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Economy

An Economy Based On LeBron James – Forbes

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In the viral “Hastily Made Cleveland Tourism Videos” of the Great Recession era, comedian Mike Polk provided a panorama of his faded hometown. The scenes were of “crippling depression,” the opportunity to “buy a house for the price of a VCR
VCR
,” urban redevelopment looking like “a Scooby-Doo ghost town,” and the downtown perches where one could watch “poor people all wait for buses.” Hey but “at least we’re not Detroit!”

Ohio like Michigan adopted a state income tax about fifty years ago, in 1971. In so doing it sealed its fate as a charter member of the Rust Belt. As I’ve been writing lately, the states that in the 1960s and the 1970s added an income tax, including every one from New Jersey across to Illinois, turned out to be precisely coextensive with the Rust Belt that emerged and settled in for good in the 1980s.

Cleveland’s claim as the forge of the American industrial revolution is as strong as anybody’s. Rockefeller’s decision to locate in that city during the civil war sealed its fate. The founding of Standard Oil in Cleveland in 1870 comprehensively transformed the American economy for good. Here was a business that would redefine quality control, customer service, and the practice of management, let alone the accumulation and deployment of profits, creating a new level of ambition of what companies could aspire to as enterprises useful to the public. The immense economic-growth decade of the 1880s saw phenomenal expression in Cleveland, which among other innovations pioneered swell living in the suburbs.

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Old timers from Cleveland recall that as of the 1940s, the arc swinging from Buffalo around through Cleveland, including Pittsburgh, Detroit, and Chicago as well, accounted for a wildly disproportionate share of world economic production. The geographic center was Cleveland.

As of the early 1930s, Ohio had neither a sales nor an income tax. After local property taxes clocked property owners in the early years of the Great Depression, Ohio adopted a sales tax in 1933. Miami University tax professor George W. Thatcher contemplated his Ohio as of 1952 with these words:

“A study of the expenditures of the state of Ohio shows a rapid increase since 1931. Total state expenditures….amounted to a rate of increase for the state of Ohio from 1931 to 1950 [of] 669 percent while for the nation as a whole the rate of increase was only 426 percent. The per capita expenditures of the state of Ohio increased 642 percent from 1931 to 1950 while for the United States the increase was only 440 percent….The state, since 1932, has assumed greater responsibility for welfare….Again, there was increased financial participation by the state in public education and highways.”

1880s, huge private wealth creation inclusive of mass public services and amenities; mid-twentieth century, creeping state takeovers of all sorts of functions including—touché Rockefeller—transportation.

In 1952, as the worthy Thatcher reported these data, Ohio had barely contemplated the fiscal implications of the baby boom. The voters would let officials know how they felt. In a remarkable essay in a recent issue of the Journal of Policy History, Josh Mound has tallied the collapse of public support for school-bond issues in Ohio—particularly in the smokestack city of Youngstown—in the 1950s and 1960s. We call on Mound’s work in our new book on the history of the income tax, Taxes Have Consequences.

Place after place in Ohio in the post-World War II era tried to raise their property tax rates. The rates. Huge post-1945 economic growth raised the value of property immensely. Taxed at the same rate, there would have been (there was) a harvest of new revenue for governments. Ohio tried again and again in the 1950s and 1960s to raise property tax rates.

The failures became so epic—they chuckled about it on national TV, on Laugh-In—that new Ohio governor John Gilligan pushed through a state income tax in 1971. He was a one-termer, ushered out of office in the vicious stagflation recession of 1975. In New Jersey, “One-Term Byrne” Brendan Byrne was supposed to meet the same fate after he started an income tax in 1976. Somehow he got re-elected.

The point of Ohio’s income tax, like Pennsylvania’s of the same year, was to cover expansive education spending from pre-K all the way through college. Kent State was going to get a facelift. The problem is that you need young people for such plans. Since 1971, Ohio has lost badly in its share of national population and national income. I offered Michigan’s horrendous statistics on this score last week. Ohio’s are only a little better—see the chart in Taxes Have Consequences.

The top rate of Ohio’s income tax started out at 3.5 percent. Within ten years it was 9.5 percent. Over the last dozen years, the top rate has come down by a third, from 6 to 4 percent. Ohio has miles to go before it thrives.

Columbus is supposed to be the up-and-coming Ohio city, the tech hub and incubator of the future. How did they get Intel
INTC
to commit there recently? Tax abatements (plus visions of a federal subsidy). Have a burdensome tax rate, and the exemption from it becomes valuable. Intel’s stock has not moved in this millennium. This is the kind of outfit ready to do business in Ohio. In Rockefeller’s day, the place attracted visionaries before they started something.

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Economy

Britain's economy went into recession last year, official figures confirm – The Globe and Mail

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Open this photo in gallery:

People walk over London Bridge, in London, on Oct. 25, 2023.SUSANNAH IRELAND/Reuters

Britain’s economy entered a shallow recession last year, official figures confirmed on Thursday, leaving Prime Minister Rishi Sunak with a challenge to reassure voters that the economy is safe with him before an election expected later this year.

Gross domestic product shrank by 0.1 per cent in the third quarter and by 0.3 per cent in the fourth, unchanged from preliminary estimates, the Office for National Statistics (ONS) said on Thursday.

The figures will be disappointing for Mr. Sunak, who has been accused by the opposition Labour Party – far ahead in opinion polls – of overseeing “Rishi’s recession.”

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“The weak starting point for GDP this year means calendar-year growth in 2024 is likely to be limited to less than 1 per cent,” said Martin Beck, chief economic adviser at EY ITEM Club.

“However, an acceleration in momentum this year remains on the cards.”

Britain’s economy has shown signs of starting 2024 on a stronger footing, with monthly GDP growth of 0.2 per cent in January, and unofficial surveys suggesting growth continued in February and March.

Tax cuts announced by finance minister Jeremy Hunt and expectations of interest-rate cuts are likely to help the economy in 2024.

However, Britain remains one of the slowest countries to recover from the effects of the COVID-19 pandemic. At the end of last year, its economy was just 1 per cent bigger than in late 2019, with only Germany faring worse among Group of Seven nations.

The economy grew just 0.1 per cent in all of 2023, its weakest performance since 2009, excluding the peak-pandemic year of 2020.

GDP per person, which has not grown since early 2022, fell by 0.6 per cent in the fourth quarter and 0.7 per cent across 2023.

Sterling was little changed against the dollar and the euro after the data release.

The Bank of England (BOE) has said inflation is moving toward the point where it can start cutting rates. It expects the economy to grow by just 0.25 per cent this year, although official budget forecasters expect a 0.8-per-cent expansion.

BOE policy maker Jonathan Haskel said in an interview reported in Thursday’s Financial Times that rate cuts were “a long way off,” despite dropping his advocacy of a rise at last week’s meeting.

Thursday’s figures from the ONS also showed 0.7 per cent growth in households’ real disposable income, flat in the previous quarter.

Thomas Pugh, an economist at consulting firm RSM, said the increase could prompt consumers to increase their spending and support the economy.

“Consumer confidence has been improving gradually over the last year … as the impact of rising real wages filters through into people’s pockets, even though consumers remain cautious overall,” Mr. Pugh said.

Britain’s current account deficit totalled £21.18-billion ($36.21-billion) in the fourth quarter, slightly narrower than a forecast of £21.4-billion ($36.6-billion) shortfall in a Reuters poll of economists, and equivalent to 3.1 per cent of GDP, up from 2.7 per cent in the third quarter.

The underlying current account deficit, which strips out volatile trade in precious metals, expanded to 3.9 per cent of GDP.

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How will a shrinking population affect the global economy? – Al Jazeera English

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Falling fertility rates could bring about a transformational demographic shift over the next 25 years.

It has been described as a demographic catastrophe.

The Lancet medical journal warns that a majority of countries do not have a high enough fertility rate to sustain their population size by the end of the century.

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The rate of the decline is uneven, with some developing nations seeing a baby boom.

The shift could have far-reaching social and economic impacts.

Enormous population growth since the industrial revolution has put enormous pressure on the planet’s limited resources.

So, how does the drop in births affect the economy?

And regulators in the United States and the European Union crack down on tech monopolies.

The gender gap in tech narrows.

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John Ivison: Canada's economy desperately needs shock treatment after this Liberal government – National Post

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Lack of business investment is the main culprit. Canadians are digging holes with shovels while our competitors are buying excavators

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It speaks to the seriousness of the situation that the Bank of Canada is not so much taking the gloves off as slipping lead into them.

Senior deputy governor, Carolyn Rogers, came as close to wading into the political arena as any senior deputy governor of the central bank probably should in her speech in Halifax this week.

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But she was right to sound the alarm about a subject — Canada’s waning productivity — on which the federal government’s performance has been lacklustre at best.

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Productivity has fallen in six consecutive quarters and is now on a par with where it was seven years ago.

Lack of business investment is the main culprit.

In essence, Canadians are digging holes with shovels while many of our competitors are buying excavators.

“You’ve seen those signs that say, ‘in emergency, break glass.’ Well, it’s time to break the glass,” Rogers said.

She was explicit that government policy is partly to blame, pointing out that businesses need more certainty to invest with confidence. Government incentives and regulatory approaches that change year to year do not inspire confidence, she said.

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The government’s most recent contribution to the competitiveness file — Bill C-56, which made a number of competition-related changes — is a case in point. It was aimed at cracking down on “abusive practices” in the grocery industry that no one, including the bank in its own study, has been able to substantiate. Rather than encouraging investment, it added a political actor — the minister of industry — to the market review process. The Business Council of Canada called the move “capricious,” which was Rogers’s point.

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While blatant price-fixing is rare, the lack of investment is a product of the paucity of competition in many sectors, where Canadian companies protected from foreign competition are sitting on fat profit margins and don’t feel compelled to invest to make their operations more efficient. “Competition can make the whole economy more productive,” said Rogers.

The Conservatives now look set to make this an election issue. Ontario MP Ryan Williams has just released a slick 13-minute video that makes clear his party intends to act in this area.

Using the Monopoly board game as a prop, Williams, the party’s critic for pan-Canadian trade and competition, claims that in every sector, monopolies and oligopolies reign supreme, resulting in lower investment, lower productivity, higher prices, worse service, lower wages and more wealth inequality.

(As an aside, it was a marked improvement on last year’s “Justinflation” rap video.)

Williams said that Canadians pay among the highest cell phone prices in the world and that Rogers, Telus and Bell are the priciest carriers, bar none. The claim has some foundation: in a recent Cable.co.uk global league table that compared the average price of one gigabyte, Canada was ranked 216th of 237 countries at US$5.37 (noticeably, the U.S. was ranked even more expensive at US$6).

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Williams noted that two airlines control 80 per cent of the market, even though Air Canada was ranked dead last of all North American airlines for timeliness.

He pointed out that six banks control 87 per cent of Canada’s mortgage market, while five grocery stores — Sobeys, Metro, Loblaw, Walmart and Costco — command a similar dominance of the grocery market.

“Competition is dying in Canada,” Williams said. “The federal government has made things worse by over-regulating airlines, banks and telecoms to actually protect monopolies and keep new players out.”

So far, so good.

The Conservatives will “bring back home a capitalist economy” — a market that does not protect monopolies and creates more competition, in the form of Canadian companies that will provide new supply and better prices.

That sounds great. But at the same time, the Conservative formula for fixing things appears to involve more government intervention, not less.

Williams pointed out the Conservatives opposed RBC buying HSBC’s Canadian operations, WestJet buying Sunwing and Rogers buying Shaw. The party would oppose monopolies from buying up the competition, he said.

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The real solution is to let the market do its work to bring prices down. But that is a more complicated process than Williams lets on.

Back in 2007, when Research in Motion was Canada’s most valuable company, the Harper government appointed a panel of experts, led by former Nortel chair Lynton “Red” Wilson, to address concerns that the corporate sector was being “hollowed out” by foreign takeovers, following the sale of giants Alcan, Dofasco and Inco.

The “Compete to Win” report that came out in June 2008 found that the number of foreign-owned firms had remained relatively unchanged, but recommended 65 changes to make Canada more competitive.

The Harper government acted on the least-contentious suggestions: lowering corporate taxes, harmonizing sales taxes with a number of provinces and making immigration more responsive to labour markets.

But it did not end up liberalizing the banking, broadcasting, aviation or telecom markets, as the report suggested (ironically, it was a Liberal transport minister, Marc Garneau, who raised foreign ownership levels of air carriers to 49 per cent from 25 per cent in 2018).

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The point is, Canada has a competition problem but solving it requires taking on vested interests. Conservative Leader Pierre Poilievre has indicated he is willing to do that, calling corporate lobbyists “utterly useless” and saying he will focus on Canadian workers, not corporate interests.

“My daily obsession will be about what is good for the working-class people in this country,” he said in Vancouver earlier this month.

Even opening up sectors to foreign competition is no guarantee that investors will come. There are no foreign ownership restrictions in the grocery market (in addition to the five supermarkets listed above, there is Amazon-owned Whole Foods). When the Competition Bureau concluded last year that there was a “modest but meaningful” increase in food prices, it recommended Ottawa encourage a foreign-owned player to enter the Canadian market. It was a recommendation adopted by Industry Minister Francois-Philippe Champagne, to no avail thus far.

But it is clear from the Bank’s warning that the Canadian economy requires some shock treatment.

Robert Scrivener, the chairman of Bell and Northern Telecom in the 1970s, called Canada a nation of overprotected underachievers. That is even more true now than it was back then.

It’s time to break the glass.

jivison@criffel.ca

Get even more deep-dive National Post political coverage and analysis in your inbox with the Political Hack newsletter, where Ottawa bureau chief Stuart Thomson and political analyst Tasha Kheiriddin get at what’s really going on behind the scenes on Parliament Hill every Wednesday and Friday, exclusively for subscribers. Sign up here.

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