A key goal laid out in the federal government’s recent speech from the throne was to “build back better to create a stronger, more resilient Canada.” In our view, “building back better” must include placing growing clean industries (such as electric vehicle manufacturing and zero-carbon power generation) at the centre of Canada’s industrial policy. At the same time, our social contract must be rejuvenated to take care of our young and old with affordable and accessible childcare and long-term care. The sketch provided by the throne speech suggests the government is on the right track – but it did not explain how we will be able to afford the significant investments needed to make the vision into a reality. Those details will be revealed in an upcoming budget or economic statement, but there are a number of fiscal tools at Ottawa’s disposal to make a clean and caring economy a reality.
A decent roadmap
If we look at the speech using a clean economy and caring lens, there were four essential lines. The commitment that “climate action will be a cornerstone of our plan to support and create a million jobs across the country” is a game-changing update to the government’s narrative around climate change. The related promises to support energy-efficient building retrofits and to launch a new fund to attract investments in zero-emission product manufacturing suggest that Canada may be on the way to having a clean industrial strategy.
In stating that “the government will make a significant, long-term, sustained investment to create a Canada-wide early-learning and child-care system,” the feds recognized that the majority of job losses (63 percent) caused by the pandemic-induced economic crisis have affected women, many of whom may not be able to return to the workforce without better child-care options.
The government’s intent to wave off the fiscal hawks and continue to dig deep to help us build back better was made clear when it noted that “this is not the time for austerity.”
The government further signaled it is serious about building back better by saying it would work with the provinces and territories to “make the largest investment in Canadian history in training for workers,” with the first item listed as “supporting Canadians as they build new skills in growing [read ‘green’] sectors.”
What was missing from the throne speech?
On the green recovery side (a package of investments and regulatory reforms to relaunch the economy on the back of green industries), there was a fair bit of detail on the new investment fund meant to support zero-emission vehicles and batteries – which will largely benefit central Canada. But there was scant mention of how to rev up the low-carbon resource sector in the West. This includes (in order of technology readiness): sustainable biofuels, hydrogen, and the potential bonanza of extracting carbon fibres from bitumen.
The immense potential for the farming and forestry sectors to contribute to climate solutions was given just one line, referring to “farmers, foresters, and ranchers as key partners in the fight against climate change, supporting their efforts to reduce emissions and build resilience.”
There was no mention of how to ensure that Canadians reap our fair share of capital gains and intellectual property rights in return for the billions of dollars of public investment about to be directed at the recovery. It would have been nice to see some indication of how the government plans to ensure that our pension funds get the inside track on these growth investment opportunities in Canadian enterprises. There was also a missed opportunity to lay down markers for more democratic ownership models, including provisions to encourage employee-owned businesses and co-ops.
The next economic update and a nation building strategy
Now is the time for the federal government to go “all in” for a caring economy and a green recovery by using its fiscal power and monetary sovereignty to make the investments that will expand, mobilize and redeploy our productive capacity for building the Canada we want and the Canada we need for the 21st century.
On a long-term basis, we are going to invest an additional 0.5 percent of GDP into the caring economy to make affordable and quality child care and elder care a universal reality. And over the next five years, to ensure that Canada plays to its full potential in seizing clean-growth markets, we will invest an additional one percent of GDP per year to build up the clean economy.
How are we going to pay for it? We can issue bonds today that will be directed at investments in affordable child care, long-term care for seniors and a green recovery, and we can afford to do it without raising tax rates. We can do this because these programs stimulate economic activity that will generate future government tax revenue that will be greater than the interest on the bonds.
Here’s how it works: affordable child care creates jobs to deal with the “she-cession” and boosts labour force participation overall, which in turn fuels higher growth and tax revenues. A child care program (building on lessons learned from the Quebec model) would require additional federal investment of $80 billion over the next 10 years. On an annual basis, we estimate this investment would represent 0.35 percent of GDP (assuming 50-50 cost-sharing with provinces and territories). That expenditure in turn would be offset by higher economic growth – by reducing the gender workforce gap, GDP would go up a corresponding 2.4 percent by our estimates (based on an IMF paper extrapolating from the Quebec child care experience). This would represent an increase in federal revenues of $8.3 billion per year (or 0.36 percent of GDP, using the 15 percent federal revenue-to-GDP ratio).
Securing dignified long-term care as an element of universal health care almost certainly requires setting up a national long-term-care insurance program, with a strong community and home care component, according to the National Institute of Aging. Setting this up will likely require significant federal government contributions in the order of an additional 0.25 percent of GDP, assuming a matching contribution by provinces and territories. Together, this would raise Canada’s spending on publicly funded long-term care from 1.3 to 1.8 percent of GDP, in line with our OECD peers, and take some of the load off the 35 percent of Canadians who balance paid work with unpaid caregiving.
The federal contribution would be offset by higher levels of GDP. Corporate Knights estimates that GDP would rise by one percent, by factoring in a 35 percent productivity boost among the Canadians who currently balance paid work with unpaid caregiving, plus the economic boost associated with creating the new long-term care spaces, as estimated by the Conference Board of Canada. Savings in the order of 0.12 percent of GDP would arise from the hospital beds freed up through increased provision of long-term-care spaces and in-home-care support services, which are 80 percent more cost-effective.
Meanwhile, the government could support technological innovations and attract large-scale private investment into clean-growth areas that align with Canada’s strengths by issuing low-cost, long-dated sovereign bonds (issued now to lock in low interest rates). The European Union has a similar system. Corporate Knights economists estimate this would create a new engine of growth based on boosting the growth of clean industries, raising Canada’s 2030 GDP levels between five and 10 percent. At seven percent GDP growth, federal tax revenues would increase by 1.1 percent of GDP, enabling us to manage our sovereign debt loads and sustain a clean and caring economy over the coming decades.
Investing in a caring and green recovery will expand, mobilize and redeploy Canada’s productive capacity, enabling us to manage the sovereign debt and sustain a clean and caring economy over the coming decades.
Toby Heaps is the co-founder and CEO of Corporate Knights.
Céline Bak is the president and founder of Analytica Advisors.
Ralph Torrie is the president of Torrie Smith Associates, and a senior associate with the Sustainability Solution Group.
Please attribute the author(s) and mention that the article was originally published by Policy Options magazine. Editing the piece is not permitted, but you may publish excerpts.
Euro zone economy at risk of double-dip recession, PMIs show – The Globe and Mail
Euro zone economic activity slipped back into decline this month as a second wave of the coronavirus sweeps across the continent, heightening expectations for a double-dip recession, surveys showed on Friday.
Renewed restrictions to control the pandemic forced many businesses in the bloc’s dominant service industry to limit operations, and nearly 90% of economists polled by Reuters this week said there was a high risk the coronavirus resurgence would halt the nascent euro zone economic recovery.
“The euro zone PMI confirms that the second wave of the coronavirus is weighing more and more on the economy. A double-dip in the fourth quarter is becoming more likely at this rate,” said Bert Colijn at ING.
IHS Markit’s Flash Composite Purchasing Managers’ Index, seen as a good gauge of economic health, fell to 49.4 from September’s final reading of 50.4.
That was below the 50-mark separating growth from contraction and only fractionally better than the 49.3 predicted in a Reuters poll.
That headline PMI was dragged down by the service industry’s PMI, which sank more than expected to 46.2 from 48.0.
“The further decline in the euro zone Composite PMI in October adds to the evidence that the second wave of infections, and the new wave of containment measures, is taking a heavy toll on the economy,” said Jack Allen-Reynolds at Capital Economics.
Friday’s surveys showed the bloc’s economy is running at two speeds, with manufacturing benefiting from strong global demand but services – which make up the bulk of the economy – struggling to remain active as lockdowns force consumers to stay home and businesses to close.
In contrast, in China – where the economy relies much more heavily on manufacturing and where the pandemic is largely under control – the recovery accelerated last quarter as consumers shook off their caution.
Echoing the divide between services and manufacturing, German factories powered ahead this month, while in France activity contracted as a resurgence of the virus hit the euro zone’s second-biggest economy.
Outside the currency bloc and now outside the European Union, Britain’s economic recovery also lost more momentum as restrictions hit businesses in the hospitality and transport sectors.
European stocks pushed 0.8% higher for their best day in five trading sessions as strong third-quarter results offset the survey data.
WINTER IS COMING
It will likely be a chilling winter for the job market which until now has been shielded by government furlough schemes as the uncertain outlook meant firms reduced headcount for an eighth month.
The composite employment subindex nudged up slightly, but remained in negative territory, while the Reuters poll concluded that the bloc’s jobless rate would not peak for at least six months.
With infection rates and the death toll rising, optimism fell. The services business expectations index dropped to 54.6 from 59.2, its lowest since May when the initial lockdowns were being eased.
A 750 billion euro stimulus plan agreed by the European Union in July to support its suffering economies will be delayed, a senior diplomat said on Thursday, which is also likely to have a negative impact on sentiment.
Still, factories fared much better than expected. The flash manufacturing PMI climbed to a 26-month high of 54.4 and was far above the median forecast in a Reuters poll.
An index measuring output, which feeds into the composite PMI, rose to its highest since early 2018.
Strong demand for manufactured goods meant factories were also able to increase their prices for the first time since mid-2019, albeit only slightly.
That will provide some relief to policymakers at the European Central Bank as inflation, which they want close to 2%, has been negative for two months.
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Europe's Economy Risks New Contraction From Virus Curbs – BNN
(Bloomberg) — The resurgence of the coronavirus has knocked Europe’s economic recovery back a step and raised the possibility of another contraction.
IHS Markit’s monthly measure of business activity fell to a four-month low of 49.4 in October from 50.4 in September. Within the report is a clear, divergent trend of manufacturing strength being offset by damage to services from the second wave of the pandemic.
New government curbs as well as consumer fears of the virus are driving the two-speed economy. In Paris and eight other major French cities, authorities introduced a curfew this month that’s hitting restaurants and bars particularly hard. In Germany, a Bavarian district imposed a two-week lockdown after infections climbed above a rate that triggers an automatic tightening of restrictions.
While the weakness is largely limited to services, the fallout on jobs and spillovers to the rest of the economy will worry policy makers. The deteriorating outlook strengthens the case for the European Central Bank to pump more monetary stimulus into the economy, and governments may have to extend expensive aid programs.
IHS Markit warned that the euro-area economy could shrink again this quarter. Its report said employment fell again in October, confidence deteriorated and orders declined.
“While the overall downturn remains only modest, and far slighter than seen during the second quarter, the prospect of a slide back into recession will exert greater pressure on the ECB to add more stimulus and for national governments to help cushion the impact of Covid-19 containment measures,” said Chris Williamson, chief business economist at IHS Markit.
©2020 Bloomberg L.P.
ECB Seen Preparing More Aid as Virus Spread Derails Economy – Yahoo Canada Finance
As renewed scrutiny grows around the death of 15-year-old Wally Rich, Newfoundland and Labrador’s child and youth advocate says the situation is a tragedy, and her office’s ability to investigate is held up in bureaucratic limbo.Rich, from Natuashish, died by suicide while at a group home in Labrador in May, nearly three years after the provincial government promised an inquiry into Innu children in care.Jackie Lake Kavanagh, the child and youth advocate, said any ability to do her own investigation into Rich’s death is on hold, as by law she cannot look at or investigate a matter until the Child Death Review Committee has completed its own review. She has yet to receive a file from that committee, she said, and added the awaited inquiry is also standing in the way.She wants to see if Rich’s case will be included in that inquiry, which will determine whether she can proceed with her own investigation. That’s one more reason she feels the years-long delay for the inquiry is unacceptable.”When you look at the sense of urgency, this should have been happening already, and Innu children are struggling in the system and this is a prime example of it,” she said. Kavanagh said it’s inexplicable to her how the province hasn’t moved ahead with the inquiry yet. “This inquiry was committed more than three years ago, and if you look back beyond that, the Innu people were demanding and asking for that inquiry before it was committed. So, it goes back much more than three years,” said Jackie Lake Kavanagh. “I think the piece that they want is, they want answers, they want accountability and they want reconciliation, and they’ve said that. And I think those are very reasonable requests to make.”Troubling statisticsAs of March, there were 165 Innu children in provincial care. It’s clear to Kavanagh that Rich is not the only one who encountered problems with the system.”It’s not unique which is really, really tragic,” she told CBC Radio’s St John’s Morning Show.Her office is seeing troubling statistics in the province.Legislative changes to the Child and Youth Advocate Act in 2018 meant her office has to be notified if a child is critically injured or dies while in care and custody, or within the last 12 months of care and custody.”Between April 1, 2019 and the end of September this year, we have had 75 reports, and 60 per cent of those have been around suicide attempts or suicide ideation,” Kavanagh said. “That’s really, really significant in this little province of ours.”Kavanagh said Indigenous children and their communities have been marginalized for a long time, and the impact of intergenerational trauma is working its way through younger generations. She said Rich’s death is heartbreaking, and it’s part of larger, systemic issues that are pervasive across Canada.”When you look at the situation across the country, in fact, between 10- and 24-year-olds suicide is the second leading cause of death, and that is really, really troubling,” Kavanagh said.”I think all of us should be left with a whole sense of unrest about that.”Kavanagh said a lot more work needs to be done, particularly a plan dedicated to youth and children in the province’s suicide prevention strategy as well as services dedicated to Indigenous children based in their culture. Where to get help:Canada Suicide Prevention Service: 1-833-456-4566 (phone) | 45645 (text) | http://www.crisisservicescanada.ca/ (chat)In Quebec (French): Association québécoise de prévention du suicide: 1-866-APPELLE (1-866-277-3553)Kids Help Phone: 1-800-668-6868 (phone), Live Chat counselling at www.kidshelpphone.caCanadian Association for Suicide Prevention: Find a 24-hour crisisRead more articles from CBC Newfoundland and Labrador
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