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Chrystia Freeland may already have plans to repair the Canadian economy: Don Pittis – CBC.ca

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As finance minister, Chrystia Freeland’s new job of leading the Canadian economy out of trouble will be a bit like conducting an orchestra while a large portion of the musicians stand on their chairs and jeer.

The analogy is inadequate, because there is no job like running a national economy during a time of crisis — especially with a minority government. But Freeland has an advantage in that, so much more than her predecessors, she has already sketched out the score.

Like great war leaders, such as former Canadian insurance salesman Arthur Currie at Vimy Ridge or the idle and awkward youth who became the Duke of Wellington and faced Napoleon at Waterloo, successful finance ministers are proven in the field.

Among those already jeering are those who say Freeland is not qualified.

Tough as it is to make money in business, the task of running a country’s finances is by comparison colossal. And it must be done in public view.

“The restart of our economy needs to be green,” Freeland said in her first day on the job. “It also needs to be equitable, it needs to be inclusive and we need to focus very much on jobs and growth.”

Economic rough draft

To help us imagine how the new finance minister might begin solving such diverse — and some would say — conflicting problems, there is in her case a unique resource available.

As a long-time journalist and author whose articles are easily available in the internet age, Freeland has left open a picture window into her economic thinking open to anyone whose interested. 

Besides proving that she can absorb complexity at the highest level and synthesize it into something almost anyone can understand, as a journalist Freeland has met with and commented, revealingly, on economic and political actors around the world.

“Voters care deeply about big ideas and will elect the leaders who take the trouble to engage them,” she wrote approvingly for Reuters as she paraphrased the thinking of newly elected Calgary mayor Naheed Nenshi in 2011.

‘Voters care about big ideas,’ Chrystia Freeland wrote when she covered Calgary Mayor Naheed Nenshi’s surprise election for Reuters in 2011. (REUTERS)

Perhaps even more revealing as a political economy blueprint for fixing what ails Canada is her book Plutocrats, which is also conveniently summarized in her 2013 TED Talk.

Laid bare as an unflagging supporter of capitalism, she points out that one of the system’s biggest flaws in its current format is the still growing rich-poor divide which, if it continues, she insists, will likely bring that system to its knees.

“Global capitalism wasn’t supposed to work that way,” Freeland wrote.

Looking for the invisible hand

One advantage of depending on the “small-government” capitalist free market system so often backed, at least with lip service, by conservatives, is that in theory, the role of the politician is relatively simple: back off and let the invisible hand do its job.

Intervening to make things work better is so much more difficult and error prone. But with the economy shrinking due to COVID-19, the wealth-gap widening, and the deficit exploding, a traditional small-government policy of austerity and low taxes seems untenable. It is deeply in conflict with Freeland’s stated views.

So far the money distributed, including Friday’s announced $37-billion extension of the Canada emergency response benefit (CERB) by the federal government has been useful in tiding us over an economic shock that few expected.

But even if the bottomless piggy bank of modern monetary theory works, most proponents of government spending believe it cannot outgrow GDP forever, but must rekindle the economy so that the spending eventually pays for itself.

That is harder but not necessarily impossible, according to economists like Mariana Mazzucato, author of The Entrepreneurial State, who debunks the idea that governments must stand by helplessly as the titans of business decide how money should be spent.

Pumping money into green growth as Europe and even pro-coal Australia have done certainly has widespread support from the expanding environmental business sector and if packaged wisely, could have even broader appeal.

Following Australia to become a “renewable energy export superpower” is hardly crazier than the billions spent by former prime minister Stephen Harper to promote a similar plan for fossil fuels, or Prime Minister Justin Trudeau’s multi-billion dollar investment in a pipeline, now that oil prices are falling and demand shrinking.

But to create jobs, especially in the booming tech sector, means creating businesses and keeping them from being bought up by foreign giants.

“Immediate action must be taken to create a domestic supply chain of capital, both public and private sector, working in tandem to support all entrepreneurs,” wrote a group of venture capitalists in the Hill Times last week. They say they have a plan to make it happen.

And how to stop the slide into greater inequality? The Green Party last week added its support for a universal basic income. The New Democrats have pushed for universal child care. Gradually raising the federal minimum wage toward a living wage might do the trick. Alternatively, some Conservatives have called for an election to stop out-of-control spending.

With her hands on the purse strings, Freeland knows there is only so much money to go around.

But with so much in flux and so much money spent already, she may have a window to make significant change. Tax historians have suggested this might be a rare moment when Canadians would support a more distributive tax regime.

Radical changes are risky. They can lead to radical errors. But time is of the essence. And the window may soon close.

Freeland’s task is no cake walk. Without a majority government the job may be impossible, as a cacophony of opposition from entrenched and divergent interests overwhelms the conductor’s timely measures.

Follow Don on Twitter @Don_Pittis

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Hungary extends loan moratorium as economy struggles to recover from pandemic – TheChronicleHerald.ca

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By Krisztina Than

BUDAPEST (Reuters) – Hungary will extend a moratorium on loan repayments for some households and companies until the middle of 2021, as its finance minister warned the economy could struggle to grow next year unless a coronavirus vaccine is found.

Prime Minister Viktor Orban introduced the moratorium for all companies and private borrowers in March as one of his government’s key measures to help reduce the economic fallout from the pandemic. It was due to expire at the end of the year.

In a video posted on his official Facebook page on Saturday, Orban said the moratorium would be extended by six months for families with children, the retired, unemployed and those in public works programmes.

The extension until the middle of 2021 will also apply to companies that have seen revenues drop by at least 25%.

Orban also said loan contracts for all households and companies agreed before the pandemic could not be terminated for six months.

The moves come as the government prepares to announce more steps to try to revive growth, after the economy plunged more than expected in the second quarter and prospects for a recovery next year have worsened.

The weak economic outlook could represent the biggest threat to nationalist Orban’s decade-long rule as he prepares to face parliamentary elections in the first half of 2022.

Finance minister Mihaly Varga said in an interview published earlier on Saturday that if a coronavirus vaccine was not available by the middle of 2021 the economy might struggle to grow next year, based on a pessimistic scenario.

Under an optimistic scenario, the economy could grow by 4-5% if a vaccine was available in the second quarter, he told newspaper Magyar Nemzet.

A third scenario was for a protracted recovery with 3%-4% growth, also conditional on a vaccine being available, he added.

Hungary’s economy is expected to shrink by 5%-6% this year.

Varga said the government was working on new stimulus measures that could include targeted tax cuts for crisis-hit sectors.

After a spike in new cases in recent weeks, Hungary reported 809 new coronavirus infections on Saturday, bringing the total to 16,920, with 675 deaths.

(Reporting by Krisztina Than; Editing by David Clarke and Mark Potter)

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Hungary extends loan moratorium as economy struggles to recover from pandemic – The Guardian

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By Krisztina Than

BUDAPEST (Reuters) – Hungary will extend a moratorium on loan repayments for some households and companies until the middle of 2021, as its finance minister warned the economy could struggle to grow next year unless a coronavirus vaccine is found.

Prime Minister Viktor Orban introduced the moratorium for all companies and private borrowers in March as one of his government’s key measures to help reduce the economic fallout from the pandemic. It was due to expire at the end of the year.

In a video posted on his official Facebook page on Saturday, Orban said the moratorium would be extended by six months for families with children, the retired, unemployed and those in public works programmes.

The extension until the middle of 2021 will also apply to companies that have seen revenues drop by at least 25%.

Orban also said loan contracts for all households and companies agreed before the pandemic could not be terminated for six months.

The moves come as the government prepares to announce more steps to try to revive growth, after the economy plunged more than expected in the second quarter and prospects for a recovery next year have worsened.

The weak economic outlook could represent the biggest threat to nationalist Orban’s decade-long rule as he prepares to face parliamentary elections in the first half of 2022.

Finance minister Mihaly Varga said in an interview published earlier on Saturday that if a coronavirus vaccine was not available by the middle of 2021 the economy might struggle to grow next year, based on a pessimistic scenario.

Under an optimistic scenario, the economy could grow by 4-5% if a vaccine was available in the second quarter, he told newspaper Magyar Nemzet.

A third scenario was for a protracted recovery with 3%-4% growth, also conditional on a vaccine being available, he added.

Hungary’s economy is expected to shrink by 5%-6% this year.

Varga said the government was working on new stimulus measures that could include targeted tax cuts for crisis-hit sectors.

After a spike in new cases in recent weeks, Hungary reported 809 new coronavirus infections on Saturday, bringing the total to 16,920, with 675 deaths.

(Reporting by Krisztina Than; Editing by David Clarke and Mark Potter)

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Why falling immigration isn't that bad for the economy during COVID-19 – Yahoo Canada Finance

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COVID-19 travel restrictions have put a big dent in immigration, widely seen as something the economy relies on, but the negative effects aren’t as bad as they might seem.

The latest government numbers show 13,645 fewer permanent residents came to Canada in July, down 63 per cent from the same month last year. April and June were similarly weak periods, making the likelihood of reaching the federal government’s target of 341,000 less likely.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.” data-reactid=”18″>For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada.&nbsp;” data-reactid=”19″>“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada

“So, even a complete shutdown of immigration would (roughly) shave 1 percentage point from growth (or a bit less). Not small by any means, but that compares with what could be a 6 per cent drop in GDP (OECD said -5.8 per cent for this year, we are looking at -5.5 per cent).”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.” data-reactid=”21″>Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.

“Overall, given the realities of COVID and the now-soft demand for labour, the cool down in immigration by itself will not be particularly harmful — and certainly less so than it would have been say a year ago.” said Porter.

Long term effects without immigration

Pedro Antunes, the Conference Board of Canada’s chief economist, also thinks the effects are mitigated in the short-term but that doesn’t mean the economy will be totally unscathed.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.” data-reactid=”25″>“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.

However, he believes it’s more important to look at the long term repercussions of reduced immigration.

“Canada’s underlying capacity is dependent on private and public investment, adoption of technology and the number of workers (and the skills of those workers). We know from our prior research that without immigration, our labour force would be flat or declining (since exiting baby-boomers outnumber school leavers),” said Antunes.

“If immigration levels are reduced over a few years (we think 2020 and 2021 at least) the result is a long-lasting impact on our potential (or productive capacity).”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter&nbsp;@jessysbains.” data-reactid=”29″>Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Download the Yahoo Finance app, available for&nbsp;Apple&nbsp;and&nbsp;Android.” data-reactid=”30″>Download the Yahoo Finance app, available for Apple and Android.

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