Piketty’s new book “Capital in the 21st Century” is all the rage amongst an economic world that rarely mentions inequality, let alone read something on it. This acceptance into such a diverse political terrain is a sign that we could be at the dawn of a new era politically, economically, socially, environmentally and technologically or so the causal chain goes. (This is not quite what the post-modernists had in mind- but potentially modernity reborn and rebuilt?) In many parts of Canada there has been little recovery since the great recession, instead a slow decline and stagnation for most workers and their families. Similar to other times in history of economic depression that have lasted this long- the political space has changed and political parties have transformed. The right has essentially transformed into the radical right led by the likes of Harper and his collaborators such as Hudak. The centering Liberals are hard to pin down- traditionally wavering to popular appeal. The NDP under Jack Layton has found a direction and the heading under the leadership of Mulcair is being crafted. Given these openings and the potential for change this is an opportune time for progressives in Canada to further develop and extend a progressive functional economic plan. With the decline of the economy, frustrations mount amongst the population making new ideas more easily transmitted and embedded. A potential unlike any other we have witnessed since the post war era of the forties. Ideas that can carve out new political space that propose solutions to these economic impasses. However to achieve such objectives, ideas, vision and leadership are needed. We need to think about change and innovation, but we must also stay connected and centered on the past foundations. There is the reality of a globalized economic world, however the popularity surrounding the Piketty book opens up some new potential. Progressives have choices to make- and much work needs to be done. In that process- the following guide was developed to help those contemplate building of a new economy based on progressive principles.
An interesting dichotomy set itself upon me today and I think it is a good point to start this guide to building a progressive economy in Canada. Today I read an article on the cost of razing parts of Detroit- large parts of the city have been abandoned, de-industrialization has been hollowing out the auto sector, off-shoring, mechanization, and foreign competition have witnessed the decline of the big three Detroit automakers. Together, with the great recession and the housing meltdown, these forces have taken a destructive toll on the people of Detroit. Recall that not even fifty years ago, Detroit was the pride of Capitalism- basking in profits for the wealthy, the center of the automobile world, filled with hundreds of thousands of workers making middle class pay. A rising living standard based on an egg shape distribution to wealth rather than the hour glass of today.Tax rates on the wealthy and the corporations were substantially higher and the collective good was paid for by all. Contrast it to Detroit today-with its population in serious decline it will have to pay over $1 billion dollars to raze large parts of its abandoned city. In fact in those abandoned parts of the city, one of the dangers lurking are hordes of wild dogs who number in the thousands. With cut backs there are no dog catchers or humane societies to keep the wild dog population in check and they have multiplied and become a real danger in those areas. Yet in this article the debate within the media was about how many jobs razing the city would create!!!
Reading about Detroit brought the contrast to the study of China I have been performing for over a year now, focusing on parts of its economy, history and workers.
China is undergoing a massive transformation- most likely the biggest in all its very long history. It has become the world manufacturing center and with that a massive level of economic development has been ongoing in China for the last two decades. At first experimenting with markets forces- (letting corporations make the rules of exchange) then having some level of success they expanded these market forces and now have allocated almost half of the economy to corporate control somewhat beyond the State Owned Enterprises (SOE) – the boundaries of power relations are still somewhat blurry. However, there has been some transfer of economic decision making outside of the party and its SOEs.
China is embarking on a new form of capitalism- a state centered command capitalism. Its development has been very questionably uneven and unequal on many fronts. The results are undeniable- as it has been pulling hundreds of millions out of a traditional rural economic culture into a much different apparently wealthier mass production based economy. It is new in some ways but very old in others- surely not one that I would dare claim worker friendly as it was mainly built on the backs of 400 million workers who migrate from the 800 million rural folk- trying to supplement their family income back in their rural homes by working in the urban centers for questionable wages and working conditions for many. But a new burgeoning middle class of 300 million has been built and many new cities in China have grew from this massive economic development. The built form of the landscape reflects this sudden massive surge where long historical tradition is plowed under to make way for new skyscrapers. Take the pearl river delta north of Hong Kong. Just 20 or so years ago, a small fishing village of Shenzhen has a population in the thousand. Today, 20 some years later it has become the heart of the global electronics industry. It is a world leader in manufacturing, and now making headway in design and automation. This small fishing village has grown to a mega city with a population of more than 10 million- with several adjoining cities of similar size. It is uncanny. And of course these new journeys of wealth under a mix of capital and state direction discover new and old challenges of social cohesion, environmental degradation, and social injustice. China still is considered a developing country and there is no doubt about its extremes in wealth- a whole lot of extreme poverty and now a middle class to go along with those inside the Party.
The comparison and contrast between these two countries is amazing- very similar yet also different in key areas from leadership down to the shop floor. Change and at different points in historical processes and space. So many people making it and so many people left behind.
I am not flag waving here for China- in fact far from it, as my point- China is struggling and so to is the USA. They have both taken different paths to development- but ultimately they seem to be leading into the same space. A plutocracy leading both countries- and a political ideology filled with more propaganda than truth all to engage the necessary social cohesion to produce value and surplus. The question for progressives- how can we change such outcomes as we see with China and USA – which both started at extreme ends of the political and economic spectrum and now both seem to be meeting in the middle of political and economic power. How does one build a foundation of theory and develop a vision for a future social and economic when both systems have come forward and failed to deliver some of the most basic ideals that founded their history and culture upon.
Where will the practical ideas on progressive visions for Canada come from and where will they lead us.
For me a functional approach to economics is the starting point of this debate. Many countries are embarking on questioning the future of their economic base, as the global recession still has a hold on many economies. Some countries are being proactive- some are content with the status quo and- some are being driven to them. At the core of most failing economies in this great recessionary period and its stagnation, is the question of declining demand. It was the central thesis of the Keynesian economics solve the demand problems and one will have taken a large step in sorting out the rest of the economy.
Keysian economics when compared to other economic attempts at organizing capital and labour was moderately successful. At least temporarily, as it climbed the developed worlds summits after the second world war to the pinnacle of the commanding heights. And had a glimpse. It was a point in economic development unlike any other in our modern history under capitalism. Wealth and power were redistributed, not equally shared- but the state was much more independent and somewhat empowered with the ability to tax and spend. Workers had stronger representation in unions, and through the machination of the state. social security was on the rise for all. It was a heady time- still filled with many problems but at least wealth and power were starting to be shared- and in many cases it was through collective action and state regulatory actions that power and corporate interests were somewhat contained.
So as Piketty suggests or maybe he is asking- do we go back to seeking that compromise in the form of a new deal like strategy and try it all again. Some on the left have questioned the logic on that strategy- as many point to the issue that the ink was not even dry as the wealthy and the corporations signed onto the new deal-of the Keynesian compromise- and they fought behind the scenes to dismantle it. It took them 30 some years to the mid-70’s to destroy Keynesian economics- and maybe it imploded a bit itself but ultimately they had the power to destroy it. Therefore some economists ask why rewind history and recreate conditions for similar outcomes. It is a good question that many are starting to ask Piketty followers.
In practical terms what can progressives do- to follow up on a platform for functional progressive change. I only intend to outline some ideas below- they are not dealing with the entire transformation of the political- but mainly focus on some economic possibilities and realities of a global connected economy inside a politically empowered state and an effectively enhanced worker voice.
If we can convince capital to come out of the financial markets, the low wage value adding strategies of off shoring to China, the deep US south and Mexico, then we could will see some change. The good news is with the Piketty fascination comes a sign that we are starting to see at least a small question mark on the neo-conservative economic reality and vision of today. To me that means behind the scenes there must be some real trouble brewing.
So here is a partial and incomplete listing that I will be expanding as we move forward in time. I am hoping it helps frame some ideas for left progressive. I have to come clean- nothing here is revolutionary and nothing here is something that you have not probably heard before. However- it is my attempt at fitting many ideas together to start exploring them further.
1)wealth creation and investment- we need a financial system that builds value from a future that is sustainable and equality based. Not the current destructive machinations from the global financial markets and derivative vehicles of speculative bubble based at the center of ones economy. We have had our dot.com bubble, our housing bubbles and these are not a sustainable nor a value creating approach to building an economy that will survive the challenges of present and future. All the dead money we speak about is actually caught up in short term investment vehicles, interest rate swaps, repos of varying lengths and types, and also credit default swap. The stock market in the traditional sense is merely the type of the derivative iceberg. Re-regulating finance is not enough we need to ensure the state is empowered enough to press for substantive change. We need a new SEC, we need to reduce tax haven, ensure our banking system has more of the public interest than profit motives in mind. With Canadian banks increasingly involved in these global markets we must ensure liquidity rates for banks and leverage ratios are sustainable. We need more information on the operations of the CMHC, and its relationships with the banks. We have been impacted greatly by the US financial meltdown both directly and indirectly.
2) We need to transform the energy sector- the carbon bubble is building- and most fossil fuel assets are currently being environmentally challenged by first nations leaders and the global environmental movement, especially the tar sands, coal and oil. These energy extraction assets will be faced with a growing global push back and divestment pressure. It is at best a very short term base to our economy that is clearly not something any developed economy of the future will continue to rely upon as a core economic base. Resources are a gift that we have in this quite physically large and geographically diverse country. However- we must also be a caretaker first and extractor second we need to slow the rate of extraction and eventually transform to alternative energy. Economically, our country’s vast resources enable us to deliver onto the world just about any mineral, wood, or energy product we desire and plenty of food crops as well. The future success of the nation as in the past and present with the auto sector- relies on value adding to these resources. We need to get away from our staples economy past. We need to leverage these resources to allow the country to become a leader amongst the most developed economies in the world by producing outputs higher up in the increasingly global value chain. The world needs us to serve in a leadership role in this complex world – not more pillaging and destruction of the land and people. Resource extraction is something any country can do- but what one does with those resources separates standards of living. We are falling fast back down the staples economy trap- becoming more and more a source for resource exploitation- governed by those who would prefer to allow foreign corporations to lower tax rates and relax environmental standards to basically take our resources, destroy our natural environment and value add back in home countries.
3) We need to engage the future now, of a production process that is undergoin the most massive changes since the industrial revolution. The digital economy- will accelerate the amount information and transcend its current capacity to will become just as important as capital and labour as an input into the traditional production process. It has been growing for 20 years and still maturing, but lately with the focus on big data and smarter machine learning these forces will continue both in terms of an increase in productivity through diversifying the abstract production of value and also the direct more concrete aspects of value adding. The globalized production process with it’s lower wages of manual production will continue to prove to be a disincentive to innovate into these processes, but eventually productivity combined with workers who can work with this data and these new machines will over come the low wage strategy that other countries compete on. There will be smart automation that takes the worker as a cost to be minimized. However the more successful designs in this process of integrating this information into the production process that is worker centric and not machine centric. We will have a shift away from the black box approach to smarter machines, and there will be a race to see who can capture this production process and its large gains to productive outputs. From robotics, to AI, to building and integrating this information into all aspects of production- the information revolution is real. It will take a lot more time to mature and Big Data is just another step in this longer term process. As big data is the first realization that informating the digital world actually produced massive amounts of data, and inside that data there is a new found value that will allow machines and workers to act in the value adding process in ways and means that will be compared to that which history refers to the invention of the steam engine. We are still only a couple of decades into the digital economy- and its transformations of the traditional economy- within this 20 – 30 year space have been all encompassing.
4) We need to ensure rewards and safety nets are at levels that allow people and families to gain access and participation in the middle class. Providing a good job is part of that-and allowing workers to unionize and a right to collective representation empowers workers and their union representatives to builds good jobs. It is increasingly more difficult within the globalized economy to ensure good jobs are protected and grow. Much of the job growth over the past years has been in low waged- lower value adding jobs. Investment capital is more portable- service and products can now be designed, produced and sold in many regions of the world. This allows companies an upper hand to whipsaw workers from many countries in a race to the bottom. However it does not have to be that way. Investment needs workers and it needs infrastructure. Both of which Canada has comparative advantages in. For a small open economy such as Canada’s with its massive geographic that sits on the border of the wealthiest country in the world- we have a lot of unrealized potential. The goal must be to build a high wage, high productivity economy that we can build a more equality based society. It will take skillsets for the new value chain that will be demanded of a modern successful economy. Information and application of these new tools will be necessary. Education, training infrastructure and a cultural process to support such efforts are the new causal forces behind enabling the ecosystem of a highly innovative sustainable economy. We have a highly trained workforce now- with a good foundation to adapt and change as the technology and organizational inputs will demand such skills, experience and worker and management expertise. This will focus on all levels of value adding.
5) Public sector plays a massive role in building all the above- and also ensure the middle class and access to the middle class are healthy, one way, regenerative and robust. Education, healthcare, transportation and urban infrastructure, telecommunication are keys to building social cohesion and labour and capital productivity to increase standards of living. We need to ensure those workers that fall outside the higher productivity wage gains- are included in this growth and increasing wealth. We need to have higher minimums in terms of wages and benefits and more effective social policy to ensure gains are shared across all occupations. When labour markets fail we need a new set of social protections to come into place- whether they be guaranteed income floor, a whole new training culture for all, or a reduced working time for the same pay- many options need to be considered and regulated by the state. However these cannot just be regulated, they must become a part of the cultural process- where society never gives up and casts anybody out of opportunities and achievements.
6) The green revolution- what is there to say- green energy, conservation and a focus on accepting the externalities that the current system takes for granted in its cost equations need a rebuilding. We will need a lot of innovation and change in this space- the good news is, we have a whole lot of spare capacity in employment and investment to take this on. A lot of technology already ready and waiting to take this on- can markets do with effectively or will this be a public good effort. Market have failed so far to penetrate the solution space. There are a lot of good best practices and some quite astounding projects out there, but still have a long way to go to meet the challenges of these necessities for sustainability. It seems like energy conversion is the new focus. Profits are what the markets look for- however- will this ever be something the state can transform successfully in such a manner.
7) Diversity and inclusiveness- women, racialized workers, disabled, and other minorities entering within the workforce require equal opportunity and access to work, training, education, healthcare and other benefits that a equality focused society strives to fulfill.
8) First nations- our history books are still based on many lies- can we start with at least affordable food! See my food price study on the link above for the north.
9) Social safety nets and the great society restored-rebuilding a social security system goping backward to get ahead- with growth in jobs and taxation- the much starved social programs over the past 30 years, can be rebuilt and updated to reflect current needs. From training, and education needs, unemployment protection, pensions, child care, regional equalization- so much can be accomplished by building a more equal, and productive society.
One thing for sure a Hudak win on June the 12th will accelerate Ontario and the rest of Canada on it’s trajectory to an actually existing Detroit.
The above graphic is what comes out of a text mining algorithm when one feeds in Hudak’s Million Job Plan that he is basing a lot of his Tory campaign promises upon. Reading through the plan not a lot of detail is evident, plenty of large pictures of people who seem to be working in offices and one picture of a Heinz plant. So given the lack of conscious evidence in his economic plan to create 1 million jobs, I thought potentially his handlers may be using subconscious techniques to communicate how such an amazing amount of jobs could be created.So I ran this Million Job plan through one of the latest text mining analysis algorithms to see if one can synthesize any core logic.
Recall that even in the headiest days of Ontario’s past, when our economy was booming- we could barely create one million jobs over an eight year period. Given I have been a labour economist for 20 years, I started thinking potentially I am missing some new logic in job creation strategies within the economic development literature, potentially the Tories have been hunkered down in their large underground economic labs and have designed some brand new policies that will shock and awe the global economy. Ontario’s economy and especially it’s labour market has yet to recover from the great recession in 2008 and nowhere in the world, save for China are we seeing economic growth rates that could match the job creation promises that Hudak is making to Ontario Voters. The question for Ontario- can you trust the fragility of the economy and our current jobs with such people who make such massive economic promises- yet produce such awkward economic plans with such disregard for detail, and flimsiness in ideas and intelligence?
So what can the outputs of the text analysis tell us. As you can see from the word cloud above, which sizes the words based upon count and somewhat on relations to one another a series of words have a high priority. From the word cloud health care, jobs, action, better jobs, economy, education and plan are all the most prevalent words in the Corpus. The data widget below allows one to browse through the list of words used in the Million Jobs plan posted on the Hudak website, so go ahead and have a look.
For a Jobs Plan that is supposed to create 1 million jobs- oddly enough, the term “health care” is the number one word in the derived corpus. In fact health care is mentioned more often than the word “jobs”. So one could potentially presume, given the focus on health care, the tories will grow their million jobs plan by a massive expansion of the health care system. Well that is actually not a bad idea- but that is not anywhere outlined or a focus. In fact there does not seem to be any focus within the document.
Another aspect of text mining that can be as informative as high word counts and sentiment analysis, is low word counts within a document. Typically within the economic development and jobs creation field words and ideas focus on Investment, innovation, skills, training, technology development, efficiency, productivity, but as one can deduce from the word corpus, these words are sparsely mentioned.
There are some other very glaring omissions in this document which undoubtedly cast a long shadow over the truisms behind the document, for example the word “women” is used just once within the document. Can you imagine, a massive job creation program where we know that in order to fulfill such promises, a lot of job creation would center on women, yet the word “women” is mentioned only once.
Also topping the list of infrequent words are “society”- used once. Also “union”, or “unions”, again only used once. It is pretty obvious that labour unions will not be part of any plan to create one million jobs, or potentially that will be one method, Hudak will elevate his obnoxious attacks on labour unions and working people.
We do know that he promises to fire over 100,000 public sector workers so I am sure that will involve a whole lot of attack on unions within the public sector and also women as it is within the public sector that women have made great strides in securing better wages and working conditions.
Textual analysis aside, Ontario faces a huge decision with the next election. We have never seen the economy, stuck in such decline and then stagnation over so long a period. Our manufacturing base has been in decline for almost a decade as the rise of the petro dollar pushed the cost of doing business above the longer term valuation of the dollar in terms of Purchasing Power Parity. Since the great recession, we have not had one year of healthy economic growth. And we still have many areas of the labour market stuck in recessionary areas, for example the long term unemployed are still near recessionary highs, part- time workers wanting full-time work and other underemployment aspects are still very close to recessionary highs, youth unemployment is painfully elevated and, low wage occupations are still among the highest in terms of job growth- (see CCPA Ontario Economic Report spring of 2013).
So what is it that must be accomplished to create jobs in the numbers that Hudak is promising. First and foremost, we would need to see a rise in family income. Consumers and their spending make up nearly 70% of the economic activity in Ontario. If one looks into the major causal economic forces that have large affect on household income, we can see that many of these are at some quite serious turning points.
1) Declining unionization rates in the private sector mainly due to economic restructuring and manufacturing job loss has resulted in stagnant wages in the private sector as verified by several studies. So as we shift from good jobs to more precarious jobs we will see more pressure to ratchet down wages and benefits or risk capital flight given the high dollar and the lack of innovation within the economy. Manufacturing and export growth are the backbone of the Ontario economy- and a good portion of that is linked to the auto sector. We know that investment is critical to modernize and expand production capacity here in Ontario. This is of course reliant on the US economy which is the largest market for our exports in Ontario. The challenge over the past several years has been the petro fueled dollar has place many manufacturers at a cost disadvantage due to the valuation of the dollar being hijacked by the petroleum industry rather than longer term processes like the Purchasing Power Parity of the economy. There have been several key major investments by the big three auto makers that have bypassed Ontario recently and went to US and Mexican locations. The Ontario government has to ensure we have a continuing healthy portion of the auto sector.
2) Low interest rates backed by more lenient lending terms have produced a consumer debt spending spree. As the housing bubble inflated over the past few years it has enabled a quick build up in home owner equity which has augmented work based income, and has created a debt fueled consumption explosion unlike any we have witnessed. As worker incomes have stagnated or declined home equity has piled up for those lucky enough to own a home and much of this build up in assets valuation has been extracted to keep the shortfalls in wages from impacting the consumption required to keep the economy rolling along. This is not sustainable as Canadian consumer debt levels hit some all time highs and many bankers, economic analysts have been warning policy makers. The fallout of from this housing bubble as a source of income is mainly premised on the rising real estate markets- the question right now for serious policy makers is not can we keep this housing bubble going, but can it be managed and slowly deflated rather than burst- as the fallout from a housing bubble bust was quite painful to our neighbour to the south. Obviously with the recent gains in real estate markets the banks are still lending- but for how long?? This has the potential to drive the entire Canadian economy into recession.
3) Government austerity- as we all know public services and government transfers are what keep a middle class robust and those at the lower end some help – yet after 30 years of neo-liberal cuts and now the austerity set in motion by the great recession and the tax cuts by recent right wing governments- the benefits of public sector services and income supports to the middle class have been in decline. Mainly due to tax cuts and focusing on deficit cutting and debt. This has actually resulted in lowering household income over the longer term through increasing costs of providing many of these former publicly provided services with private consumption and also the decreasing public transfers to every household reduced household income. An additional cost in the medium and longer term is the impact on households as reduced government investment into new schools, affordable education, highways and other public infrastructure produce social welfare loses as many public institutions struggle with lower budgets and less revenue. Basically by cutting away public services, through a series of tax cutting Tory policies initiated by the Harris government that allowed consumers to spend more on private consumption- we have basically been trading off new schools, education and better healthcare for new cars and bigger TVs. Not a healthy trade off when one is striving to meet the demands of building a high wage\ high innovation\high production economy. Standards of living rely on these social outcomes.
4) Demographics and aging- we obviously have more and more household incomes that will decline as people move into retirement. It was estimated recently that nearly 60% of retirees have no pension plan other than the CPP. So we will see a drop again in income, however as evidenced by recent labour market reports, seniors re-entering the waged workforce have been rising at almost double the normal rate- but at some age many of these elder workers will no longer have the ability to work and supplement their income.
5) A 30 year trend of increasing female participation rates in the waged economy has been what helped in a good part to keep household income robust and growing as wages for male workers fell and or jobs were lost. However we have now started reaching “peak women employment” which has many implications, as we have become so accustomed to more women entering the waged workforce. (see my website of a statistical analysis). So as women between the ages of 25 and 54 have reached an employment rate of nearly 77% and has flat lined for six years for the first time in 30 years- the added income from these women workers in the waged labour force will no longer have the impact on increasing household income.
So any plan that focuses on creating a million jobs, must focus on increasing household income in Ontario- yet if you look into the plan put forward by Hudak- much of what he outlines actually attacks household income- and if anything- his plan could actually push Ontario- which is in a very precarious economic position- into a recession. Instead of creating 1 million jobs- we could see the reverse and see Ontario decline into the economic backwaters of low wage, non-union, low productivity economic base located somewhere between the deep south States in US and the Mexican Border.
There is a stir in the hopelessness of mainstream economics and politics, a spector rising(?) and in quite visible hands at the center of that stir is a book – again called Capital- but this time by an author called Thomas Piketty- a French Economist who studies inequality and has published plenty on the subject.
In a recent book he authored called Capital in the 21st Century it somehow of all places seems to have created an unusual ground swell in the USA. In fact I am sure the whack- a- mole response will soon be out in mainstream media as the book slowly meanders through the pathways of the press- Krugman gave it a nod,the New Yorker gave it a review- and now some others seem to see some merit. If it dare take root and grow, it might just be the start of something worthwhile.
So here on LivingWork.ca I am launching the official Picketty watch- here is a Google Trend to monitor the progress. It is definitely on the rise- lets hope it will sustain. Today, the launch date- saw it correlated with the following search terms: World Bank GDP, and Inflation targets. Hmmm that might be telling, and it was also trending highest in guess which state? Washington DC! New York was second. This will be updated in real time- but I will also be providing weekly updates from Google Correlate (click here to see what states are searching for Piketty and what search terms he is correlated with). The revolution is indeed just a T-Shirt away- now I just got to get one!
And here for Doug Henwood from the Left Business Observer in the US, a listing of searches for Piketty over time by State. And below is a listing of searches for Freakonomics. The timeline for Freakonomics is a lot longer, but if one slides the dates back a bit on freakonomics to its first few months in publication, I would say it had a similar geographic pattern. Currently Piketty does not have enough time under his belt to do a proper comparisn, but it seems like Washington DC has more of an interest than the East coast.
And Here is the google dirt on Levitt’s popular book “Freakonomics” which for some reason my older brother bought for me for my 40th birthday- nine years ago- he is an engineer and would not read an economics book if I force fed it to him. So I have a better question for Doug is Picketty’s book the new book for brothers to get their economist brother for their 40th birthday. I wonder what I will get next year for my 50th? I will update the list.
My review of Piketty’s book-
I hate to be negative as the book has a powerful message and it will do some good. It’s central focus on Income distribution as capital’s failing – is a great effort at explaining the flows and stock of wealth. However, given the reality of the actually existing capitalism we are living through- Piketty’s thesis is not capitals’ most critical flaw and therefore proves to be problematic on some fronts. Capitals central flaw is profit as it is constructed and socially defined by the big hammers of the social and cultural powers of economic wealth- which he only touches upon. If profit was forced to include all the externalities of capital’s destructive nature- there would be no profit to extract and hence never enough investment to keep the circuits flowing and the wealth piling up at the one end. (and that does not include the current debt explosion that has overtaken consumers and governments)
So the wealthy and their powers create this numerical accounting that allows profits to be defined with the current concretization. Piketty does a good job of linking the wealth and their cultural control, but does fail to clearly delineate how this wealth is created as much of the risk and the destruction of the living and dead labour, and the land is missing in the modern equations of profit.
The key to change is we need to have a proper accounting for profit and how value is created- it is not the wealth inequality that Marx foretold that destroys capital (although that is a trip wire along the pathway) it is the definition of profit and the accounting that we allow the regime of wealth to culturally control. The inequality and its instability could lead to a rationalizing of the irrational when it comes to profit and the current notions of value- but that is only an accelerator in starting a fire. However potentially that is his goal- to be a fire-starter- and making a point with the wealthy in this space- given the historical lens- does have an impact. But one does wonder- will change ever be forced from the current hands of the global wealth with such tactics? Even two world wars did little to alleviate much in the way of power sharing – the great post war era of 30 years or as we call it here in North America- the golden years of capital mentioned by Piketty- was just a temporary deal to share a bit of power and wealth to make more profit during the rebuilding phase of the post war era. So call me a deterministic fatalist- but at least I am being realistic!
On a more optimistic note, essentially this all could be cleared up with a proper statistical program and information that penetrates deep into the core of the machinations of profit and building of value. Sadly much of the truth telling machinery needed to measure and collect this information- is not available and will never be built- not with the current power in place. Information is indeed all powerful. The technology is here- and the informating ability is also here, and look big data is also starting to make a move to bring it all together.
But a true accounting is far far over the rainbow as it would take new information- and the will to informate, collect, collate, disseminate, educate, analyze, regulate and plan the scarcity we face and the sustainability we need. Yes plan- the varieties of capitalism are planning massively now to extract as much wealth from the system as it exists now- ( what do you think High frequency trading does- plans to avoid risk by controlling markets through super computing and information processing- designed by thousands of mathematical wizards who push and pull around $640 trillion worth of derivative vehicles as estimated by the bank of international settlements up from the $400 trillion prior to the financial crisis- if that is not planning to be too massive to fail I am not sure what is) then why can progressive change not bring forward a new version of a planning regime- one that defines profit and value with a much different perspective- one that indeed engages the information age with every megabyte of information possible to unleash a combination of the smarter machines, and the smarter workers to engage the future and its possibilities of sustainability and more sharing of the wealth.
So my assessment of Piketty- not quite spot on- but it does evoke the symbolism of guillotines of a time in the not so distant past in France and anything that scares the rich- is good during these times where given the gifts humanity has – so much more could be done- but it takes the tribe’s surplus resources to do that- and they are in the hands of the few.
New Explorations into the Canadian Workforce
As part of a larger research project being coordinated by the Canadian Center for Policy Alternatives, entitled Working Across Canada, I have been volunteering my time researching various dimensions of labour markets in Canada with the intention of creating a new measure to evaluate the nature of employment quality- or as some call it at the International Labour Organization and elsewhere – a Good Jobs Index (I am not sure what to call it). As I work through this project I thought it would be constructive to write up some of the more interesting findings that are uncovered along the way. I also thought it might be constructive to evaluate some new web based software that allow users to interact and explore data in which was loaded up for this project. This interactive aspect will hopefully allow readers a chance to dig deeper into the research and explore the data, slicing, dicing, rolling up and segmenting with ease and adventure. Just click on the included link below to interact with the data chart. (you can use the software online CLICK HERE, or you can download the reader here and use it offline.) Mainly I want to bring light to some of the data artifacts that are uncovered and try and fit some reasoning and limited analysis to the facts.
Part 1- The Limits of Women’s Work or Did Women just lose 400,000 Jobs- The Great Recession and Employment Rates in Canada
Employment, or having access to a means of the production is the key to a person’s survival and well-being within a market based economy. For women in many developed nations, the past thirty years have served as an unprecedented period of entry into the waged workforce of the formal economy. It has been heralded by some as the great exodus out of the chains of the informal economy into the “freedom” of the waged workforce- as one artist famously put it in the ‘70s, moving away from “being a slave of a slave”.
Examining chart 1 and comparing the employment rate of women over the past thirty years verifies that this transformation has been ongoing in a substantive and hurried process. Only briefly interrupted by two recessions the upwards rate of women workers into the formal economy marched steadily onward from less than 50% in the 70’s to an employment rate that has women workers now approaching that of men. After nearly thirty years of steady and consistent employment rate growth, the great recession of 2008 ravaged the economy and the velocity of change in women employment rates for prime age women aged 25-54, came to a very sudden halt. Upon hitting the employment wall- the rate has stalled for the last 6 years at a historic (non-war time) high of 77%. These past six years of stagnation has been the longest period of non- growth in the employment rate of women in more than 30 years. As we move through this unprecedented period, the question must be asked- are we witnessing a historical maximum for women’s employment in the Canadian workforce? Have we reached an upper bound of women workers in waged work?
If we are not at this upper bound, then much of what has been written about the great recession has to be rewritten as the pundits have forgot to mention the 400,000 plus jobs that women have lost during this period. Indeed if one is to run the trend for women workers using the employment rate and its robust growth rate over the past 15 years, then we can estimate with econometric forecasting that women have lost over 400,000 jobs during the past 6 years of stagnation. (See graph and calculations using an additive model of exponential smoothing to forecast an average expected Women’s Employment Rate of 83% which equate to roughly 400,000 jobs in 2014) Suddenly the great recession seems much more traumatic for women and turns the popular notion of a “he-session” coined by media depicting this great recession as being more difficult for men- on its head. (to explore this data visually click here)
The debate of who lost more, is of course a loaded question chalk full of the political dimensions of bias and would simply result in the divide and conquer mentality. So rather than focus on a gender divisive debate, given the numbers, one can conclude both genders have suffered greatly but differently. As can be seen in chart 1 women’s employment rate has been growing at a much higher rate over the past 30 years than men, as women entered into the waged workforce in droves. The employment rate for men on the other hand has slowly declined over this period in a very awkward but evidently painful recession induced jagged downward trend. Each of the three major recessions over the past thirty years has been quite painful for both genders but for men it has meant a permanent adjustment to a lack of waged work for an increasingly larger proportion of the workforce.
Starting in the 70’s the employment rate of prime aged males was averaging above 91% – then after a massive carnage of job loss in the early 80’s recession due to high interest rates and the beginning of the neo-con assault on workers, recovered to stabilize around 87% for much of the 80’s. After which the early 90’s recession took its toll and again male workers dropped off and recovered to stabilize at a lower 85% employment rate. Facing the great recession of 2008, males were hit quite suddenly with substantive jobless and they seem to have recovered ever so slightly to stabilize again at a lower rate at 83%. Obviously, given these are prime aged workers, many have to adjust to life without employment, as either discouraged workers or in some other activity (training, house husbands, return to school, early retirement). The focal point for men has been a three decade long adjustment to a lower and lower equilibrium of life without waged work.
Considering this 30 year linear climb for women, the velocity and scale of such growth over is historic and an impressive display of the market’s ability to find such space for waged workers during a neo-liberal era of uneven economic growth. Recall in retrospect that we are witnessing an almost doubling of the labour force for women in just 30 years- yet we have still maintained an unemployment rate of below ten percent (outside of the recessions and depending on how you measure unemployment). Of course as impressive as that sounds it says very little about the quality of a high proportion of jobs that were and continue to be created for women- more on that in another paper.
Since the end of the early 90’s recession, women have been entering into waged work at somewhat slower velocity then previous periods, however the acceleration is still positive and consistent up until the great recession hit in 2008 and then it flat lined. So the logic is clearly evident, we are either at a maximum of women’s grand entry into employment- or alternatively women have suffered massive loss of forgone jobs through the recession. This does not mean women actually lost all 400,0000 jobs, as in the case of men who actually did experience plenty of job loss, but it does mean that for women the pain of the recession was in terms of lost actual and potential jobs and was differently realized then men. That is women, were not hired, but most likely would have been, given the strength of the underlying historical trend in growth of women’s employment. And that loss actually does count as a dead weight loss to society given the strength of the relationship prior to the slowdown. In summary, we need to be mindful that lost opportunities must be factored into the damage the recession unleashed. Oddly enough if we look at the participation rate of women it is does not quite reflect this notion, in terms of proportion, or fluidity. As one would have expected a large increase in unemployment to match this employment flattening trend. However unemployment falls short of that which we would have expected and is only partially made up for in the pattern that was witnessed in the participation rate. So what does that mean- it means a whole lot of women workers either left the labour market in discouragement or indeed we have reached the height of women’s entry into the workforce? It is actually a very odd finding given the timing.
So what is going on?
Given the ongoing stagnation in the economy and recessionary winds it would be premature to say that women’s historical employment rate has peaked at 77%, a full five plus points below men. So that begs the question should we expect a difference between women and men employment rates? Is there some systemic discriminatory disincentive to waged work operating independently or dependently on gender to explain such a difference? One could suggest differences in job quality, pay rates, precarious work, career opportunity, and/or unwaged labour demands are all undoubtedly some factors.
You can explore the data yourself. Have a look and compare different age groups, participation rates, or other aspects of the labour force and see how these measures reacted in previous recessions. Of course the employment rate is different from that of the participation rate that is often used to measure waged workers participation into the workforce. Employment rate includes discouraged workers who fall into the numerator. Also recall that we are referring to relative increases, and as the population increases we will see more women enter into employment, but given the flatness over the past six years means that employment for women is constant with the total amount of people employed.
This is indeed a very big question and only the future holds clarity for outcomes, but if this current employment rate of 77% is to become a permanent fixture of the labour market for women and we have reached a maximum, then it will unleash some very massive changes in other areas of the labour market and society. All of which have been affected by the almost constant rate of increase in women’s commodification into the waged labour of the market, and the dynamics that are intricately woven through the fabric of society. It will mean a lot of change on many other connected issues, and will have a significant slowdown in everything from day care to food items in the grocery store. We have become so accustomed to this large ongoing change of the women into employment, that without that growth much will have to adjust to the relative stability of natural population growth.
If we are not at this point, then we must reconsider and rewrite that the recession had a massive impact on the employment loss for women workers, and rather than being the “he-cession” that many labelled this last recession- it will mean over 400,000 jobs will have been lost by women workers- as that is what the trend would have predicted.
(Note- the employment rates above are measured for prime aged workers, between the ages of 25-54. Other segments of the population are not considered, but you can explore them with the data software and compare click here. Other age groups over such long historical periods have flows out of the stock of employment that produces a greater variance due to retirement, returning to school, retraining, etc. The segment of the population aged 25-54 has the highest probability to be part of the waged workforce and therefore was used to guide the exploration process. This is not to discount the experiences of other aged workers, but simply to clarify the trends and bring more focus to a labour market in transition)
Over the past year LivingWork.ca has been actively organizing and setting up a research network to link Canadian and Chinese applied and academic researchers. The goal of the network will be to enhance the exchange of information and shared understanding of economics and labour markets issues that each country faces. The network will engage in a variety of activities including original research, translation of the latest research documentation, publication of materials that are mutually agreed upon and dissemination of information. The focus however will be to establish better communication, dialogue and exchange of ideas and experiences.
As suggested in this Radio Free Asia Video the trouble that lay ahead in China as 300 Million plus rural citizens are targeted to move to the urban is quite complicated. More to come on this endeavor.
The continuing stagnation of investment that set in during the great recession is catching up to Canadian business as innovation by Canadian companies in 2012 has fallen dramatically. Statistics Canada recently released the results of the Survey of Innovation and Business Strategy and its ominous headline indicates that Innovation in Canadian businesses has fallen off by a whopping 17 percent in 2012 to a mere 60 percent of surveyed companies indicating a level of measured innovation. This lack of investment is creating an ecosystem of reduced innovation within the value adding infrastructure of the Canadian business sector.This inevitably leads to lower productivity as more than 1 in 5 Canadian firms between 2009 and 2012 reduced their level of innovative activity. Ultimately this translates into an increasing downward pressure on standards of living for Canadians. The study reads like a dark shadow falling over the whole idea of building a higher value adding/ high wage/ high innovation economy that many developed countries are pursuing out of this great recession.
Developed countries like the USA, are highly focused on reversing the off shoring trend that was the focal point of corporate strategy for two decades, and “on-shoring”- high waged jobs back inwards is the goal. This of course will mean higher degrees of innovation, new business strategies and the like. However the results of this extensive survey suggest that Canada’s corporate leaders are not only just sitting on their hands, when it comes to investment, but the most critical area of investment into innovation is being cut back. The ongoing lack of focus on innovative investment by Canadian businesses is coming home to roost and it will mean more jobs lost, more decline and lower standards of living.
The question of where has all the investment gone has reached a crisis point for the Canadian economy and it is not for want of funds. The investment conundrum famously defined by former bank of Canada governor Carney when he coined the term “dead money” was outlined to Canada’s corporate leaders as he ridiculed them for sitting on mountains of cash. However what he failed to mention to the Canadians is much of this cash is not dead and as he full well knows, the cash sitting on corporate balance sheets is more likely financialized into off balance sheet derivative trading. It is difficult to allocate just how much of an affect the finacialization of the economy is having on corporate investment decisions, but the negative impact on the brick and mortar economy is real. This due to much of the book keeping for these assets is off balance sheet and end up in what is known as the shadow banking sector of the economy. Not many statistics are kept on this portion of the economy, and as such not much in the way of regulation exists in the globalized casino however as the Bank of International Settlement (BIS) ,makes clear on the statistical reports the amount dollars involved in derivative vehicles is estimated at over $640 trillion dollars globally. This is up dramatically from the $400 trillion that was reported by the BIS before the finanical crisis of 2008 . So the question remains, how does the economy come out of this recessionary stagnation in terms of growth and declining worker outcomes, when investment seems to be caught up in other profitable and apparently less risky assets within the financial circuits of the economy.
A few key points should be underlined from the survey that add some qualitative and quantitative into the lack of investment question.
1) Innovation as defined and measured by the survey was significantly down from the ’07-’09 in to the ’10-’12 period by over 16% to 60.1% of firms signifying some form of innovation. Broadly speaking, this slow down in terms of innovation translates into further evidence of a slow down in investment- and most likely the most vital type of investment, when considering productivity and competitiveness which in the key areas of higher value adding. This also reflects the decline of the higher innovative industries found in manufacturing and a continued expansion in lower innovative resource extraction industries.
2) Many progressive economists have praised such concepts as industrial strategy over the past several years for getting a foothold to climb out of this economic recession. One policy option that is critical in the formation of industrial strategy and is highly effective within a high value adding/high wage economy is targeted investment in the form of tax credits. In this study on Innovation, firms surveyed indicated that the most critical of all government programs to support innovation are tax credits. Despite Canada’s Mr. Flaherty’s constant ideological stance of very low tax credits and as pontificated not wanting to “pick winners and losers” (which is quite a simplistic and destructive stance) it quite obvious that businesses feel this a required policy with over half of all respondents indicating that tax credits are an important determinant of innovation. Notably this is up from 34.9 percent in the previous survey period- which is highly significant as we stagger through this elongated slump.
3) Thirdly it was quite enlightening as this survey sees through this whole notion that the Harper government has allocated a substantive amount of tax money on priming the pump on skills shortages. However businesses reported that only a mere 7% felt that government help on training was necessary for innovation and this actually fell during this period from 19%. If indeed we were suffering through a massive skills shortage that the Tories claim, than I would imagine businesses would be ranking Training a lot higher than 7%.
Wow that last point is a zinger! How can the tories stake their entire human resource strategy on the country that there is a skills shortage when only 7% of businesses feel it is an issue. I have to say this empirical evidence surely must make the tories look again at the whole skills shortage argument it is indeed the straw man.
4) Lastly this survey again debunks the claim of small business being agile, innovative and bleeding edge as Large enterprises indicated a much higher innovation rate than small business.
Some very interesting findings.
When will this survey get cancelled??
This business survey is the highly cut back- business enhanced/ worker and labour content subtracted version of the workplace and employee survey (WES- long live WES! It was a survey to trump all surveys and take policy to the eternal fountain of truth of higher productivity and worker outcomes! Now a shadow of itself and look at our economy since WES was cancelled in 2009). We can now call it the productivity survey for sure.
Welcome to my first blog post and as such I would like to dedicate this post to one of my favourite economists, Mel Watkins (right up there with Karl Polanyi, Colin Leys, and Pat Armstrong). It is difficult to encapsulate the labour process of learning and how one takes in the social construction and manifestations of the prevailing learned. Being a student of political economy for many years and attempting to engage the workings of the global economy, it was through such work and teachings of Mel Watkins that made this journey easier.
Mel’s important contributions to the Staples theory and later his work on foreign ownership and Canada’s growing reliance on foreign direct investment were of great comfort and guidance for me. It is much easier running the rapids with a skilled canoeist in the boat. Too often in other areas one finds themselves in the cold, dark, shark infested waters. The great asset of the staples theory for me is its ability to examine linkages that are demarcated by the boundary of the firm and follow the value chain of productive processes. It is an approximate extension, and necessary outline of the circuitry of capital. Recently I finished reading Capital Volume II and what I took away was a greater appreciation of the flows of capital as Marx provides a fairly detailed outline to the circuitry of capital – yet it was frozen in terms of technology. So there is plenty of work to be done to understand how this circuitry has changed over time. I found the Staple’s theory to be a start into that process. The necessity due to an increasingly complicated and diversified process of value adding- in terms of product design, division of labour, and geographical location. The Staples theory allows a simplified and focused theory to situate power relations, inputs and outputs within the totality of the production process. It indeed at first glance seems to be focused on resource extraction and inputs, but it’s actual extension into the deeper reaches of the production process allow a more synthesized perspective in the face of an increasingly complicated value chain of the production process.
It is in that fashion that one does indeed have to give Mel a lot of credit for seeing through this and providing the necessary work to bring Innis and the Staple’s theory back into the main discourse for understanding this process as globalization was beginning to make its comeback. Mel is still at it, looking into the linkages and how they actually do potentially inadvertently propagate newer technologies and industries that build up from those original industrial linkages and technologies. As Mel stated recently in a blog post-
“Following Hirschman’s insight, focus on a dialetical relationship, a shifting symbiosis, between an emerging mode of industrial capitalism and an emerging industry. Add, as it seems to me, that as the mode forms more fully, it then facilitates the emergence of other industries – the most powerful of linkages, the exemplary case of what some writers have come to call “lateral linkage.””
That is quite a deep insight into the functioning of the circuitry, and given the nature of the complexity in causality, and the lack of data to explore such causality and outcomes, it takes a real economist to interrogate such depth of analysis. This leads me in many ways, to remind myself that people such as Mel in this field of economics, reminds me of the great artist, Tom Thompson. Yes an artist- after much debate, reading, research, math, and age, I do find the study of economics and the political space it is embedded within very much an art. There is very little science in Economics, very little in the theoretical space and much less in the praxis of real life where real people need to eat, work and survive. Indeed there is math and some notions of science, but given the dimensions of power in the field and the fact that it is applied with external force for specific ends, how could these means be considered as striving for minimal subjectivity.
Consider the inputs, the process and the outputs of the current state of the field of economic study. Given the outcomes how could economics in its current form be anything but some-kind of crazy art. Indeed the current variety of capitalism is an art form based on the notion of haphazardly designed misery. As we increasingly move into the Risk Society, billions in the “developing” countries have been left out and more are continually pushed out. How could an field of study be considered a science when it ignores so much of the life world. The new equations of economics need to expand, it’s not just the sharing of the rewards, we also have sharing of the risks. Yet the “sciences” within the economics subject matter guided under the quite visible hands of the orthodoxy of neo-classsical economics and the rest of it, rarely make any space for the risks it creates. From the environmental collapse and the accelerating CO2, the instability of the economy, the lack of adequate food and security for billions, is an equation without enough parameters. But plenty of mathematical weight for the thin veneer of the shiny flashy objects of the commodity fetishism and the ego stroking keep the profits maximized and the human experience as an externalized- I am imagining that is the basis for Marx’s focus on alienation and they are more relevant than ever.
These thoughts never stray far from me and reading through Travis Fast’s dissertation on the Varieties of Capitalism reminded just how artistic the neo classical- Orthodoxy has been and will always be under the current power relations. (great work Travis)
It is precisely this space of assumed science- that prevented the Staples theory from becoming part of the orthodoxy- and that is indeed problematic- given the truth behind the prime movers of knowledge construction. There are indeed hints that Staples theory makes a splash in the main stream teachings- but typically it is cast out as some historical artifact of a bygone era. It is in fact a theory that could be applied across many developing and developed countries and is ripe for research and informating capacity.
Thinking more about the relationship between art and economics- I realize now that potentially Tom Thompson reminds me more of Mel Watkins than the reversal. One could claim that indeed Tom Thompson was an early proponent of Staples theory in his own way. One of his famous works of art entitled “The Jack Pine” has been interpreted much differently than many believe. Instead of the majestic massive Jack Pine on the shores of Canoe Lake in Algonquin park, where Thompson painted it, some have stated (and you can actually see what seems like stumps in the painting itself and the whole lone pine without a friend), it is a portrait of critical analysis, of the very few Jack Pines that remained in Algonquin park. It is well known Thompson was highly critical of the clear cutting and logging operations that were ongoing throughout the park during his stay. It was his love and the park which he treasured was being assaulted. So potentially Thompson helped out early economists like Innis form up the Staple’s theory. I like it and endorse it fully.
In Canada we are fortunate to have that great bastion of Canadian Political Economy to embrace, and guide us through the layers of the economic terrain laid down. Mel has and always will be a pillar within that space. The recent Tar sands debate within Canada is proof positive that our resources aplenty economy will necessitate its survival. The Staples theory indeed has global appeal in potential and a necessary perspective to grasp the foundations in which understand the structure of the Canadian economy. The history and future of our economy will gyrate somewhat into higher value adding but always at the base our economy will unfold like a Staples economy glove, form fitted and never getting free, sometimes feelings its fists of velvety sting and other times regional prosperity will keep us debating the merits of sharing. From the tar sands to big data and its computational high performance GPU farms cooled in the cold airs of the north- staples theory touches the lives of millions of gainfully employed workers in its boom and bust resource based flows of output through the productive circuits of capital.
Mel and a cast of several, created and built what is now defined as Canadian Political Economy- from the founding work of Innis it has grown and evolved. It is difficult to affix labels to define the makeup of Canadian Political economy but if one had to it would start with a mix of heterodox economics from the realms of Keynesian economics, Marxian economics, and the post-Keynesians. It also infuses larges amounts of sociology, history, feminist theory in a uniquely interdisciplinary mixture. Indeed Canadian Political Economy is a mongrel- but at its root, it is home grown and started with the seeds of the Innis’s Staples theory to economic development. Mix in its blend of qualitative and quantitative uniqueness and you have one very robust yet flexible base of knowledge, theory and empiricism. It is what fuels the progressive movement in Canada that helps power up the debates and greater social awareness that pervades Canadian economics and society.
Over at the Progressive Economic Blog, they have paid tribute to Mel Watkins and his work through a series of guest articles from several academics, labour economists and activists. The series of article shows just how deep the Staples theory runs, as the articles focus on applying and nurturing an understanding in a variety of fields. It has been over seven years that I have been involved with the Progressive Economics Forum through commentary and guest blogs and this tribute to Mel made possible by the collective efforts of the fine collective at the blog is another wonderful adventure into defining and breathing in this new terrain for collaboration and debate.
My recent studies in machine learning and natural language processing combined with political economy brought me to an idea to add in my own celebration of Mel’s work. Unfortunately for Mel he will have to be my lab partner in this experiment. I have combined all texts submitted to the “Staples at 50″ project that are in honour of Mel’s work. With this large file I applied some new standardized machine learning algorithms within the natural language processing field producing a word cloud. It is a bit of a simplistic approach but it tries to extract some nuances with the aim of introducing these thoughts to the social networks, twitter verse and the rest of the online world. Word clouds based upon sentiment extraction are a new tool to analyze text, and I am currently research a method to automate a process to rate and maybe create a typology of economic texts based upon the political aspects of the textual content.
For the word cloud below I added a few stop words to the algorithm as they were so over whelming or redundant. For example I excluded Canada and Canadian, which given the potential of the long run outcome of Staple’s theory- might actually be foreshadowing. I will follow this up soon with another version of a word cloud and this time using Mel’s own original article to feed into the machine learning algorithm and compare the two.