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'In advanced industrial economies like Canada, the consumer will have to adjust into believing that less is more … and that’s not necessarily a bad thing,' says economist and author Jeff Rubin. (Tim Fraser for The Globe and Mail/Tim Fraser for The Globe and Mail)
'In advanced industrial economies like Canada, the consumer will have to adjust into believing that less is more … and that’s not necessarily a bad thing,' says economist and author Jeff Rubin. (Tim Fraser for The Globe and Mail/Tim Fraser for The Globe and Mail)

q&A: jeff rubin

Silver linings of a slow-growth economy Add to ...

If there is a central message in Jeff Rubin’s sprawling new book, it is this: the end of cheap oil prices means the world is shifting into a period of slow economic growth, one in which many citizens will have to learn to live with less. But that’s not all bad.

Sipping a Tim Hortons coffee at his Toronto book publisher’s office, he expounds on the contents of his new book, The End of Growth. We go from Rob Ford’s Toronto to fishing in northern Saskatchewan, from the streets of Egypt to bars in Copenhagen and rural villages in China.

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“The book is really about understanding the finite boundaries in which we live, and certainly in advanced industrial economies like Canada, the consumer will have to adjust into believing that less is more … and that’s not necessarily a bad thing,” he says. Though he looks tanned and fit, he describes writing the book as “exhausting” and says he can’t think about whether he’ll write another.

Growth is not the Holy Grail of measuring progress, Mr. Rubin says. Slow growth is the best way to curb greenhouse gas emissions – and a recession is even better.

The former chief economist of CIBC World Markets says Bank of Canada Governor Mark Carney is wrong to keep interest rates low while admonishing consumers about debt. Oil prices will hit a record and we will re-enter a global recession, likely in the next year. More countries, such as Portugal, will default. The greenback will enter a period of prolonged decline.

He’s been called a “mosquito in the eye” by federal finance officials. Many of his predictions on oil, housing and productivity have come true, but he’s also had his fair share of missed calls (oil at $225 a barrel by 2012?).

Clearly, oil and its connection to the economy still most interests him. He’s shifted tone a little. His last book spoke of oil “scarcity” and how that will reshape the global economy. This one focuses on oil prices and their impact. Here are some of his views about current economic trends.

Monetary policy

I think there will be a day of reckoning with setting interest rates at zero. I find it somewhat amusing that our Governor of the Bank of Canada continues to caution Canadians not to add more debt, while he keeps interest rates at 1 per cent. Just what does he and the other 300 economists who work in the Bank of Canada think the relationship is between the rate of interest and the demand for credit?

I think the policy settings of the Bank of Canada can do but one thing, and that is to encourage people to borrow more, to build even more condominiums. If he was really serious … why doesn’t he rack the overnight rate to 4 or 5 per cent? Then he won’t have to worry about over-building in the condominium market.

Greenback

In the next 10 years, who’s to say that the yuan could not appreciate 40 to 50 per cent against the U.S. dollar. I very much doubt whether the greenback will be the unchallenged world currency in 10 years that it is today.

Recession

I think we’re going to find that oil prices will set a new all-time record high. And we will plunge back into another recession, probably within the next 12 months.”

Defaults

We’re likely to see further defaults in the system. In Europe, if you look at a country like Greece, half of the time in the last 200 years it’s been in default … Ultimately the only way that it’s going to be able to extricate itself from a continual implosion of its economy is to default, to leave the European monetary union, to bring back the drachma, to have the 40-per-cent devaluation, and once again, German tourists will go to Santarini like they always have.

But it’s not just going to be Greece. Consider Portugal. What’s Portugal’s main industry? Also tourism. Well, how is the Algarve, or the Azores, going to compete with Santorini if they’re in euros and Greece is in drachmas. I think you’ll find in very quick order that the escudo, the Irish pound, the peseta and the lira are coming back.

Future of labour markets

It makes sense to job-share [similar to Germany’s Kurzarbeit program] In fact, more than that, I see the future of the labour market in people having multiple jobs and multiple sources of income. I think we’re going to see a labour market with a lot of older people in it. I don’t [think]the age of 65 is going to be the age of retirement, not with pension plans where they are … At the same time, you’re already looking at youth unemployment rates in the teens, I think you’ll see more and more people stay at home and a huge jump in post-secondary education.

But job creation and job-sharing is going to be the biggest challenge of managing an economy in which we’re not growing at nearly the same speed as we have in the past.

Carbon emissions

There are silver linings that are going to be coming with this [slow-growth]story. We’re going to see the re-emergence of a local economy, and we’re already starting to see that … Our greatest silver lining is emissions. If you’re David Suzuki, I think this is a very hopeful book. Because this says, you know what?, we may always be counted on to do the wrong thing, but it isn’t up to us. Because, like everything else, even our inexorable march to self-destruction is going to run out of fuel.

Economics and the environment

I went fishing with my son in that region [the West] I’ve been to Lake Athabasca. This is a primeval wilderness … British Columbia carries all the risk, and Alberta gets all the revenue. That’s gotta be arbitrage. In a similar vein, there’s 160 native groups have a land rights claim there. If there’s an oil spill, they bear all the risks.

The one salvation for the region, for those who don’t want to see tankers coming up to Kitimat, if we have a global recession and oil prices go back to $40 or $50 a barrel, just like they cancelled $50-billion in cap ex in Fort McMurray [in the recession] maybe the economics won’t work.

We’re pushing the frontier not only on the cost side, but certainly on the environmental sustainability side as well. So I could see a lot of people who are concerned about sustainability and are concerned about the consequences of uninterrupted growth seeing this book as actually having a very hopeful message. Because I think environmental regulation, compared to the economy – the economy’s always going to trump. But that can swing two ways. When the economy slows down, it’s not just the tar sands, think of all the resource projects that were cancelled around the world in 2009 when everything from the price of copper to the price of oil plunged.

I don’t think we have to worry about carbon capture or carbon taxes. I think triple-digit oil and coal prices will look after that all by itself. Just as Russia found a way of reducing its emissions without even trying, we can too. So I’m not counting on Stephen Harper, because I think the economy will trump whatever Harper does.

Follow on Twitter: @taviagrant

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