be communist and workable, allowing the dynamism of the market.

Generally speaking my time in the workforce convinced me that upper management is usually clueless because they don’t do the job and haven’t done it in ages. You have to be on the front lines to have some idea what the issues actually are.

Communism is worker control of capital, and nothing else. We’ve never really tried it.

It’s The Economy, Stupid (AKA Economists)

By

On November 6, 2024

Comments

Over ninety-nine percent of economists did not predict the 2008 financial crisis.

The vast majority of economists were pro-globalization, by which I mean pro offshoring and outsourcing. They said it would be good for America, they were wrong.

China is predicted to wind up with over 50% of the world’s industry by 2030. Forget all the bullshit about great power competition. It’s over. There may be a war, but if there is one the West will either lose or the world will be destroyed in a nuclear exchange.

Back in the 90s an economist called Brockway liked to say “Economists are bad for your health.”

(If you like the writing here, well, support it if you can. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. Please Subscribe or Donate.)

Let’s bring this back to the election. I thought that abortion would be the election defining issue. Stupid of me, though abortion was and only four percent behind inflation. It was inflation, which given how much I write about it, I should have expected. Two tables from the CNN exit polls:

Abortion was the second most important issue. Inflation was , and people who voted for pro-abortion measures voted about 9% less for Harris.

Economists meanwhile keep talking about the : the idea that there is no recession, people just think there is.

Economists, as usual, are full of shit. They have a professional dependence on official statistics and refuse to realize that many of them don’t reflect reality. As I have written in the past, according to official inflation statistics the price of cards did not rise between 2000 and 2020. In another case, you will be happy to know that medical service costs are going down. Hedonic adjustments are completely out of control: prices are dropping, you see, because products are so much better now. (There are other finangles, this is the main one.)

Growth numbers are based entirely on nominal growth minus the inflation rate, as are real wage numbers.

I would bet that the US economy has been contracting since 2008, but since inflation is understated, it isn’t visible.

I would also bet that median welfare for Americans has been declining since somewhere between 1968 and 1979, though average might have been increasing till 2008 because of how much money was being shoveled to the rich and wealthy.

We live in a pretend world, and economists are the chief pretenders, the sycophants telling the Emperor how wonderful his new clothes are.

To riff on Galbraith, economists exist to make astrologers look good.

Economics, as a discipline, should be wiped from the face of the Earth. The less than 1% of economists who aren’t charlatans or fools are not enough to justify the harm economists do, which exceeds even that of MBAs.

Harris lost because of the insistence of Democrats that the economy was good, inflation was fine, and that voters were too stupid to read their own grocery bills. Because of this belief Harris said she wouldn’t have done anything different than Biden did. What she needed to do was get out there and say she was going to drive down prices, especially rent and groceries.

As for Trump, we’ll talk more about the effects of his economic plans, if instituted, later.

Page 2 of 90

Previous

Next

Powered by WordPress & Theme by Anders Norén