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John Robson: Here's a plan for the post-COVID economy: Get government out of the way – National Post

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In addition to a schedule for reopening the economy we also evidently need a map. Unfortunately there doesn’t seem to be one in the glove compartment, nor is there a reliable app. Instead it’s like one of those Renaissance deals with “Here be dragons.” So I’ve drawn one on a napkin.

It says “Focus on the medical aspects and reread ‘I, Pencil.’ ” Pencils may have gone mechanical, or for all I know digital, since Leonard Read penned (penciled?) his classic essay back in the slide rule era. But as the economy has only grown more complex since 1958, let alone 1850 when Frédéric Bastiat wrote Harmonies Économiques, their central insight has only become more valid.

For those not fortunate enough to have been forced to read his piece years ago, Read has a humble lead pencil explain that making it required the co-operation of an astounding global network from the loggers who cut the trees to those who made their chainsaws and coffee to the metallurgists who created the “ferrule.” Even this mundane object requires a web of interactions so complex no human brain could contain it all. Including that the people who made the ships carrying the loggers’ coffee beans themselves use pencils.

Focus on the medical aspects and reread ‘I, Pencil.’

No person or people can understand and guide such a process. Nor could any computer. It’s literally “transcomputable.” Which is why central planning can’t work. Including here.

It is tempting to think “restarting the economy” resembles restarting a ship from drydock. Especially for politicians who’ve long believed the economy is a machine they can rev up at will, and a fairly simple one at that, it seems intuitively like a linear task: Boot up the emergency generators, activate critical command and control systems, start main engines, turn on bilge pumps and so on down to lighting and air circulation in crew quarters. But economies are enormously more complicated, with feedback loops no one can hope to comprehend.

Luckily in market economies nobody needs to. As Read said, prices compress all the information any individual person needs to figure out whether something is worth more to them than it costs or not. I was going to write “producer or consumer” instead of “person” but we are almost all both at once.


Customers entering a T&T Supermarket in Markham, Ont., get a temperature scan to check for precautionary signs of COVID-19 on April 20, 2020.

Jack Boland/Postmedia News

For the same reason it’s not possible for anyone to know what’s “essential” or isn’t. As John Locke wrote before Read, Bastiat or even the Industrial Revolution, the very “bread we eat” requires “the labour of those who broke the oxen, who digged and wrought the iron and stones, who felled and framed the timber employed about the plough, mill, oven, or any other utensils” etc.

So do not attempt to decide which restaurant, hair salon or bicycle shop should be allowed to reopen or why. (Just kidding — in Ontario bike shops were apparently “essential” all along, unlike marinas or jury trials.) Do not try to determine who should make the fiddly plastic bits needed to get groceries to market or when. Just try to figure out who has COVID-19, who might get it and what to do about them.

The key job of the public authorities now is public health. And surely it’s enough to tax the capacity of any group of mortals. Focus on how to test, track and quarantine the infected so the second wave is not a disaster. Not to prevent it; it is inevitable. And don’t go locking down the economy again.

Focus on how to test, track and quarantine the infected so the second wave is not a disaster

Also, don’t go placing too much faith in epidemiological models. It’s not that they’re so unsophisticated the U.K. was relying on undocumented code 13 years old, although that revelation would embarrass lesser beings than the experts in charge. It’s that human conduct is too complex to model. (And don’t get me started on climate.)

When I was nearly finished scribbling on my napkin, a map from Britain’s Adam Smith Institute worthy of high-class velum not increasingly scarce wood pulp reached my inbox. It said: “The economic heart of the nation has slowed, and it needs major and urgent action to revive it. … We look not to those on high to save us, but ideas and initiatives from the little platoons Edmund Burke correctly said made up a nation … Companies stand on the edge of ruin and our prosperity with them. … So we want to hear from you of every tax cut that can lift a burden, and every regulatory change that can lighten the load on businesses that want to grow again. Let us hear of every bureaucratic impediment that stands in the way of renewed growth and expansion, and let us hear of the ways in which it might be suspended or permanently extinguished.”

There’s your map. Get government out of the way of the economy and into the way of the disease. And the sooner the better.

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The U.S. economic slide is likely bottoming out, but a recovery could take years – The Washington Post

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On Thursday, the latest sign that the economic decline may be bottoming out came as the government reported that 1.9 million Americans had applied for unemployment insurance during the last week of May — a painfully high number but the lowest since the novel coronavirus started spreading widely in the country in March.

The jobs data follows modest signs that the economy may be inching toward the beginnings of a recovery as the nation reopens. Mortgage applications have surged in recent weeks amid record-low interest rates. Consumption of oil and petroleum products is up. The number of travelers at airports, as measured by the Transportation Security Administration’s precheck numbers, has begun increasing in recent weeks. Even restaurant reservations have inched up.

“This covid recession will go down as the shortest and arguably the most severe in history,” said Mark Zandi, chief economist at Moody’s Analytics.

Zandi said the recession caused by the pandemic is likely to be over, almost as abruptly as it started. He points out that private payrolls declined by 2.76 million people in May, according to a report released Wednesday by payroll processor ADP. That was far below analysts’ estimates.

Yet, even when economists declared the Great Recession officially over in June 2009, the unemployment rate did not return to prerecession levels until 2017, a reminder that the economic pain can linger for years. Similarly, experts predict that this recovery will take years.

Cheered on by President Trump, some states have lifted some of their most severe restrictions in recent weeks, more businesses have reopened — at least partially — and brought back workers. But there is still no sense of when commerce will resume at the scale seen late last year. Until there’s a widely available vaccine against the novel coronavirus, the economy is likely to continue struggling at a low rate. And public health officials continue to warn of a second wave of infections in the fall or winter, which could bring on another round of shutdowns.

For now, the U.S. economy is in limbo, with many companies operating at half capacity and a big question mark about how long firms can survive that way. Idled workers aren’t sure when they will be called back, so they are hoarding cash. State and local budgets have been decimated, which is likely to trigger more layoffs later this year.

“These are extremely ugly numbers, but because there were so many forecasts talking about a total collapse of the economy, the numbers we’re seeing, while extremely bad, aren’t the worst-case scenario,” said Lindsey Piegza, chief economist at Stifel Fixed Income. “It’s not as bad as it could have been. It’s an odd silver lining.”

The dueling stories about this economy — it is improving yet remains greatly depressed — are likely to play out all the way through the presidential election. Trump is seizing on any data showing a rebound and is taking credit for the bounce-back in the stock market, where the S&P 500 index just experienced its best 50-day rally since 1952.

“By the time of [the] election, I believe the economy will be doing phenomenal numbers. Big job increase, big GDP increases, and that’ll be before the election,” Trump said Wednesday on Fox News Radio’s “The Brian Kilmeade Show.”

“The stock market is booming,” he said.

But presumptive presidential nominee Joe Biden and other Democrats have been quick to point out that millions of Americans remain out of work and that the job losses aren’t as bad in other countries, raising questions about the U.S. government’s response to the pandemic. Biden predicts a slow recovery.

“Economic growth is likely to be back in positive territory by the third quarter,” Stifel’s Piegza said, but “what we’re really talking about is going from extremely terrible to slightly less terrible.”

Official government growth data looks at how much the economy changes from quarter to quarter. Since the April-to-June period is likely to be one of the worst in U.S. history, the third quarter, even if sluggish, will look like a big surge, giving Trump a talking point just before the election.

What matters to many Americans is the job situation. When Americans feel it is easy to get work, they tend to give the economy more-positive ratings and spend more. When people fear they will lose their jobs, have to take pay cuts or have trouble finding new work, they tend to save more. In April, the U.S. savings rate hit a record high of 33 percent, a sign of how scared people are.

“The savings buildup over the past two months can hardly be considered firepower for future consumption,” Bob Schwartz, senior economist at Oxford Economics, said in a recent note. “The stimulus checks were a one-time payment that has already run its course.”

The CBO also said that the pandemic will shrink the size of the U.S. economy by nearly $8 trillion in the next decade, assuming there are no more coronavirus waves that trigger crippling shutdowns in coming months.

More than 40 million people have applied for unemployment benefits during the pandemic, and roughly 30 million are receiving them, previously unimaginable figures that wiped out a job market in which unemployment was at historic lows as recently as February.

“Whatever optimism there is from seeing some people return to work, we’re not seeing a drastic move off unemployment,” said Jay Shambaugh, a senior fellow at the Brookings Institution. “If anything, we’re seeing a stable number of people on unemployment. Last year it was around 1.5 million.”

Still, signs that the economy is no longer plunging are an encouraging start, forecasters said.

New data from the Census Bureau’s weekly Small Business pulse survey shows businesses are starting to get back on their feet. In the week ending May 30, about 3 in 5 small businesses reported revenue of above $15,000. That’s a massive reversal from a month earlier, when 60 percent of businesses reported little or no revenue.

Other signs of a turning point are that only a quarter of businesses closed locations in the past week, down substantially from a month earlier, and businesses are reporting fewer supply-chain problems and missed loan payments.

Flights are also picking up. American Airlines announced Thursday an expansion next month as travel demand picks up again. For July, the airline expects to fly 55 percent of last year’s domestic trips, up from a mere 20 percent in May.

Americans are also beginning to eat out again. Restaurant reservations on the online platform OpenTable showed that more than 30 percent of its participating restaurants had begun taking bookings as of June 3, vs. zero throughout most of April.

The Federal Reserve has scaled back its purchases of government bonds, a vote of confidence that the worst probably is over.

Yet, the manufacturing sector is a telling example of just how modest any rebound is.

The industry experienced its worst contraction in April since the Great Recession. The Purchasing Managers’ Index slumped to 41.5 in April, signaling a deep contraction. In May, the index rose to 43.1, an improvement but far below the 50-mark that is considered healthy and expansionary.

Such contradictions are also apparent in the job-market data, economists say. New jobless claims are trending lower, but even with so much of the economy reopening, nearly 2 million people filed new applications for unemployment aid.

“It’s a sign that things are not getting as worse as they were before,” said Nick Bunker, economic research director at Indeed Hiring Lab. “We have seen a reduction in the pace of people becoming jobless. So that’s positive. But we’re still seeing claims at astronomical levels than what we saw before this crisis.”

Job postings tell a similar story. The number of jobs posted on Indeed’s site in May was 5 percent higher than in April. But those numbers were still 34 percent lower at the end of May than at the same date in 2019 — a staggering drop.

“It is, at most, an extremely partial rebound,” Bunker said. “Postings are still growing at a rate far slower than we saw last year. I think it’s worthwhile celebrating that the pace of things getting worse has slowed down. But that means we haven’t hit a bottom yet. There are still a fair amount of folks losing their jobs and folks not hiring yet.”

Andrew Van Dam contributed to this report.

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Final roundtable: Clean economy projects could create 670,000 jobs per year – Corporate Knights Magazine

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The COVID-19 pandemic represents an opportunity to “reposition” the Canadian economy to take full advantage of the low-carbon transition, the new chair of the Canada Infrastructure Bank said June 3.

The economic crisis resulting from the pandemic has forced corporations and governments to deviate from their standard operating procedures, opening up an opportunity for innovation and creativity, said Michael Sabia, who was recently appointed by the federal government to head up the infrastructure bank.

“We need to seize this moment to be creative about how we reposition the national economy for a world that is going to be different, and a very important part of that [effort] is repositioning our economy to be a significantly lower carbon economy,” Sabia told a virtual roundtable hosted by Corporate Knights.

Sabia said that there is plenty of potential for the Canada Infrastructure Bank (CIB) to participate in clean energy projects but that the federal Crown corporation has underperformed to date.

The CIB has a mandate to invest $35 billion in federal funding by 2027/28 but has been criticized for its slow start.

Sabia said the bank should focus less on traditional infrastructure like roads and ports and more on stimulus projects that accelerate the energy transition, including renewable power, interprovincial transmission, low-carbon transportation and digitalization efforts to ensure all Canadians have access to high-speed internet.

The Corporate Knights roundtable was part of its seven-part Building Back Better project that urged the Liberal government to ensure that any economic recovery plan have a climate-change focus.

Addressing the roundtable, Industry Minister Navdeep Bains said Canada will have to be innovative in responding to the COVID-19 pandemic and the climate crisis.

He said hundreds of Canadian businesses have responded to the need for medical equipment by changing their operations to produce new products. “That’s the same mindset we have to have when it comes to confronting the climate crisis.”

In a white paper released Wednesday, authors Ralph Torrie, Céline Bak and Toby Heaps said the federal government should allocate $106 billion over the next 10 years for a host of clean energy projects that would create the equivalent of 670,000 full-time jobs per year. More than a third of the federal government investment, $40 billion, would be frontloaded in the first two years (with half dedicated to grants to finance a green renovation wave). Over 10 years, the white paper estimates, the federal investment and complementary policies would crowd in a further $730 billion in mostly private sector investment.

All told, the investments would reduce greenhouse (GHG) emissions by 236 megatonnes annually by 2030, from 2018 levels of 729 megatonnes. That scale of GHG reductions would put the country on track to meet the Liberal government’s target of net-zero emissions by 2050, Bak told the roundtable.

Proposals have included support for a major retrofit program to improve energy efficiency in buildings, planting an additional 800 million trees a year for 10 years, and investments in coast-to-coast electric-vehicle (EV) infrastructure, as well as interprovincial transmission lines to deliver low-carbon electricity and a $40 billion Energy and EV Innovation Fund to help create Canadian champions in fast-growing low-carbon markets where Canada has strong assets, including bitumen-derived carbon fibres, green hydrogen, renewable jet fuels, batteries and EVs.

Other speakers suggested that a green stimulus plan should have goals beyond job creation and emission reductions.

Canadians are now confronting a triple whammy of the COVID-19 pandemic, the climate crisis and the vivid reminder of the systemic racism embedded in the country’s attitudes and institutions, said Catherine Abreu, executive director of Climate Action Network Canada.

Any green stimulus programs must be based on a “just recovery” Abreu said. Her group was one of 150 civil society organizations that released a document this week proposing “Six Principles for a Just Recovery” for a more equitable and sustainable future.

“This moment is forcing us into confrontation with the vulnerabilities that are built into our economic and social systems,” she said. “There are ongoing crises that lurk behind the current health and economic emergencies . . . So if we are going to tackle issues like climate change, we have to come at them fundamentally as a fight for justice.”

The federal government can pursue reconciliation with Indigenous communities by partnering with them on clean energy projects that deliver health, economic and social benefits to the people, said Terri Lynn Morrison of the Indigenous Clean Energy network.

Morrison said Indigenous people are already major developers and partners in clean energy projects across the country. “They’re ready to seize the opportunity,” she added.

Some economists have questioned whether stimulus spending on clean energy infrastructure is the optimal way to respond to an economic slump precipitated by a health crisis that has forced Canadians into social isolation. Sectors like retail, restaurants and tourism have been hit hardest with job losses, and it’s not clear they would benefit from traditional – or even non-traditional – stimulus spending.

In a blog post last month, economists Dale Beugin and Mike Moffatt argued that green stimulus spending should target areas such as infrastructure, while government should continue to rely on regulation and carbon price to drive climate policy.

Trying to meet the requirements of both recovery and emissions reductions would result in an approach that fails to do either efficiently, they argued.

“Climate considerations should be less constraint and more a radar to help identify non-traditional but job-rich investment opportunities, such as deep retrofits and flood protection for homes and workplaces,” Heaps said via email. “Climate can also be a tiebreaker where two recovery options offer similar economic benefits.”

“In addition to the large investments in green infrastructure, the ‘shecovery’ will likely require significant investments in eldercare and childcare,” he added.

During the roundtable, Ivey Foundation president Bruce Lourie noted that countries like Germany and South Korea have succeeded in providing support for key clean energy sectors. The refrain that “governments shouldn’t pick winners” is a “tired and misguided refrain for us to be using,” he said.

As an example, he cited the promising opportunities for Canada to be a global leader in the emerging market for hydrogen-powered buses and trucks.

Environmental economist David Sawyer said proponents of green stimulus plans should emphasize “co-benefits” that come with investment in emission-reduction projects. They can include not only more jobs but also health benefits from reduced fossil-fuel pollution and greater resiliency to withstand the severe weather impacts of the climate crisis.

Dianne Saxe, Ontario’s former environment commissioner, said Canada needs to find a way to maintain long-term climate-change policies so businesses and consumers have confidence that investments made today are not undermined tomorrow.

“The biggest challenge is how to have stable policies that survive government changes,” she told the roundtable. Canadians need to be active, she said. “Fundamentally, to get durable public policy, we need strong, loud public demand for it.”

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Final roundtable: Clean economy projects could create 670000 jobs per year – Corporate Knights Magazine

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The COVID-19 pandemic represents an opportunity to “reposition” the Canadian economy to take full advantage of the low-carbon transition, the new chair of the Canada Infrastructure Bank said June 3.

The economic crisis resulting from the pandemic has forced corporations and governments to deviate from their standard operating procedures, opening up an opportunity for innovation and creativity, said Michael Sabia, who was recently appointed by the federal government to head up the infrastructure bank.

“We need to seize this moment to be creative about how we reposition the national economy for a world that is going to be different, and a very important part of that [effort] is repositioning our economy to be a significantly lower carbon economy,” Sabia told a virtual roundtable hosted by Corporate Knights.

Sabia said that there is plenty of potential for the Canada Infrastructure Bank (CIB) to participate in clean energy projects but that the federal Crown corporation has underperformed to date.

The CIB has a mandate to invest $35 billion in federal funding by 2027/28 but has been criticized for its slow start.

Sabia said the bank should focus less on traditional infrastructure like roads and ports and more on stimulus projects that accelerate the energy transition, including renewable power, interprovincial transmission, low-carbon transportation and digitalization efforts to ensure all Canadians have access to high-speed internet.

The Corporate Knights roundtable was part of its seven-part Building Back Better project that urged the Liberal government to ensure that any economic recovery plan have a climate-change focus.

Addressing the roundtable, Industry Minister Navdeep Bains said Canada will have to be innovative in responding to the COVID-19 pandemic and the climate crisis.

He said hundreds of Canadian businesses have responded to the need for medical equipment by changing their operations to produce new products. “That’s the same mindset we have to have when it comes to confronting the climate crisis.”

In a white paper released Wednesday, authors Ralph Torrie, Céline Bak and Toby Heaps said the federal government should allocate $106 billion over the next 10 years for a host of clean energy projects that would create the equivalent of 670,000 full-time jobs per year. More than a third of the federal government investment, $40 billion, would be frontloaded in the first two years (with half dedicated to grants to finance a green renovation wave). Over 10 years, the white paper estimates, the federal investment and complementary policies would crowd in a further $730 billion in mostly private sector investment.

All told, the investments would reduce greenhouse (GHG) emissions by 236 megatonnes annually by 2030, from 2018 levels of 729 megatonnes. That scale of GHG reductions would put the country on track to meet the Liberal government’s target of net-zero emissions by 2050, Bak told the roundtable.

Proposals have included support for a major retrofit program to improve energy efficiency in buildings, planting an additional 800 million trees a year for 10 years, and investments in coast-to-coast electric-vehicle (EV) infrastructure, as well as interprovincial transmission lines to deliver low-carbon electricity and a $40 billion Energy and EV Innovation Fund to help create Canadian champions in fast-growing low-carbon markets where Canada has strong assets, including bitumen-derived carbon fibres, green hydrogen, renewable jet fuels, batteries and EVs.

Other speakers suggested that a green stimulus plan should have goals beyond job creation and emission reductions.

Canadians are now confronting a triple whammy of the COVID-19 pandemic, the climate crisis and the vivid reminder of the systemic racism embedded in the country’s attitudes and institutions, said Catherine Abreu, executive director of Climate Action Network Canada.

Any green stimulus programs must be based on a “just recovery” Abreu said. Her group was one of 150 civil society organizations that released a document this week proposing “Six Principles for a Just Recovery” for a more equitable and sustainable future.

“This moment is forcing us into confrontation with the vulnerabilities that are built into our economic and social systems,” she said. “There are ongoing crises that lurk behind the current health and economic emergencies . . . So if we are going to tackle issues like climate change, we have to come at them fundamentally as a fight for justice.”

The federal government can pursue reconciliation with Indigenous communities by partnering with them on clean energy projects that deliver health, economic and social benefits to the people, said Terri Lynn Morrison of the Indigenous Clean Energy network.

Morrison said Indigenous people are already major developers and partners in clean energy projects across the country. “They’re ready to seize the opportunity,” she added.

Some economists have questioned whether stimulus spending on clean energy infrastructure is the optimal way to respond to an economic slump precipitated by a health crisis that has forced Canadians into social isolation. Sectors like retail, restaurants and tourism have been hit hardest with job losses, and it’s not clear they would benefit from traditional – or even non-traditional – stimulus spending.

In a blog post last month, economists Dale Beugin and Mike Moffatt argued that green stimulus spending should target areas such as infrastructure, while government should continue to rely on regulation and carbon price to drive climate policy.

Trying to meet the requirements of both recovery and emissions reductions would result in an approach that fails to do either efficiently, they argued.

“Climate considerations should be less constraint and more a radar to help identify non-traditional but job-rich investment opportunities, such as deep retrofits and flood protection for homes and workplaces,” Heaps said via email. “Climate can also be a tiebreaker where two recovery options offer similar economic benefits.”

“In addition to the large investments in green infrastructure, the ‘shecovery’ will likely require significant investments in eldercare and childcare,” he added.

During the roundtable, Ivey Foundation president Bruce Lourie noted that countries like Germany and South Korea have succeeded in providing support for key clean energy sectors. The refrain that “governments shouldn’t pick winners” is a “tired and misguided refrain for us to be using,” he said.

As an example, he cited the promising opportunities for Canada to be a global leader in the emerging market for hydrogen-powered buses and trucks.

Environmental economist David Sawyer said proponents of green stimulus plans should emphasize “co-benefits” that come with investment in emission-reduction projects. They can include not only more jobs but also health benefits from reduced fossil-fuel pollution and greater resiliency to withstand the severe weather impacts of the climate crisis.

Dianne Saxe, Ontario’s former environment commissioner, said Canada needs to find a way to maintain long-term climate-change policies so businesses and consumers have confidence that investments made today are not undermined tomorrow.

“The biggest challenge is how to have stable policies that survive government changes,” she told the roundtable. Canadians need to be active, she said. “Fundamentally, to get durable public policy, we need strong, loud public demand for it.”

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