Part II: Japan’s Great Fall

Japan’s fall from grace in the mid-90s was part and parcel of extreme policy failure on multiple fronts.

First, Japanese labour supply eventually hit a wall and with it came rising wages and productivity stagnation.

Second, while the protection of domestic industry worked for large export-oriented firms, it also limited competition and innovation amongst firms operating in the domestic market.

None of this mattered, however, so long as the country’s trade surplus continued growing.

But this growth, and the 1985 Plaza Accords designed to devalue the US dollar, caused a significant appreciation of the Japanese Yen, and began a slow process of “hollowing out” the Japanese manufacturing economy. Exports, which were just about all Japan excelled at, suddenly hit turbulent waters. One million manufacturing jobs were lost between 1992 and 1996. Read the rest of this entry »


Part I: China’s Future – a Japanese Repeat?

In the 1970s and early 1980s, Japan was the world’s fastest growing industrial economy. With growing competencies if not leadership in manufacturing and high-value financial services, many predicted it would surpass the United States as the world’s great economic power, despite a population half the size.

And Japanese companies didn’t just export. As their success grew into the 1980s, they increasingly sought to purchase American assets in industries once marked by American dominance, such as cars, steel and electronics. Japanese banks increased their share of the American lending market to near 20%.

Japan was taking over.

Fast forward 20 years and that same economic concern is being voiced about China’s meteoric economic growth since its market reforms in 1979. Read the rest of this entry »

Immigration as innovation

The modern world is replete with examples of how immigration from outside of a nation’s border has contributed to dramatic increases in the stock of human ingenuity within. Historically, the tolerance for diversity present in Northern Europe during the reformation is often equated as one of the factors that allowed the region to enjoy a head start economically, culturally and socially compared to their more single-minded Southern neighbours.

A tad more recently (1999), research by AnnaLee Saxenian of the University of California at Berkeley showed that foreign-born scientists and engineers were at the heart of a massive boom in jobs and wealth creation for the California economy. Her research Read the rest of this entry »

Update: How should we assess Harper?

Originally published in the Waterloo Record on Saturday, January 23, 2010 (Insight, A13)

The prorogation of Parliament aside, this prime minister will ultimately be judged on his economic record

By Dan Herman

A new poll from Ekos Research shows the Conservative Government is on the verge of seeing its once 10-point advantage over the Federal Liberals disappear.

Given growing discontent over the prorogation of Parliament, this move seems to have backfired on Prime Minister Stephen Harper. If – and this may be a big if – voters actually turn this discontent into action at the polls it could be fatal for the Conservative party.

Prorogation aside, the primary issue facing Canadians in the short- and mid-term is the hangover we’ll likely to suffer fiscally from the past 18 months of stimulus spending, bailouts and increased employment insurance payments. For 2010 this amounts to a $56-billion deficit, and that’s no small change.

If there’s a silver lining, though, it’s that most of this debt is composed of cyclical, demand-boosting stimulus and nothing structural, or so we thought.

The most recent estimate by parliamentary budget officer Kevin Page has it that we’ll face a $19 billion structural deficit well into 2014 thanks to an aging population and an overall decrease in economic growth. His forecast stops at 2014, but he foresees an even greater structural deficit beyond that date.

The solution to this short and mid-term problem, a la Harper and Finance Minister Jim Flaherty, is the hope that economic growth carries our economy sufficiently to produce sufficient revenue to erase this shortfall.

But increasingly most economists across the country are pointing to a prolonged recovery from recession, which when combined with labour market trends and the strength of the Canadian dollar, will fail to address the deficit. Read the rest of this entry »

The shifting currents of globalization

The Ontario Government yesterday announced a multi-billion dollar investment deal with South Korean technology company Samsung to build wind and solar energy installations across the Province. The deal will combine Samsung’s expertise and technology with Ontario’s now very available manufacturing labour force.

The Province expects 1,400 direct manufacturing jobs and as many as 15,000 indirect jobs to be created as a result. Setting aside some controversy over the subsidies given to the South Korean company, the deal marks a reversal of fortune of sorts for Ontario, and more broadly, for North American technology. While once we exported technology and imported in-kind labour, now the reverse is occurring. We provide the labour, they provide they technology. Read the rest of this entry »

A Prorogation of Leadership

A new poll from Ekos Research shows that the Conservative Government is on the verge of seeing their once 10 point advantage over the Federal Liberals disappear. Given growing discontent over the prorogation of parliament, this latter move seems to have backfired on Harper. In fact, if, and this may be a big if, voters actually translate this discontent into action at the polls, then this could be fatal for the Conservative Party, or more likely, Harper’s leadership of the Conservative Party.

The decision to prorogue, no matter the historical (i.e. Liberal) precedents, is quite akin to John Tory’s disastrous campaign strategy in the 2006 Ontario Provincial elections re: religious schools – a bad decision made for political rather than meritocratic reasons. We all know what happened to Tory and I can only think that the Conservative base will think long and hard about what the backlash from Harper’s decision will mean for his leadership of the party.

But prorogation aside, perhaps now is the time for Canadians to think about the leadership of their country and we’re going in both the short and long-term. I write this not as an appeal for any other political party to take over, for we all know that at the present time none of the alternatives have shown themselves to provide any sort of tangible progress, but rather as a quick analysis of who leads us right now. You can make your own decisions afterwards. Read the rest of this entry »

Up and running after a year off

Early last year I left Canada to travel and subsequently stopped blogging outside of my wife and I’s travel blog. We’re now back in Canada and I’m back to  regularly posting my opinions and thoughts about global economics and geo-politics, as well as Canadian domestic issues.