Wednesday Night #1440

Written by  //  October 7, 2009  //  Guy Stanley, Herb Bercovitz, Reports, Wednesday Nights  //  2 Comments

Jaime Webbe gave birth this Wednesday morning to a fine, healthy baby boy, Sebastian (possibly with an ‘e’ depending on the linguistic circumstance), thus contributing to the growth of the Quebec population and future Wednesday Night attendees. A sleep-deprived Bert telephoned to say that all is well and they are ecstatic.

Guy Stanley’s introduction of Frédéric Laurin paid tribute to him as a gifted economist, whose impressive academic career spans two continents, with degrees that include a docorate in economics from l’Université catholique de Louvain, Belgium, plus a  masters degree in applied economics from HEC Montréal, and a licence en études européennes from Strasbourg. Frédéric now teaches at UQAM Trois-Rivières and at the International School of Economics at Tbilisi State University (ISET) in the Republic of Georgia.

Scribe’s Prologue
Regardless of whether one believes in divine creation or evolution from a unicellular organism, religion (including atheism) and governance form an important part of both the individual and collective belief system, hence behaviour.  It is therefore, not surprising that the total separation of state and religion (including the secular religion) is difficult, if not impossible.  Whether it be totalitarianism, communism, democracy or other, Pierre Trudeau`s (not universally accepted) stated belief on the government`s role in the bedrooms of the nation is applicable to many areas, depending on the mores of the population and the nature of the government.  It is possible that people in either a theocracy or other dictatorship, or in a democracy, may feel secure in the belief that a higher power (including government) will provide a secure environment within a wicked world that seeks to corrupt and are prepared to sacrifice their own good judgment and personal mores in anticipation of attaining that end or to find eternal peace in an afterlife.  Whatever the form of government, there is one area that they have in common, namely the perceived need, sometimes valid, sometimes transparently devious, to raise money as painlessly as possible so as to govern the country (or province).  Gasoline taxes are a valid way to pay for construction of transportation infrastructure, income and consumption taxes to pay for the cost of governing.

OÙ SONT LES VINS?  (Youtube video interview with Frédéric)
In the guise of protecting the population from excessive alcohol consumption (control of morality) , Québec created the SAQ, a chain of attractive wine and spirits stores, a laudable effort, which not incidentally pours some $700 million into the coffers of the Province. Government monopolies are not all bad. The time has come, however for a review of the situation in the light of an increasingly sophisticated consuming population. The SAQ provides the consumer with a valuable service, but it does not serve the best interest of Quebec oenophiles. The government apparatus that controls the sale of wines is cumbersome, expensive, and the overwhelming majority of sales staff lacks education and appears to be more interested in stocking and selling the product than sharing the subtleties, similarities and differences with their clients. Because of its size, the SAQ  cannot share the joy of discovery that is part of the product.  The size and complexity of the SAQ, aside from the resulting unnecessarily high cost to the consumer (roughly twice the purchase price from the producer, including transportation costs), makes it very difficult to cater to the individual tastes of consumers.
Applying economic principles to the way wine is currently sold in Quebec, Frédéric points out the importance of diversity and its lack in Quebec, thanks to the monopoly exercised by the SAQ which favours the big producers. Private importation is a costly and lengthy process.  He advocates a system under which competitive, independent specialty wine shops with knowledgeable, interested owners and employees would determine what wines they would stock and the prices at which they would be sold. There should, however, be the option under which state-sponsored stores (SAQ) might operate a monopoly in remote regions and rural areas where the markets are small.
Comparisons with the market for cheese are apt.  For years, the anachronistic fear of tuberculosis related to the consumption of raw milk restricted the variety of cheeses available in Québec.  With the change in government regulation, cheese production, marketing and sales have flourished with the rise of small specialized cheese shops; new produce has been encouraged and les arts de la table enhanced. Jobs have been created. The same would result from a dismantling of the SAQ monopoly.
Readers are encouraged to visit Frédéric’s website and raise points for debate, make comments and suggestions. The aim is to open serious debate on the question.

For the past 30-40 years there has been a vision in Quebec that jobs are protected by the State. This has not proven to be a highly successful approach. There is an important debate regarding those state monopolies that serve a societal purpose versus those that do not. The obvious example of an ‘appropriate’, and outstandingly successful government monopoly, is Hydro Québec that despite inevitable government inefficiencies, has provided relatively inexpensive electrical power, attracted industry to Québec and provided the government with important income, while serving the public good. The issue of monopolies in other sectors (energy, telecommunications, transportation), public policy and economics, including social versus private benefits and entry costs for smaller producers, was hotly debated and remains unresolved.

The [many] markets
It’s a bull market because there’s lots of cash around and the cash is looking for a home
The stock market continues to rise at a rate unanticipated by many observers.  Since the dramatic disintegration of the market, prudent investors husbanded whatever cash was salvaged in the anticipation of a recovery. Money markets in the U.S. alone are $3.5 trillion. With interest and bond rates below that of inflation, many investors have returned to the market, becoming the cause rather than the result of a dramatic upturn, or of renewed economic vigour.  In fact, with a mere G.D.P. growth of 2%, Canada enjoys the best growth of the G8 countries.  Our economy and currency are doing well and are expected to continue to do so. However, only two countries did not go into recession because they maintained growth: Poland and Australia. On the other hand, China is deemed to have gone through recession because growth dropped from 12% to 8%. Thailand, which is in political turmoil is doing well economically.  Other countries that are doing well economically, although some are politically troubled, include Australia, China, Korea, India. Indonesia, the fourth largest country in the world, the only Asian country that is a member of OPEC, has a local, domestic economy that is working well. Longer term, Vietnam will be a country to watch.
Brazil, self-sufficient in energy, flourishing agriculture and newly-named Olympic Games host – with all that means in terms of badly-needed infrastructure development in Rio – is a place to put money (closed-end funds are good vehicle).
The price of gold is rising in U.S. dollar terms while faith in the U.S. dollar as a world currency is rapidly disappearing and will continue to decline unless the United States can significantly expand exports.  Although commodity prices may continue to increase, that increase is not yet reflected in consumers’ inflation. [See Gold shines as base metals are tarnished: Bullion prices hit all-time high but oil prices were choppy and base metals retreated as US dollar volatility limited momentum for commodity markets].
The U.S. consumer’s habits are changing; he is paying down his debts and the retail business is in trouble. The U.S. cannot defend the dollar; their only solution is to allow the dollar to drop, import less and begin to export again.
An ongoing conundrum is the apparent unwillingness of banks to grant loans considering the apparent continuing good economic health of the Canadian banking system and the potentially positive potential effect of freer access to capital by small and medium size enterprises.  It may be that they are concerned by what toxicity is left over from the recent financial meltdown from which we appear to have been recovering. The G20 capital requirements – still not specified, but undoubtedly substantially higher – may be another factor.

Medical matters and flu vaccine update
A second wave is expected this Fall. The two vaccines are ready, but will not be given together because one would weaken the other. H1N1 vaccine will be given in November, with priority for people living in institutions (homes, hospitals), healthcare workers, young children, pregnant women and the elderly; the vaccine for children is slightly different. The vaccine is stored in local secure sites and will only be given by your local CSS; it is proposed that there be large centers (e.g., Blue Bonnets) for mass vaccination. The currently proposed procedure sounds as though it will encourage rather than discourage the spread of the flu. There is considerable anxiety and skepticism about the benefits/angers of the H1N1 vaccine. [Swine Flu Shots Revive a Debate About Vaccines], however Wednesday Night’s OWN Family Medicine practitioner reassures us that his children will be vaccinated. Regular flu vaccine will be given in January.
Quebec has the dubious distinction of being the province with the greatest shortage of full-time family physicians – roughly 25% of the total population, and 34% of Montrealers, do not have access to a family doctor. The shortage is now estimated at 1,105. There are encouraging increases in numbers of graduating students (from 150 should reach 300 next year), but simply to maintain the current level (shortage) there is a need for an annual average of 350 new family doctors starting practice, which may be hard to achieve when eight percent of Quebec graduates leave.
What will eventually emerge as healthcare reform in the U.S. is still questionable, as there are a number of rumored alternatives and much also depends on whether President Obama will take a forceful lead during the final debates in Congress.

T H E   I N V I T A T I O N

TWO Book launches for Wednesday Nighters this week

Are we the only people who find a certain irony in the announcement that 3 Americans have won the Nobel prize for medicine  at the same time as the health care battle in the U.S. continues to rage?
[Tony comments: The Nobel is awarded for scientific achievement. The current US policy debate is about health care delivery, which is a business. (One hopes that the product of science eventually feeds into health care.) The resources (private and public) made available for scientific research in the US have dwarfed everyone else’s for many years, that is why the best and the brightest work/worked in US labs if their home governments allowed them to go. Medicine winner Szostak received his first degree from McGill at age 19. – He could no longer do that, thanks to the introduction of CEGEPS. – Among today’s winners in Physics , one received his Ph.D. from McGill while that Department flourished during the decade following WW II. As before-Hitler Germany used to collect science Nobels by the score, for a long time it will be people working in US labs. Perhaps some day it will be the Chinese ? While on the topic, it is fair game to guess who will get the Nobel in Economics this year. My guess is that it will not be an American, and will not be anyone working in Finance. Economic History and Development are [possibilities]. Chances are they will surprise us all and give it to some Scandinavian no one has heard of, for his contribution to game theory.]
You all know that we enjoy seeking out abstruse bits of information for your delectation.  This week we have discovered that in the year 1440, the Ming Dynasty begins a decade-long series of harsh edicts towards those who illegally mine silver, the latter known as ‘miner bandits’. The government establishes community night watches known as ‘watches and tithings’ (baojia) who ensure that illegal mining activities are brought to a halt.
This information offers an interesting segue to news that Stockwell Day has appointed Marketa Evans as the first corporate social responsibility (CSR) counsellor for the extractive sector. Ms. Evans will help Canadian mining, and oil and gas companies meet and exceed their social and environmental responsibilities when operating abroad  and presumably help them to avoid penalties imposed by the Ming or any other Chinese government.  Now if we could just get them all to behave with the same probity at home….
A frightening illustration of lack of CSR is the CBS “Sixty Minutes” report on coal ash in the U.S.  We are truly blessed to live under the umbrella of Quebec’s hydro power, but then we cannot be too smug given our history with asbestos.
And Lo! Look what’s back in the headlines: “Harper gave a commitment that he will block a UN environmental agreement (the Rotterdam Convention) and prevent chrysotile asbestos from being put on its list of hazardous substances. This would allow Canada to sell asbestos without informing people in developing countries that it is hazardous” And this despite “15 doctors, toxicologists, occupational hygienists and epidemiologists, several being professors at the universities of Montreal, Laval and Sherbrooke, [who] have issued an extraordinary public statement calling for Quebec’s asbestos exports to end.”
Nonetheless, as David Mitchell reminds us, according to the UN annual United Nations human development index, Canada is the fourth best place to live
Much has happened since last Wednesday, including the celebration on October 1st of sixty years of CCP rule. We have endeavoured to assemble some of the most interesting news, comments and analysis for you.
25 years ago, on October 5, 1984, Marc Garneau blasted off into space. As Canada celebrates the milestone, the first Canadian space tourist (clown), Guy Laliberté is half-way through his trip to publicize his One Drop Foundation and raise awareness of the threat to global water supplies. Space tourist Guy Laliberté sends water-conservation message to Earth
Elections in Greece were held on Sunday and the Socialists are back. We hope Kimon may be with us to comment. And Ireland has voted in favour of the Lisbon Treaty.
The count-down to Copenhagen continues, with less and less hope that negotiations will be successfully completed, while Cleo draws our attention to the report that the CIA has  announced plans to launch a center on climate change to examine the potential security risks of environmental issues. She assures us that she had nothing to do with this decision, but we suspect IMPORTANT PEOPLE have been reading her papers on climate change, security and foreign policy
The impact of climate change on agriculture and food security is receiving much attention with a new report from the International Food Policy Research Institute
We also draw your attention to the important McGill Conference on Global Food Security “Impacts of global financial turmoil on food security” (Oct 5-7)
Chicago’s bid for the Olympics was quickly dismissed in favour of Rio de Janeiro, the first city in South America to win. Contrary to most public opinion – or at least, punditry – we agree with the author of Victory: Chicago loses the Olympics who points out that “If they [the Olympics] had come to the Windy City, it would have been an eight-year distraction and political gold for his [Obama’s] opponents.”
To no-one’s great surprise, Peter Trent is the new Mayor of Westmount by acclamation . But there will be several battles for Council seats.
The Liberals [See Adam Daifallah‘s excellent piece in the NP The Liberals’ slow painful recovery]   continue to attract unwanted attention as Mr. Ignatieff tried to mend fences, but once again appears to be going back on his word. After Denis Coderre’s resignation, we clearly heard that the leader did not intend to appoint a Quebec lieutenant any time soon; this was followed by Sunday’s statement that he will   And, speaking of flip-flops, how about Stephen Harper playing piano at an NAC gala that he had previously dismissed with derision? But he received kudos for his change of heart.
In closing, we return to the traditional Wednesday Night topic with a recommendation from Tony Deutsch, who forwards MARKET FATIGUE – The Anglo-Saxon model has taken a knock with the comment “If I still taught intro Microeconomics, I would put this on the reading list.” Consider that it is on your reading list for this Wednesday. You should also be interested in the article that follows, Industrial design – Can governments help revive innovation and trade? On another topic : In The demise of the dollar, The Independent reports that Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading.

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