Brian Lee Crowley

Getting real about China, on NAFTA, national security and trade diversification

I have a bit of a bee in my bonnet these days about China, as any sensible person should. Everyone seems fixated on Donald Trump bullying Canada (and that is a reasonable concern) but the number of people who hold up China as some kind of alternative is truly staggering. If you want real, subtle, long-term bullying in unapologetic pursuit of national interests, you cannot do better than China. Add to that that China is an authoritarian, autocratic and repressive country without even a nodding acquaintance with the rule of law and a hostile relationship with the western alliance, etc., etc., etc., and China gets less appealing every day as a partner for Canada. Here are three recent op-eds in which I develop these various themes:

In the 30 May 2018 edition of the Globe, I took aim at China for its clear threats to Canadians’ national security. The context was Ottawa’s rather unexpected but welcome decision to veto the takeover of Canadian construction giant Aecon by a Chinese firm. As I pointed out, if this means that Ottawa is going to take national security threats from China more seriously (including their to-date insouciance about Huawei’s deep involvement in building Canada’s next generation 5G wireless network) that is very good news indeed and not before time.

Then came the G7 Summit. The G7 seems to me a little adrift these days, an organisation in search of a mission that would unite the disparate interests of Japan, North America and the largest European economies. My suggestion in an 8 July piece in Inside Policy: they should all agree to unite and reinforce their current disparate efforts to confront China’s disgraceful behaviour in the South China Sea that is an affront to the rule of law and freedom of navigation. There is also a video version of this piece.

Finally, Ottawa has been ramping up its focus on “trade diversification” as a kind of defensive card to play in its NAFTA negotiations with Washington. But of all the daft ideas, the one that China can replace or even partially compensate for our trade relationship with the US is surely the daftest. Read my op-ed, co-authored with Sean Speer, in the Globe of 20 July 2018 about why China is no trade saviour for Canada.

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Don’t look at unemployment, but rather employment to understand Donald Trump

In what turned out, alas, to be my last regular column for the Globe’s ROB, I point out that unemployment statistics hide more than they reveal. What tell us a lot more are the data for the shae of the population in paid work or looking for work, know as the labour force participation rate. Focusing on this number tells you lots about politics, the state of the economy, and even some of the roots of Donald Trump’s presidential victory. You can read the unedited text below or online here.

 

What do we know about the people who Donald Trump turned into such a potent political force in the last election?  US unemployment is well below five percent; surely there was no objective basis for the economic insecurities that drove the “basket of deplorables” to vote for the Republican candidate.

Consider, though, that one of the best places to seek insight is not the unemployment rate, but the “labour-force participation” or LFP. The LFP shows the share of working age people who have jobs or are actively seeking jobs in the US. In other words it is also a pretty good measure of how many people have left the workforce because they are discouraged and feel there are no opportunities for them. What do we know about them?

Trump’s election coincides with the US LFP rate hitting its lowest level in more than 30 years. The state-by-state figures  provide even more insight into Donald Trump’s political resonance.

Nine out of 10 states with the lowest LFP rates voted for him. Of the five states that went from Blue to Red in 2016, three – Florida, Michigan and Ohio – experienced a drop in their participation rate relative to 2012, meaning a smaller share of people worked and were looking for work compared to four years earlier. The other two states had no increase in the share of people working despite several years of modest economic growth.

By contrast, the years of Bill Clinton’s presidency coincided with a high LFP rate, a time when workers were prepared to give Bill “I feel your pain” Clinton the benefit of the doubt about how trade would improve Americans’ standard of living and those harmed would not be left behind. No more. That good will is gone.

New research from the centre-right American Enterprise Institute think tank shows that millions of American men are jobless and have given up looking. The share of men 20 and older without paid work is nearly 32 percent. That bears repeating: basically a third of all men in America who are over 20 have no paid employment. Two economists at the centre-left Brookings Institution have now added that the LFP rate of prime-age women has stagnated and also declined. People collecting disability benefit has increased markedly.

This doesn’t just affect their job prospects. Other research, including by a Nobel laureate, shows that the life expectancy and health of these displaced and discouraged workers has gone into a tailspin thanks largely to illnesses related to drug and alcohol abuse and other “lifestyle” factors. As one analyst said, these people are dying of despair, with over half a million needless deaths being attributed to bleak job prospects.

So looking solely at the unemployment rate causes us to lose sight entirely of a major part of the population. This segment is not just constituted of men–and now increasingly women–left behind by economic change. It also includes their parents, friends, and colleagues, who see these people they care about left on the shelf and are angered that opportunities for them seem so few and far between. This starts to be a significant part of the population—and the electorate.

It is no answer to say that these people have misdiagnosed their plight when they follow Trump in seeing trade and immigration as the cause of their problems. Yes, the problem is far more down to automation and other productivity-enhancements, meaning that manufacturing requires fewer and fewer poorly-educated, relatively low-skilled workers. Yes, Trump is wrong when he says that America doesn’t make things anymore and needs to return to this economic vocation. The truth is that America has never made more things than it does today. It just doesn’t require many workers to do so.

But the fact that the diagnosis is incorrect misses the key point about Trump’s voters – they vote for him chiefly because they feel he is the only political leader who doesn’t simply dismiss their fears and anxieties as misguided and ill-informed and doesn’t tell them condescendingly that their problems will disappear if only they get a university degree or if the government institutes a guaranteed annual income and basically writes them off as contributing members of society.

A pervasive feeling has taken hold in many parts of American society that ordinary people are being made to pay the price of the ideals of the elites. Free trade is one such ideal, one in which I happen to believe, but also one whose highly-concentrated destructive effects are undeniable and frequently easier to identify than its widely-dispersed benefits. That is why free trade can only be sustained when the winners use the extra wealth created to compensate the losers – something we, like the Americans, have done poorly and unimaginatively.

Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.

 

 

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The conflict between elites and ordinary people that brought us Trump and Brexit has Canada in its sights

There is no wall protecting Canada from the populist tidal wave that washed Donald Trump to the presidency in the United States, as I argue in a new Macdonald-Laurier Institute commentary based on a talk I gave in Vancouver to the local chapter of NAIOP.

The phenomena that delivered a stunning election result in the United States and a surprise vote to leave the European Union in Britain are – despite what some observers think – also happening here in Canada. I single out three areas where this conflict is already coming into the open: labour markets, immigration and housing prices.

The Brexit vote last June and the recent election of a populist and anti-establishment American president are perhaps only the opening chapters of a new era of friction and even confrontation between the opinions of the Davos-inspired elites who have been in charge for decades, and those of the man and woman on the street.

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Think the conditions that led to Trump’s rise don’t exist here? Think again.

In my Globe column I argue that typical Canadian smug moral superiority has no place in our assessment of Donald Trump and the political phenomenon he represents. Canada is not immune to the economic dislocation and policy arrogance that propelled Trump to the presidency. If we forget about those whom free trade, balanced budgets and higher productivity are leaving behind important parts of our population will be vulnerable to Trump-like appeals.

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Making lemonade out of Trump lemons

To hear the chattering classes tell it, the election of Donald Trump is the End of the World as We Have Known It and over the gate to the new world is inscribed Abandon Hope All Ye Who Enter Here. What balderdash. Life goes on and the Trump presidency, by making marginal changes to America’s behaviour and policies, will create both problems and opportunities for Canada. We should look at both in a calm clear-eyed fashion. Thus my Globe column (in the Report on Business’s Economy Lab feature) in the Remembrance Day edition focuses on three opportunities the Trump presidency offers: 1) reorienting wasteful “infrastructure” spending to thoughtful defence spending; 2) getting Keystone XL built and buying time to get our own pipeline approval process right; and 3) giving Ottawa political cover for a rethink on how to make our business taxation regime a competitive advantage rather than a drag on investment.

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Donald Trump’s economic crankery

Donald Trump isn’t just a bombastic windbag. He’s an economic crank, most obviously in his claim that America has weakened itself by allowing manufacturing to go to China. He promises to make America great again by “beating” China and bring those jobs back. The only problem with that is that the jobs that have gone to China and elsewhere are not the great “value-added” jobs of economic mythology, but the low value-added assembly jobs that America has abandoned because, well, there are more valuable things for Americans to do and the unemployment rate today is 5.3 percent, or essentially full employment. Read the full analysis in my column for Economy Lab in today’s Globe and Mail (7th August, 2015).

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Brian Lee Crowley