Canada’s bogus unsustainable economy – Lake Superior News

0

When growth is not really growth, we have a serious problem.

THUNDER BAY, SAULT STE MARIE, ONTARIO January 1, 2022 (LSNews) Credit for the idea of ​​writing this article goes to Darshan Maharaja, who said this on Twitter:

This excellent point needs an article in itself, Spencer.

Before we get into a discussion of Canada’s fake economy, I encourage you to visit the Darshan website, DarshanMaharaja.ca, where you can find very informative commentary and analysis on the issues facing Canada and the world today.

An unsustainable form of “growth”

There are two ways a person can grow:

They can grow naturally, as part of the early aging process, or they can artificially inflate their height with shoes on.

If someone tells you that they’ve gained a foot in height, that doesn’t tell you whether the height increase is real or artificial.

It is the same for an economy.

In terms of GDP, an economy can grow through an increase in productivity, typically seen when technological advances make it possible to produce more in less time and with less effort.

An economy can also “grow” by increasing inflation, a higher population and an explosion in public spending of borrowed money.

The first type of growth – productivity – equates to a person growing naturally, while the second equates to a person putting on taller shoes to appear taller than they are.

Now, what kind of growth has Canada experienced recently?

I think we both know the answer.

Productivity problem

Canada’s economic productivity has been low for some time:

“During the 1960s and 1970s, new equipment and machinery allowed Canadian workers to produce more with less, and a boom in international trade gave companies access to huge foreign markets to sell that output. Productivity has increased by about two to three percent each year, contributing to an average economic growth of four to six percent. Over the past 20 years, however, things have slowed down considerably. The annual economic growth has averaged around 2.2% and the average productivity growth is only 0.8% per year.

While some may argue that this is a problem affecting all advanced economies, the fact is that Canada lags far behind our neighbors to the south.

This is what the Alberta Business Council said about it, noting that the differences in hours worked are only a small percentage of the difference:

“To put the difference into perspective, Canadians earn about C $ 54,000 per year on average, while their American counterparts earn about C $ 67,000. In other words, by traveling only a few hours south, income increases by almost 25% on average. How are the United States or Americans different?

Part of the gap is unrelated to productivity: Americans work more hours than us, about 3.5% more. If Canadians worked the same number of hours as Americans, they would instead earn close to $ 56,000. This narrows the gap a bit, but the remaining 20% ​​gap is due to a difference in the value of output produced per hour worked (i.e. productivity). While the average American worker produces $ 66 of value per hour, the average Canadian worker produces only $ 50 of value per hour. “

Lack of competition

As we know, many sectors of the Canadian economy are dominated by a few large companies. This, combined with increasingly onerous taxes and regulations, creates a barrier to entry for new competitors, thus strengthening the position of those already at the top.

This creates a lack of competition, and a lack of competition is devastating for innovation.

The more companies compete for a market segment, the more they must seek to innovate and outdo each other to provide a more valuable service at a lower price.

But too often, once a business achieves a decent level of success in Canada, it can come to terms with implicit government support.

Interestingly, while reading an article that focused on the differences between the US economy and the Chinese economy, there was this anecdote about Canada:

“The highest concentration of companies in the market, meaning one or two companies in a particular industry, is not in China but in Canada. “

It is a serious problem.

China is a country ruled by an all-powerful centralized party, a party that intervenes in almost all affairs and runs large swathes of the economy through state-owned enterprises. And yet, Canada has a more concentrated business market than China.

This is why it is not hyperbole when we call Canada a socialist, since this country has a serious problem of lack of competition.

Ironically, in the few areas where a lack of competition can be good (industries directly essential to national security), our country often allows foreign countries to buy our companies.

Booming immigration

With competitiveness a serious problem and productivity growth quite low, our “leaders” attempt to create the illusion of growth through a large annual increase in population.

Canada’s annual immigration level has led us to attract about 33% of the number of people entering the United States, although Canada has about 1/9 of the United States population.

On a per capita basis, our immigration levels have been higher than in the United States for some time.

This means that when we compare the growth of Canadian GDP and the growth of US GDP, we must take into account that much of Canada’s “growth” is based on a percentage increase in population that is faster.

We can see the impact of this by looking at the stat that really matters:

GDP per capita.

In 2012, Canada’s GDP per capita was US $ 52,669.

In the same year, the GDP per capita of the United States was $ 51,602.

In 2020, Canada’s GDP per capita was US $ 43,241.

In the same year, the GDP per capita of the United States was US $ 63,543.

This means that while our economy may appear to be growing due to large annual increases in population, the average Canadian is actually getting poorer.

The inflation scam

So, we have seen that Canada has a competition problem, a productivity problem and a per capita GDP problem that politicians are trying to mask with increasing immigration levels.

Now there is another problem.

Galloping inflation.

Prices are what make market economies and civilization possible.

Prices convey an astonishing amount of information – too much information for one person to really understand – in a clear number.

If the car manufacturers have a serious and deeply complex technical problem that makes it more difficult for them to produce cars, you don’t need to know the problem, you just need to be able to see the impact, which will be demonstrated. in the price.

Prices – when not manipulated by governments – allow us to make good decisions with our money, and over time ensures a much more efficient and beneficial allocation of resources.

Over the past two years, governments have repeatedly ordered massive restrictions on economic activity, shutting down many businesses and imposing restrictions on businesses. Besides the question of whether governments should have this power (they should not), you would expect a massive drop in prices.

Stock prices should have gone down, house prices should have gone down and prices overall should have gone down.

A heavily state-constrained economy should have looked like a much poorer economy.

Indeed, it’s much poorer, but we’ll get to that in a minute.

Instead of lowering prices, prices jumped, with inflation hitting Canadians hard.

Asset prices are on the rise as the housing market jumped about 30% last year, which should never have happened in a deep recession.

This happened because – rather than allowing prices to adjust to a significant drop in economic activity – governments have flooded the economy with fiat money.

They printed money and distributed it widely.

This was done to maintain a politically beneficial illusion, giving the impression that the economy had not been deeply damaged.

Yet you cannot escape reality, you can only hide it for a while.

Instead of prices going down, the value of our money has gone down.

Of course, there was no deflation in the price of goods, but the purchasing power of your hard-earned money has rather deflated.

Thus, by voluntarily generating higher and higher inflation, governments have sought to mask the significant decline in our economy.

But this decline still happened.

Deflation would have been preferable, because it would have provided realistic price signals which would have allowed a better allocation of financial and productive resources. In contrast, the money-printing frenzy has hidden the true cost of government restrictions and blockages and distorts price signals, resulting in severe misallocation of resources.

Just look at our housing market, which is a huge percentage of our economy and is now essentially supported by endless public debt and a money-printing frenzy that cannot be sustained.

A false economy

Add all of this, the lack of competition, low productivity, and higher immigration combined with higher inflation to mask our severe drop in GDP per capita, and it becomes clear that Canada’s economy is largely fake and not viable.

We have to accept that a difficult readjustment and comeback is necessary, and that the government must step back and step aside.

Spencer fernando

#LSN_Econ #LSN_SSM #LSNews_TBay

Below please rate and share this story
To help us learn what’s important to you

https://spencerfernando.com/

Spencer fernando
Spencer Fernando is based in Winnipeg

Warning
The opinions expressed in this opinion piece
or photos are those of their author only and are not necessarily shared or endorsed by Lake Superior News / Lake Superior Media.



Source link

Share.

About Author

Comments are closed.