The horizon is not so far as we can see, but as far as we can imagine

Month: April 2011 Page 1 of 2

On the NDP Surge in Canada

So, amidst the standard gloomy news of austerity, autocratic elites who don’t give a damn about anything but themselves and populations who keep voting for the wrong people, some actual good news arises: the New Democratic Party (NDP) in Canada has surged into second place in the polls.

The NDP are the leftmost party in Canada with the exception of the Bloc Quebecois, the Quebec separatist party who runs candidates only in Quebec.  They are strongly union associated.  They have been the third party in federal politics basically forever.  Provincially they do run some provinces.  Their birthplace was the prairies, but in the last few decades they’ve been strongest in Canada’s Pacific coast province, British Columbia (BC), though that does fluctuate.  I’d argue that the NDP are BC’s natural ruling party and has been for about 30 to 40 years.  The other parties, to defeat them, have generally had to agree that only one of them seriously run against them.

The NDP is most famous for having created Canadian Medicare, provincially under Tommy Douglas, who many Canadians consider the greatest Canadian to have ever lived.  The Feds adopted the plan after he pushed it through at the provincial level.

The scourge of the NDP has been the perception that they can’t win Federally.  As a result, in most Federal elections vote switching has often cost them at least 5% of their vote, and I’d argue up to 10%.  Canadians would vote Liberal in an attempt to keep the Conservative party out.

As a result, parties that range from Center to Left (the Liberals, NDP and Bloc) have regularly pulled in about 60% of the vote, and yet the Conservatives have had minority governments for much of the last decade.  This is also due to the fact that, like the US system, ours is first past the post, winner take all.  Geographical concentration counts big, and the Conservative’s hard support in the prairies and Alberta in particular has translated well into seats.

So the NDP being second in the polls is a really good sign, because it means that core NDP voters now have no reason to switch, and Liberal voters whose first priority is making sure the Conservatives don’t get a majority government may switch to the NDP, instead of the other way around.

The NDP surge is particularly impressive in Quebec, where they are now clearly in the lead.  The Bloc Quebecois has collapsed.  Why this has happened, exactly, isn’t something I’m entirely clear on, Quebec politics are somewhat opaque to me, but I will note that it is particularly in Quebec’s interest to make sure that Harper (the Conservative leader) doesn’t get a majority.

You may have noticed the emphasis on “majority”.  In a parliamentary system like Canada’s, with extraordinarily strong party discipline, a prime minister with a majority is pretty close to an elected dictator.  If he wants to pass a law, it gets passed. If he wants to do something administratively, it happens.  God only wishes he had as much power as a Canadian Prime Minister.

Harper is run by energy interests from out West.  Essentially they want to pump oil and exploit the oil sands, and they want to keep all the money from their windfall profits.  Quebec’s economy, in export/import terms is also an energy economy.  Quebec, essentially, is a hydro-power farm for New York State.  That money allows Quebec to run their economy the way they want—lots of farm subsidies, lots of good food, a generally fairly relaxed lifestyle. Quebec isn’t France, but it’s as close as you get in North America.  It’s a pleasant place to live in many respects.

If Harper gets his majority, the energy interests he is beholden to may cast their eyes on getting control of Quebec’s energy.  That would be the end of Quebec’s pleasant little economy.  I doubt most Quebecois are explicitly aware of this, but I think they may feel it in their guts.

And other than in terms of independence, the NDP and BQ aren’t very far apart on policy. If anything the BQ is slightly to the left of the NDP. (In American terms, they’re practically communists, not that they are in reality.  But they definitely are socialists.)

There are other factors.  Ignatieff, the Liberal leader, is a sleazeball who apologized for torture.  Most Canadians don’t really care about the torture apologetics, but Ignatieff comes across as a sleazeball with no actual convictions.  So when the Liberals went on the offensive against the Conservatives, claiming Conservatives couldn’t be trusted with Medicare (which in Canada means universal single payer health care), I suspect that many Canadians thought “well, that’s true.  But I don’t think I can’t trust you with it either.”  On the other hand, the idea that the NDP would ever harm Medicare if in power is ludicrous.   Whatever one thinks of the NDP, even its detractors know that the NDP loves universal healthcare.

Jack Layton, the NDP leader, is someone I’ve always liked.  He used to be a Toronto city councilor.  Back in the early 2000’s I went and watched city council during budget deliberations.  As it happened, it was a session when ordinary citizens were giving depositions.  They were limited to 5 minutes each, and there were plenty of them.  In essence, many of them were begging for money to whatever they cared about to keep coming, or for tax changes, and so on.  It was obvious that for most of them, whatever their issue was, it was extraordinarily important.  I remember one guy, admittedly a bit of a crank, with 5 boxes of documents.

Most of the councilors clearly weren’t paying any attention.  They were talking amongst each other, laughing, walking in and out of the room, in some cases clearly mocking the people ostensibly speaking to them.  Now I get this, it was the end of a long day, and really, most of these people were asking for money they obviously weren’t going to get, or that they obviously were going to get.  The councilors had already made up their minds.

But the people giving depositions, they cared.  Some of them were desperate, all of them had put a lot of work into it.  Ignoring them, laughing while they talked, or even mocking them, was extraordinarily cruel and disrespectful.

There were only three councilors who at least appeared to be paying attention to what the citizens were saying.  They may not have been, they may have been off in space, but they at least had the common decency or basic political cops to pretend to give a shit.  Jack Layton was one of them, his wife, Olivia Chow (now a Federal MP as well, and my MP, as it happens) was another.  There was a third female councilor whose name I forget as well.  Every other one was a complete jackass, being cruel to desperate people who had put a lot of work into the speeches they were giving.

So ever since then I’ve had a soft spot for Jack Layton.  I don’t know if he’d make a good PM, but at least he isn’t an asshole to constituents in public.  And at least he showed he could handle the basic blocking and tackling.

So, what’s outcome of this election going to be?  Damned if I know.  The polls are all over the place.  The most likely outcome remains a Conservative minority government.  The second most likely outcome seems to be that the NDP and Liberals, together, get more seats than the Conservatives, in which case they could form a coalition government, probably with the NDP as the senior coalition member (at which point I will spend a few minutes rolling on the floor laughing hysterically.)

If the Conservatives get a minority government, odds are the NDP will be the official opposition party.  Layton will be a far more effective opposition leader than Ignatieff.  And Ignatieff’s days as Liberal leader will soon be over, the Liberals will turf him, as being third party is a complete and absolute disaster for them.  The Liberals and Conservatives have traded being the government of Canada back and forth for as long as Canada has existed.

If Layton does do a good job, he might be able to cement the NDP as the second party in Canada, and if he does that, eventually the NDP will be the government.  That’s a big deal, because the Liberals are essentially centrists.  They campaign slightly left, rule slightly right, and are certainly neo-liberal friendly.  I say this as someone who actually has a lot of respect for the government of Chretien and Paul Martin.  They did a good job overall and managed a period when Canada had to kiss America’s ass very well.  Chretien, in particular, is due a lot of credit for telling Bush to fuck off when Bush tried to coerce Canada into joining the Iraq war, as that took a lot of guts from a Canadian PM, and was clearly the right thing to do.

What does this mean for the rest of the world? Canada was one of the first nations to go to a right wing government.  Through the 2000’s there has been a wave of right wing governments in the West.  The NDP doing this well might be a sign that things are beginning to turn.  Again, the NDP aren’t the wimpy left, they are actually socialists, not a party like Labor in Britain, which is clearly right wing, just not as right wing as the nutbar Conservatives.

How good a government Layton would run I don’t know. I don’t have a good feel for the wonks behind him, or for how strong a leader he’d be.  Nonetheless I am confident that of the possibilities, he’s the best man for the job.  Ignatieff is a weasel, and no one who has apologized for torture should be in charge of anything, anywhere, while Harper is a conservative ideologue who thinks that Canada should be more like the US, as well as being an autocrat who spits over Canada’s democratic and parliamentary traditions.  The sooner he retires, the better.

The outcome is still uncertain.  Heck, it’s even possible the Liberals could come back into second place, or that the Conservatives could surge.  The polls are all over the place, as noted, and this has been a very volatile election.  Someone could put their foot in it.  But still, for the first time in a long time, I am actually seeing some hope for the future.  Canada, amongst countries in the world, is uniquely positioned to ride out the next couple decades.  We have everything we need to do really well, to be one of the most prosperous and free nations in the world.  But doing so requires a course change that will never happen under the Conservatives and is unlikely to happen under the Liberals.  The NDP are the best chance, not a sure thing, but a decent chance.  So here’s praying they keep surging.

More Details for those who care

Ontario.  The largest population province in Canada is Ontario, and the Conservatives are doing gangbusters here.  This really bad for the Liberals, whose heartland Ontario is.  One of the most depressing political results of the last year was in Toronto, where Rob Ford, a conservative whose first act was to tell the unions he was canceling their contracts, was elected on the strength of the suburbs deciding that they didn’t want to pay taxes to keep the goose that lays the golden eggs healthy.  Ontario, as with much of Canada, is in a mild housing bubble, a bubble which has been deliberately kept inflated by the Conservatives.  The actual cities (not the burbs) vote Liberal or NDP, but the suburbs have been going Conservative.  Southern Ontario’s employment has been devastated by the decline in the US auto industry, and the Conservatives have really done nothing about that, but what they have done is make sure housing prices stay high.  So people who, in essence, have nothing else, are voting for them.

Alberta: Ah, Alberta.  Think of Alberta as Canada’s Texas, except that Alberta still has lots of oil, even if most of it is in the form of the oil sands.  Alberta votes Conservative both out of old resentments against central Canada (somewhat justified, though the most legitimate complaints are getting to be decades old, and I say this as someone who grew up out West) and for cold hard cash reasons: exploiting the oil sands is brutally environmentally degrading, and the Albertans want to do it dirty so they make more money.  They also don’t want their windfall oil profits taxed, nor do they want to be forced to sell oil to other Canadians (ie. they don’t want a pipeline to Central Canada).  Since all of these policies make sense if you think of Canada first, and Alberta second (ie. if you’re looking out for all of Canada) and some of them make sense even if you think of Alberta first (the oil economy will end, and if they’ve fucked up their groundwater, Alberta will be in a world of hurt, plus they aren’t reinvesting properly),well, Alberta doesn’t want a leftish party in charge of Ottawa.  What should be done is windfall profit taxes on the oil, and policies which make it necessary to reinvest in Canada (and not in real estate.  It should be made very hard or impossible to invest these profits in real-estate.)

There’s still a ton of stupidity and greed in Canada.  The five big banks have never forgiven the Liberals for not letting them merge, there is a housing bubble, there is insufficient investment in our industrial base, which is collapsing, and no one is really thinking properly about the future. Even brain dead simple obvious things, like expanding Halifax’s harbor to make it into the major northern east coast container port or like making a pipeline from west to east for oil so that we can credibly threaten to withhold oil from the US when the US fucks with us, are not being done.   How much of even the brain dead obvious stuff Layton will do, I don’t know.  But I know there’s at least a chance with him, and no chance with Harper of Ignatieff.

A blast from the past and a reminder about the future

Courtesy of the Black Agenda Report:

As election year 2008 began, Obama took the most pro-banker, laissez faire capitalist position on home foreclosures of the three major Democratic presidential candidates. John Edwards backed a mandatory moratorium on foreclosures and a freeze on interest rates, while Hillary Clinton supported a “voluntary” halt and $30 billion in federal aid to homeowners. But Obama opposed any moratorium, mandatory or voluntary, and balked at cash for homeowners and stricken communities

You don’t always get what you vote for, but the surprises aren’t usually on the upside.  Obama was given the opportunity to be the new FDR.  The financial crisis was a huge opportunity to break the power of the financial industry and the rich for a generation, and in so doing make it possible to have an economy which worked for everyone, to fix America’s energy problems, and to have universal healthcare.

Instead what happened is that Obama bailed out the rich and the financial industry, who were bankrupt, then refused to prosecute them for systemic fraud.  He did so in a way which left, by and large, the exact same class of people in charge of the financial industry, made the remaining banks bigger and more powerful, restored the wealth of the rich to pre-crisis levels and restored their profits.  Meanwhile employment has still not recovered (ignore the unemployment rate, it is a lie), wages are flat or declining, real inflation is through the roof, the price of oil is skyrocketing and the current discussion in DC is how much the poor and middle class should get screwed out of their Social Security, Medicare and Medicaid, in order to keep the rich filthy rich.  Oh, and how much tax cuts the rich should get.

America is in terminal decline.  There may be a lot of ruin in a nation, as Adam Smith wrote, but that amount is not infinite.  The next chance you get to turn this around you will be starting from a much worse position.  A lot more pain will be unavoidable.

Obama is not turning things around, what he is doing is negotiating with Republicans how fast the decline will be, and how much and how fast it is necessary to fuck ordinary Americans in order to keep the rich rich.  If Obama wins another term, he will continue to negotiate the decline, then, odds are very high, a Republican will get in, and slam his foot on the accelerator of collapse.

This is why Obama must lose in 2012. I would prefer that he lose to a Democrat in a primary, then that Democrat wins, but he must lose regardless.  If he loses to a Republican, then 2016 you get a chance to put someone in charge who might do the right things (or even just some of them.)

No, those odds aren’t good. They suck.  Every part of them sucks.  And even if you get a Dem in 2016, you’ll probably choose the right most candidate, just like  you did last time, and he’ll go back to negotiating with Republicans over what parts of the corpse of America’s middle class they should dine on next.  “No, no, eat one kidney first, they only need one to survive, so that’s not too cruel.”

But it is still your best chance.  Otherwise you’re looking at full, Russian-style collapse.  What comes out the other end, I don’t know, but  you really won’t enjoy getting there.

And yes, if a Republican gets in in 2012, that’ll be awful. Just awful.  But it’s not like a Republican is never going to be president ever again.  That’s not on the agenda, that’s not possible.  It will happen, and he will substantially cater to the Teabaggers.  He will trash your country.  That’s baked into the cake now, all you can choose is how soon it happens, and work to replace him with someone who might do the right thing.

Remember, the question is not “if” this will happen, it is when.  The sooner you get it over with, the sooner you have another chance to get it right, and the less decline the US will have suffered. If President Teabag gets in after 4 years of Obama, the US will be in better shape at the start of his wrecking than it will be if he gets in after 8 years of Obama.  Obama is a disaster, who is making things worse, not better.  He’s just making it worse more slowly than a Republican.

A bit more on hedonic adjustments

Hedonics, in economics, is essentially the idea that if something is better than it used to be, it is effectively cheaper, so inflation is less than it seems.

In comments, BDBlue posted this:

In Queens, New York, on Friday, William Dudley was bombarded with questions about food inflation, and his attempt to put rising commodity prices into a broader economic context only made things worse.

“When was the last time, sir, that you went grocery shopping?” one audience member asked.

Dudley tried to explain how the Fed sees things: Yes, food prices may be rising, but at the same time, other prices are declining. . . . “Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful,” he said referring to Apple Inc.’s latest handheld tablet computer hitting stores on Friday. “You have to look at the prices of all things,” he said.

This prompted guffaws and widespread murmuring from the audience, with one audience member calling the comment “tone deaf.”

“I can’t eat an iPad,” another quipped.

And that bit about an Ipad2 being twice as powerful, as if that means it has twice as much utility, is why hedonics are complete  bullshit.  I have a computer today that is so much faster than the computer I had 10 years ago that that computer is a snail in comparison.  What do I do with it?  Write, go on the internet, play games, use spreadsheets, basically.  At none of those things is it all that much better than my computer in 2001.  The graphics in my games are a lot better, but they aren’t better games because of it (Deus Ex is better than anything I’ve played this year, and it was published in the late 90s.)  My word processing software is not enough better that I notice, the spreadsheet is essentially identical, the browser is certainly better, but not that much better.  This computer just does not have that much more utility than my old one.

Adding computers to physical processes gives you about a 50% gain max.  Adding computer to most service or clerical activities gives you almost nothing in terms of productivity, it just lets management have more control and more detailed reports (supply chain management is the big exception).  The gains are NOTHING compared to what attached an internal combustion engine did, which gives you about  10X gain compared to manual labor, or even what steam power did for those things it could be used for.  Computers today may process 100s of times faster than those of even a few years ago, but they are neither hundreds of times more productive, nor do they improve happiness (utility) by hundreds of times.

Hedonics are largely bullshit. They are a way to reduce what inflation is measured as, so that all the things which are indexed to inflation (like many pensions) cost less.

And yes, you can’t eat an iPad, so food inflation matters more.

Core CPI is exactly the wrong thing to watch

Our lords and masters (h/t Americablog):

Those trends came as real income dropped 0.5 percent for the month.

The Labor Department said its Consumer Price Index increased 0.5 percent after rising by the same margin in February. That was in line with economists expectations.

Core CPI is vindication for officials at the Federal Reserve who have viewed the recent energy price spike as having a temporary effect on inflation.

Food and gasoline rose 0.8 percent, the largest gain since July 2008, after increasing 0.6 percent in February.

When thinking about inflation, think of individual’s (or companies) surplus income, that is, how much income do they have left to spend after their necessities.  Necessities include food, housing, heating and transportation.  To a lesser extent, clothes, though most people don’t need to buy clothes every month.

Goods inflation, that is to say, core inflation, is mostly in items that you don’t have to buy. Sure, you might want to, but you don’t have to have a new toaster, or TV, or computer.  Food, on the other hand, you have to have.  If you live off rapid transit, and most Americans do, then fuel for your car is something you have to have otherwise you can’t get to your job: you must buy it, at whatever price it is selling for.  Heating oil is something you have to have, freezing to death is bad.

If you earn $2k a month and your fixed bills come to $1,600, your expendable income each month is $400.  If oil and food rise enough that you have to spend an extra $50 you’ve lost 12.5% of your income.  If they rise enough to cost you $100 a month, 25%.  That margin is what matters to most people.  And for people close to the line, the extra money they must spend may kick them from surplus into a personal deficit, at which point they have to start borrowing money, usually at usurious credit card rates of over 20%.

The day laboring class is particularly vulnerable to this.  A bit of drying up of work, an increase in the price of food, and they can reach the point where they can’t afford to eat enough every day.  When that happens you either get a revolution, or you get famines.  This was particularly a factor, by the way, in Egypt.

Inflation in what people must have is what matters to most of the population.  But it isn’t what matters to your lords and masters.  Food costs and fuel costs, are, for them, roundoff errors.  If  you’re really rich, spending $1,000/day on food doesn’t even show on the scale.  So, by and large, goods inflation is what matters to them, personally, though they may have business concerns about fuel inflation (and note that inflation in oil leads to food inflation very directly.  Modern agriculture is how we turn oil into food, essentially.)

So when someone talks about core inflation being the most important form of inflation, check your wallet, it’s likely lighter than it used to be.

The Budget and Obama’s Speech

Just to note the obvious, this budget will throw the US back into a depression (well, ok, really you never left the depression, but you know what I mean), and contrary to all of Obama’s “jobs, jobs, jobs” talk, it will cost jobs.  Also, as long as we’re at it, ignore the unemployment rate, it tells central bankers something useful (about the potential for a tight labor market), it tells you nothing useful, it’s a lie to you.  Look at the percentage of the population unemployed, that cuts out all the bullshit, and it shows the US is still in a hole. Inflation may be officially around 2%, but that’s a lie too, Shadow stats shows it at almost 10%, which is what it would have been if they hadn’t changed the inflation measurements from how they were done in the eighties.  So what you have, is stagflation – high unemployment combined with high inflation, and on top of that wages are flat even using 2% inflation, and in freefall if you use something closer to the real inflation rate.

Combined with the fact that virtually every other first world country is going into austerity, the fact that oil prices are through the roof, and that nothing is being done about any of these things, well, you can take off your shades, because the future’s so dim you need night-vision goggles.

An update on the effect of the price of shipping oil and tax on exports

From Skuppers, in comments:

In February, the Fuel Surcharge (FSC) on shipments was 26%. It is now 31%. It keeps climbing with no end in sight. It’s not always a straight formula though, as I saw an invoice from the steam line the other day, where the customer’s freight rate is $1400, but the added FSC was about $1800. Adding a margin? Lol. But really what I want to add here could be best captured by this title: Cynical, naive, or just dumb?

In July 2010, the government instituted a tax incentive to businesses to get exports moving. I would guess their motivation was to encourage exports to increase profits to get companies to hire more workers. You know, work on that unemployment thing. So they give a tax break to exporters, and reduce their tax on profits from 35% to 15%.

My customer in Australia imports a lot of pork. They are owned by a U.S. company that supplies about 60% of their product. They got their product delivered FAS Long Beach, meaning free along side. The supplier paid for all expenses up to the side of the ship; rail to long beach, transloading, and delivery to the ship. My customer paid for everything from that point on – I acted as their agent, and so I was “technically” the exporter. Starting in August, the supplier wanted to sell the product, in order to take advantage of the tax incentive, DES – delivered ex-ship. Meaning they paid for all expenses up to the point that the ship tossed the container overboard at the foreign port. The supplier was now the exporter, in name, where they hadn’t been so before.

Was there any increase in exports? No; same business being done as before. Did the supplier hire new staff to handle the “new business?” No, in fact they let staff go; I’m still managing the shipments and getting my same ‘cut.’ So on paper, it looks like the supplier increased business by about 700 containers a year, and get a reduction of 20 points in those profits, but they haven’t really increased business, they just get the tax break.

This is just ONE business in the U.S. How many others are doing the same thing? So is the administration cynical, naive, or just dumb? Didn’t they do their homework on this? It took me about 5 minutes to figure this scheme out. How come the geniuses at Department of Commerce didn’t see this coming? Or did they? Is this just another way to get around the repatriation of foreign earned profits taxes by ‘reimbursing’ them at home (after all, money is fungible isn’t it?)?

Obama to Right Wing

“I agree with you, now make me do it”

(what FDR said to the left, if you aren’t aware.)

See, he is the new FDR!

Lambert and Corrente Need Help

If you value what Corrente and Lambert do, and you can afford it, consider tossing Corrente some money.  Blogging isn’t free, someone’s labor is always involved.  Corrente punches above its weight, the big dogs in the blogosphere may not link to it, but they definitely do read it, it’s sort of the guilty pleasure of many a-listers.  Ideas which start in Corrente do circulate out, and within Corrente there is a community which actually gets things done, as when they were the movers behind an alternate conference on the debt and deficit.

Times are hard for a lot of people, and if you don’t have the money, of course don’t give, but if you can afford it and you think Corrente does good work, help them out.

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