China: three things January 26, 2012
Posted by Dan Herman in Canada, china, Economics.Tags: Canada, china, trade
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What stands out most about my recent trip to China is how familiar it feels. Walking through the downtown streets of Shanghai, Hangzhou or Beijing, you’d be hard pressed to know you’re in China and not in downtown Toronto or Chicago. The hordes walking past wear the same clothes, they each carry multiple shopping bags from brand name stores, and most are glued to their smartphones using near ubiquitous wifi. In fact China’s cities feel like they’ve leap-frogged ahead with massive investments in modern transportation infrastructure and futuristic architecture that make Toronto feel old.
When I was last in China, a four month stint in 2002, it was clear that the country was undergoing a massive, and rapid, process of modernization and development but it still felt decades, and in some cases, centuries behind. Beijing was booming, as were Shenzen, Chengdu, Xian and Guanzhou, but the interior felt… like the early 1900s. And while that’s still undoubtedly true in parts of the country, far less of it seems to be stuck in time thanks to an endless expanse of brand-new highways, high-speed trains, and forests of condominiums and apartments that sprout for what seems to be hundreds of kilometers around major cities. Some of the smaller towns evens seem to have been razed to the ground and rebuilt, despite a ghost-town quiet, a trend that reminded us of some of the deserted villages cum cities in Western Sahara/Morocco that had been “updated” by the Moroccan government as a means of showing progress/occupation.
With that, here are three things about China that stand out with respect to the country’s future. (more…)
Trade strategy for the not-so-powerful November 25, 2011
Posted by Dan Herman in Canada, Economics, Geo-politics.add a comment
The logic of free trade – why we’re signing CETA
Sometimes the answers are so simple you miss them for fear they couldn’t possibly be correct. Analyzing the rationale for Canada’s participation in a comprehensive economic trade agreement (CETA) with the European Union has reminded me of that.
For unless a magical pot of gold has been promised to us (likely by the Irish … or maybe the Greeks..) and not communicated to the rest of us, a reasoned analysis of the potential costs and benefits of CETA wouldn’t lead one to automatically sign up.
As while the Federal Government continues to bandy about a 3 year old study conducted prior to any of the negotiations that highlighted a potential net benefit of $12billion per year, and upwards of 80,000 new jobs. Two research projects conducted in the wake of the negotiations, and thus using the negotiations as the base of their quantitative assumptions, show much weaker gains. For example, Jim Stanford from the CAW finds that the agreement will actually lead to between 28,000 and 150,000 job losses. Less extreme, research by Kitou and Philippidas show an annual gain of 3 billion Euros, or 5 billion CDN, far less than the Canadian government’s somewhat useless data points.
If the truth lay in Stanford’s figures, we wouldn’t sign up right? And if the figures we’re closer to Kitou and Philipidas’ we’d likely be even more reticent about the procurement and IP related items in the agreement.
So why in the world are we rushing headlong into this? (more…)
Have we lost our voice? November 8, 2011
Posted by Dan Herman in Canada, Current Events, Economics, Government, Uncategorized.add a comment
For all this talk of Occupy “insert place”, I can’t help but notice that few amongst us are talking about the immediate issues and policies that are being debated as we speak in Ottawa and that hold tremendous economic and social consequences.
For example, the Comprehensive Economic and Trade Agreement currently being negotiated between Canada and the European Union, while an important element of diversifying our trade away from the United States (where we send 75% of our exports), is far from an ironclad winner.
While the government has promised the agreement will potentially add $12 billion and 80,000 jobs to the economy, with notable gains for agricultural exporters, the numbers are based on three year old research conducted on the basis of broad assumptions rather than actual negotiated details. I wouldn’t buy a car, let alone sign the most important trade agreement in our country’s history without an accurate test of the real costs and benefits of participation.
More recent research conducted on the basis of early drafts of the agreement, including that of CAW economist Jim Stanford, highlight that the deal may in fact cause a loss of between 28,000 and 152,000 jobs. Whose numbers are right? And in which sectors are those supposed job gains or job losses going to occur? Given ongoing weakness in Canada’s labour market, a focus on jobs as opposed to a myopic focus on “growth” is necessary.
Moreover, as a result of intellectual property provisions in the CETA agreement, an estimated $2billion a year will be added to our health care expenditures thanks to the effect of greater patent protection on the availability of generically-branded medications. Given the tremendous burden healthcare currently places on our fiscal budgets (approximately $0.40 of every Provincial dollar), is this tradeoff the right one? And if the agreement does indeed place an outright ban on “buy local” provisions, and similarly-themed local content requirements, as well as opening up municipal-level procurement to European competition, what will this mean for jobs, wages and prices in Canada?
CETA promises to be the most significant trade deal Canada has signed to-date. It promises access to, in spite of the current economic challenges, a market of nearly 500 million relatively wealthy consumers. A healthy trade relationship with Europe is essential, as is the diversification of trade away from the United States. But will Canadian workers, consumers and taxpayers enjoy a net benefit under the terms of this agreement? Unfortunately we’re heading into this with our eyes closed given the government has shared no research on the specific impacts of the trade deal as currently negotiated.
And there is no shortage of other worthy topics of discussion. Be it Tony Clement’s financial misadventures related to G8/G20 spending, our Canadian position on Palestinian statehood, the future of the long-gun registry or our strategies related to climate change. The future, let alone the present, isn’t waiting for our input.
To be sure, the current climate of economic uncertainty means we’re all worried about our jobs, about paying the bills, and about taking care of those most dear to us. Moreover, our growing distrust of government and disengagement with policy – dramatically reflected in historically low voter turnouts – leaves many of us feeling helpless to affect change.
But these immediate concerns shouldn’t blind us to the changes that take place under our watch and that future generations will inherit. Our silence on these issues, and our willing disengagement from the electoral process, mean we’re as much to blame as anyone for the outcomes of government policy.
The Occupy movement might suffer from confused and misunderstood economics, but atleast they’re saying something. For most of us have lost our voice, and if that’s true, we risk losing much more as a result.
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Defining accountability in global governance October 31, 2011
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For when you’re really bored and in the mood for some semi-philosophical analysis of how the world is governed:
From a forthcoming edition of the Canadian Journal of Globalization -
Dan Herman Polity without demos: defining global accountability in global governance.
This article examines how global governance is constructed and held to account for its various constituent parts, and notes that as the geographic scope of cause and effect widens, and as the mechanisms for their governance is increasingly structured along multi-level and networked lines of authority, accountability becomes ever more challenging given the presence of still undefined polity. This forces scholars of global governance not only to question the design, actors and structure of global governance, but also to investigate the deeper meanings of global governance in relation to power, identity and ethics. This paper endeavours to look at both sets of issues, and in the process argues that global governance cannot exist as an accountable mechanism of rule without an overarching commitment to global ethics that has so far escaped its reach.
Canada’s resource wealth: necessary but insufficient September 7, 2011
Posted by Dan Herman in Canada, Economics, Innovation.Tags: Canada, Economics, Industry, Innovation
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It’s become near-orthodox belief that Canada’s natural resource wealth endows the country with a superman-like ability to withstand shocks in the global economy. As many an editorial on the state of the Canadian economy has noted, “Compared to its Group of Seven peers, Canada emerged from the financial crisis relatively unscathed in part due to its strong banking system and wealth of natural resources, and it was among the first economies in the developed world to move from the recovery to expansion phase. “ I was presented with this rationale last week during a meeting with a very-well regarded and influential President of a Canadian university, and with resource exports amounting to near $200 billion per year, there’s no doubt that what’s in the ground is indeed an important part of our economy.
But such numbers need to be digested with a critical mind. For while the aggregate total revenue from resource extraction is indeed important, it’s broader impact on employment, both direct and indirect, is far less impressive. For while resources comprise near 40% of Canada’s total exports (which works out to about 4% of total annual GDP), the sector employs only 226,000 Canadians. Compare that to the over 1.5 million who (still) work in manufacturing, the 1.7 million in healthcare and 1.8 million in retail. In fact, resources contribute a measly 2.5 jobs per dollar of GDP compared to 9 jobs for every unit of manufacturing activity, 10 jobs per construction dollar, 24 jobs per retail dollars and a whopping 37 jobs per food services dollar. Evidently, this doesn’t infer that a retail or food service dollar is the way forward, quite the opposite. However, what’s clear is that resources are far from a significant (direct) creator of jobs in Canada. Certainly, resource extraction and its subsequent sale, creates significant revenues, profits and spending that circulates in the economy, however this is true for all forms of economic activity.
For want of easily accessible Canadian data, let’s use US industry multipliers as our guide. The US Bureau of Industry and Security (…think about that combination for a minute…) estimates an industry multiplier of 1.50 for petroleum and gas extraction, and a 1.65 multiplier for other mining activity. By way of comparison, manufacturing provides an average multiplier of 2.31 and services and retail roughly 1.6. Applying those multipliers to related export income streams yields what I’ll call a ‘full-impact’ GDP total of $311 billion for resource-related income, a third of the nearly $ trillion ($CAD) in manufacturing-related income. Resources are a significant source of income for Canada but insufficient as a means of ensuring broad employment, especially in an economy where the primary manufacturing sector has seen approximately 350,000 jobs losses since 2006, and about 600,000 since 2000. The (usual) downgrading of those manufacturing jobs to retail and service positions reduces the associated income multiplier thus requiring other industries to pick up the slack. Yet what seems to have replaced those higher-value jobs (measured in terms of multiplier) is construction and retail employment, and to a lesser extent financial services and healthcare. This mirrors Canada’s aggregate position, whereby since 2001 Canada’s manufactured output has grown by a miniscule 0.2%, services have grown by 2.4%. This growth in services, however, is dependent on incomes created elsewhere in the economy.
So where is that elsewhere? It should be in the innovation and development of competitive products for both domestic and international consumption. Yet as noted, we’ve actually seen a decrease in this type of employment. And while Canada’s 600,000 manufacturing job losses pale in comparison to the 3 million lost south of the border, the (similar) trends experienced in both related to stagnant and declining real wages for most income earners and increasing income equality highlights the potential necessity of a strong (i.e. globally competitive) manufacturing sector to buttress high levels of employment and a relatively equal distribution of the proceeds of growth. Our switch to services from production has indeed led to more growth, yet it’s done so in an increasingly unbalanced fashion.
And while resource income does provide Canada with a powerful income stream, it’s only as valuable as what we do with that income, and the concomitant shift to service related employment is not the answer. As the President of MIT recently noted in an op-ed to the New York Times, “Rebuilding our manufacturing capacity requires the demolition of the idea that the United States can thrive on its service sector alone. We need to create at least 20 million jobs in the next decade to offset the effects of the recession and to address our $500 billion trade deficit in manufactured goods. These problems are related, given that the service sector accounts for only 20 percent of world trade. To make our economy grow, sell more goods to the world and replenish the work force, we need to restore manufacturing — not the assembly-line jobs of the past, but the high-tech advanced manufacturing of the future.”
The US is far from alone in targeting this challenge. All Western economies will seek to do the same, as will developing economies that currently hold significant wage-related advantages. Rebalancing a domestic economy in the face of this competition means hard-thinking on not just investment and innovation priorities, but also on wages and productivity and their relative global positioning, and the distribution of profits domestically that can counter the deflationary impacts of a more globally competitive wage structure.
Ultimately, the world’s changing and Canada can’t afford to sit back and assume that the geographic serendipity that endowed us with natural resources is enough to ensure that future generations of Canadians will enjoy the quality of life that we have. We need a strategy to compete in a 21st century global economy that is dramatically different, and dramatically more competitive, from the past several decades of relative good times. The gradual introduction of millions to the skilled labour force across the emerging and developing world presents a significant challenge to now-orthodox conceptions of wages and incomes in the West. This isn’t about returning to low-value production of textiles and white goods. Rather it’s about competing in the next generation of technology and ensuring a domestic production base. Eventually, growth across the developing world may witness the development of a consumer base that absorbs production from higher-wage countries. However, as we’ve witnessed with China’s emergence, the creation of a broad domestic consumer base is a decades-long process. And in Canada, the US and other mature economies, we can’t wait decades to put people back to work in fulfilling and relatively well-valued work.
Globalization’s next stage June 27, 2011
Posted by Dan Herman in Uncategorized.Tags: Economics, Global Governance, trade
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The following was published as part of the Centre for International Governance Innovation (CIGI)’s partnership with the Institute on Net Economic Thinking, and is available online here.
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From Multi- to Mini- lateralism…
“Politics has returned to the national.” Those were the words of former British Prime Minister Gordon Brown at the INET conference on April 8–11, 2011. He called for renewed vigour to be applied towards developing cooperative economic and regulatory standards in the face of significant retrenchments towards national economic spheres. As the global economy emerges from the uncertainty of the post-2007 global economic crisis, its future architecture remains clouded from view as a result of continued challenges to the development of a truly representative and practical set of global economic and financial regulatory standards that can better enable sustained progress and development well into the twenty-first century.
This brief paper highlights the tensions and dynamic interplay of domestic and international priorities that underline the challenges to future multilateralism noted at the INET conference. While the immediate post-crisis period was marked by an exceptional degree of coordination related to stimulus spending, interest rate policies and bailout programs, the still-evolving transition to a new normal highlights the increasing tension between long-term global economic cooperation and short-term domestic priorities.
Re-asserting Domestic Sovereignty
While the turn towards the domestic may be novel in contemporary economic governance, it is not without precedent. International relations theorist Peter Katzenstein’s findings on the impact that transitional periods in the global economy have on this two-level dynamic are reflective of this contemporary tension. Katzenstein found that when the structures and hierarchy of the global economy can no longer be assumed to be fixed, “the relative importance of domestic forces in shaping foreign economic policy increased” (Katzenstein, 1978: 595) Katzenstein’s work continues to ring true when applied to the global economy today, where current tensions have their roots both in the previous three years of economic turmoil, as well as in the rapid and intense shift of the locus of economic influence from Washington, London and Brussels to Rio, Beijing and Mumbai. Brown’s comment that “the US and European Union are at risk of being out-everything’d by the rest of the world” is indicative of an increasingly tenuous balance between producers in emerging economies and their rich world consumers. The growing employment needs in both, though structurally distinct, highlight a fundamental challenge to sustained economic cooperation.
The subsequent rise of economic nationalism, albeit still nascent, follows on such immediate and future employment needs and poses a grave threat to the global economy given the barriers such policies raise vis-à-vis the establishment of global economic and financial standards. The world of economic and regulatory multilateralism that marked the second half of the twentieth century is at risk of giving way to an increased focus on “mini-lateralism,” both its regional and bilateral varieties, in the early stages of the twenty-first century.
Among the many lessons served by the post-2007 global financial crisis, none has been as revealing as the level of economic interdependence present. As Claudio Borio of the Bank for International Settlements noted in his presentation on the complexity of international finance, “there is no longer such a thing as absolute sovereignty in economic governance.” Despite the Anglo-Saxon roots of the crisis, the complex integration of domestic financial structures into international networks helped precipitate the bankruptcy of Iceland and the failure of financial institutions in at least a dozen countries across the globe. The broader macroeconomic impact of the crisis saw 10 countries seek emergency lending from the International Monetary Fund, and pushed many governments to nationalize formerly private institutions to ensure the stability of domestic economies.
The crisis revealed deep inadequacies within both global and domestic structures of economic and financial governance. However, it is at the domestic level that such inadequacies hit hardest. The crisis is estimated to have pushed 50 million people worldwide into unemployment (nearly a fifth of these were in the United States alone), and upwards of 200 million into extreme poverty (International Labour Organization, 2009). Subsequent national responses, including the use of capital controls on incoming investment, explicit intervention in volatile currency markets and increases in the use of both tariff and non-tariff barriers are indicative of domestic attempts to mitigate the excesses of economic globalization. As Eric Berglof from the European Bank for Reconstruction and Development noted at the conference, these moves represent the reassertion of host-country control over economic and financial globalization and the reversal of several decades of the prioritization of the rights of capital over other domestic interests.
The prohibitive costs of the crisis are far from the sole cause of the shift away from multilateralism, which is occurring despite the advent of the G20. Rather, the perceived benefits of economic globalization have begun to be clouded by an increasing body of research that links the processes of global economic liberalization with increasing income inequality, and long-term unemployment and underemployment in developed economies. The conference played host to eye-opening presentations by Dalia Marin from the University of Munich and William Lazonik from the University of Massachusetts on European and US experiences with economic globalization over the past three decades. In particular, Marin’s work on European offshoring efforts, and their correlation with increasing domestic inequality, highlights the increased attention being paid to the potentially harmful domestic effects of global economic integration. Marin’s research found that offshoring by rich-country trade partners reduces domestic skill premiums by 20–30 percent, and when combined with increased executive compensation, has seen the gradual decline of highly skilled, middle-class wage levels. Similarly, Lazonik’s work on the decline of domestic employment and real wage levels in the United States finds a strong correlation between this decline and labour outsourcing and increased corporate profits.
It is subsequently of little surprise that the use of trade barriers and discriminatory regulation, whether explicit or “murky,” is of increasing popularity among developed economy governments as a means of mitigating the worst effects of economic globalization. According to World Bank figures, over 500 explicitly discriminatory trade measures have been implemented since 2008, with the vast majority implemented by industrialized countries. Of the 141 measures found to target least-developed country exports, over 100 have been implemented by G20 countries (Evenett, 2009). Moreover, Bussiere et al. (2009: 41) found that 24 percent of all financial regulatory changes implemented in 2007 were unfavourable to multinational enterprises, up from 12 percent in 2003-2004. While periods of economic liberalization and globalization are empirically associated with economic growth, the long-term vulnerabilities and dislocations they produce at the domestic level may act as catalysts for the predominance of domestic or “mini-lateral” priorities over multilateral ones.
Conclusion
The global economic crisis highlights the limits of orthodox economic thought on the benefits of globalization. Aggregate growth measures alone do not properly capture the systemic vulnerabilities produced by economic liberalization on domestic constituencies. As Lord Adair Turner noted, “economics must begin to focus on job creation, rather than simple measures of economic growth, as the key indicator of economic progress.” The rise of protectionist economic strategies, be they a reaction to the complex interdependence of contemporary capital movements or a reaction to the social dislocations related to real wages and employment, signal a shift away from strict economic globalization to a more nuanced “mini-lateral” version that ensures space for, and a privileging of, the domestic over the international. The inherent vulnerabilities of the latter have proven to hold too great a degree of risk for domestic political leaders. When combined with the dramatic rise of emerging economic powers, globalization in the twenty-first century will likely be radically different from its twentieth century version, and is likely to return to the adage that all economics, like all politics, is ultimately local.
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Dan Herman is a Ph.D. student at the Balsillie School of International Affairs at Wilfrid Laurier University. His research focuses on the political economy of international trade.
Works Cited
Bussiere, M., E. Perez-Barreiro, R. Straub, and D. Taglioni (2009). “Protectionist Responses to the Crisis: Global Trends and Implications” (unpublished). Frankfurt: European Central Bank.
Evenett, Simon (2009).“Crisis-era protectionism one year after the Washington G20 meeting.” Global Trade Alert. November.
International Labour Organization (2009). “Tackling the global jobs crisis-recovery through decent work policies: Report of the Director-General,” International Labour Conference, 98th Session 2009, Report I(A), ILO, Geneva.
Katzenstein, Peter J. (ed.) (1978). Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States. Madison: University of Wisconsin Press.
Notes on two very distinct India’s June 9, 2011
Posted by Dan Herman in Current Events, Demographics, Economics.Tags: development, Future, India
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Few places we’ve visited over the past several years offered such stark contrasts as does India. For while places like Gurgaon, just outside of Delhi, or Mansoravar, on the outskirts of Jaipur, offered glimpses of the India that is leap-frogging into a modern future, much of the rest remains decades behind.
Those two suburbs are great examples of the India of the future – one with towering office buildings, throngs of bilingual, suited professionals and modern urban infrastructure. Home to every international and domestic heavyweight company imaginable, they’re at the heart of India’s outsourcing economy and a large part of the country’s accelerated growth rate since the late 1990s. And both are served, at least in part, by modern infrastructure. For example, Delhi’s subway puts Toronto’s to shame; construction began in 1998 and in the twelve years since they’ve put together 180kms of air-conditioned, bilingual and digital service, including a link to the airport. Evidently, as this NYTimes article notes, there’s much to be desired from the government’s service provision in Gurgaon, but relative to the rest of the country, it’s an oasis of modernity. Jaipur hopes to do the same as it builds a new 32km subway system to serve over 3.5 million citizens who are witnessing entire city blocks being rebuilt to office towers and shopping centres.
And while these cities are geared in part towards foreign multinationals, one of the most striking aspects of India’s marketplace is the strong set of domestic companies that seem to dominate the consumer space. From automobiles to textiles, domestic brands are front and centre. For example, I’d estimate that over three-quarters of the cars and trucks on the road are domestic led by Tata Motors, Mahindra and Maruti-Suzuki. Foreign brands seem very limited, with Hyundai the only one to stand out. The same rings true in infrastructure, construction, beverages and telecommunications where big names such as Tata, Reliance, Kingfisher and Bharti dominate on billboards and television advertisements throughout the country. Together, the domestic and international presence in India has contributed to a burgeoning middle class of between 50 and 200 million Indians (depending on the metrics used to define “middle class”, and a grouping that comprise over 40% of India’s population by 2025.
However, this picture of India marked by modern mega-suburbs, impressive research and development centres , and a growing middle class contrasts with the stark reality of much of the India we saw. This “other” India was far less developed than I had imagined, and was far more reminiscent of a sub-Saharan African standard of development than a Chinese one. And given India’s impressive post-1990s growth rate (average 8% growth since 2000) and its over 300 billion in foreign exchange reserves it’s easy to overlook the dramatic developmental challenges it still faces. Notably, and despite impressive efforts at decreasing poverty, it’s still home to the world’s largest number of malnourished children (very visible on the streets of Delhi) and approximately 40% of the population qualifies as living in poverty. Moreover, despite the bright lights and air conditioning that adorn India’s burgeoning corporate offices, energy demand far outstrips energy supply as witnessed by blackouts in each of the five cities we spent time in. And unlike my experience in China where I saw very broad and quite spread out development across both major and minor centres, India’s development is much more “spikey” and seems to have completely neglected non-urban centres. In contrast, throughout China I was consistently surprised at the scale of development and reconstruction in small cities, especially those far removed from the eastern seaboard. And finally, and perhaps most indicative of the cultural uniqueness that exits in India, was the continued relevance of caste amongst people we met, and their self-identification as belonging to one group and others from an another.
And thus while India’s massive demographic weight alone supports its rise as a superpower, doing so in a sustainable manner will largely be determined by the country’s ability to meet the concomitant challenges of poverty alleviation, broad nationwide development and energy security. The country’s infatuation with security issues emanating from its northern neighbour, and a very heavy media focus on political corruption will be equally formative.
Ultimately, India’s rise is much more nuanced than I believed prior to my visit. For India’s aggregate economic figures, and the focus on its so-far successful democratic and federal model, conceal issues related to poverty and inequality that need to be addressed for the country to continue its upward trajectory. As Indian author Shashi Tharoor writes in the the Elephant, the Tiger & the Cellphone , “India in the first decade of the twenty-first century is a young country, an optimistic country, a country marching confidently towards the future…but it is still a land of land of contrasts, where millions lives wretched lives amid poverty and neglect… We must do much more to promote education, health care and an end to caste and gender discrimination. Only then can we produce Indians truly ready to take India to the top in the twenty-first century.”
Hegel and the philosophy of protest March 30, 2011
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Over the summer of 2002 I spent a couple weeks in the China’s far north-western province of Urumqi province pretending to be Marco Polo. The region provided a startling physical and cultural contrast to the China we most often think of as represented by Beijing and Shanghai. Predominantly Muslim, rural and far less developed than the country’s eastern seabord, Urumqi was home to an increasingly antagonistic relationship between the local population and the national government. The then-nascent war in nearby Afghanistan and increasing rhetoric about the threats posed by Islamic fundamentalism only stoked the fires of that antagonism.
I spent countless evenings sitting at local restaurants talking with the Uighur equivalents of me about their lives in China, the challenges of minority status in China, and the persecutions they faced. And while many were initially reserved while in public, on several occasions I was ushered into back rooms where, away from over-jealous listeners, I was told of family members and friends who had disappeared for their roles in advocating for rights, cultural preservation and local autonomy.
What struck me at the time was the fervor with which my hosts explained their desire for voice, for recognition and ultimately for a role in deciding their own fates. The violent protests and reprisals that engulfed the province in 2009 thus came as little surprise. If anything I wondered why it had taken so long to boil over. What I heard over bowls of soup was a desire for recognition and respect no different than what Hegel’s Philosophy of Right taught us about man’s desire for recognition when he wrote it in 1833.
Weeks before, as I travelled through the country’s predominantly Tibetan countryside in Sichuan and Northern Yunnan province, I experienced the same. On several occasions I shared tea with young Buddhist monks who, eager to speak English, and once away from prying ears, shared their perspective on their rights and their desire to determine their own futures. The rapid influx of Han Chinese into traditionally Buddhist regions only served to sharpen their demands. And like in Urumqi, the protests that swept through monasteries across the region in early 2008 was far from surprising. Eventually those demands for recognition and the tensions they cause boil over.
The current unrest and upheaval in Syria is fundamentally no different. Yes, the issues, actors and contexts are extremely different. However, as our brief time in Syria in 2009 taught my wife and I, the confluence of stagnating economic prospects and a lack of voice provided kindling for the current fire. I remember a conversation one night with a local engineer about Syria’s “supposed democracy,” his words not mine, and the growing angst that the lack of free speech and truly democratic accountability was catalyzing. Syria was ripe for change, he said, because people were demanding a voice. Once again, the subsequent protests fail to hold much surprise.
What’s interesting is that there are places we’ve been to where, based on what seemed like public consensus, I’d swear the revolution should be right around the corner – like Cameroon – but where nothing has happened, and others – like Tunisia – where just over a year ago we heard not the slightest indication of what was to come. The mix of factors that determines the speed of change is huge – economic issues, the strength of the state, communications tools, grassroots organization etc.
But beyond these specific contextual factors, what’s interesting is that Fukuyama’s once-negated thesis on the natural evolution towards democracy looks increasingly apt. Many thought that the survival of autocratic regimes in Asia and the Middle East discredited Fukuyama’s work. Contemporary events however might just bring him back en vogue.
Ultimately, what still needs questioning is his thesis on “the end of history.” Recent events might mark a progression but is contemporary democracy really it?
Seeing the forest through the trees March 5, 2011
Posted by Dan Herman in Canada, Economics, Politics.Tags: Canada, Economics, Politics
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Why continued corporate tax cuts miss the point.
Much ink has been spilt debating the merits of continued corporate tax cuts in Canada. But it’s fair to say that much of this debate misses the point. For corporate tax cuts are only one element, amongst many, of an economic strategy that will facilitate the development of a highly skilled, flexible workforce that will provide the foundation for a competitive Canadian economy well into the 21st century.
In isolation, corporate tax cuts are proving to have very little impact on either job growth or foreign direct investment. For example, the federal corporate tax rate in 2009 was 18%, down from 29% a decade ago. Similar cuts in Ontario have made this province tax regime one of the most competitive in the developed world, ahead of both the US and EU averages. But instead of leading to more investment in employment-creating or productivity enhancing projects, all they’ve done is pad corporate profits and savings rates – while business investment and private sector R&D development inputs have actually decreased, as shares of GDP, across Canada.
The impact on foreign direct investment was similarly muted. Even the Canadian Association of Manufacturers and Exporters (an invariably staunch supporter of corporate tax cuts), have admitted that “over the past decade, reductions in Canada’s effective and average combined statutory corporate tax rates have had little observable impact on net flows of foreign direct investment into the country.”
So why, in the face of Canada’s so far ambiguous (and perhaps that’s being generous) record with corporate tax cuts, are policy makers and economists still battling over their implementation – and why are we now looking to reduce them further (target of 15% in 2012)?
Jack Mintz from the University of Calgary is often pointed to as a primary source of support for the cuts in corporate taxes. His work, as well as research by the OECD, highlights a large body of empirical evidence that shows that higher corporate taxes have a negative relationship with economic growth, therefore cutting taxes should expand the economy.
That this theory has not played out in the real economy should make us leery. But the bigger issue is that much of the empirical basis of this work is on the effects of cutting corporate tax cuts in high tax economies – not what should be done once corporate tax levels have been made competitive. This is an important distinction, because otherwise the theory would point to 0% tax rates across the board.
So further tax cuts have neither a strong theoretical foundation, nor any recent evidence of real impact on job creation and productivity. Further, they could be counterproductive. As Jim Stanford of the Canadian Auto Workers notes, by choosing to allocate tax revenue back to corporations and consumers rather than to productive investments in infrastructure, we actually cost ourselves the opportunity to create 50,000 new jobs.
Hence the focus on corporate tax cuts fails to address the most important issues related to the future of our Canadian economy. Our key issue is not corporate profitability, or even driving economic growth. Rather, it is productivity. Canadian labour productivity lags behind our American counterparts by 25 per cent, and over the last decade ranks second last amongst G7 countries and far behind most comparable EU countries. A decade of large corporate tax cuts has not improved this; it’s unlikely another decade of them will either.
So perhaps some tweaks to the tax code, such as targeted subsidies and tax incentives for productivity-enhancing investments in new technologies, research and development and job creation activities, and maybe even tax cuts aimed directly at small and medium sized businesses, could be beneficial. However, implementing blanket tax cuts for large corporations, when we already have a competitive tax regime, is not the answer.
What will attract both domestic and foreign investors in the future is a productive and highly skilled workforce, and further incentives for long-term investments that boost productivity and our ability to compete. This means that ongoing investments into education, retraining and infrastructure (both digital and physical), are the keys to building a Canadian economy able to withstand the pressures and uncertainties of a hyper-competitive global marketplace – rather than continually lowering tax rates to pad corporate profits. If we’re serious about competing with the world then Canadians need to look beyond political and economic rhetoric and focus on the real issues and actions that can help facilitate the ongoing development of a highly-skilled, flexible workforce that positions Canada as a place to invest.
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Dan Herman is a PhD student at the Balsillie School of International Affairs and a Senior Associate at the Ottawa-based Institute on Governance. You can follow him on Twitter @danherman
Is the medium really the message? February 10, 2011
Posted by Dan Herman in Current Events, Demographics, Internet.1 comment so far
What revolutions look like
While a lot of ink has been spent anointing the recent popular uprisings in North Africa and the Middle East as “Wiki Revolutions” or “Revolution 2.0” thanks to the role that social media may have played in facilitating the coordination of mass protest efforts, as a forever skeptic of such hype, I thought I’d check out what the numbers, rather than rhetoric, tell us about the three countries most often mentioned.
So to begin with, the basics –
In short: young, educated, urban populations with dismal job prospects, albeit in relatively (nominal terms) equal societies.
And then, the tech basics -
*Note that user numbers spiked by between 25 and 50 per cent in January 2011 across all three.
The latter chart tells us a few important things, notably that Twitter is of minor consequence as a medium compared to Facebook, and more importantly, that both are rather insignificant compared to mobile phones and by inference, texting.
Evidently one would need to account for the reach and influence of those Twitter (and Facebook) users to ascertain the aggregate role of social media in catalyzing and coordinating the uprising across these three nations but it’s hard to fathom that these were more effective tools than the phones in the pockets of the vast majority. Perhaps this latter inference explains why on January 29th, the day Egypt literally shut down the Internet, the protests, coordinated better than ever, reached their (then) heights. Or as the Atlantic reported, perhaps hand-to-hand distribution of flyers did the trick. Social media tools are just tools, and if not them, other tools will replace them.
Now my former boss has anointed this a “Wiki Revolution” for its birth in individual, uncoordinated actions. He argues that leadership is no longer a necessary element of social uprisings, noting that, “enabled by social media, leadership is coming from the people themselves.” This, however, ignores how social unrest works – past and present. Revolutions have in some cases been led by organized opposition movements, but as often they’ve been led by relatively ragtag groupings of student groups and non-governmental organizations that have their roots in individual action. The colour revolutions across Central Asia and the former Soviet republics provide good examples of the latter. What’s new about similar groupings in North Africa and the Middle East is not the lack of leadership or planning from those involved but rather the relative anonymity of that leadership in online spaces. Moreover, at some point there’s no difference between 100 people who coordinate their efforts under the guise of a specific organization and 100 people who do so on a Facebook page. And as many others have noted, there was no lack of leadership amongst the activists who organized and coordinated the first protests.
And ultimately, all this talk about the role of social media misses the point. Revolutions don’t happen because of tools, they happen because of schisms in the fabric of society. We seem to have forgotten history. Whether it’s the colour revolutions over the past decade, or the Philippine uprisings in 2001 that is commonly known as the first ICT-enabled revolution, let alone those that happened thanks to the radio and the handwritten pamphlets that were passed around in France back in 1789 , revolutions happen regardless of the mediums available.
Sure the Web 2.0 adds another layer, but it’s by no means necessary nor sufficient to enable them. Rather they happen as classless, or perhaps trans-class, challenges to the status-quo, and this cohesive societal backlash only happens when the perceived gap between have and have not, and between the desire for rights and the perception of rights received gets too big.
So while I don’t doubt that social media tools helped coordinate the uprisings, let’s not get too dogmatic about their role as mediums. If anything, perhaps the easily replaceable nature of these tools tells us that Marshall McCluhan’s famous pronoucement on “the medium is the message” needs questioning. For if the medium can be replaced but the outcome remains the same, what does the medium actually do? And does the type of medium matter? Or is simply the fact that mediums convey the power of the message behind it, notably that there exists some form of popular support for the message being sent.
Silver spoon revolutionaries will no doubt rejoice that thanks to the Web 2.0 they can now feel part of the plight of those repressed elsewhere but let’s not kid ourselves, retweeting and “liking” a Facebook page does not constitute involved or engaged participation. Rather, short of taking part in the protests or making tangible investments into change, we quickly forget and move on to the next one, feeling good about ourselves on the way. The hosts of the uprisings, however, get to move on (hopefully) to the slow and often painful process of rebuilding and readjustment that like the initial causes, have their roots in society and economics, not technology.
