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Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

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Aggressive growth policies a priority after Ottawa balances its budget


The goal line of a balanced federal budget in 2015 is in sight, just as the Conference Board of Canada projected four years ago. What next? Within the framework of a balanced budget, the next federal government – regardless who forms it – should be investing in growth as its core budget strategy.

Here’s the economic context for that advice, which the Conference Board gave to the House of Commons finance committee last week. Canada’s economy is expected to grow by 2.2 per cent in 2014 and improve to 2.6 per cent in 2015, on the coattails of a strengthening U.S. economy. However, we do not expect that higher rate of growth to last. Aging demographics are already affecting Canada’s labour force, a key driver of growth, and these pressures will only grow as more and more baby boomers prepare to retire. Canada’s growth in 2016 and beyond will be slower; our estimate for future long-term growth potential of 2 per cent is a full percentage point below growth potential less than a decade ago.

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The economic basket case that is the euro zone


Although the recession ended five years ago, our economy remains in a rut. Economic growth is sluggish, the labour market shows too much long-term unemployment, and exports are very far below normal. Our policy makers wait patiently for a solid U.S. recovery to pull us from the doldrums. But whatever problems we face in Canada, we should be grateful to be far away from Europe, where the situation is very much worse.

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Dissecting the false claims of ‘monopoly’


Confucius once said that when words lose their meaning, people lose their liberty. George Orwell mined this rich idea in both Animal Farm and Nineteen Eighty-Four, showing how political authorities crave to redefine inconvenient words, making them tools of ideology rather than enemies of obfuscation.

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The depressing future of income inequality


Best-selling author Thomas Piketty argues in his book, Capital in the Twenty-First Century, that inequality is set to return to the extreme levels of the “Gilded Age” of the late nineteenth century when very large shares of income and wealth were concentrated in the hands of the super rich. And he is far from alone.

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Sinking loonie masking the dire state of Canada’s competitiveness


In the spring of 2013, when the Canadian dollar was trading at parity, we might have surprised some investors by claiming that Canada’s loss of competitiveness and fading sentiment on commodities would eventually catch up and start pressuring the loonie down.

This scenario came to fruition in the past year, in part a result of the change of tone from the Bank of Canada, which removed its tightening bias that indicated interest rates could rise sooner than expected and moved to a more dovish stance, signalling that interest rates could now be lowered if need be.

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Alberta economic diversification should be a present-day priority


It’s Alberta’s own Holy Grail. Since the Leduc No. 1 oil gusher transformed the province in 1947, economic diversification has always been just slightly out of our reach. We wish for it and dream of it, and some of us even worry about it. But strangely, few of us are compelled to act on it.

A new book by British writer George Marshall, titled Don’t Even Think About It: Why Our Brains Are Wired to Ignore Climate Change, explains why concrete action on global warming has proven so elusive. The reason is our neurology. According to Mr. Marshall, our brains have developed over the millennia to respond to present and tangible dangers – the sabre-tooth tiger about to lunge, the enemy’s arrow pointed at our head. We’re less capable of responding to abstract threats that loom somewhere in the ill-defined future.

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How to ease Ontario’s fiscal squeeze


Ontario is caught in a fiscal squeeze play. Pressed between slower economic growth on one side and aging demographics on the other, Canada’s largest province will be very hard-pressed to balance its books in 2018 under its current plan, even after having successfully reduced the deficit in 2013-14 below expectations.

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Voodoo economics: Busting some popular monetary myths


Last week my friend sent me a link to a short video ranting about our monetary system. I immediately recognized it as another in a large collection of videos I have seen, many of which are sent to me by students pondering the validity of the central messages – which appear quite at odds with the things I say in class.

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