tag:blogger.com,1999:blog-72959412024-03-13T15:01:01.811-04:00North America UnionA discussion of the economic, political, cultural, and environmental issues surrounding the creation of a North American Union. A chance for Canadians, Mexicans, and Americans to embrace their shared economic fate.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.comBlogger62125tag:blogger.com,1999:blog-7295941.post-66813395558232165602009-10-26T21:39:00.003-04:002009-10-26T21:44:46.768-04:00Singing birds for currency unionFinally, a new call for currency union with the U.S. dollar. The article in the Globe and Mail sings of promise, although there is always a tremendous political headwind. Still, I must link to this welcome essay:<br /><br /><a href="http://www.theglobeandmail.com/news/opinions/putting-to-rest-a-too-vigorous-bird/article1336485/">Putting to rest a too vigorous bird</a>Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com2tag:blogger.com,1999:blog-7295941.post-5166979821035535272009-04-01T22:53:00.002-04:002009-04-01T22:55:09.616-04:00The misguided foible of U.S. energy security<p>The call for “energy security” emanating from the United States is dripping with unseemly protectionism. Never mind the predictable union soothers in the left - there is an extremely troubling fissure between supposed “market economy” politicians and their energy policy rhetoric. Wrapped in the hysteria of global terrorism and environmentalism, calls for energy security are a bold rebuke of free trade. Worse, they are a call for the most dangerous form of taxation – high energy costs. Economic growth, in the context of the energy policies being paraded in America, will be handicapped severely.</p><br /><p>Americans intuitively understand the importance of cheap energy. They are the first to wave a flag of protest when the price of gasoline rises enough to impinge on their driving habits. However, they are not fully aware of the way in which cheap energy lubricates the wealth creation wheel. Just as under-developed economies are crippled by high energy costs, industrial and service economies depend and thrive on access to cheap energy. Many American jobs will disappear long before any alternative “eco-friendly” energy sources reach the necessary economy of scale. Current cap-and-trade proposals will undoubtedly prove this if they are enacted.</p><br /><p>Even more damaging for energy consumers is the inflationary consequences of the profligate monetary policy debasing the U.S. dollar. If we look at the Gold/Oil Ratio since 1971 the average is 15. Currently, the ratio is 19, rising considerably from a low of 7 last summer. This tells us clearly that something is rotten in the state of the dollar. </p><br /><a href="http://2.bp.blogspot.com/_SoOr23jANUM/SdQo33vwpiI/AAAAAAAAAME/MR_7UJMSUYc/s1600-h/2009-04-01_2234.png"><img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 320px; DISPLAY: block; HEIGHT: 234px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5319922000153585186" border="0" alt="" src="http://2.bp.blogspot.com/_SoOr23jANUM/SdQo33vwpiI/AAAAAAAAAME/MR_7UJMSUYc/s320/2009-04-01_2234.png" /></a><br /><p>So what about energy security? Americans should consider where they actually get most – almost all - of their energy imports. Look no further than next door – in Canada, Mexico, and Venezuela. Leaving the Marxist state of Venezuela aside for now, the resources in North America are considerable, and fuel billions of dollars of trade in energy products for Canada and Mexico. </p><br /><p>The governments of North America should strive for an integrated energy policy that maximizes the plentiful reserves in situ. Yes, the price of crude oil is determined by global demand, but the North American energy market can be self sufficient with coordinated action. Look to energy states and provinces like Alaska, Alberta, Saskatchewan, and Newfoundland to lead the way. It is in everyone's interest to bring reliable and secure supplies to America. And these supplies are in North America. Let’s work together! </p>Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-89055607871147044422009-03-18T12:03:00.006-04:002009-03-18T12:12:25.669-04:00Border zealots seize on protectionist sentimentThe economic downturn has brought the usual protectionist currents. Unfortunately, border crossings become even more entangled with these sentiments. The CBC reports of one such ugly <a href="http://www.cbc.ca/canada/british-columbia/story/2009/03/16/bc-borderprotectionism.html">occurrence</a>. The US administration must take the firehose to this anti-growth protectionist pandering and douse it before the wheels of trade grind down. This is not good news for the prospect of recovery.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-10288070835438289652009-03-17T12:17:00.003-04:002009-03-17T12:24:46.746-04:00The ugly head of protectionismNot surprisingly, the Mexican government has not taken kindly to the U.S. administration's decision to violate the terms of NAFTA. It has <a href="http://www.nytimes.com/2009/03/17/business/worldbusiness/17fobriefs-TARIFFSPLACE_BRF.html">retaliated </a>with new trade tariffs. President Obama is lacking the necessary spine to ward off the protectionist lobby in his party. This is not surprising. It is also a harbinger of fractured trade relations. The headwinds are going to be great.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-56179052731747601552009-03-03T10:25:00.003-05:002009-03-03T10:41:47.484-05:00Mexico needs US mightThe war on drugs in Mexico should be an important policy focus of the US administration. <a href="http://online.wsj.com/article/SB123604341688015233.html">Bret Stephens of the Wall Street Journal</a> dismisses the argument that the battle against drug cartels cannot be won unless there is a change in social and political acceptance of drug use in the United States. That shift in policy is highly unlikely. He posits the only real world solution is to outspend the adversaries - to make the might of justice and order far greater than that of lawlessness and chaos. That is what the U.S. has done to succeed when it engages in war. North Americans have a stake in the political stability of Mexico. A failed state there would be disastrous. For that reason, the US and Mexico should work together to provide a military solution to the drug war. The might of the military is needed to defeat the entrenched drug lords with vast sums of money at their disposal.<br /><br />President Calderon may not be politically open to US intervention in the border regions, but an argument is there to permit it.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-75788863868224328252009-02-23T10:39:00.004-05:002009-02-23T11:21:06.206-05:00Drugs and security in MexicoThe war on drugs is a failure. Nobody can refute that. Not surprisingly, the desperate political class of the victimized Latin countries can only make a plea for America to take a <a href="http://online.wsj.com/article/SB123535114271444981.html">new approach</a>. Worse news is that organized crime threatens to destabilize Mexico and hampers its relationship with the United States. Drug thugs are <a href="http://www.latimes.com/news/nationworld/world/la-fg-mexico-police21-2009feb21,0,5260268.story">too much for the local authorities </a>- running them out of town with violent threats and intimidation. This is not a good situation for Mexico or the United States.<br /><br />While the coalition forces gear up for an overdue offensive against the Taliban in Afghanistan, the Mexican drug cartel should be another human rights initiative that demands a swift and decisive military action. U.S. and Mexican authorities should co-ordinate a return to lawfulness in districts where peace and security are lost to criminals. We need a war on drugs military surge.<br /><br />Of course, there should be a real debate about the alternative approaches put forward by the former presidents of Mexico, Columbia, and Brazil, among others; but until there is security in Latin America there can be no substantial political progress toward tapping the economic potential of North America. The forces of globalization could have our hemisphere relying increasingly on each other - especially if relations with China falter. It's best we take care of our own family here on this continent. An answer to the drug problem is needed in Mexico. And it is needed in America.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-61254634359152146672009-02-20T10:17:00.003-05:002009-02-20T10:27:09.891-05:00Harbinger of border controlThe U.S. is now <a href="http://ca.news.yahoo.com/s/cbc/090216/canada/canada_manitoba_drones_border_6">monitoring the Canadian border with unmanned drones</a>. This is a symptom of the very concerning approach our national governments have to North American security. It is faulty, wasteful, and reveals an underlying fracture that could disrupt trade. Better that technologies be used to guard the North American perimeter. However, it is important that Canada, in particular, do everything possible to appease American security concerns by harmonizing its security policies with the U.S. Failure to do so leads to this kind of initiative - one that only foreshadows even more stringent border control. This can only harm both economies.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-70261301541634410792009-02-19T23:47:00.003-05:002009-02-20T00:02:43.275-05:00Obama tries to say the right thing... but it is what he <strong>does</strong> that is worrisome. On his first presidential visit to Canada he says he wants to "grow trade". That, indeed, is the real question. Canadians have to be concerned about a U.S. administration that seems to be more interested in command and control. It's piecemeal socialistic answers to every problem, making the guise of crisis the impetus for increasing regulatory and confiscatory policy, is sure to dampen economic prospects for America's greatest trading partner. How can trade really grow if the U.S. government drives toward economic policies that render the dynamism of the American people crippled by an increasingly overbearing state? Not too sure that Canadians should be all that excited about this visit. Canadians need America to be strong and prosperous.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-14436790392053310212009-02-03T09:29:00.004-05:002009-02-03T09:48:18.150-05:00Stand on guard for thee, free tradeThe trade tensions inherent in the U.S. move toward protectionist measures has one good result: it brings to the foreground the highly integrated North American economy. Canada, in particular, is a key U.S. trading partner that accounts for about 80% of total Canadian exports. It takes about 20% of U.S. total exports, and imports more U.S. goods and services than the entire European Union, an economy 10-times Canada's size. Last year trade between the two nations reached $700-billion. That trade accounts for much prosperity - and many jobs.<br /><br />The more politicians own up to these facts with their constituents, the more policy will move toward greater integration. Canadians should take the first step forward to be sure that they don't, in trade retaliation, bite the hand that feeds them. It is important that the Canadian government take the high road and work toward unilateral removal of trade barriers should the U.S. regress toward an unfortunate period of protectionism. Self-interest and common sense will prevail.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-86490075162776981472009-01-30T10:27:00.006-05:002009-01-30T10:49:15.635-05:00The darkness approachesSocialist approaches to economic challenges always have an ugly nationalist side to its agenda. Some Canadians celebrating Obamafest are in for a <a href="http://ca.news.yahoo.com/s/afp/090129/canada/canada_us_economy_17">nasty awakening</a>. Indeed, the global economy is in for a chill if the protectionist measures built into the U.S. Congress' protectionist-laden stimulus bill pass into law. We are in for another bout of policy failure echoing the abuses of the market system espoused by FDR's New Deal. Did not America learn then?<br /><br />This is an opportunity for the new U.S. administration to show its commitment to free trade. It is also an opportunity to recognize the inextricable trade relationships Canada and Mexico have with America. Of course, its failure to do so will only make the economic lesson that much more difficult. This could turn into a trade war if proper leadership does not direct these issues. Let's see what kind of vision President Obama has. Regrettably, he has given free-traders and free-marketers little reason to be optimistic.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-65650135812165793372009-01-23T00:17:00.007-05:002009-01-23T11:14:49.839-05:00One union to stand for: currency unionThe Canadian dollar rode the commodity boom from 2002 to its peak above par with the greenback in October 2007. Since then it has ridden the the brutal commodity slide. Whether the oil market regains some of the lost ground - it has been a correction from $140 a barrel to the sub $40 now floating crude oil - remains highly debatable. What we do know is that the <span class="blsp-spelling-error" id="SPELLING_ERROR_0">loonie</span> has settled back to the sad position it had been in for decades. This is as damaging for the Canadian economy as the "high" Canadian dollar was to the industrial complex of Eastern Canada. Once again Canadian industry will revert to the patterns of industrial production born not out of true <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">competitive</span> efficiencies and comparative advantage, but out of devaluation and handicapped productivity. Worse, the shock the revalued <span class="blsp-spelling-error" id="SPELLING_ERROR_2">loonie</span> had on markets will not <span class="blsp-spelling-corrected" id="SPELLING_ERROR_3">necessarily</span> right the ship for many industries that previously enjoyed growth on the back of weak Canadian dollar. Will the Canadian film industry bounce back? Will tourism increase substantially? Will other Canadian firms forced to scramble to become more efficient in 2007/08 be able to regain some lost market share in their export business? How will Canadian-based NHL teams deal with the increased labour costs associated with a depressed Canadian dollar? The disruption this revaluation of the <span class="blsp-spelling-error" id="SPELLING_ERROR_4">loonie</span> causes is significant.<br /><br /><a href="http://1.bp.blogspot.com/_SoOr23jANUM/SXlau8lmEYI/AAAAAAAAAIs/tL0xSzuatVs/s1600-h/2009-01-23_0020.png"><img id="BLOGGER_PHOTO_ID_5294362599535022466" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 268px; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_SoOr23jANUM/SXlau8lmEYI/AAAAAAAAAIs/tL0xSzuatVs/s400/2009-01-23_0020.png" border="0" /></a><br /><br /><br />Industry needs stability of exchange rates. The North American economy - if it is to achieve higher levels of integration - needs currency stability. Working on currency issues in the current economic climate may not seem politically feasible, but it may be more palatable now than at the top of a business cycle. There are solutions to the current economic challenges facing the United States and Canada (and Mexico) that are institutional. These are solutions that are "outside the box", and have immense potential to reshape the economies of the nations of North America. The challenge from the global economy will force us to turn to our neighbours. Now would be a good time to sound a bell. Let's hear more about currency union.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-59890887367974478942009-01-20T11:17:00.005-05:002009-01-20T11:34:27.529-05:00Time to tackle the border problemAnother voice for a proactive Canadian approach toward an expanded U.S. security perimeter: economist Patrick Grady shares today in his <em>National Post</em> op-ed piece, "<a href="http://www.financialpost.com/story.html?id=1196258&p=2">Mr. Obama, tear down that border</a>". The substantial economic challenges the North American economy faces will not be met by grand speeches and <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">colossal</span> public expenditure. A concerted effort to frame the politics of an integrated North American economy should be a top priority. A good starting point is the Canada-U.S. border. There is much at stake for both economies if <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">trans-border</span> inefficiencies continue to hamper trade. Many politicians recognize this - but few are <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">committed</span> and forceful enough to take on this issue. It is time an inspired voice come to the fore.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-69878160914102096772008-12-11T09:46:00.000-05:002008-12-11T10:26:10.615-05:00The security pinch growsAn article in the <em>National Post</em> today reports that the United States is deploying new surveillance technology along the U.S. borders with Canada and Mexico. This new technology includes the use of unmanned drones that will monitor the vast terrain from above.<br /><br />It is understandable that America is moving to secure its borders. Given the threats of both terrorist activity and illegal immigration, the current North American framework gives the U.S. government little options. However, this is very damaging to the interests of both Canada and Mexico. It is also damaging to the long-term interests of the United States.<br /><br />The costs of maintaining a security perimeter around the U.S. will only grow - both in terms of technology and personnel. But more importantly, the disruption of legitimate and productive cross border traffic will hamper economic growth in all three countries. Trade is an integral part of the North American economy. Few will argue this. It seems, though, that few are standing up to seriously address the competing forces at work here. Security and trade will only work efficiently if borders are eliminated.<br /><br />The implementation of a broader security perimeter around North America is the only way to facilitate the contradicting agendas of increased trade and security. Here it is important that the governments of both Canada and Mexico show leadership and forethought in addressing specific needs of the U.S. Harmonization of security measures and trade issues should be a priority.<br /><br />There are those that would chose not to make compromises that infringe on national autonomy. But these instincts are a dangerous impulse. The sooner North Americans work together to become a larger and more connected family, the better. The strains of global economy will be felt more acutely if Canada and Mexico do not proactively nip this unfortunate impulse in the bud. North Americans need each other.<br /><br /><br /><br />Article rank<br />11 Dec 2008<br />National Post<br />BY MATTHEW COUTTS<br />National Post mcoutts@nationalpost.com<br />New eyes on border<br /><br />A U.S. drone delivered to North Dakota will soon begin northern patrols<br /><br />Sitting on the tarmac at a North Dakota Air Force Base is the future of U.S. northern border security: an unmanned patrol airplane similar to ready-to-fire aircraft used in Afghanistan, identical to drones scouting above the U.S. border with Mexico and the first of its kind ready to fly along the Canadian border, in search of drug runners, illegal immigrants and terrorists heading south.<br />The Predator B Unmanned Aircraft System, a plane with a thin, cylindrical body, three wheels and no cockpit, was delivered to Grand Forks by U.S. Customs and Border Protection authorities last weekend and will be launched on patrol missions above the western Prairie landscape early next year. The US$10million, remote-controlled craft is equipped with video equipment and heat sensors capable of spotting people crossing the border illegally by avoiding ports of entry.<br />Once heralded as t he world’s longest undefended border, the thin line of security between Canada and the United States is now viewed by many Americans as a sieve, capable of being exploited by terrorists, and a major concern for national defence in the post-9/11 world.<br />In recent years, U.S. Customs and Border Protection and the Department of Homeland Security have upgraded security measures making documents such as passports mandatory for visitors from Canada, increasing the number of agents and screening measures at border ports and installing extra cameras and motion detectors along undefended portions of the line.<br />The idea of a physical security fence running along the Canadian border, similar to one found along the Mexican border, is still an option being endorsed by some state governors.<br />The use of unmanned aerial vehicles were first proposed in the 2005 Secure Border Initiative as part of a “virtual fence” that also includes fixed towers and mobile radars. The aircraft went into action along the U.S.-Mexico border immediately, but this will be the first one will take flight along the United States’s northern border.<br />According to a statement from border protection’s air and marine assistant commissioner, the aerial patrol with help “identify and intercept potential terrorist or illegal cross-border activity” while supporting Canadian and U.S. law enforcement agencies.<br />Border patrol officials say they make about 4,000 arrests and intercept about 18,000 kilograms of illegal drugs each year along the Canadian border.<br />Juan Munoz-Torres,<br />a spokesman for border protection’s ai r and marine operations, said the CanadaU.S. border poses significant security concerns because of the distance between checkpoints and a geography which is often hard to reach by land. Aerial patrols will help close those gaps while answering questions about how many people are slipping into the country between checkpoints.<br />“We don’t know what we don’t know so I can’t tell you what we will find or what we won’t find. As we begin operations, we will see what type of activity is taking place and we will then start working in order to stop that activity,” he said.<br />Three mo r e Predators are expected to join the pa tro l along Canada’s nearly 9,000kilometre border. For now, Federal Aviation Administration authority will only allow the aerial patrol along a 480-kilometre stretch along North Dakota and Minnesota.<br />Senator Kent Conrad, a North Dakota Democrat who has been working for four years to shore up security along the Canada-U.S. border, said the Predator’s arrival is the beginning of a secure border.<br />“It is vital to America’s security that we protect our borders, particularly the northern border,” Sen. Conrad said.<br />“ The Grand Forks Air Branch plays an essential role in helping shut the door on terrorists who want to sneak across remote border points to strike on U.S. soil.”<br />Colonel John E. Michel, commander of Grand Forks Air Force Base, told the Grand Forks Herald the base will eventually house more than 20 unmanned aerial vehicles, at least six of which will be used for surveillance.<br />Similar aircraft have patrolled the country’s southwestern border since 2005, leading to the confiscation of more than 8,000 kilograms of marijuana and the arrest of 4,000 illegal immigrants flowing from Mexico.<br />Similar versions of the unmanned aircraft, equipped with missiles, are being used in reconnaissance missions in Afghanistan and Iraq. Those to fly along Canada’s border will be unarmed, equipped instead with Raytheon electro-optical sensors and a synthetic aperture radar that can help document natural changes to the area. <a href="javascript:;"></a><br />The Predator is 20 metres long and weighs more than 4,500 kilograms. It will patrol at an altitude of 15,000 metres. It can fly 418 kilometres per hour and stay aloft for 18 hours before landing to refuel. With its cameras and sensors, it can detect a moving person from 11 kilometres away.<br />Printed and distributed by NewpaperDirect www.newspaperdirect.com, US/Can: 1.877.980.4040, Intern: 800.6364.6364 Copyright and protected by applicable law.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-82454582207954849832008-11-20T11:05:00.000-05:002008-11-20T11:15:01.058-05:00A less contrived North AmericaWe live in a global economy that facilitates economic growth through trade and capital investment. Without either trade or capital there is no growth. There is no wealth creation. Whether we acknowledge this fact or not, our welfare is linked to the successful working of the global economy, and more importantly, the elimination of trade and capital barriers between our greatest and closest trading partners. The benefits extend well beyond large corporate interests. Workers, consumers and entrepreneurs all would benefit from lower costs and greater opportunities.<br /><br />I was born and raised on the Canadian prairies. From there I saw the way Ontario and eastern Canada exercised great control over the regions. I saw how we paid more for goods manufactured in eastern Canada, when I wondered why we could not instead buy from American plants that were closer to Western Canada than Toronto or Montreal. I wondered why we had to watch the CBC and its central Canadian bias, and were either denied access or forced to pay more for media more reflective of the environment I lived. I learned early that Canada is what you make of it, but it is a contrived nation. My vote is for a less contrived political and economic framework - one that opens up potential for people to be their best. A North America Union offers that opportunity.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-86291483117798526322008-10-22T12:00:00.001-04:002008-10-22T15:33:19.047-04:00The "third option" refrain...againIn the news recently is a renewed call for a trade pact between Canada and Europe. See <a href="http://www.nytimes.com/2008/10/17/business/worldbusiness/17trade.html">Canada and Europe ponder trade pact</a>. When will Canadians dispense with nationalistic pretenses and whole-heartedly embrace the good fortune of being America's primary trading partner? Fears about having all your eggs in one basket are misplaced. While the glorious effects of globalization have lifted the economic clout of Europe and the Far East, America remains a powerful and dynamic market. Canadians would be better served to work toward an improved North American trade framework, freeing up labour mobility and capital constraints. Yes, there are expanding markets abroad, but unfettered trade will gravitate Canada toward trade among partners in this hemisphere. Better that Canada work with the U.S. to improve the economic vitality of Latin America than to play politics with Europe and China. There is tremendous potential that can be unleashed here in the Americas.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com3tag:blogger.com,1999:blog-7295941.post-84383036659904896572008-10-08T09:34:00.001-04:002008-10-21T22:31:02.005-04:00Free market solutions to the credit crisisThe credit crisis has threatened severe economic hardship on the global economy. Many politicans have turned toward stepped up regulation and socialization of the credit markets in searching for a solution to this very serious problem. The failure of the financial system has been equated by both liberal and some conservative voices as an indictment against the free market. This is a dangerous consequence of policy failure and threatens the economy with a new round of growth-killing liberal economic policies. Indeed, the U.S. election campaign is replete with a range of vilifying statements about both financial institutions and borrowers. But these market participants are not the root cause of this crisis. Instead, it is the institutionalized failures of The Federal Reserve Board and its dual mandate and the failed immigration policies of the United States.<br /><br />The Federal Reserve's hand prints are all over the mortgage crisis that has crippled the financial system. Clarifying voices that direct blame toward this institution are starting to be heard, although the tremendous regulatory roar for banker's blood is still far too defeaning. The(<a href="http://online.wsj.com/article/SB122273029076687929.html">WSJ opinion piece - Judy Shelton: Loose money and the roots of the crisis</a>) , is a recent example that clearly states the source of the credit crisis. Instead of vilifying market participants and regulators, Ms. Shelton directs blame on the compromising dual mandate of the Federal Reserve - its monetary fine-tuning of economic output at the expense of its core responsibility of protecting the value of the currency. Such an incompatible mandate is untenable over the long-term. Cheap money is the fertile soil of credit abuse. We should not be surprised that both financial institutions and borrowers abused a fiat money system that makes it so easy to lose sight of fiduciary responsibility and financial discipline.<br /><br />In addition, the demand failure of the mortgage markets to continue to fuel ballooning asset prices can be linked to an immigration shortage. Demographics are the foundation of the housing market - policies that inhibit the natural labour flows of the economy handicap its proper functioning. Restrictive immigration policies are the prime culprit. Here the U.S. has failed itself immeasurably by institutionalizing the boom and bust cycle of this critical asset class. They have brought collapsing house prices upon themselves. <br /><br />Today's WJJ opinion piece by <a href="http://online.wsj.com/article/SB122342618776613613.html">Lee Ohanian - Good policies can save the economy </a>reveals how pivotal immigration is to achieving a solution to the housing crisis. Instead of taxpayer bailouts - as both Republican and Democratic Presidential candidates have espoused - this housing crisis has a free market solution: immigration. <br /><br />In this respect it is important that Americans understand the importance of the integration of North American labour markets. Without a new vision toward the North American economy the failures of the institutions that create crisis will lead to continued breakdowns of the market economy. It is time for North Americans to rethink the national boundaries of its member states and work toward a partnership that ensures prosperity and energy security in the face of a complex and challenging global economy.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-12238911894042255912008-02-12T10:10:00.000-05:002008-02-12T10:32:28.630-05:00The economic cost of the Canada-U.S borderMost Canadians do not realize the impact of the current leadership void in tackling cross border security issues with the United States. Without an integrated security perimeter commercial relations between the two countries will become increasingly strained. It is imperative that border issues be resolved and that Canadians recognize the importance of a joint security plan. In a recently published study by the Woodrow Wilson International Center Michael Hart details the trade costs of this failure. See Free Trade in Free Fall? Assessing the Impact of Nontariff Barriers on Canada-U.S. Trade accessible at <a href="http://www.wilsoncenter.org/index.cfm?topic_id=1420&fuseaction=topics.event_summary&event_id=372221">http://www.wilsoncenter.org/index.cfm?topic_id=1420&fuseaction=topics.event_summary&event_id=372221</a>Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-14245217754557987312008-01-18T13:34:00.000-05:002008-01-18T16:09:27.754-05:00Dropping Canada's floating exchange rateWhether Canadians want to admit it or not, the floating exchange regime of the loonie is fracturing mechanism that exposes the tenuous geographical and economic links of the Dominion. Exchange rate uncertainty will pit one region against another. A strong loonie reflects the comparative advantage of one region (oil producers) versus another (non-oil producers). The policy strains caused by this imbalance are becoming increasingly evident both in monetary and fiscal arenas. Exchange rate uncertainty is extremely detrimental to commerce, and has a crippling effect on productivity. For that reason there should be an increasing debate about changing the current currency regime with an alternate vision that more aptly reflects our U.S. centric trading relationship. Currency Union and dollarization, although highly desirable options, are political swamps for those brave enough to espouse these objectives. Another alternative is set forth by Professor Herbert Grubel of Simon Frazer University, whose commentary below was found in today's National Post. Although currency controls are highly debated, the special circumstances of the Canadian economy vis a vis its U.S. partner - and the political intractability of the population on both sides of the border - makes Grubel's position worth entertaining.<br /><br /><strong>Fix the loonie<br /></strong>Cure Canada’s Dutch disease by setting the dollar at par<br />HERBERT GRUBEL Financial Post<br />David Laidler’s recent defence of Canada’s flexible exchange rate system misses completely the point made by Nobel Prize winning economist Robert Mundell in his famous article on optimum currency areas. Mundell’s article has been widely credited with providing the intellectual base for the European Monetary Union and merits attention.<br />Mundell’s point is simple and straightforward. If flexible exchange rates are best for Canada on the grounds presented by Laidler, why would flexible rates not be best also for Alberta, Ontario or New Brunswick? Like Canada, these jurisdictions encounter economic shocks the impact of which would be minimized by the exchange rate buffer.<br />Milton Friedman’s response to Mundell was that he would not advocate flexible rates for every possible region. He told me once that he did not think that Panama would benefit from flexible rates and that its hard currency fix, the use of U.S. dollars, served the country best.<br />Clearly, the standard FriedmanLaidler analysis misses essential ingredients needed to decide the case for Panama and, I would insist, Canada. The following analysis considers the costly burden suffered by Canadian manufacturing through the strong appreciation of the dollar during the recent boom in commodity exports, the short-comings of all suggested remedies, and the permanent cure to the problem by the adoption of a hard currency fix.<br />As Laidler notes, Canada has a bad case of the dreaded Dutch disease, which is named after the problems that developed in the 1960s when the Netherlands sold natural gas that had been discovered on its coast. The increases in Dutch exports of resources, like those of Canada in recent years, resulted in a strong appreciation of exchange rates, which was reinforced by interest rate policies of central banks and currency speculators.<br />The disease manifests itself through the loss of domestic manufacturers’ ability to compete abroad and with imports. In both countries many workers in these manufacturing firms lost their jobs. Some became unemployed but many undertook the desirable move into the booming export and steadily growing service sectors.<br />Less desirable was the move of some of the unemployed into public-sector employment, which was facilitated by fiscal surpluses due to the economic boom. During the year ending October 2007, Canadian public sector employment rose by 4.9% while private sector employment rose only .9%<br />This increase in public-sector employment reduces the growth in productivity because of the perverse incentives facing civil servants: punishment if innovations fail, no rewards if they succeed. Moreover, productivity growth in the private sector is slowed by the proclivity of civil servants to design and administer onerous private-sector regulations.<br />There are no simple remedies for Canada’s Dutch disease. Subsidies for manufacturers are complex to administer, inefficient and likely to become permanent.<br />The government can use fiscal surpluses to retire public debt, a large part of which is held by foreigners. While such foreign-debt retirement lowers the exchange rate and thus helps manufacturers, it comes at the expense of tax reductions.<br />The Bank of Canada can keep interest rates low to discourage capital inflows and thus exchange rate increases, but at the cost of fuelling inflationary pressures.<br />The most promising remedy for the Dutch disease is the increased importation of labour-saving capital by the private sector, taking advantage of the favourable exchange rate. The problem is that the resultant higher productivity and international competitiveness would grow only slowly.<br />While all of the opportunities for dealing with Canada’s Dutch disease have some merit as quasi palliatives, there is only one permanent cure: inoculation of the system by fixing the exchange rate at a level that allows manufacturers to be competitive, perhaps at the rate the Bank of Canada research identifies as the longrun equilibrium, around US90¢.<br />The Netherlands and Austria in the years before the introduction of the euro successfully operated such a system and enjoyed near perfectly stable exchange rates against the German currency. The essential ingredient in this success was the official commitment of the central banks of these two countries to maintain the same interest rate as that of the German central bank.<br />An analogous commitment by the Bank of Canada with respect to U.S. interest rates may not be credible, tested by speculators and therefore ultimately doomed to failure.<br />However, there is a solution to this lack of credibility. In Europe, it came through the creation of the euro and formal end of the ability of national central banks to set interest rates. The analogous creation of the amero is not possible without the unlikely co-operation of the United States.<br />This leaves the credibility issue to be solved by the unilateral adoption of a currency board, which would ensure that international payments imbalances automatically lead to changes in Canada’s money supply and interest rates until the imbalances are ended, all without any actions by the Bank of Canada or influence by politicians.<br />It would be desirable to create simultaneously the currency board and a New Canadian Dollar valued at par with the U.S. dollar. With longer-run competitiveness assured at US90¢ to the U.S. dollar, the creation of the new currency would reduce present incomes, prices, assets and liabilities from their current Canadian dollar value by the same 10%, leaving real incomes and wealth unchanged.<br />The public would readily use the new Canadian and the U.S. dollars interchangeably and enjoy savings in the conversion of one currency into the other. The present exchange risk premium on Canadian interest rates would be eliminated completely.<br />The creation of the New Canadian dollar and its credible fix against the U.S. dollar is not a panacea.<br />Fluctuations in global demand for natural resources will always result in competition for labour and capital among Canadian manufacturers and producers of resources. But, at least, the firms in these sectors would no longer have to concern themselves with exchange-rate fluctuations and policies of the Bank of Canada.<br />There will also always be changes in the U.S. (and Canadian) dollar exchange rate against the euro and other major currencies. But these changes would have minor effects on the Canadian economy because 80% of the country’s trade is with the United States.<br />Herbert Grubel is Professor of Economics Emeritus, Simon Fraser University.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-22437343822020197492007-12-05T20:53:00.000-05:002007-12-05T23:12:44.146-05:00"Union-made" monetary policySurprise, surprise: the incoming Bank of Canada <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">Governor</span> disses currency pegging to the U.S dollar. Of course, such a union implies <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">redundancy</span> for the green <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">governor</span>, his job likely just ceremonial in a regime managed by the Federal Reserve. But really, for whom is the Bank of Canada looking out? Claims that we need a made in Canada monetary policy should be viewed sceptically if the vision of continental integration is to be realized. What Canada needs is currency stability, not a floating rate that encourages slack productivity and <span class="blsp-spelling-corrected" id="SPELLING_ERROR_3">inefficient</span> allocation of capital. A brave new central bank would embrace currency union and encourage policy initiatives to facilitate the move. Pegging the <span class="blsp-spelling-error" id="SPELLING_ERROR_4">loonie</span> to the dollar would be unpopular in some corners, but would allow our economy to move one step closer to proper integration with the United States. Protecting the fiefdom of the Bank of Canada is not the visionary leadership Canadians need.<br /><br />Don't peg <span class="blsp-spelling-error" id="SPELLING_ERROR_5">loonie</span> to greenback, incoming Bank governor says<br />The Canadian Press<br />Wednesday, December 05, 2007<br />OTTAWA — Canada should resist the understandable appeal of pegging the <span class="blsp-spelling-error" id="SPELLING_ERROR_6">loonie</span> to the greenback or forming a currency union with the United States, the incoming governor of Bank of Canada said Wednesday at a Parliamentary hearing.<br />At an historic appearance by a governor-designate before the Commons finance committee, Mark Carney defended the Bank of Canada's management of monetary policy in the face of the recent surge — and just as sudden fall — of the <span class="blsp-spelling-error" id="SPELLING_ERROR_7">loonie</span>.<br />And while Mr. Carney said it was understandable that many would want exchange rate certainty to protect some industries, such as the manufacturing sector, he maintained that the cost would be too high.<br />“Although there is no target exchange rate for the Canadian dollar, the bank does care why the exchange rate is moving and what the potential impact will be on output and inflation,” Mr. Carney told the committee.<br />But it would be a mistake to peg the <span class="blsp-spelling-error" id="SPELLING_ERROR_8">loonie</span> to the greenback, he continued.<br />“It would mean that, <span class="blsp-spelling-error" id="SPELLING_ERROR_9">de</span> facto, Canada would adopt U.S. monetary policy, despite the reality that the structures of our economies are very different and, as a consequence, often require different types of adjustments in response to global developments.”<br />The Canadian dollar has been on a roller-coaster since it began it's steep climb in mid-August, peaking above $1.10 (U.S.) in mid-November, before beginning a steep decline to its current value of just over 98 cents.<br />The volatility has been difficult for Canadian manufacturers and exporters, Mr. Carney acknowledged, but he said the Bank of Canada should not interfere unless the repercussions are so severe as to seriously damage Canada's economic prospects.<br />The best action the bank can take, he said, was to keep inflation low, stable and predictable. He noted that Canada has experienced the second-longest expansion in its history beginning in 1991, when the bank and the government signed an agreement to set a 2 per cent inflation target.<br />“That's what we risk if we take our eye off the ball, and I assure you I will not take my eye off the ball,” Mr. Carney told the committee.<br />“Inflationary booms always end badly and they require Herculean efforts to put us back into the path we already have now.”<br />There had been suggestions before Mr. Carney's appearance — the first by a bank governor nominee — that he would face a respectful but pointed grilling from the <span class="blsp-spelling-error" id="SPELLING_ERROR_10">MPs</span>.<br />While the <span class="blsp-spelling-error" id="SPELLING_ERROR_11">MPs</span> cannot override the appointment that goes into effect on Feb. 1, they could at least dig into his past and delve into areas of potential philosophical differences between him and outgoing Governor David Dodge.<br />And some <span class="blsp-spelling-error" id="SPELLING_ERROR_12">MPs</span> tried, particularly Liberal Garth Turner, who repeatedly attempted to get Mr. Carney to admit he was behind the government's Halloween surprise last year to tax income trusts.<br />Aside from repeating the government's stated reasons for the decision, Mr. Carney would neither deny nor confirm he was the architect of the policy, saying his advice to Finance Minister Jim <span class="blsp-spelling-error" id="SPELLING_ERROR_13">Flaherty</span> is covered by cabinet privilege.<br />© Canadian PressSkot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-1079224116360813042007-10-19T12:18:00.000-04:002007-10-19T12:20:35.012-04:00Speaking the truthIndeed!<br /><br /><br />Breaking News from The Globe and Mail<br />Some day we'll wish for a permeable U.S. border<br />Neil Reynolds<br />Friday, October 19, 2007<br />OTTAWA — Canada and Mexico do well, as nations, buying and selling things in the United States - as do Canadians and Mexicans who habitually cross national borders to play and to toil there. Canada and the U.S. traded more than $530-billion (U.S.) in goods and services last year, commerce at the rate of $1-million a minute. Canada's trade surplus with the U.S. last year was $73-billion. Mexico and the U.S. traded more than $330-billion in goods and services. Mexico's trade surplus with the U.S. was $66-billion.<br />For the two relatively small countries that live next door to the United States, you can round off the combined trade surplus at an invigorating - the fashionable word these days would be "robust" - $140-billion a year.<br />Canada now sells so much to the U.S. - $300-billion worth a year - that 37 states count Canada as their No. 1 foreign trading partner. (Take Texas. The two-way trade between Canada and Texas exceeds $20-billion a year. The Lone Star State hosts 886 Canadian-owned companies that directly employ 30,000 Texans and indirectly sustain another 500,000.) Mexico sells so much to the U.S. ($200-billion) that 22 states count it as either their No. 1 or No. 2 foreign trading partner.<br />And this merely measures the things that cross the two borders. The people who cross these borders are setting robust records, too.<br />In any given year, individual Canadians and Americans make as many as 200 million separate border crossings for business purposes, holidays, shopping, medical care or visits to friends and relatives - though some of them do so much more frequently than others. Sixteen million cars pass through the Windsor-Detroit border crossings each year; 10 million cars pass over the international bridges that connect Ontario with New York State.<br />In one U.S. study of foreign travellers, published this year, statisticians calculated that Canadians spent 120 million "person-nights" in the U.S. in 2006. They spent 2.8 million person-nights in the Capital Region (Virginia, Maryland and Washington, D.C.) alone. Although 70 per cent of Canadians who make casual cross-border excursions say they're in the States primarily for shopping, more than 40 per cent report that they also visit friends or relatives.<br />Forty per cent of Americans live in states that share a border either with Canada or Mexico.<br />Ninety per cent of Canadians live within a couple of hours of the border, where crossing - until 9/11 - has always been easy. No visa required. No paperwork either.<br />Mexicans have simply made themselves at home in the U.S. More than 42 million Mexicans (or Americans of Mexican descent) live and work in the United States, 12 million of them illegally. When you cross the Mexico-U.S. border - through the multiple traffic lanes, say, at San Diego - you could swear that all of them commute. More Mexicans live in the United States than Canadians live in Canada.<br />From a historical perspective, of course, proportionately more Canadians have crossed the border and stayed in the U.S. than Mexicans. Back then, though, the border was simply irrelevant. Canadians were free to live anywhere in North America that they wanted.<br />Call it an almost perfect example of labour-force mobility rights. Between 1860 and 1910, Canada's population grew from 3.5 million to 5.5 million. In these same years, by some estimates, 2.8 million Canadians migrated to the States - most of them without asking permission from anyone. More than 900,000 of these were French-speaking Canadians. Had these border-crossing migrants remained in Canada, we would now have almost twice the population that we have.<br />Canada's border with the U.S. acquired a mythic dimension - and deserved it.<br />Though often hampered by misguided tariffs, the economic integration of three North American neighbours proceeded apace in a natural way - however disorderly and, occasionally, illegally. (The undefended border worked perfectly through Prohibition.)<br />The word now used to describe this border phenomenon is "porous." A better term would be "permeable," which eliminates the pejorative implication of "porous."<br />It was 9/11, of course, that made an impermeable border inevitable. In the months after the terrorists struck, the U.S. proposed a North American security perimeter that would have gotten rid of the anachronistic border crossings. The choice for Canada was simple. Canada could position itself inside a North American security perimeter - or remain outside it. In one of his very worst mistakes, former prime minister Jean Chrétien decided that Canada would remain outside.<br />The Americans are now building an impermeable security fence around the United States. In years to come, Canadians will remember nostalgically the border that didn't work and will thoroughly curse the new one that does.<br /><a href="mailto:nreynolds@xplornet.com">nreynolds@xplornet.com</a><br />© The Globe and MailSkot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-8611177608777942432007-02-13T23:48:00.000-05:002007-02-14T00:18:35.883-05:00Entrepreneurial kinshipA compelling op-ed in <em>The Wall Street Journal</em> on Monday puts forth a thesis that the lack of entrepreneurial culture in Europe and the Continent's relatively <span class="blsp-spelling-error" id="SPELLING_ERROR_0">underperforming</span> economy has roots in a dearth of economic dynamism. Edmund S. Phelps, 2006 Nobel Laureate in economics, argues that this dearth of dynamism - "loosely, the rate of commercially successful innovation" - is determined by the economic model that handicaps much of the Continent. Canadians should take note of the differences between the American and European models described here, and recognize that Canada shares very important aspects of the economic dynamism America <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">possesses</span>. Canadians would do well to celebrate this, and see the European model for what it is: deeply flawed. Too often Canadian nationalists, in a heavy-handed anti-American spirit, look to Europe as an alternative model. Indeed, Europe has its own values to right as it seeks to be <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">competitive</span> in the global economy.<br /><br /><blockquote><p>Entrepreneurial Culture<br />By Edmund S. Phelps<br />(Copyright (c) 2007,<br />Dow Jones & Company, Inc.)<br /><br />The nations of Continental Western Europe, in the reforms they make to try<br />to raise their economic performance, may prove to be a testing ground for the<br />view that culture matters for a society's economic results.<br />As is<br />increasingly admitted, the economic performance in nearly every Continental<br />country is generally poor compared to the U.S. and a few other countries that<br />share the U.S.'s characteristics. Productivity in the Continental Big Three --<br />Germany, France and Italy -- stopped gaining ground on the U.S. in the early<br />1990s, then lost ground as a result of recent slowdowns and the U.S. speed-up.<br />Unemployment rates are generally far higher than those in the U.S., U.K., Canada<br />and Ireland. And labor force participation rates have been lower for decades.<br /><span class="blsp-spelling-error" id="SPELLING_ERROR_3">Relatedly</span>, the employee engagement and job satisfaction reported in surveys are<br />mostly lower, too.<br /></p><p>It is reasonable to infer that the economic systems on<br />the Continent are not well structured for high performance. In my view, the<br />Continental economies began to be <span class="blsp-spelling-error" id="SPELLING_ERROR_4">underperformers</span> in the interwar period, and<br />have remained so -- with corrective steps here and further missteps there --<br />from the postwar decades onward. There was no sense of a structural deficiency<br />during the "glorious years" from the mid-'50s through the '70s when the<br />low-hanging fruit of unexploited technologies overseas and Europeans' drive to<br />regain the wealth they had lost in the war powered rapid growth and high<br />employment. Today, there is the sense that a problem exists.<br />What could be the origins of such <span class="blsp-spelling-error" id="SPELLING_ERROR_5">underperformance</span>? It may be that the relatively poor job satisfaction and employee engagement on the Continent are a proximate cause --<br />though not the underlying cause -- of the poorer participation and unemployment<br />rates. And high unemployment could lead to a mismatch of worker to job, causing<br />job dissatisfaction and employee disengagement. The task is to find the<br />underlying cause, or causes, of the entire syndrome of poorer employment,<br />productivity, employee engagement and job satisfaction.<br /></p><p>Many economists<br />attribute the Continent's higher unemployment and lower participation, if not<br />also its lower productivity, to the Continent's social model -- in particular,<br />the plethora of social insurance entitlements and the taxes to pay for them. The<br />standard argument is fallacious, though. The consequent reduction of after-tax<br />wage rates is unlikely to be an enduring disincentive to work, for reduced<br />earnings will bring reduced saving; and once private wealth has fallen to its<br />former ratio to after-tax wages, people will be as motivated to work as before.<br />An indictment of entitlements has to focus on the huge "social wealth" that<br />the welfare state creates at the stroke of the pen. Yet statistical tests of the<br />effects of welfare spending on employment yield erratic results. In any case, it<br />is hard to see that scaling down entitlements would be <span class="blsp-spelling-error" id="SPELLING_ERROR_6">transformative</span> for<br />economic performance. (Indeed, some economists see increased wealth, social plus<br />private, as raising the population's willingness to weather market shocks and<br />helping entrepreneurs to finance innovation. I am skeptical.)<br /></p><p>In my thesis,<br />the Continental economies' root problem is a dearth of economic dynamism --<br />loosely, the rate of commercially successful innovation. A country's dynamism,<br />being slow to change, is not measured by the growth rate over any short- or<br />medium-length span. The level of dynamism is a matter of how fertile the country<br />is in coming up with innovative ideas having prospects of profitability, how<br />adept it is at identifying and nourishing the ideas with the best prospects, and<br />how prepared it is in evaluating and trying out the new products and methods<br />that are launched onto the market.<br />There is evidence of such a dearth.<br />Germany, Italy and France appear to possess less dynamism than do the U.S. and<br />the others. Far fewer firms break into the top ranks in the former, and fewer<br />employees are reported to have jobs with extensive freedom in decision-making --<br />which is essential at companies engaged in novel, and thus creative, activity.<br /></p><p>Further, I argue that the cause of that dearth of dynamism lies in the sort<br />of "economic model" found in most, if not all, of the Continental countries. A<br />country's economic model determines its economic dynamism. The dynamism that the<br />economic model possesses is in turn a crucial determinant of the country's<br />economic performance: Where there is more entrepreneurial activity -- and thus<br />more innovation, as well as all the financial and managerial activity it leads<br />to -- there are more jobs to fill, and those added jobs are relatively engaging<br />and fulfilling. Participation rises accordingly and productivity climbs to a<br />higher path. Thus I see the sort of economic model operating in the Continental<br />countries to be a major cause -- perhaps the largest cause -- of their<br />lackluster performance characteristics.<br /></p><p>There are two dimensions to a<br />country's economic model. One part consists of its economic institutions. These<br />institutions on the Continent do not look to be good for dynamism. They<br />typically exhibit a <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Balkanized</span>/segmented financial sector favoring insiders,<br />myriad impediments and penalties placed before outsider entrepreneurs, a<br />consumer sector not venturesome about new products or short of the needed<br />education, union voting (not just advice) in management decisions, and state<br />interventionism. Some studies of mine on what attributes determine which of the<br />advanced economies are the least vibrant -- or the least responsive to the<br />stimulus of a technological revolution -- pointed to the strength in the less<br />vibrant economies of inhibiting institutions such as employment protection<br />legislation and red tape, and to the weakness of enabling institutions, such as<br />a well-functioning stock market and ample liberal-arts education.<br /></p><p>The other<br />part of the economic model consists of various elements of the country's<br />economic culture. Some cultural attributes in a country may have direct effects<br />on performance -- on top of their indirect effects through the institutions they<br />foster. Values and attitudes are analogous to institutions -- some impede,<br />others enable. They are as much a part of the "economy," and possibly as<br />important for how well it functions, as the institutions are. Clearly, any study<br />of the sources of poor performance on the Continent that omits that part of the<br />system can yield results only of unknown reliability.<br /></p><p>Of course, people may<br />at bottom all want the same things. Yet not all people may have the instinct to<br />demand and seek the things that best serve their ultimate goals. There is<br />evidence from University of Michigan "values surveys" that working-age people in<br />the Continent's Big Three differ somewhat from those in the U.S. and the other<br />comparator countries in the number of them expressing various "values" in the<br />workplace.<br /></p><p>The values that might impact dynamism are of special interest<br />here. Relatively few in the Big Three report that they want jobs offering<br />opportunities for achievement (42% in France and 54% in Italy, versus an average<br />of 73% in Canada and the U.S.); chances for initiative in the job (38% in France<br />and 47% in Italy, as against an average of 53% in Canada and the U.S.), and even<br />interesting work (59% in France and Italy, versus an average of 71.5% in Canada<br />and the U.K). Relatively few are keen on taking responsibility, or freedom (57%<br />in Germany and 58% in France as against 61% in the U.S. and 65% in Canada), and<br />relatively few are happy about taking orders (Italy 1.03, of a possible 3.0, and<br />Germany 1.13, as against 1.34 in Canada and 1.47 in the U.S.).<br /></p><p>Perhaps many<br />would be willing to take it for granted that the spirit of stimulation,<br />problem-solving, mastery and discovery has impacts on a country's dynamism and<br />thus on its economic performance. In countries where that spirit is weak, an<br />entrepreneurial type contemplating a start-up might be scared off by the<br />prospect of having employees with little zest for any of those experiences. And<br />there might be few entrepreneurial types to begin with. As luck would have it, a<br />study of 18 advanced countries I conducted last summer found that inter-country<br />differences in each of the performance indicators are significantly explained by<br />the <span class="blsp-spelling-error" id="SPELLING_ERROR_8">intercountry</span> differences in the above cultural values. (Nearly all those<br />values have significant influence on most of the indicators.)<br /></p><p>The weakness<br />of these values on the Continent is not the only impediment to a revival of<br />dynamism there. There is the <span class="blsp-spelling-error" id="SPELLING_ERROR_9">solidarist</span> aim of protecting the "social partners"<br />-- communities and regions, business owners, organized labor and the professions<br />-- from disruptive market forces. There is also the <span class="blsp-spelling-error" id="SPELLING_ERROR_10">consensualist</span> aim of<br />blocking business initiatives that lack the consent of the "stakeholders" --<br />those, such as employees, customers and rival companies, thought to have a stake<br />besides the owners. There is an intellectual current elevating community and<br />society over individual engagement and personal growth, which springs from<br /><span class="blsp-spelling-error" id="SPELLING_ERROR_11">antimaterialist</span> and egalitarian strains in Western culture. There is also the<br />"<span class="blsp-spelling-error" id="SPELLING_ERROR_12">scientism</span>" that holds that state-directed research is the key to higher<br />productivity. Equally, there is the tradition of hierarchical organization in<br />Continental countries. Lastly, there a strain of anti-commercialism. "A German<br />would rather say he had inherited his fortune than say he made it himself," the<br />economist Hans-Werner <span class="blsp-spelling-error" id="SPELLING_ERROR_13">Sinn</span> once remarked to me.<br /></p><p>In my earlier work, I had<br />organized my thinking around some intellectual currents -- <span class="blsp-spelling-error" id="SPELLING_ERROR_14">solidarism</span>,<br /><span class="blsp-spelling-error" id="SPELLING_ERROR_15">consensualism</span>, anti-commercialism and conformism -- that emerged as a reaction<br />on the Continent to the Enlightenment and to capitalism in the 19<span class="blsp-spelling-error" id="SPELLING_ERROR_16">th</span> century. It<br />would be understandable if such a climate had a dispiriting effect on potential<br />entrepreneurs. But to be candid, I had not imagined that Continental Man might<br />be less entrepreneurial. It did not occur to me that he had less need for mental<br />challenge, problem-solving, initiative and responsibility.<br /></p><p>It may be that<br />the Continentals finding, over the 19<span class="blsp-spelling-error" id="SPELLING_ERROR_17">th</span> and early 20<span class="blsp-spelling-error" id="SPELLING_ERROR_18">th</span> century, that there was<br />little opportunity or reward to exercise freedom and responsibility, learned not<br />to care much about those values. Similarly, it may be that Americans, having<br />assimilated large doses of freedom and initiative for generations, take those<br />things for granted. That appears to be what Tocqueville thought: "The greater<br />involvement of Americans in governing themselves, their relatively broad<br />education and their wider equality of opportunity all encourage the emergence of<br />the 'man of action' with the 'skill' to 'grasp the chance of the moment.'"<br /></p><p>The most basic point to carry away is that the empirical results related<br />here lend support to the Enlightenment theme that a nation's culture ultimately<br />makes a difference for the nation's economic performance in all its aspects --<br />productivity, prosperity and personal growth.<br /></p><p>It was a mistake of the<br />Continental Europeans to think that they expressed the right values -- right for<br />them. These values led them to evolve economic models bringing in train a level<br />of economic performance with which most working-age people are now discontented.<br />Perhaps the way out -- to go from unsatisfactory performance to high performance<br />-- will require not only reform of institutions but also a cultural shift that<br />returns Europe to the philosophical roots that put it on the map to begin with.<br />---<br />Mr. Phelps, a professor at Columbia University, is the 2006 Nobel<br />Laureate in economics.<br /></p></blockquote>Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-79050048064808519512007-02-09T12:10:00.000-05:002007-01-22T21:17:45.485-05:00Voices of realismI was pleased to find at least one voice of realism about North American integration in some of the recent blogs I have reviewed. See <a href="http://reflight.blogspot.com/2007/02/stealth-fighters.html">http://reflight.blogspot.com/2007/02/stealth-fighters.html</a> .Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-88111158038011591452007-01-22T20:04:00.000-05:002008-12-13T00:35:25.337-05:00The roads that join us<a href="http://1.bp.blogspot.com/_SoOr23jANUM/RbVwJuaHaMI/AAAAAAAAAAY/kRITJs6EJFc/s1600-h/nasco.jpeg"><img id="BLOGGER_PHOTO_ID_5023044271780358338" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="http://1.bp.blogspot.com/_SoOr23jANUM/RbVwJuaHaMI/AAAAAAAAAAY/kRITJs6EJFc/s320/nasco.jpeg" border="0" /></a><br /><div><a href="http://1.bp.blogspot.com/_SoOr23jANUM/RbVvYuaHaLI/AAAAAAAAAAM/tvGlXYUFW1o/s1600-h/nasco.jpeg"></a>Getting more attention in media and blog circles is the planned "superhighway" system that is part of the strategic integration of North America outlined by the the Strategic and Prosperity Partnership of North America (SPP) agreement entered into by the three nations almost two years ago. The initiative is designed to remove impediments to trade on the north-south axis throughout the continent. Expect the debate about the NAFTA Super Corridor plan will begin to bring special interest voices against this economic strategic plan, which is detailed at the North America’s SuperCorridor Coalition web site: <a href="http://www.nascocorridor.com/pages/about/about.htm">http://www.nascocorridor.com/pages/about/about.htm</a> . Policymakers in all three countries will be well served if business interests outline integrated transportation solutions that improve our competitiveness in the global economy. The NASCO 2007 Conference in Fort Worth, Texas this spring is an encouraging example of this business initiative. </div><br /><div></div><br /><div><br /></div><br /><div></div><br /><div><br /></div><br /><div></div><br /><div><br /></div><br /><div></div><br /><div><br /></div><br /><div></div>Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-58353039919402850512007-01-19T22:01:00.000-05:002007-01-19T22:43:15.556-05:00The battle for a North America UnionThe fear of North America Union found voice in Lou Dobbs and his fear mongering again (See link to CNN video). The negative tone of his report is indicative of what policy makers will face as the North American integration initiative develops. It will be a grand battle that will tear at the souls of a generation of Americans, Canadians, and Mexicans. And it will await the voice of a bold leadership.<br /><br />North American unity is an important issue, and it will make Manifest Destiny a valiant call again. But first the population must understand what is at stake. Without integration the United States, Canada, and Mexico will suffer economically. There is strength in unity - of resources, of people, and of values. Let free markets and liberty prevail and great wealth will come to our land. Yes, there will be cultural growing pains with this communion of people - all brought together in the spirit of the Union. But the fear of differences must be overcome by our commonality. Just as our North American nations have thrived thanks to generations of immigrants who came to this distant and strange land, the union of North American peoples will unleash new hope for all. Isolation is not an option. Borders are chains on our prosperity.<br /><br /><br /><embed src="http://www.youtube.com/v/ernLnhIR8uI" width="425" height="350" type="application/x-shockwave-flash" wmode="transparent"></embed>Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0tag:blogger.com,1999:blog-7295941.post-2506631135457975582007-01-18T15:37:00.000-05:002007-01-18T15:59:36.114-05:00Fear and harmonyThe cultural fears that handicap the natural forces of trade and globalization are strong. Immigration stands as one of those issues that exposes our fears, fears that come out as racism and protectionist rant. As always, politicians will be beholden to the loud voices of fear. In Utah, a state congressman has introduced a bill to restrict or retract the partnership agreement President Bush, Prime Minister Harper, and the former Mexican President Fox entered last year.<br /><br />See <a href="http://www.immigrationwatchdog.com/?p=2819">http://www.immigrationwatchdog.com/?p=2819</a><br /><br />The idea of continental harmonization of trade and security is seen as threatening to nationalists who seem less concerned about prosperity through increased trade and security. Prosperity only comes through the attainment of security and the growth of trade. Short of choking off trade with our continental neighbours, there is no way to secure our borders without harmonization. North America must come to terms with its diversity and develop institutions of inclusion that allow the growth of economic liberty. Borders restrict that liberty. It is highly encouraging that our leaders recognize this. Let us hope that they can enlighten the population and deter the kind of fear-based reaction represented by this bill.Skot Kortjehttp://www.blogger.com/profile/00681338027031381137noreply@blogger.com0