The economist who says Canada is headed for a credit crisis

Professor Steve Keen, of Kingston University in Greater London’s western suburbs, has made a name for himself as one of economics’ leading contrarian voices. He has criticized the idea that no one could have seen the 2008 global financial crisis coming as “balderdash“. He was one of the relatively few economists to favour Britain leaving the European Union; and perhaps less controversially, he sees the common European currency as “destroying Europe” and as something which “should never have started in the first place.

But Keen foresees problems in more places than just Europe. In an interview broadcast in late September on RT, the Russian government’s foray into 24-hour cable TV news, Keen discussed the rising risk of a debt crisis in China caused by the over-construction of new housing and office space. As he sees it, private debt and demand for credit has reached hazardous levels:

“The potential trigger is simply the level of private debt. Anything above 1.5 times GDP is enough to put you in the range where changes in credit have a large impact on your demand. Secondly, if your credit demand exceeds 10 percent of GDP, you’re in danger territory again, because, simply, stabilization of that rate of growth of credit, so that it grows at the same rate of GDP, will mean a fall in total demand in those economies.”

The more disturbing part of the interview comes when Keen sets his sights firmly on Canada:

“The most vulnerable economy apart from China on that front appears to be, of all things, Ireland — again! They’ve got themselves back in the situation; but that may involve their dodgy accounting and their dodgy tax records. But certainly Canada. Canada is the western developed economy that I think is most exposed to a credit crisis, and indeed using a different metric, that’s the country that the BIS [the Bank for International Settlements; a Swiss-based banking institution for the world’s central banks] identifies as the most likely one to face a credit crunch.”

Indeed, news watchers might have noticed that just this past week the Canada Mortgage and Housing Corporation (CMHC) issued its first-ever “red warning” for the Canadian housing market, noting that “high levels of indebtedness coupled with elevated house prices are often followed by economic contractions . . . The conditions we now observe in Canada concern us.”

One glimmer of hope that Keen sees for Canada is that the federal government’s deficit spending might turn out to be a good thing, by diluting the impact of any shock that comes along. Yet he also sees some risk from the possibility that those deficits might come under attack for political reasons:

“What worries me of course is when that credit crunch occurs, the political opponents to Trudeau will blame it on his deficit spending. But his deficit spending is one thing that’s attenuating how bad that shock is going to be. So, Canada definitely, Australia, Sweden, Norway, possibly Switzerland, there’s about 17 countries . . . but those are the major ones [facing a problem].”

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The Jimmy John’s case: When doing what’s best for the organization means doing what’s worse for the economy

Usually, when you hear about staff being required to sign non-compete agreements as a condition of employment, it’s easy to assume that this only applies to the big-shots: executives, senior managers, people with intimate knowledge of corporate strategy, and so on, and surely not to a 19-year-old restaurant server or even a 24-year-old shift supervisor at a suburban fast-food outlet.

Think again. In a country where so many feel that “the little guy” is condemned to always end up with the short end of the stick that many have turned to Donald Trump or Bernie Sanders as would-be saviours, a news story appeared this past week that might just reaffirm their suspicions.

Illinois attorney-general Lisa Madigan filed a lawsuit mid-week against Jimmy John’s Gourmet Sandwiches, a Champaign, Ill.-based sandwich shop franchise, for requiring its employees until just last year to sign non-compete agreements. These agreements forbade employees from seeking employment with any other restaurant “that does at least ten percent of its business making sandwiches” within a two- or three-mile radius of any Jimmy John’s restaurant nationwide.

Under the agreement, the ban on working for even marginal competitors remained in effect for two years after leaving Jimmy John’s.

The non-compete agreement was almost certainly designed as a bluff to discourage staff turnover, not with the intent of actually enforcing it. Enforcement would have required:

a.) Keeping track of former employees’ whereabouts, or somehow finding out that the former employee had landed a job at Subway a mile and a half away, 15 months later (possible, but unlikely);

b.) Giving enough of a damn about the alleged breach to actually attempt to hold the former employee to the terms of the non-compete agreement (extremely unlikely for a low-wage job, and unlikely even in some better-compensated, mid-level jobs, if the path of least resistance was to just ignore the whole matter), and;

c.) If all else failed, convincing a court to enforce the agreement even though the courts have a history of overturning such agreements in all but the most serious of disputes.

Even Jimmy John’s conceded in a written statement that holding restaurant workers to non-compete agreements was a bit absurd:

“We made clear to the Attorney General that we would never enforce a non-compete agreement against any hourly employee that might have signed one. We offered to have our CEO sign a declaration to that effect, and pointed the Attorney General to an April 2015 ruling dismissing a federal claim against Jimmy John’s over the use of non-compete agreements, on the grounds that those agreements were not at risk of being enforced.”

Non-compete agreements are nevertheless popular. While the percentage of Canadian workers covered by non-compete agreements is not readily at hand, a White House analysis released just a month ago found that 18 percent of American workers are subject to restrictions on finding work elsewhere, including 14 percent of those earning less than $40,000 annually.

They even have their defenders. “Something strange is happening in the Beehive State,” law professor Nathan Oman wrote in Salt Lake City’s Deseret News this past March, as legislators were passing a new law banning non-compete agreements — a law Oman described as “a solution in search of a problem” and “a classic example of the legislative process run amok.” In defence of non-compete agreements, Oman wrote:

“In non­compete agreements, employees commit not to work for their former employers’ competitors if the employment relationship ends. This encourages employers to invest in their employees and share proprietary information. Everyone benefits, which is why employees and employers agree to the contracts in the first place.”

“In theory, such contracts could harm workers and consumers by giving monopoly power to employers. We solved this problem, however, more than a century ago. Like every other state, Utah law already requires that such contracts have reasonable limits on their geographic scope and duration. Indeed, any business that used them to monopolize a market would commit a crime under federal antitrust laws that have been in place since 1890.”

Others see non-compete agreements as being harmful to the overall economy even if they are beneficial for individual businesses by protecting secrets and calming competition.

On Twitter, I called the idea of requiring restaurant workers to sign non-compete agreements "asinine". Martin's response (in jest, I hope!) made my day. If you don't already do so, follow me on Twitter at @kevinmcdougald

On Twitter, I called the idea of requiring restaurant workers to sign non-compete agreements “asinine”. Martin’s response (in jest, I hope!) made my day.
If you don’t already do so, follow me on Twitter at @kevinmcdougald

A 2010 research paper by three academics from the MIT Sloan School of Management, the INSEAD global business school and the Harvard Business School found that non-compete agreements were economically harmful by encouraging former employees to move away in search of work and thus “stripping enforcing regions of some of their most valuable knowledge workers while retaining those of lesser value.”

“To the extent that one can draw normative conclusions from the above findings, policymakers who sanction the use of non-competes could be inadvertently creating a potential regional disadvantage. From a regional policymaker‘s perspective, the free flow of particularly high-ability talent to the best opportunities seems beneficial as long as it occurs locally . . . whereas such talented workers who take out-of-state jobs are a loss to the region. Regions that choose to enforce employee non-compete agreements may therefore be subjecting themselves to a domestic brain drain not unlike that described in the literature on international emigration out of less developed countries.”

[…]

“…[E]nforcement of non-compete agreements might act as a brake on labor pooling in two ways. First, regions that allow firms to enforce non-compete clauses against ex-employees drive some of their most highly valued skilled workers out of the region, decreasing the local supply of talent. Second, the interorganizational mobility of those workers who remain in the region is lower when non-competes are enforced. Given the role of labor pooling as a microfoundation of agglomeration, we should therefore expect more clustering in regions such as Silicon Valley where non-competes are unenforceable.”

This was supported more recently by a U.S. Department of the Treasury report which found that, while non-compete agreements can protect trade secrets and thus encourage innovation, reward employers for spending more on employee training and reduce staff turnover, they can also lead to lower wages, cause people to leave the careers in which they are most productive, and slow productivity growth.

The Treasury report recommended, among other things, that employers be dissuaded from requiring non-compete agreements unless there is a high probability that they could and would be enforced (i.e., not frivolously or as a bluff, as in the Jimmy John’s case) and requiring that employees continue to be paid at partial salary by their former employers in exchange for agreeing not to seek employment with competing organizations.

The Jimmy John’s case, and the evidence above, suggests that it might be a good use of legislators’ time in the U.S., Canada and elsewhere to limit the use of non-compete agreements. While those in the business and legal communities might see such agreements as useful from their point of view, it’s a benefit that comes at a cost to the wider community. It’s also an example that there’s a gap between what’s good for business (or labour, which has made its own case for competition-limiting measures at times) and what’s good for the economy. The two are not always the same, or even compatible.

Demographic shift putting dream of lower taxes, balanced budgets and no cuts out of reach

By all indications, Manitoba’s provincial election on Tuesday is going to result in the election of the first Progressive Conservative government since 1999, with Brian Pallister being sworn in in late April or early May as Premier of Manitoba. As Pallister and his cabinet settle in to office, they will go through a ritual that all new governments go through: briefings by department staff who will explain the cold, hard realities that they will have to deal with as the excitement of winning an election wears off.

One of those cold, hard realities to be anticipated will be an update on how changing demographics will affect the province’s finances. The heavy influx of immigrants into Manitoba in recent years paints a picture of a young province; but the population data tells a different story.

Statistics Canada periodically updates its population projections for each Canadian province and territory, and its projections of population by age are sobering.

Over time, the balance between working-age Manitobans aged 15-64 and retirement-age Manitobans aged 65-plus has been shifting. Forty years ago, in 1976, there were 6.1 working-age Manitobans for every retirement-aged Manitoban.

Thirty years ago, in 1986, it was 5.3. Twenty years ago, in 1996, it was 4.8; rising slightly to 4.9 in 2006.

But despite the arrival of younger immigrants by the thousands, that ratio has resumed its decline over the past 10 years.

Currently, there are about 4.4 working-age Manitobans for each retirement-age Manitoban. And according to Statistics Canada’s M1 –medium-growth, 1991/1992 to 2010/2011 population trends, in just 10 years time, there will be one less person on the working-age side of the balance than there is today — or 3.4 to 1.

The change is expected to continue in this direction into the mid-2030s, when there will be three working-age Manitobans for every retirement-age Manitoban.

Number of working age Manitobans per retirement-age Manitoban by year. Based on Statistics Canada's Projected population, by projection scenario, age and sex, as of July 1 -- M1 medium-growth, 1991/1992 to 2010/2011 scenario.

Number of working age Manitobans per retirement-age Manitoban by year. Based on Statistics Canada’s Projected population, by projection scenario, age and sex, as of July 1 — M1 medium-growth, 1991/1992 to 2010/2011 scenario.

Why does this matter? As people retire, their spending changes. If you’re a working-age person, think of what you spend your money on today: transportation to and from work, food, clothing, shelter and income taxes.

Now think about how that would change if you were a retiree. You wouldn’t need to drive around so much (or buy a car or fill it up with gas as often). You would likely eat out less; you wouldn’t need neckties or dress shirts anymore except for special occasions; you may very well never be in the market to purchase a home ever again.

All of which means you’ll be paying less in sales taxes, even if the rates stays the same, and less in other government fees and taxes. That includes income tax, since you’ll be earning less. (As you can see below, the average Canadian household in which the designated “reference person” was aged 55-64 years in 2014 paid $18,220 in income tax. But when the “reference person” was aged 65 or older, average income tax payments dropped by more than half to $7,851.)

Average annual spending by Canadian households, by age of designated "reference person", Canada 2014

Average annual spending by Canadian households, by age of designated “reference person”, Canada 2014

The number of households in Manitoba (and throughout much of Canada) in which that “reference person” is one of those lower-spending 65-plus retirees is going to continue growing much faster than the number of younger, higher-spending households.

That’s going to put a bit of a squeeze on government finances, and on the businesses that sell those things on which spending drops the most in retirement: department and business-wear stores, restaurants, auto dealers, gas stations, realtors and so on.

Among the few areas where spending is higher among 65-plus households than it is among the 55-64s: direct health care costs, by $211 per year at the national level.

With that, the governments of the next 20 years will need to deal with a world where satisfying the dream of a balanced budget every year, no tax increases and no controversial cuts is an increasingly difficult task.

No contradiction between pro-free-trade and progressive

What it means to be “progressive” can be as nebulous as defining what it means to be “conservative”, “socialist” or “liberal”.

But if the core definition of what it means to be “progressive” is to be in favour of policies that would steer a country toward being at the top of the game by one simple metric — how its citizens respond to the question, How satisfied are you with your life? — then it is important to identify and pursue the policies that have the most favourable odds of producing a better life for the greatest number.

Thus, it was surprising today to see the suggestion in the National Post that being pro-free-trade is somehow incompatible with being progressive. The comment in question concerned NDP leader Tom Mulcair, who has shown a level of sympathy toward free trade agreements out of step with his party’s traditional position. As reporter Tristin Hopper wrote:

If there was one thing that united the NDP in the 1990s, it was opposition to NAFTA. But Mulcair isn’t only indifferent to free trade, he likes it, as evidenced by his support for agreements with Japan, Jordan, India, Brazil and South Africa. Labour activists often oppose free trade on the grounds that Canada might lose jobs because another country will have better and more efficient workers. But even this appears to be fine with the NDP leader. “I don’t mind being beaten out by a competitor on the manufacture of steel if they have labour rights, environmental rights and we’re on an even playing field,” said Mulcair in 2014.

Yet a pro-free-trade position might be more progressive than many on either the left or the right might like to think. For many years, economists have recognized that reducing barriers to trade is a more effective path for raising overall living standards than are protectionist policies. As Bryan Caplan documented in The Myth of the Rational Voter:

There are numerous surveys of the economic beliefs of both economists and the general public. They broadly confirm the “wide divergence” with which Newcomb maintained “all are familiar.” Take the case of free trade versus protection. A long-running survey initiated by J. R. Kearl and coauthors has repeatedly asked economists whether they agree that “tariffs and import quotas usually reduce the general welfare of society.” In 2000, 72.5% mainly agreed, and an additional 20.1% agreed with provisos; only 6% generally disagreed. The breakdowns for 1990 and the late 1970s are even more lopsided in favour of free trade.

Five years later, a survey of 210 randomly selected American Economics Association members found that “the overwhelming majority (87.5%) agree that the U.S. should eliminate remaining tariffs and other barriers to trade.”

In January 2014, this blog identified several economic factors as being strongly correlated with higher overall citizen satisfaction with life: these included employment rates, relatively rare instances of long-term unemployment, personal earnings, and household disposable income.

If policymakers have a choice between two policies — one of which, according to the evidence, has better odds than the other of producing an outcome that will raise citizens’ overall standard of living — they have an obligation to the people they were elected to serve to pursue that policy.

If that is not consistent with a past position — as was the case with Brian Mulroney in the ’80s and is the case with the NDP today — they have a duty as public servants to change their thinking and their position accordingly.

As long as the evidence continues to support the view that a pro-free-trade policy is better than protectionist or self-sufficiency policies for overall citizen well-being, let’s call free trade for what it is: a sensible policy.

Why a “Netflix Tax”, in the form of GST, might be coming no matter who becomes Prime Minister

A Conservative Party video suggests Liberal leader Justin Trudeau (left) and NDP leader Thomas Mulcair (right) are eager to impose a "Netflix Tax". But does the application of GST, which the incumbent government expressed interest in, count?

A Conservative Party video suggests Liberal leader Justin Trudeau (left) and NDP leader Thomas Mulcair (right) are eager to impose a “Netflix Tax”. But does the application of GST, which the incumbent government expressed interest in, count?

During an election campaign, one gets used to hearing all kinds of absurd, over-the-top rhetoric from the professional manipulators otherwise known as party leaders and their campaign staffs.  So, when Conservative prime minister Stephen Harper vowed on the campaign trail this past week to block Liberal leader Justin Trudeau and NDP leader Thomas Mulcair from imposing a “Netflix tax”, it was fairly easy to brush it off initially as yet another bit of daft nonsense one can expect from a mid-summer election campaign.

Out of curiosity, though, I decided to look up “Netflix Tax” on Google to see if any other jurisdiction had ever imposed one. Sure enough, just last month, the City of Chicago announced a nine-percent tax on “electronically delivered amusements” that many are referring to as a “Netflix Tax”. It comes into effect Sept. 1, and is intended to improve the dreadful state of the city’s finances.

Then another case caught my eye, this one from Australia, whose conservative Liberal-National governments under prime ministers John Howard (1996-2007) and Tony Abbott (2013-present) have long been a source of ideas and advice for the Conservative Party here in Canada.

This past May, the Australian federal treasurer, Joe Hockey — a man whose name alone would make him a star here in hockey-mad Canada — announced that Australians will need to begin paying 10-percent GST on international digital purchases beginning in 2017. As the Australian media company News Limited reported:

The move, dubbed the “Netflix tax,” would see the GST expanded to cover digital purchases from overseas companies, potentially raising the price of Amazon e-books, Steam online games, Tidal music subscriptions, and apps from Microsoft and BlackBerry by 10 per cent.

The scheme would not begin until July 2017, however, and would not affect international companies already collecting the GST from Australian consumers, including Apple and Spotify.

Federal Treasurer Joe Hockey said the move would “level the playing field” for Australia-based businesses delivering digital content.

“It is unfair that overseas-based business selling services into Australia may not charge GST when local businesses have to charge GST,” Mr Hockey said.

“A local business that employs Australians, pays rent in Australia, pays tax in Australia, and helps build our economy is disadvantaged by the current system.”

Similar issues have been raised here in Canada in the recent past. The Canadian government’s own 2014 Budget pledged to look into “cross-border tax integrity issues, such as ensuring the effective collection of sales tax on e-commerce sales to Canadians by foreign-based vendors.”

As the Globe and Mail reported in January 2015, one of the vendors that could be among the targets of this 2014 budgetary vow could be Netflix, which officially is not “carrying on business” in Canada and is therefore not compelled to collect GST.

But there is a difference between not being required to collect GST and being GST-free. As the Globe and Mail report went on to note:

In theory, when foreign companies don’t charge sales tax, it is up to each consumer to self-report digital purchases from abroad and pay HST or GST, though virtually no one does.

“These digital supplies are already taxable,” Rogers writes in a submission to government, decrying “the competitive disadvantage in the digital economy for Canadian domestic suppliers which must charge GST/HST to Canadian consumers.” Rogers, for example, recently launched a streaming service called Shomi, which costs $8.99 a month, plus tax.

And it is an idea that has had its fans within the incumbent government:

The Organization for Economic Co-operation and Development agrees the best solution is to compel companies to register and collect sales taxes in the countries where they make sales. Such measures are part of a larger OECD tax plan presented to G20 finance ministers in the summer of 2013, aimed at combatting tax-base erosion and profit-shifting.

In Canada, the notion of taxing digital sales from abroad gained traction with the government in the fall of 2013, under then-finance minister Jim Flaherty. But it burst onto the European Union’s agenda more than a decade earlier over fears that companies might move offshore to stay competitive.

The notion of expanding GST to include digital services such as Netflix is not necessarily a bad one. Like many affluent nations, Canada has a growing population of pensioners, in absolute numbers and as a percentage of the population, who will become more reliant on costly government services at the same time as their income tax and sales tax payments drop significantly.

For instance, Statistics Canada data shows that in households where the key financial decision-maker was between the ages of 55 and 64, the average household income taxes paid were $16,189 in 2013. In households where the key financial decision-maker was aged 65 or older: just $8,097.

Other wholly or partially taxable household expenditures that were, on average, more than $1,000 lower in 2013 among the 65-plus group than they were among the 55-to-64 group: total food expenditures (-$1,668), shelter (-$3,838), household operations (-$1,028), clothing and accessories (-$1,286), transportation (-$4,624), recreation (-$1,483) and education (-$1,088). Overall, total household consumption was on average $16,810 lower among the households where the key financial decision maker was aged 65-plus than it was when that decision-maker was aged 55 to 64.

If Canada is going to have a prosperous economy in the future, it also needs a healthy and well-educated workforce; it needs transportation systems that gets goods to market and both imports and exports to where they need to go promptly; it needs a border that is secure against various threats, but at the same time not delaying harmless people or goods needlessly; it needs local roads and public transit systems that get employees to and from work and customers to and from businesses; and it needs places where people can leave their children while they work, even if this is evening or weekend work. All of that is going to require government spending to at least some degree.

At the same time, as the fierce response to even a modest one-point rise in the Manitoba provincial sales tax in 2013 showed, there are high political costs to be paid for raising the rates that show up on the sales receipt.

Therefore, much like the airlines, governments have high fixed costs and yet struggle to exert pricing power. Thus the path of least resistance to raising the revenue that is needed to pay the bills for the services that people won’t tolerate being deprived of is to move sideways instead of tackling the issue head-on: by eliminating exemptions and giveaways, charging more fines, unbundling the core product, packing people more tightly into existing space, and replacing less complicated forms of human labour with technology wherever possible.

As the population ages, making the revenues add up to what is needed to pay for the bills that Canadian governments cannot easily get out of paying will only get more difficult. Whether this October’s election produces a Prime Minister Harper, a Prime Minister Mulcair or a Prime Minister Trudeau — or, though the odds are extremely long, a Prime Minister May —  the urge to apply GST to Netflix and other foreign-based digital services might be virtually impossible to resist.

Tsipras: The loser who ought to have not bet

Greek PM Alexis Tsipras: A man with not much to smile about.

Greek PM Alexis Tsipras: A man with not much to smile about.

“In politics, one plus one does not necessarily equal two,” a political science professor once told a roomful of us back in my university days. “In fact, in politics, if you add up one and one and get two, you’ve probably got the wrong answer.”

Indeed, concealing one’s true intentions has long been a useful skill in politics. “Je vous ai compris,” French prime minister Charles de Gaulle told the ruling white minority in Algeria in June 1958 to allay concerns that he would grant Algeria the independence that would bring the colonists’ privileged way of life to an end. In English, the words meant “I have understood you” or, more aptly, “I get the message.”

This and other duplicity bought time for de Gaulle to accomplish his real goal: France’s withdrawal from Algeria, which de Gaulle even in 1958 privately knew had no hope of continuing on as a French colony, and overseeing the country’s transition to independence. After de Gaulle’s deception of the colonists became known, the bitter joke was that the French leader had been misquoted, having actually told the crowd “Je vous hais, compris?” (“I hate you, understand?”)

If someone of de Gaulle’s intelligence and cunning were Prime Minister of Greece today, that country might not be on the verge of a meltdown of its banking and even medical system, which could trigger emergency humanitarian assistance for what was a few years ago a moderately affluent European country.

What Greece has instead is prime minister Alexis Tsipras, who is no Charles de Gaulle. Frustrated by negotiations in which fellow members of the European Union, primarily Germany, insisted on painful economic and political concessions in return for helping the Greek government avoid national bankruptcy, Tsipras called a snap referendum on the European Union’s terms, which was held this past Sunday.

Tsipras himself campaigned for the “No” side in that referendum, claiming that a rejection of the European Union’s onerous terms would strengthen his position at the bargaining table. And he won, with 61 percent of the vote.

Yet there are now reports that perhaps no one in Greece was more horrified by Sunday’s “No” victory than Tsipras himself. A stunning article written by Ambrose Evans-Pritchard, the Athens correspondent for Britain’s The Telegraph newspaper, and published Tuesday notes that the result left the Greek prime minister “depressed” and that “what should have been a celebration on Sunday night turned into a wake.”

Why? According to the article, Tsipras had tried his hand at de Gaulle-style duplicity, campaigning for a “No” vote while privately hoping for a “Yes” vote, and failed miserably. Evans-Pritchard writes:

Greek premier Alexis Tsipras never expected to win Sunday’s referendum on EMU bail-out terms, let alone to preside over a blazing national revolt against foreign control.

He called the snap vote with the expectation – and intention – of losing it. The plan was to put up a good fight, accept honourable defeat, and hand over the keys of the Maximos Mansion, leaving it to others to implement the June 25 “ultimatum” and suffer the opprobrium.

The consequences of Tsipras’s losing bet, according to Evans-Pritchard:

Syriza [Tsipras’s governing party] has been in utter disarray for 36 hours. On Tuesday, the Greek side turned up for a make-or-break summit in Brussels with no plans at all, even though Germany and its allies warned them at the outset that this is their last chance to avert ejection.

[ . . . ]

Events are now spinning out of control. The banks remain shut. The ECB has maintained its liquidity freeze, and through its inaction is asphyxiating the banking system.

Factories are shutting down across the country as stocks of raw materials run out and containers full of vitally-needed imports clog up Greek ports. Companies cannot pay their suppliers because external transfers are blocked. Private scrip currencies are starting to appear as firms retreat to semi-barter outside the banking system.

Greeks cannot be blamed for feeling miserable about their lot in life, with unemployment running at 25 percent and their citizens rating their own average satisfaction with life at the lowest level of any OECD country. Austerity policies, under which the population is obligated to accept a lower standard of living as the price of being assisted by other European governments (who need to be mindful of their own electorates) and of returning to economic competitiveness in the absence of a currency-devaluation option, is now being linked to rising suicide rates and growing public health problems, and has put the country in “an effective debt trap in which the effort to escape through austerity has reinforced the enclave” (see PDF page 8, print page 138).

By calling a referendum, Tsipras gave the Greek people an opportunity to vent their pent-up anger — and they did just that by voting “No” in Sunday’s referendum. If it is indeed correct that Tsipras was betting on a “Yes” vote to get himself out of office at an opportune moment in which he could leave with his reputation intact rather than as the man who took Greece into bankruptcy,  he has botched it up spectacularly.

Recommended reading for those interested in this topic (and who want something more than the tedious, uninformative partisan mudslinging to which the Greece issue has been sometimes reduced in Canada):

The worst economy since World War II? Well, no…

An ad that has been recently airing on Canadian radio stations and paid for by Unifor, a major private-sector union, claims that Canada’s economy has done worse under the current federal government than under any other federal government since World War II. This is a rather bold claim to make. But is it true?

One rough measure that economists use to measure a society’s economic distress is the Misery Index, which is rather simply the sum of the unemployment rate and the inflation rate. It attracts its share of criticism for giving inflation too much weight and unemployment too little weight: fair enough.

Yet even if one accepts that the weighting could use a little fine-tuning, it appears that recent years have been far from the worst since World War II. That dubious honour goes to a decade-long bout of economic ill health from about 1976 to 1985 (at its worst around 1982) when either high inflation was eating away at people’s savings, or unemployment was wreaking havoc with peoples’ cash flow.

A second difficult period came in the early ’90s, when the misery index briefly spiked and unemployment was persistently greater than 10 percent for a two-and-a-half year period from late 1991 to mid-1994.

Unemployment rates, inflation and the "misery index", Canada, 1976-2014. (Click to enlarge.)

Unemployment rates, inflation and the “misery index”, Canada, 1976-2014. Source: Statistics Canada Consumer Price Index and Labour Force Survey data on CANSIM. (Click to enlarge.)

 

Recent times, by comparison, have been not so bad. Even during the 2008-09 global economic crisis, unemployment rates — which suddenly rose here, as in other countries — were no worse than they were during the mid-to-late ’80s economic boom, and they have been gradually declining since then. Inflation rates have also remained low, much unlike the 1976-82 period when they were trending steeply upward. The only way these could be described as being the worst economic times since World War II is by pretending the tough times of the ’70s, ’80s and ’90s never happened.