Deindustrialization of Canada

[Infanteer]

I don't really know what those numbers are measuring and I don't think they are right.

The numbers are valuation - Apple is more valuable than Walmart.  100 years ago, a steel company was the most valuable company in the world's largest economy.  50 years ago, a computer company was the most valuable company in the world's largest economy.  Now, a information software/app company is the most valuable company in the world's largest economy.  What should this tell us about our economy?

The "so what," to me at least, is that the information age economy does not value making stuff - Ricardo doesn't buy his port from England.  I don't dismiss the concerns with the economy, and there are trends that have me concerned, but I need to be convinced that the loss in quantity of resource extraction plants is a sign of bad times.  Having hundreds of Canadians sitting in an assembly or processing line is an industrial age mode of employment.  There are a few sources out there, but it seems to me that Canada earns it money with banking (5 of the top 10 most valuable companies in the country are banks), insurance, and telecoms.  We make port, not wool!

I come from small pulp and paper town in B.C. and it is down to one mill.  I am told (anecdotally, I wish I could find figures) that the one mill now spits out as many board feet as four or five of the older mills combined.  If that's the case, then all the better, as industry is evolving.

 

[Altair]

Our standard of living is dropping when you account for the increased size of our workforce and its growth due to families being dual income as opposed to single income now, don't believe me?  Look here:

https://blogs.ubc.ca/newdealforfamilies/declining-standard-of-living/

30%  larger workforce due to women now working as opposed to staying at home, but household income has basically flatlined.  Couple this with increased housing costs and you can see the problem I hope?

Then there is this little issue:

Source:  https://inflationcalculator.ca/why-canada-needs-to-pay-attention-to-inflation-and-interest-rates-south-of-the-border/

I could keep pace with Joneses to if I went out today and maxed out my line or credit and credit cards.  Canadians are living off borrowed money.

This kind of makes me upset to be honest.

It states in the article that you posted that quantitative easing in the U.S. allowed the private sector to reduce its debt and worked to lower long-run interest rates.

Meanwhile in Canada its been household debt doing largely the same thing.

So in the USA,  trillions spent under Obama had the effect of lowering household debt,  and with Trumps tax cuts and massive 804 billion dollar deficits doing largely the same thing to propel the economy as opposed to households makes Canada look bad in comparison.

But if Canada took the same route,  again,  going with the common USA is ten times the size of Canada,  Canada would need to be running deficits around 80 billion dollars a year!

80 billion!  People are gripping (look at the post by daftandbarmy)  about deficits in the 20-30 billion dollar range,  complaining that the deficits the Canadian federal government is spending canada into the poor house,  but then point towards the economy that is pushing the equivalent of 80 billion dollars Canadian a year.

It honestly makes me upset.

 

[Brad Sallows]

>So if a town loses a mill but has a tourism industry, then I would say the local service industry is self sustaining.

A town can have 3 or 4 major employers and suffer a local recession when one goes down; I know this empirically from experience.  And the value of each job is of secondary importance to whether or not people continue to have jobs.  Also relevant is the amount of taxes contributed to the municipal tax base.  A city which receives substantial revenues from a handful of major employers is vulnerable.

What I wonder - it's an open question - is at what point the "service economy" becomes a case of everyone doing each other's laundry when enough of the "old economy" jobs at the bottom of the inverted pyramid* disappear.  If substitution has already happened (eg. opening of a major post-secondary institution, re-location of some core public enterprise), there is a measure of protection.

*Bottom layer : resource, agriculture; second layer : processing and finishing; top layer : service.  100 years ago, a regular pyramid (broad base, narrower middle, narrower yet at the top).  Today, inverted.

 

[Infanteer]

It honestly makes me upset.

Don't get upset at the internet, it is bad for your health.

What I wonder - it's an open question - is at what point the "service economy" becomes a case of everyone doing each other's laundry when enough of the "old economy" jobs at the bottom of the inverted pyramid* disappear.  If substitution has already happened (eg. opening of a major post-secondary institution, re-location of some core public enterprise), there is a measure of protection.

This is what I wonder too, and maybe I need to dig around C.D. Howe's website or something.  We can't all be baristas and bankers.  There has to be some percentage of the economy that actually makes things - whether that be boards or microchips is another question.  In an information age economy, what is a healthy level of relying on others to do your making, and to what level is a highly productive domestic industrial base needed to ensure a solid foundation?  The bank has to have someones money to invest, and the barista has to serve coffee to someone aside from the banker.

 

[Brad Sallows]

The problem with deficits is not so much the sustainability, provided there is no end-of-time at which all accounts come due (ie. everything keeps rolling over); the problem is the amount of public revenue not spent on public programs because it is spent servicing debt.

An aside: I continually encounter articles in which authors claim Canada has a spending problem; we don't.  What is true is that at one time (the FYs ending 1976-87) we had a spending problem.  With the exceptions of that period and the FYs ending 2010-11,  Canada's federal governments posted operating surpluses over more than 50 years (haven't looked at older data).  The existing accumulated deficit and almost the entirety of all the money paid out to service the debt originates with about $65B (nominal, not adjusted) worth of operating deficits during the 76-87 period.  That $65B has actually cost well over $1T (again, nominal).  It might have been money well spent, but I doubt whatever it bought was worth the total cost to date (and continuing).

 

[Altair]

Don't get upset at the internet, it is bad for your health.

I try to be here less often, I took a long break from this place and when I find myself needing to stop myself from writing something I might regret I take a break again.I do find it helps to put into writing how I feel as opposed to getting snarky or extremely sarcastic which may upset people. 

This is what I wonder too, and maybe I need to dig around C.D. Howe's website or something.  We can't all be baristas and bankers.  There has to be some percentage of the economy that actually makes things - whether that be boards or microchips is another question.  In an information age economy, what is a healthy level of relying on others to do your making, and to what level is a highly productive domestic industrial base needed to ensure a solid foundation?  The bank has to have someones money to invest, and the barista has to serve coffee to someone aside from the banker.

Canada isn't just a nation of manufacturing though.

We export a lot of agricultural products, we export a lot of energy,  wood,  minerals,  computing devices, electronics,  aerospace parts, cars. I feel like that's being overlooked. And due to automation,  we don't need as many people on the assembly line,  the farms,  the mines, to extract the same amount or more production. Which leaves more people in the service industry as a result.

Just because flesh and blood humans are doing the labour doesnt mean the labour isn't being done,  wealth created and passed through the economy.

 

[Humphrey Bogart]

This kind of makes me upset to be honest.

It states in the article that you posted that quantitative easing in the U.S. allowed the private sector to reduce its debt and worked to lower long-run interest rates.

Meanwhile in Canada its been household debt doing largely the same thing.

So in the USA,  trillions spent under Obama had the effect of lowering household debt,  and with Trumps tax cuts and massive 804 billion dollar deficits doing largely the same thing to propel the economy as opposed to households makes Canada look bad in comparison.

But if Canada took the same route,  again,  going with the common USA is ten times the size of Canada,  Canada would need to be running deficits around 80 billion dollars a year!

80 billion!  People are gripping (look at the post by daftandbarmy)  about deficits in the 20-30 billion dollar range,  complaining that the deficits the Canadian federal government is spending canada into the poor house,  but then point towards the economy that is pushing the equivalent of 80 billion dollars Canadian a year.

It honestly makes me upset.

I was actually going to make a post about that.  Thanks for reminding me.

The problem with debt isn't the debt itself, it is the ability to repay that debt that matters. The US Debt is inconsequential at this time because even though it is high (it's not even the highest it has ever been relative to GDP btw) there is no risk of default to lenders. 

The US could eliminate the Federal Deficit if they wished. Relative to us, there practical tax rate is significantly less while their GDP per person is significantly more.

Canada Practical Tax = 28%
Canada Avg Salary = $48,688.00
Canada After Tax Take Home Pay = $35,299.00

US Practical Tax = 18%
US Avg Salary = $64,154.00
US After Tax Take Home Pay = $52,344.00

Source:  https://www.google.com/amp/s/amp.businessinsider.com/tax-rates-take-home-salaries-40-countries-2018-5

So Americans pay 10% less in practical taxes while having larger salaries then Canadians.  Combined with their far lower household debt and you can see how the US Government debt isn't as precarious as it appears. 

If they paid our taxes, they would still have more money and would probably be well on their way to reversing the deficit.

 

[Altair]

I was actually going to make a post about that.  Thanks for reminding me.

The problem with debt isn't the debt itself, it is the ability to repay that debt that matters. The US Debt is inconsequential at this time because even though it is high (it's not even the highest it has ever been relative to GDP btw) there is no risk of default to lenders. 

The US could eliminate the Federal Deficit if they wished. Relative to us, there practical tax rate is significantly less while their GDP per person is significantly more.

Canada Practical Tax = 28%
Canada Avg Salary = $48,688.00
Canada After Tax Take Home Pay = $35,299.00

US Practical Tax = 18%
US Avg Salary = $64,154.00
US After Tax Take Home Pay = $52,344.00

Source:  https://www.google.com/amp/s/amp.businessinsider.com/tax-rates-take-home-salaries-40-countries-2018-5

So Americans pay 10% less in practical taxes while having larger salaries then Canadians.  Combined with their far lower household debt and you can see how the US Government debt isn't as precarious as it appears. 

If they paid our taxes, they would still have more money and would probably be well on their way to reversing the deficit.

Many countries could eliminate their deficits and tackle their debt but its a painful process(Canada in the 90s,  Greece in the 2010s). The Americans are fortunate that their currency is the global benchmark and can be printed at will,  but it doesn't change the fact that comparing the Canadian economy to that of the Americans is a flawed exercise at best. Canadian household debt is continuing to grow,  but the Canadian federal government is keeping the debt to GDP somewhat stable.

Meanwhile in the states they are pushing through what amounts to aggressive stimulas in order to continue to feed the economy and stock market,  and not tossing the burden on household debt.

As a result,  I naturally don't expect Canada to be performing on the same level as the USA but that's due large part  to the fact that both countries are on wildly different fiscal strategies right now.

Back to the topic at hand,  Canada,  you are correct that a lot of Canadas continued growth has been off the backs of consumers adding to their debt burden,  i wouldn't pick the USA as the best example as to how to sidestep that issue.  Not unless it is desireable for the government of Canada to pick up the tab instead.

 

[ballz]

Don't get upset at the internet, it is bad for your health.

This is what I wonder too, and maybe I need to dig around C.D. Howe's website or something.  We can't all be baristas and bankers.  There has to be some percentage of the economy that actually makes things - whether that be boards or microchips is another question.

Well, today yes, but increasingly less. If you had a bunch of companies like Facebook, Google, Amazon, or other technology-based companies, whose services are being purchased by foreign countries, but that money is being paid into the domestic economy, then you really could get by without "making" anything. In this age you can sell lots of services to a foreign business, increasing the wealth in Canada.

It's really all about attracting wealth from outside the country, either through exports or having them somehow spend the money here. For example tourism, which is a horrible example of something to plan our economy around, but the point is tourists bring wealth from outside and leave it here, its the same net result as exporting goods.

With today's technological advances, you increasingly don't need to be offering a physical good (be it raw resources or value-added manufactured products) to bring wealth into the country.

Interesting point there.

The current US budget deficit is 804 billion dollars. Going off of the conventional wisdom of the USA being ten times bigger than Canada, the Canadian equivalent to that would 80 billion dollars, dollar for dollar. If we were to factor in the exchange rate, it would be around 100 billion Canadian dollars in order to have that American economy that is on fire.

Why would you tie population to the debt? I don't see how that is logical at all. Not many banks care more about how many employees you have than they do about your financial statements/performance.

 

[Eaglelord17]

The biggest reason that industries are leaving/closing down is basically they are heavily subsidized in foreign countries by two main factors.

1) They employ basically slave labour to do the job (paying someone a wage that isn't acceptable in Canada or Europe). Plus they don't have to follow anywhere near the same health and safety standards.

2) They don't have to deal with environmental concerns or regulations. This one is huge as every time a factory closes down in Canada one that is polluting more into the environment is opening up in some lower standard country. It also costs much less to just dump the byproducts into the river instead of dealing with them.

 

[Altair]

Well, today yes, but increasingly less. If you had a bunch of companies like Facebook, Google, Amazon, or other technology-based companies, whose services are being purchased by foreign countries, but that money is being paid into the domestic economy, then you really could get by without "making" anything. In this age you can sell lots of services to a foreign business, increasing the wealth in Canada.

It's really all about attracting wealth from outside the country, either through exports or having them somehow spend the money here. For example tourism, which is a horrible example of something to plan our economy around, but the point is tourists bring wealth from outside and leave it here, its the same net result as exporting goods.

With today's technological advances, you increasingly don't need to be offering a physical good (be it raw resources or value-added manufactured products) to bring wealth into the country.

Why would you tie population to the debt? I don't see how that is logical at all. Not many banks care more about how many employees you have than they do about your financial statements/performance.

I didn't tie it to population,  I ties it to GDP.

American GDP is around 19 trillion,  Canadian 1.6 trillion. Canadian GDP is approximately 8.5 percent of that of the USA.  Most just round up to 10.

8.5 percent of 804 billion,  68.3 billion.

So shave off 12 billion off my rough projection if you want,  the point still is a ridiculous amount of money spent giving the econony a sugar high during the boom times.

 

[The Bread Guy]

... So if a town loses a mill but has a tourism industry, then I would say the local service industry is self sustaining.

Not all service jobs are low paying starbucks jobs.

But most tourism jobs pay a fair bit less than most mill jobs that are downsized, so "self-sustaining" may only be true re: number of workers, not necessarily bucks pulled in.

 

[Colin Parkinson]

Tourism is a fickle mistress, I used to travel all through BC and the Yukon and saw a lot of shuttered and abandoned Tourist related businesses. It depends a lot on currency exchange, fuel costs, political and social interference and what the current tourist fad is.

 

[The Bread Guy]

Tourism is a fickle mistress ...

True dat - more so than even predicting natural resources.

 

[daftandbarmy]

Tourism is a fickle mistress, I used to travel all through BC and the Yukon and saw a lot of shuttered and abandoned Tourist related businesses. It depends a lot on currency exchange, fuel costs, political and social interference and what the current tourist fad is.

Downtown Victoria is exactly the same, coincidentally.

 

[QV]

Tourists need a surplus of disposable income to tour around.  If there are significant job losses, a lack of confidence in the economy, and so on, there will be less tourists touring, or tourists touring less.  Granted many tourists are foreigners who are not affected, but not all.  I think when something bad happens to a large and important industry, for instance a country's resource sector, the follow on effects impact negatively almost everywhere else.           

 

[Brad Sallows]

The recent carping about equalization highlighted the fact that AB's economy is still generally pretty healthy and AB's federal taxpayers are still weighty contributors.  A few months back there was a round of smug finger-pointing in BC that called out AB for not have a diverse enough economy.  Tourism was once #5 on the list taught to schoolchildren (forestry, mining, fishing, farming, tourism, if memory serves) in BC; now I suppose it is #1 or maybe #2.  BC might be more at risk than AB.

 

[quadrapiper]

BC might be more at risk than AB.

Something else that comes to mind is a major loss of industrial-friendly land: Victoria Harbour, for example, has seen a major shift from industrial waterfront to residential/tourist/etc. development. Would it make sense to establish an "industrial land reserve" for chunks of land with good transport links (water, rail, highway, etc.), as much of the best industrial land is also prime high-end residential territory?

 

[ModlrMike]

Something else that comes to mind is a major loss of industrial-friendly land: Victoria Harbour, for example, has seen a major shift from industrial waterfront to residential/tourist/etc. development. Would it make sense to establish an "industrial land reserve" for chunks of land with good transport links (water, rail, highway, etc.), as much of the best industrial land is also prime high-end residential territory?

I imagine it's more a question of tax revenue. The rates for multi-family dwellings is probably higher than for low-rise industrial buildings.

 

[daftandbarmy]

I imagine it's more a question of tax revenue. The rates for multi-family dwellings is probably higher than for low-rise industrial buildings.

Not really. Victoria harbour's industrial decline mirrors others, and the tax base declines apace....