Tomer Avital in the wake of the approval of the 2023-24 budget For the sake of the journalists and presenters…
Wednesday Night #1678
Written by Diana Thebaud Nicholson // April 30, 2014 // Wednesday Nights // 1 Comment
While we often celebrate our Wednesday Night authors, it gave us particular pleasure to see the Doc Zone premiere of Paul Carvalho’s documentary La Main… et les autres this week – it is a wonderfully informative account of three of the immigrant communities that first put down roots– and flourished – on The Main before moving on to establish their own unique neighborhoods. A must-see for all generations! It is the second of the series Montréal, mon amour, mon histoire prepared for the 375th anniversary of Montreal’s founding in 2017. We hope that Paul (and politicians of all stripes) will not forget the epic year of 1967 and the magical experience of Expo 67. Not incidentally, April 27th is the 47th anniversary of the opening of Expo– many, many happy memories.
We are struck by the juxtaposition of Sunday’s joyous celebration of the canonization of Popes John XXIII and John Paul II (The day of four popes: Pope Francis declares John XXIII and John Paul II saints as Benedict looks on ) and the solemnity of Holocaust Remembrance Day (Yom HaShoah) the meaning of which our friend Beryl Wajsman writes about so eloquently in The duty of witness. Forgetting evil is a dangerous corrosive
Sadly, neither the exemplary lives of the newly-canonized popes, nor the recounting of the horrors – and heroism – of the Holocaust have had the benign influence on all of humanity that we would wish for. Witness the atrocities – nominally perpetrated in the name of one religion or another, although the underlying causes are more economic than faith-based – of the CAR, South Sudan, Iraq, Syria … the litany is seemingly endless despite the great work being done by Frank Chalk, Kyle Matthews and their associates at the Montreal Institute for Genocide and Human Rights Studies (MIGS).
There is some cause for optimism, however.As Gareth Evans writes in MH370’s Beacon of Hope:
“The search for MH370 has shown in microcosm how much there is to be gained through peaceful cooperation. It should also help focus our attention on just how much there is to be lost in today’s world – a world that is far more interdependent than the one that exploded in 1914 – if we fail to apply these lessons to our broader international relationships. The world is a much safer and saner place when states search for and find common ground on which to work together.”
Let us hope that the same international good will be translated into action in the wake of the Mount Everest tragedy that took the lives of 16 Nepali mountaineers, 13 of them Sherpas. In the past years, occasional articles have been published about the excessive number of summiteers, and the clashes with the guides on whom they depend, but there has been too little discussion of national (Nepal) and international responsibility for the management of the Himalayas , scheduling of climbing parties and the appropriate recompense of the Sherpas. The comprehensive Sherpas: The Invisible Men of Everest by Chip Brown makes the case:
“The mass casualties of last week’s avalanche brought home the risks in a way that could not be glossed over the way they previously were when Sherpas died one at a time. The enormity of the death toll mobilized a vocal contingent of the Sherpas who took steps to shut down climbing for the season on Everest and put forward 13 demands calling for, among other things, more insurance for mountain workers, bigger payments for families that lost relatives and for workers who were disabled, and a portion of permit fees to be set aside for a relief fund.”
Globe & Mail contributor Wade Davis ( author of Into the Silence: The Great War, Mallory and the Conquest of Everest) adds a strong note in As equals on the mountain, the Sherpas deserve better
While the government of Nepal must take the lead, the international community from which the climbers come, must contribute to the solution.
In contrast is the tragic story of the sinking of the South Korea ferry MV Sewol – the recovery operations are almost exclusively in the hands of the South Korean authorities and international involvement is very limited.
Something to ponder
In Ignoring the Ignorant, Henry I Miller writes:
People have a right to be ignorant. … Perhaps ignorance makes sense sometimes. According to economists, “rational ignorance” comes into play when the cost of gaining enough understanding of an issue to make an informed decision relating to it outweighs the benefit that one could reasonably expect from doing so. For example, many who are preoccupied with family, school, work, and mortgages may not consider it cost-effective to sift through a mass of often-inconsistent data to understand, say, the risks and benefits of nuclear power, plasticizers in children’s toys, or the Mediterranean diet. … Regardless of their reasoning, people have a right to choose ignorance. But allowing that choice to drive public policy constitutes a serious threat to scientific, social, and economic development.
Given our preoccupation with local events (Quebec and Ottawa for starters), and current international crises (Ukraine/Russia), it is perhaps not surprising that we have only very recently become aware of the existence of the new French intellectual darling Thomas Piketty (described by The Guardian as a “rock-star economist”) and the furore created by his best-selling book Capital in the Twenty-First Century. [At 685 pages, it may well be best-selling, but we wonder about the claim that its “success indicates that this conversation is spilling into backyard barbeque and pub table discussions, as well.”] Paul Krugman is lavish in his praise “Piketty has written a truly superb book”, while, on the other hand, Tim Worstall writing in Forbes argues that It’s Impossible To Benefit The Worker By Taxing Capital — “the effect of taxing either capital or the returns to capital will be to lower the amount of capital applied to labour, leave said labour less productive than it would otherwise be and thus leave wages lower than they would otherwise be. Sure, the workers who receive the booty stripped from the capitalist will be better off for a while but over time the workers’ in the future will be poorer than they would have been.” The Daily Beast offers a different perspective: Today’s Wonky Elite Is in Love With the Wrong French Intellectual. See also Peter Berezin’s comment of April 30 below.
Not wishing to remain ignorant, we look forward to hearing what our Wednesday Night economists have to say, including the Coles Notes they may offer to those of us who are intimidated by the topic and/or length of the magnum opus. Meanwhile, we rejoice in the arrival of a new French intellectual to displace the annoying Bernard-Henri Lévy.
Last Wednesday, Philippe Couillard unveiled his cabinet and made it very clear that Quebec faces difficult times ahead. On Friday, in a report commissioned before the government officially took power, economists Luc Godbout and Claude Montmarquette painted a grim portrait of Quebec’s financial situation, arguing that drastic measures are required to prevent the province from being downgraded by credit agencies. Among their recommendations: partially privatize Hydro Quebec and the SAQ. Le Journal de Québec seized on the recommendation (with Bernard Landry in full cry) Des chercheurs se penchent sur l’héritage de Lévesque conveniently ignoring that during the campaign, PKP had stated that he would be ready to privatize Hydro if it would accelerate Quebec independence.
Now that we have (temporarily?) escaped the spectre of another Quebec Referendum, we can appreciate this déjà-vu-all-over-again headline Scottish independence: Clash over costs of ‘Yes’ vote
Last week was not a happy one for Stephen Harper. First, there was the Supreme Court ruling that rejected his government’s attempt to transform the Senate into an elected body, and to set term limits of nine years. We remind you that Mr. Harper has now lost 5 pretty big cases in front of the Supreme Court. Hugh Segal does not believe that all is lost – he says that the –Feds [are] not out of options on Senate reform, but his advice is so typically common sense, one wonders if the PM and Poilievre will listen.
Then came Minister Poilievre, climbing down from his (very) high horse to announce major modifications to the Fair Elections Act in the face of serious criticism from the opposition, experts and academics.
It gets worse. With these two stories on Keystone:
No Keystone XL? Blame Canada
(Bloomberg View) To hear the Canadian government tell it, Barack Obama’s administration has yet to approve the Keystone XL pipeline because it won’t stand up to environmental activists. Exhaustive new reporting offers a more persuasive explanation: The oil pipeline hasn’t been approved because the Canadian government keeps screwing up.
Today’s story by my colleagues at Bloomberg News bureaus in Toronto, Ottawa and Calgary, the result of more than 75 interviews, lays out how Canada’s failure to secure a green light for Keystone can be traced to a series of miscalculations, missed opportunities and flat-out mistakes.
William Marsden: Canada’s threats, whining and naivete botched Keystone XL
(Postmedia news) Six years later that pipeline remains a dream. Conventional wisdom says TransCanada botched the deal by failing to respond quickly to a fast-changing political environment while at the same time refusing to make any concessions to Nebraska, Montana and Dakota landowners and officials.
Washington insiders claim both TransCanada and the Canadian government have essentially displayed a shocking ignorance of and insensitivity to U.S. governance and politics. Then, as the company bulldozed its way through America’s heartland, it gifted a flagging environmental movement with a new climate change icon upon which they could fatten their treasuries and raise public outrage.
See also Paul Koring: Canada, you’re so vain: the Keystone delay isn’t about you
The situation in Ukraine appears ever more dire. On Sunday, Pro-Russian separatists seized control of the TV station in the eastern city of Donetsk and immediately replaced Ukrainian TV with Russian channels broadcasting exclusively pro-Kremlin views. One of the OCSE monitors has been released, but the others remain captive – the pro-Russian rebels claim they are prisoners of war. The U.S. and EU plan to impose new sanctions on Russia this week – the US may announce measures on Monday.
Another aspect of the current crisis should be of greater concern to Canada. As the situation in Ukraine continues to worsen,Robert Murray and Tom Keating argue Why Neo-Containment Should Not Extend to Arctic but it seems to us that they have an overly sanguine view of the power of diplomacy in Arctic matters.
“Canada is under increasing pressure to include the Arctic as part of NATO’s strategy to counteract Russian aggression. In the following, we content that it should continue to resist this pressure—even in the wake of events in Crimea and eastern Ukraine. The efforts to increase NATO’s common interests in the Arctic began as far back as 2010 with Norway broaching the subject at a NATO Summit. At that time, Canada requested that the Arctic be removed from the Summit’s agenda as Canada felt that NATO had no place in Arctic affairs.”
On the other hand, former Canadian Ambassador (to Moscow and also Ukraine) Chis Westdal believes that Peace is still possible in Ukraine although he recognizes that “The urgent diplomatic task now is to help Ukrainians keep the peace, however shaken, and reach a deal together, a deal Donetsk will tell Moscow it can live with too — all while having an election, trying to launch fundamental reforms (with oligarchs still in powerful political roles), combatting the “cancer of corruption” and surviving a convulsing economy.” No easy task.
For your calendar:
Blue Metropolis – 28 April to 4 May download the brochure and note the warm words of welcome from Pauline Marois and Jean-François Lisée !
May 14 @ 6:00 pm – 8:00 pm
CIC Montreal: “Still Ours to Lead: Ukraine and Beyond”
An intimate evening at the Atwater Club with one of the world’s foremost experts on US foreign policy and geopolitics. Dr. Bruce Jones will talk about his most recent book, Still Ours to Lead: America, Rising Powers, and the Tension between Rivalry and Restraint (released in March 2014) with a focus on the current crisis in Ukraine. More info and to register
On-going until June 1st
Celebrating the legacy of the great Canadian animation filmmaker Norman McLaren on the 100th anniversary of his birth, the Quartier des Spectacles, will be transformed into a vast outdoor laboratory for experimental video art. Seven original video works inspired by McLaren’s films will be projected on the façades of seven buildings in the district. The works consist of three interactive video installations and four films selected in an international competition especially for this event.
One Comment on "Wednesday Night #1678"
By my count, there are already over a dozen reviews of Thomas Piketty’s book entitled Capital in the Twenty-First Century from a variety of big thinkers, so I won’t endeavor to write yet another one (Here’s Paul Krugman’s review, and from the right, here’s one from Clive Crook; also, do check out this hilarious piece from Carlos Lozada at the Washington Post).
Rather, let me make an analytical point that I think has been largely lost in the discussion. At the core of Piketty’s book is the idea that the difference between the rate of return on capital, r, and the economy’s growth rate, g, has a significant bearing on the economic and political landscape. Specifically, Piketty argues that a decline in g will cause wealth to increase more quickly than income (Y).
It is not hard to see why this might be the case. Imagine a situation where g is zero. In such a case, as long as there is more than enough savings to cover the depreciation of the capital stock, the capital-income ratio (K/Y) will rise. Piketty convincingly shows that capital income is less evenly distributed than labor income. Since there are reasons to think that g will fall in the future (lower labor force growth, fewer productivity gains, etc.), the implication is that inequality will continue to increase.
However, notice what Piketty is not arguing. He is not saying that r is going to fall in the future. In fact, if the capital-income ratio increases, then the law of diminishing returns implies that r will decline. All he is saying is that the decrease in r will not be enough to prevent the capital share of income from rising over time. But if you are a wealthy capital owner, what do you really care about: the return on your own wealth, or the ratio of wealth-to-GDP? Now, Piketty would argue that even if the wealthy care more about the rate of return that they themselves receive, this may not matter. As long as the share of overall income accruing to capital rises, political institutions will evolve in a way that protects the wealthy at the expense of the working class.
Maybe, but I have my doubts. Here’s a concrete example. Higher immigration would cause g to increase; by Piketty’s logic, this would dilute the influence that the wealthy have over decision-making. I suppose this explains why the U.S. Chamber of Commerce and the Wall Street Journal are so adamantly against easing immigration restrictions. Oh, wait, they’re not…
Next, consider the saving rate. Standard economic models, such as the one developed by Robert Solow in the 1950s that forms the bedrock of Piketty’s analysis, predict that an increase in the saving rate will drive up the capital-income ratio, reduce the rate of return on capital, and increase average real wages along with per capita output. However, as economists have long known, if an increase in the capital stock leads to a proportionately smaller change in the rate of return on capital (i.e., in technical language, if the elasticity of substitution between capital and labor is greater than one), then capital’s share of income will increase. But is that really such a bad thing? As Solow himself points out in an otherwise glowing review of Piketty’s book, “you eat your wage, not your share of national income”.
Admittedly, in the current environment of deficient aggregate demand, more savings would indeed be undesirable. But, this isn’t Piketty’s argument. After all, his book is all about structural, rather than cyclical, trends. It’s also possible that an economy can save too much. However, in the simplest formulation of Solow’s model, …. where the production function is assumed to be Cobb-Douglas with constant returns to scale, the saving rate that maximizes the steady-state level of consumption – the so-called “Golden Rule” – is equal to the capital share of income. The gross saving rate for the U.S. is only half that level, suggesting that once the economy returns to full potential, a higher saving rate would be welcome. The point is that one can easily justify a higher saving rate if it leads to faster growth in average real wages, even if the income distribution worsens in the process.
This brings me to the title of this post: there are “two Pikettys” in full display in this wonderful, but ultimately, flawed book. On the one hand, there is Piketty the economist, who has done an exemplary job of gathering and analyzing the historic data on the distribution of wealth and income from days gone by, as well as creating an intellectual framework for thinking about how this distribution varies over time. On the other hand, there is Piketty the policy entrepreneur, who often seems to place greater importance on redistributing income away from the wealthy, rather than stressing the goal of creating an economic environment that would allow real incomes for everyone to grow more quickly. I like the first Piketty a lot more than the second one.