The most controversial phrase Prime Minister Justin Trudeau
this week might have been this one: “We can choose to embrace bold new solutions to the challenges we face and refuse to be held back by old ways of thinking.”
We won’t know what that means until the throne speech next month, but Pierre Trudeau’s son looks like he’s gearing up to test a conservative nation’s tolerance for radical change. Canada’s attempts at “bold new solutions” in the past have tended to follow Royal Commissions or years of tedious debate. The prime minister seems like he’s just going to go for it.
“As much as this pandemic is an unexpected challenge, it is also an unprecedented opportunity,” Trudeau said. “This is our chance to build a more resilient Canada.”
Some “old ways of thinking,” such as fiscal prudence, aligned with a pretty good run of economic growth from the late 1990s through to the eve of the Great Recession.
Others, however, are clearly holding us back. For example, a weak commitment to anti-trust policy has resulted in unmovable oligopolies that stubbornly resist the sort of competition that supports innovation, higher wages and lower prices.
Trudeau has played chicken with the oligopolies, but he always blinks first. His government is slow-walking preparations for an open-banking regime, which would level the playing field between the Big Six and financial technology upstarts. And last weekend, Navdeep Bains, the innovation minister,
he had sided with BCE Inc., Rogers Communications Inc. and Telus Corp. in their fight with the Canadian Radio-television and Telecommunications Commission over the regulator’s attempt to force them to lower the rates they charge upstart internet companies to use their networks. Prices will remain among the highest in the world as a result. For someone who dislikes business, Trudeau is quick to take the knee.
But he has no such aversion to spending money. Canada’s COVID-19 rescue efforts are among the world’s most generous and he appears willing to keep the taps open. He made a point of noting that the “cost of borrowing is very low,” which he said means one thing: “Now is the time to invest.”
The policy debate this autumn will be a dialogue — and let’s try to make it a dialogue, not a fight — over how to create wealth.
Redistribution appears to be the force that drives Trudeau, and he and his followers will justify it by arguing that a richer and healthier middle class will generate more demand, which entrepreneurs and executives will seek to satisfy. Innovation will follow, and Canada will become more competitive in the process.
That’s the approach Trudeau followed in his first mandate and it aligned with what was perhaps the strongest labour market in Canada’s history. Still, those low unemployment rates masked lacklustre business investment, which means executives haven’t been setting up for future growth. The COVID-19 crisis has exposed an economy that lacks the capacity to produce essential goods and services and pays its frontline workers lousy wages. People died because of it.
If Trudeau is unwilling to take on the oligopolies, then he should use his favourite policy tool — the federal government’s spending power — to make room in the economy for innovative firms.
A “Buy Canada” approach to procurement could be a launching pad for emerging companies in need of an anchor client. Rather than attempting to decide who deserves subsidies, the federal government could instead pick winners by giving them a fair shot to compete for government business. If Trudeau is serious about using the treasury to plug the holes exposed by the pandemic, there should be lots of work to go around.
For years, Canada has sent trade negotiators to Washington to fight “Buy America” policies, so adding a home bias to procurement would be hypocritical. But that fight is lost, at least for now. We know what President Donald Trump thinks about free trade, and former vice-president Joe Biden, the Democratic nominee, has
spending US$400 billion on products “made by American workers.” Canada’s free traders should concentrate on erasing barriers between provinces, as there will be no prizes for the virtuous in the international arena.
Some will decry the return of “industrial policy,” an old idea with a poor track record that nonetheless is guiding much of the thinking in China and Europe, where policy-makers realize that new corporate champions will emerge as commerce moves online and the world gets serious about climate change.
But a more aggressive use of procurement shouldn’t be viewed as a make-work scheme. Last month, NuEnergy.ai, an Ottawa-based developer of software that monitors the behaviour of algorithms powered by artificial intelligence, won a contract to educate Transport Canada on how to deploy AI ethically. It’s an emerging field, and one where Canada has a lead thanks to a clutch of companies such as NuEnergy. But to keep that lead, those firms will need some business so they can scale.
“We have no interest in becoming dependent on government,” said Niraj Bhargava, NuEnergy’s chief executive, who has taken advantage of the federal wage subsidy to help survive the recession. “We prefer to revenue-finance the company.”
An overhaul of procurement would be needed because the government’s current approach is about avoiding risk, which favours established firms that have the wherewithal to endure the bureaucracy. That means the government could jolt innovation without big new programs. Instead, it could simply reorient existing budgets to align with its broader economic policy.
Bureaucracy makes the government “really difficult to work with,” Bhargava said. If the goal is to use procurement as a policy hook, “we’re not there yet,” he added.
Copyright Postmedia Network Inc., 2020
Italy’s Chance of a Lifetime for Economy Could Yet Be Squandered – Yahoo Canada Finance
(Bloomberg) — No Italian government has ever had so much cash at its disposal as Prime Minister Giuseppe Conte — enough possibly to transform the region’s laggard economy.
But if that fiscal hoard swelled by European Union rescue funds and central bank-backed cheap borrowing is spent unwisely, it could become the biggest missed opportunity of a generation.
Avoiding that outcome is the test confronting Conte and his finance minister, Roberto Gualtieri. While targeting a revamp of the economy, they face pressure to throw funds at protecting existing jobs rather than investing in new ones, expanding the role of the state despite a troubled history of such policies in the country.
“In Italy, too many people think that any kind of public expenditure can boost output,” said Riccardo Puglisi, economics professor at the University of Pavia. “This increases the risk that recovery-fund money is not used properly and efficiently.”
The fiscal windfall that Italy’s governing class is about to sink its teeth into is staggering. Gone are the days of haggling over 0.1% budget deviations with Brussels officials concerned about burgeoning borrowings that are now well on the way to exceed 150% of gross domestic product.
The country stands ready to receive as much as 209 billion euros ($248 billion) in EU aid funded by jointly issued debt to help its post-coronavirus reconstruction.
Further bolstering its public finances are European Central Bank efforts to keep borrowing costs low. That help allowed Conte to spend 100 billion euros in stimulus on a battered economy that analysts anticipate may contract as much as a 10th this year. The yield on Italian 10-year bonds has more than halved since the peak of the pandemic in mid-March.
“Italy will have billions in its pockets,” said Paolo Pizzoli, a senior economist at ING Bank. The government “needs to show it is not only able to access European Union funds, but also to focus spending effectively to ultimately boost growth.”
With strict strings attached to EU money, officials intend to use it to boost growth to at least 1.6% a year and increase employment by 10 percentage points from the 2019 tally of 63.5% to bridge the gap with regional peers, according to draft guidelines seen by Bloomberg.
The plan is to invest in digitalization, a unified ultra-broadband network, innovation, education, more efficient infrastructure, a green economy, and also reforms of the judicial system and state bureaucracy.
“It’s a once-in-a-lifetime opportunity to exit a long period of stagnation,” Gualtieri told lawmakers last week.
That ambitious growth agenda is pulling in one direction, while the government’s own spending plans for the rest of its budget are pulling in another. Conte’s coalition of the left-wing Democratic Party and the populist Five Star Movement — newly emboldened after holding its ground in local elections this week — is increasingly tending toward state aid and government intervention.
The premier has pushed for the creation of a single broadband network company, halting the sale by Telecom Italia SpA of a minority stake in its network. He has also pressured the Benetton family’s Atlantia holding company to sell its 88% stake in toll road operator Autostrade per l’Italia. Meanwhile Gualtieri has publicly favored a sale of the Italian Stock Exchange and its MTS bond market to a European company.
The government wants the state-backed lender, Cassa Depositi e Prestiti, to take stakes in all three enterprises, and it has also set up a new publicly controlled company to run failed airline Alitalia SpA. Italy has seen such measures before, but not for a while.
Not the Solution
“The successful Italian economy of the 1950s, which was a mixed system — with strong government involvement in companies through a vehicle called IRI — worked for a time but degenerated quickly into cronyism and wasting public funds,” said Giovanni Orsina head of LUISS University’s School of Government in Rome. “Regenerating that system for all the wrong reasons is not the solution.”
The Institute for Industrial Reconstruction — known as IRI — was a state company established by the fascists in 1933. It helped rebuilding after the war, constructing roads and the phone network, and was once Italy’s biggest employer.
If Cassa Depositi becomes a revamped version of that, it would ultimately turn back the clock, reversing decades of economic policy since IRI was dissolved during a sell-off of assets in the 1990s.
“We hope the government will use the funds to boost competitiveness with a market approach rather than acting as a nanny state,” said Paolo Magni, parter at Alpha Group, a private equity fund with 2 billion euros of assets under management in Italy.
For Orsina, such an outcome would prolong Italy’s history of failing to deliver on economic reforms, hampered by special interests and a political cycle with frequent elections.
“Politicians gain very little from long-term planning and very much from spending on solutions that increase their power and popularity,” he said. “The country is condemned to short-termism.”
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GUEST OPINION: Trails can stimulate the economy in Atlantic Canada – SaltWire Network
There are many things that this pandemic will have taught us, however for many it has reinforced the value of trails and greenspaces.
As a trail professional of nearly 20 years I’ve always valued trails and greenspaces, however in this fast-paced world with ever-changing technologies, many people began to take the great outdoors for granted.
With limited activities to do during the pandemic and many people stuck in the house most of the day, the opportunity to get outside and breathe some fresh air is now becoming something that is vital for their well-being.
These days I’m inundated by Facebook posts, tweets or Instagram posts of people relishing in the outdoors and thankful to have access to trails and greenspaces. As we begin to become accustomed to a new normal, it’s time for us as a society to start thinking about getting back to some of the more simple things in life and how these things can act as both a social and economic catalyst for communities. Many of these things don’t need to be complicated, but can have a tremendous impact as we begin to come back from the ramifications of COVID-19.
One of these opportunities is to foster the development of a trail economy. Many countries have capitalized on the trail economy; however Canada and Atlantic Canada have not come close to realizing the potential it has in developing a strong economy based on greenway trails. The trail economy is the idea of generating both indirect and direct revenue through the development and promotion of trails as a product.
This however is not a “build it and they will come” scenario; it requires significant engagement between trail managers working hand in hand with outfitters, business owners and community leaders to ensure that there is a strong integration between all stakeholders. What it doesn’t require, however, is significant investment of funds to get these relationships developed.
Prince Edward Island is perfectly positioned to take advantage of the trail economy and is in a unique position as an established tourist destination. The Island is well known for their hospitality and many people consider P.E.I. as a premier vacation destination.
The Confederation Trail provides tourists and residents alike with a 450-km trail that spans the province and provides access to many of the most scenic coastal regions on the Island. A feature that the Confederation Trail has over many of its counterparts is the relative short distance between communities thus allowing trail tourists with good access to food and beverage, accommodation and other critical amenities to ensure that they have a memorable experience.
It’s now time for these communities and the provincial government to take advantage of this feature and ensure that they are properly equipped to take on the task of welcoming these tourists to their beautiful towns and villages. The development of programs such as Trail Towns, where the business community and other key stakeholders work together to assess their attributes and work together to fill in their service gaps in the next key step of the development of the Confederation Trail as a tourism product.
Trails and greenspaces connect us to the land, the people and histories of our communities. With many people staying close to home this year and perhaps in the years to come, let’s take this time to get better connected, learn more about the region, create a stronger and healthier population and a more vibrant economic outlook for Atlantic Canada.
Jane Murphy-McCulloch is a principal at Terminus Consulting and was national director of Trail with the Trans Canada Trail, developing 10,000km of land and water trail along with road cycling infrastructure to ensure the successful connection to the national trail system in 2017.
Fed's Powell says US economy faces long, uncertain recovery – BNN
Federal Reserve Chair Jerome Powell said the U.S. economy has a long way to go before fully recovering from the coronavirus pandemic and will need further support.
“The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government,” he told the House Financial Services Committee on Tuesday. While a recovery is underway, “both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain.”
Read More: Powell and Mnuchin Set to Get Grilled on Need for More Stimulus
In his own remarks, U.S. Treasury Secretary Steven Mnuchin said he and the White House continue to seek an agreement with both parties in Congress on another fiscal relief package.
“The President and I remain committed to providing support for American workers and businesses,” he said in testimony released Tuesday. “I believe a targeted package is still needed, and the administration is ready to reach a bipartisan agreement.”
Powell and Mnuchin’s appearance is a quarterly exercise mandated by the Cares Act passed by Congress in March, which appropriated about US$2 trillion to help speed the U.S. recovery. The pair are likely to face questions about their use of Cares Act funds and about what else should still be done.
Prospects for another round of fiscal support have further dimmed amid spiraling partisan tension over the battle to replace Supreme Court Justice Ruth Bader Ginsburg, with just 42 days remaining before the U.S. election.
Powell was prepared for questions about the Fed’s troubled Main Street Lending Program, a US$600 billion facility aimed at providing credit to small- and mid-sized companies. He said Fed officials had responded to feedback by making adjustments to the program.
Still, he added, “Main Street loans may not be the right solution for some businesses, in part because the Cares Act states clearly that these loans cannot be forgiven.”
The Fed has come under criticism for the low take-up so far from the Main Street program. It has so far purchased just US$1.5 billion in loans, as of Sept. 16. Some banks, especially larger institutions, have balked at lending through the program to the riskier businesses that may need them the most.
The latest on the coronavirus outbreak for Sept. 22 – CBC.ca
We looked at every confirmed COVID-19 case in Canada. Here's what we found – CBC.ca
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