FROLITICKS

Satirical commentary on Canadian and American current political issues

Jan 22

It’s Hard to be Optimistic About the Rest of 2022 — Here’s Why

by bcurry

Well, the New Year began much as the old year ended.  Across the board there are numerous reasons for North Americans not to be overly optimistic about the rest of the year.  Several key factors are leading us to this conclusion.

  • The Omicron variant of COVID-19 has created a fourth or fifth wave, depending on who you are talking to.  Although Omicron appears to have possibly peaked, it has once again severely strained our health care systems.  In addition, the unvaccinated continue to represent the largest number of hospitalizations, especially when it comes to patients in our ICUs.  Our health care providers continue to be under a great deal of strain, especially after two years of treating COVID patients.  There is now a tremendous backlog of elective surgeries and treatments.  In addition, although CDC studies show the effectiveness of booster vaccine shots in preventing severe COVID cases, far fewer adults have gotten booster shots to date.  When will we move from a pandemic to an endemic?
  • In most jurisdictions, kids are back for in-person learning in schools.  However, there are still a large number of children under the age of twelve who have not received their first dose of a COVID vaccine.  With the Omicron variant being twice as contagious as the Delta variant, many parents are concerned about the safety of schools and the potential effect of the disease on their children.  Indeed, statistics have shown that more children are being hospitalized due to Omicron.  Questions have been raised about whether in-person learning can continue in the near future.
  • Even with the economy starting to reopen, a number of economic issues have arisen.  Among these is the forecast of continuing hyperinflation over the coming months.  There continue to be supply chain problems, shortages of skilled labour and increasing fuel, food and housing prices.  With the current annual inflation rate running at around six percent, Canadians have not seen such a high inflation rate since 1991.  A survey of consumer expectations showed Canadian households also expect inflation to stay above 3 percent over the next couple of years, above the two percent average considered normally acceptable.  Central banks have little choice but to raise interest rates this year which will have a major effect on government and personal debt payments down the road.
  • Internationally, both the U.S. and Canada, as members of the North Atlantic Treaty Organization (NATO), will have to deal with on-going Russian threats suggesting a possible military incursion into eastern Ukraine.  Although the Ukraine is not a member of NATO, the allied countries strongly believe that there needs to be an immediate and firm reaction to any Russian incursion.  As a warning to Russian President Vladimir Putin, NATO countries are arming and training the Ukraine military and defence forces in preparation for such an event.
  • China’s economy is slowing, a worrying sign for the world.  China’s National Bureau of Statistics indicates that economic output from October through December of 2021 was only 4% higher than during the same period a year earlier.  This is a far cry from previous annual growth rates ranging between 6 and 9 percent in recent years.  The Omicron variant of the coronavirus is now starting to spread in China, leading to more restrictions around the country and raising fears of renewed disruption of supply chains.  Being a major supplier to the North American markets, any continuing slowdown in China’s economy will have a severe impact on U.S. and Canadian businesses and consumers.
  • COVID-19 government relief programs for the unemployed and businesses affected by government-imposed lockdowns and public health measures are being phased out.  This could result in many hardships for lower income individuals and small to medium-sized businesses.  The resulting loss of income due to the pandemic will have an impact on government revenues in the near future.  Many government support programs may have to be reviewed for termination or reduction under expected future austerity measures.

Canada China Coronavirus COVID-19 Economy Economy Federal Government Federal Government Health Care Ukraine US

Leave a comment »
Jan 14

Trade Squabbles Between U.S. and Canada Will Always Exist

by bcurry

When Canada, the U.S. and Mexico signed the U.S.-Mexico-Canada Agreement, known as USMCA, which came into force on July 1, 2020, no one really believed that any trade squabbles between the three countries would disappear overnight.  However, as a major trading nation, Canada has every desire to keep such squabbles to a minimum.  After all, the U.S. is Canada’s biggest trading partner with over 75 percent of Canada’s merchandise exports going to the U.S.  The U.S. and Canada enjoy the world’s most lucrative and enduring trade relationship, with almost $1.6 billion in goods crossing the border each day.  Goods and services trade between the two countries totalled almost $675 billion during 2017, according to the Office of the U.S. Trade Representative.

Despite our close economic relationship, disputes occurred under the former North American Free Trade Agreement (NAFTA) and continue to surface under the USMCA.  For example, the Canada–United States softwood lumber dispute is one of the most significant and enduring trade disputes in modern history.  The dispute has had its biggest effect on British Columbia, the major Canadian exporter of softwood lumber to the U.S.  In turn, it has increased the cost of softwood lumber in the U.S., influencing daily costs in housing construction.  More recently, the U.S. won a key ruling by the USMCA dispute-settlement panel that could allow more American dairy brands to break into the Canadian retail market, much to the chagrin of highly dairy provinces such as Quebec.  The next dispute on the horizon has Canada joining Mexico in formally disputing how the U.S. interprets rules governing the origin of vehicle parts under the USMCA agreement between the countries.  Ever since the auto pact under NAFTA, the three countries have established highly integrative parts and assembly capabilities when it comes to the manufacture of vehicles.  Now with the increased manufacturing of electric vehicles, the Biden administration has proposed that e-vehicles should be primarily assembled in the U.S., using American parts, in order to avoid any kind of tariffs at the American border.

In addition, all three countries are tied together in the energy sector on a truly continental basis.  Both Canada and Mexico have substantial oil and gas sectors, and help supply the thirsty U.S. markets.  None is so dependent as to ignore the other contributors.  Canada for some time now has been trying to increase the flow of Alberta oil via pipelines, such as the now defunct Keystone XL pipeline.  The Keystone XL pipeline project aimed to carry oil from the tar sands of Canada into the U.S. and has been a political football for years.  Led by pressure from American and Canadian environmentalists, both countries will continue to have issues surrounding the extraction and transport of fossil fuels, in particular via pipelines between the two countries.

However, trade wars simply are not effective.  Tariffs result in less capital spending and higher costs.  Any economics student knows that that is a recipe for net job losses across an economy, not net job additions.  For example, trade wars involving the introduction of tariffs result in more paperwork, less efficiency and higher costs as affected companies try to ‘game’ the system and attempt to get around the tariffs in any way possible.  The negative effects were clearly shown when Donald Trump introduced steel tariffs on Canadian steel.  A Canadian committee was quickly set up to make sure that other countries did not ‘dump’ steel into Canada in reaction to the U.S. steel tariffs.  Few new jobs were created in the U.S. steel industry, where the real issue is the problem of competition from modern and more efficient steel production overseas.  Again, Canada’s steel and aluminum industries are fairly integrated with American users and manufacturers, so that tariffs simply lead to market disruptions and increased end costs.

For decades now, people have talked about the need for freer trade between our two countries.  Indeed, most business people would prefer to let the marketplace determine the value of trade, including cost effectiveness and competitive advantages.  Unfortunately, it appears that administrations in both countries prefer to have dispute resolution processes settle their ongoing trade squabbles, often resulting in long, disruptive and costly legal battles.

Canada Economy Economy Keystone XL US

Leave a comment »
Nov 13

Hyperinflation Could be the Death Knell of Current Federal Administrations

by bcurry

According to just released U.S. Labor Department data, the consumer price index (CPI) increased 6.2 percent from October 2020.  The CPI in Canada was not far behind, rising almost 4.5 percent on a year-over-year basis in September, the fastest pace since February 2003.  In general, monetary authorities like to keep the annual inflation rate at somewhere between 2 to 3 percent.  What one is seeing now could certainly be described as ‘hyperinflation’, which causes all kinds of major issues for governments.  Experts also predict that this current belt of inflation is not going to go away any time soon because of a number of underlying factors, many attributed to economic consequences related to the pandemic.

You don’t have to be an economist or a political scientist to figure out the daily concerns caused by the current inflation rates throughout both economies.  The average American or Canadian sees these concerns on a daily basis when they purchase a house or pay rent, go shopping for food, put gas in their vehicles, buy new vehicles, pay their electricity and heating bills, etc., etc. 

While wage rates have been climbing in recent months, higher consumer prices are eroding peoples’ buying power.  In the U.S., inflation-adjusted average hourly earnings fell 1.2 percent in October from a year earlier.  The longer high inflation continues, the more pressure will be put on Federal Reserve and Bank of Canada officials to end near-zero interest rates sooner than expected.  With the increase in interest rates, people with mortgages and outstanding debt will be faced with the greater cost of borrowing and additional debt-related issues.

One must remember that when George H.W. Bush was president, one of the major reasons that he was unable to win a second term in 1992 was because of the early 1990s economic recession during his administration.  Some suggest that he forgot about the most important political maxim that: “It’s all about the economy stupid!”  The impacts of the recession also included the resignation of then Canadian Prime Minister Brian Mulroney.  Administrations cannot ignore a situation of hyperinflation for very long.  Both President Biden and Prime Minister Trudeau are caught in between a hard place and a rock.  With the end to financial assistance related to the pandemic and the economy’s lockdown, people are going to suffer.  Tough choices are going to have to be made, whether to put nutritional food on the table or cut back on medications and basic entertainment. 

Yes, the economy does appear to be opening up.  However, new COVID cases are on the rise once again in certain regions in North America.  Indeed, in these regions one has what is being referred to as “a pandemic of the unvaccinated.”  Consequently, should governments choose to renew or introduce new financial assistance measures, this will only exacerbate the current economic situation by further increasing the ratio of government debt to revenues.  If interest rates increase as expected in light of inflation, the future interest on government debt will also increase accordingly.  Under these extraordinary circumstances, governments can only do so much.  If the current frustrating situation continues, we would most likely see a change in federal administrations in future elections, as was the case in the early 1990s.

Canada Economy Economy US

Leave a comment »
Jun 21

Cities Will Definitely Not Be the Same After the Pandemic Is Over

by bcurry

A recent New York Times headline read: “New York Faces Lasting Economic Toll Even as Pandemic Passes.”  This should come as no big surprise given the nature of New York city’s industrial make-up, a good deal of which depends on foreign and domestic tourism.  Indeed, the article notes that the city had an 11.8 percent decline in jobs from February 2020 to April 2021, almost three times the loss on the national level.  Boarded-up storefronts and for-lease signs dot many of its neighborhoods.  Many of the businesses that depend on office and other workers who work in the core have yet to experience any substantive turnaround, especially in the retail, hospitality and performing arts sectors.  Of concern to the services sector is that several large corporations like Google and Facebook, as major commercial tenants, will not require the same amount of office space with a good percent of their staff continuing to work remotely full time or two or three days a week.  With fewer people commuting daily to downtown businesses, there will also be a substantive need to examine current public transportation policies.

While the example of New York is certainly considered to be an extreme situation, there is little doubt that all urban centers in North America will have to adjust economically and socially in the near future.  The impact of the pandemic will leave a substantial mark on every aspect of urban life for sometime to come.  The most evident immediate impact can be seen in the housing market.  Working remotely from home is only one of several factors influencing the rising costs of housing, especially single detached homes.  The average sale price for a home in Canada for example has surged 38 percent to $688,208 over the past year amid a pandemic-driven housing boom, according to data from the Canadian Real Estate Association.  Technology has allowed more people to work from ‘rurban’ communities than ever before, eliminating much of the need to commute to and from urban workplaces.  Employers are having to adjust their working arrangements to accommodate employees, who in many cases have essential skills in short supply.

Even Ottawa, where I live, is experiencing many of the economic and social consequences of the pandemic, despite being primarily a government town and having less of an economic impact that most cities.  However, as in the case of New York, Ottawa has seen dozens of small businesses, which before the pandemic employed about much of the city’s work force, haven’t survived.  Tourism, a major part of the National Capital Region, is way down, affecting hotels, tour operations, restaurants and bars.  The closure of the American border over the past year to non-essential traffic and major restrictions on international air travel has had a major impact on tourism.  Sports and entertainment venues, including Ottawa’s large festival industry, have been non-existent since the beginning of the pandemic.  Like many urban communities, the city is counting on the vaccination of seventy or more percent of its population to eventually encourage locals to return to recreational and indoor activities across the region.  However, much like projections for New York, most observers predict that it’s going to be a long, slow recovery.  Indeed, one can further predict that the eventual outcome will be quite different from pre-pandemic conditions in North American cities.

Canada Coronavirus COVID-19 Economy Economy U.S. Canada Border Urban Issues US

Leave a comment »
May 9

Reopening of Businesses Brings With It a Shortage of Workers

by bcurry

As immunization of populations against COVID-19 accelerates in the U.S., Canada and the European Union, the lessening of restrictions will allow more and more businesses to reopen, particularly in the leisure and hospitality sectors.  However, in the U.S. and Canada, federal governments had introduced additional unemployment benefits and stimulus checks to provide financial assistance to people who lost their jobs during the pandemic.  Many of the pandemic-related programs are expected to continue to the end of this summer.  However, as more businesses reopen, there will be a demand for workers to return.  The apparent data currently indicates that many workers are reluctant to return to former employment at this time for a number of very valid reasons.  Employers say it is increasingly difficult to attract job seekers to an industry whose future is more or less tied to whims of the coronavirus and the uncertainty of vaccination campaigns. 

The fact of the matter is that there continue to be pockets of COVID outbreaks in both the U.S. and Canada, regardless of increased immunization within the population.  The chances of front-line workers being exposed to the coronavirus remain high with the arrival of more contagious variants.  A good deal of uncertainty still exists.  With the unemployment benefits in place, one cannot blame many workers for being cautious about returning to employment, especially that which involves low-paying jobs.  In addition, women in particular are affected by the lack of affordable and safe daycare for their children.  Remember that in many jurisdictions, schools remain closed and on-line learning, where available, continues to offer a safer option.

Several American states, more so than Canadian provinces, have moved quickly to open up their economies.  However, despite everything, the pandemic is definitely not over.  Indeed, the so-called ‘third wave’ has been worst in terms of hospitalizations, especially among younger Americans and Canadians.  Case loads are still far too high, threatening to overload health care systems.  For this reason, some governments are reluctant to move too quickly in reopening businesses deemed non-essential.  Here in Canada, until a certain proportion of the population is fully immunized, governments actually prefer that many non-essential workers remain at home.  However, in the U.S., some Republican governors have started slashing jobless benefits in their states, hoping that the loss of generous federal aid might force more people to try to return to work.  Other states now require residents to prove they are seeking jobs to continue collecting benefits.

This past week, it was reported that just 266,000 jobs were added in the U.S. which was a disappointment since expectations were high for a hiring surge in April.  It was anticipated that potentially a million Americans would have returned to work.  Regardless of the impact of unemployment benefits on employment hesitancy, the fact is that many front-line workers continue to be concerned about the pandemic in their industries.  For obvious reasons, people don’t want to be bringing home the virus to their families.  Also, A Pew Research Center survey earlier this year found that 66 percent of the unemployed had “seriously considered” changing their field of work, a far greater percentage than during the Great Recession.  People are now more aware of the potential dangers of such outbreaks, and would be more inclined to seek other less hazardous employment.  As reported for example, grocery stores in the U.S. shed over 49,000 workers in April and nursing care facilities lost nearly 20,000 workers.  The same considerations can be found among Canadian workers in these and other sectors.  In addition, more affluent Americans and Canadians are retiring early because their retirement portfolios have surged in the past year and the pandemic may have taught them that life is too short.

In conclusion, what the pandemic has done is force many of the affected unemployed to reassess their future.  Employers will have to also reassess their employment benefits, working conditions and levels of compensation in order to attract and recruit workers.  As a consequence of the pandemic, the eventual result will most likely represent a major change in the operation of labour markets in most industrialized countries, including those in the so-called ‘gig economy’.

Canada Coronavirus COVID-19 Economy Economy US

Leave a comment »
May 3

There is a Catch-22 in Pipeline Issues Between Canada and the U.S.

by bcurry

Following Joe Biden’s inauguration as U.S. president, he took the widely expected step through an executive order of cancelling the cross-border permit for the US$14.4-billion Alberta-to-Texas heavy oil pipeline, the Keystone XL pipeline. The decision marks the third time a U.S. president has blocked the construction of this pipeline.  Next occurred the decision by Michigan’s Governor Gretchen Whitmer last November which ordered Calgary-based Enbridge to shut down its nearly 70-year-old Line 5 pipeline by May 12, 2021.  Line 5 carries each day up to 540,000 barrels of crude oil and natural gas liquids across Michigan and under the Great Lakes.  Line 5 is part of Enbridge’s mainland system carrying fuel from Alberta’s oil sands to the Midwestern U.S. and Eastern Canada, especially to refineries in Sarnia, Ontario.  Not surprisingly, President Biden’s and Governor Whitmer’s decisions were applauded by environmentalists and Indigenous groups on both sides of the border.

The difficulty is that Canada is the world’s fourth-largest producer of crude oil, and the U.S. is its top customer.  While past incidents have occurred where crude oil leakages in pipelines, including those which are part of Enbridge’s mainland system, the alternative means of transportation via rail and trucking also represents serious safety issues.  This potential danger was clearly demonstrated in the fiery derailment in July 2013 in Lac-Megantic, Quebec, which killed 47 people and wiped out part of the town.  From an economic point of view, the transport of crude oil and natural gas liquids by pipeline is the most efficient and least costly option.  Realistically, any transition within the U.S. or Canada away from fossil fuels will take time.  While the elimination of fossil fuels makes good environmental sense in light of climate change, there continues to be a dependence on fossil fuels for servicing our industries, running our transportation hubs, producing electricity and heating our homes.  Both countries have to cooperatively work together towards achieving environmental goals without creating bad relations between our governments and citizens.

Back in January, Alberta’s Premier Jason Kenney asked the Canadian government to push the U.S. government to reimburse the $1.5 billion it stands to lose from the cancellation of Keystone XL and to reimburse TC Energy, the project proponent, for the money it has sunk into the project.  Alberta took an ownership stake in 2020, representing more than $1 billion in taxpayer money to fund the construction of the pipeline.  The Biden administration’s decision to block the Keystone XL pipeline has put Prime Minister Justin Trudeau in a very difficult situation, one which he has raised with the President.  On the one hand he has to support Alberta’s oil and gas industry.  On the other hand the Prime Minister has agreed reduce in Canada’s greenhouse gas emissions by 40 to 45 percent within the next decade.  This brings Canada in line with the Biden administration recent pledge to slash U.S. greenhouse gas emissions by 50-52 percent from 2005 levels by 2030.

Critics of the decision to shut down the Line 5 pipeline note that 6,500 good-paying jobs in Sarnia, Ontario, are on the line.  A further 23,500 indirect jobs in that same region could also be impacted, and thousands more across Ontario and Quebec.  Line 5 also feeds into Line 9, which carries oil to refineries in Montreal and Lévis for Quebec’s supply needs.  According to Minister of Natural Resources Seamus O’Regan, Line 5 delivers 66 percent of the crude oil consumed in Quebec.  This means that besides Alberta, the Premiers of Ontario and Quebec are extremely unhappy with the Michigan Governor’s position.  Any decision to move crude oil and natural gas liquids by alternate means is considered less safe, more costly and realistically not viable given the vast quantities that have to be transported.  This is your Catch-22.  For this reason, both Canada and the U.S. need to work much more closely to resolve all relevant issues pertinent to their respective constituents.  Our continuing good trade and political relationships are in the balance.

Canada Cimate Change Climate Change Economy Foreign Policy Foreign Policy Keystone XL Oil and Gas Transport of Oil US

Leave a comment »
May 1

May Day is here, but where is organized labour?

by bcurry

Today is May 1rst, a day celebrated in many countries as ‘May Day’, including in Canada and less so in the U.S.  It should be noted that May Day is one of the most important holidays in communist countries such as China, North Korea, Cuba and the former Soviet Union countries.  Since the late 19th century, unions and worker groups have celebrated the first day in May as an International Workers’ Day, since referred to as May Day.  In North America, May Day largely grew out of the 19th-century labour movement for worker’s rights and an eight-hour workday in the U.S. and Canada.  In numerous cities, there will be parades, picnics and celebratory gatherings by both unionized and non-unionized workers and families.  However, historically, both the U.S. and Canada chose to celebrate the contribution of workers on an alternative national statutory holiday in September, ‘Labour Day’.  So much for the history lesson.

The fact is that May Day is celebrated much more in Europe where countries have long ago implemented universal health care systems, extensive social welfare nets, labour standards laws and other programs aimed at improving and protecting the livelihoods and health of workers.  This is why European countries did not need to introduce very many new assistance programs during the current pandemic, as their existing programs, including paid sick leave and unemployment benefits, cover most of the labour force.  Europe remains a relative stronghold of social democracy in which higher levels of taxation fund national health care systems as well as programs that automatically help those who lose their jobs.  In this way, European countries generally seek to limit economic volatility.  In addition, unions play a greater role in Europe than in the U.S., often sitting on management boards in countries like Germany, Sweden, the U.K., Austria, France and several others.  Together with a right to elect work councils, this is often called “codetermination” — something rarely seen in the U.S. or Canada.

On the other hand, the American economy has been described as a study of inequality, with risks and rewards stretching to extremes, and failures often capable of precipitating disaster, as unemployment frequently separates people from their health insurance policies.  This has forced the U.S. to be much more dependent on economic growth and emergency relief injections if something goes wrong, as it has under the current pandemic.  The Biden administration is pouring trillions of dollars into supporting American families and communities adversely affected by the pandemic, hoping to stimulate the economy as the U.S. emerges eventually from government-imposed shutdowns.  Increasing economic growth is expected to continue, but there are questions as to just who will benefit from such growth?  Recent studies have indicated that the rich have gotten richer.  Wall Street has thrived versus the evident losses experienced by the Main Street economy, especially small businesses and their workers.

With the decline in private sector unionization in the U.S. and Canada, there are fewer and fewer workers willing to march on this May Day.  The pandemic may have greatly knocked the wind right out of the unions’ sails.  There is also every indication that the pandemic may further reduce the number of good paying blue collar jobs, leaving many workers scrambling to secure employment in lower paying non-unionized jobs.  Alas, it is really difficult to happily celebrate this year’s May Day, or next Labour Day for that matter.

Canada Economy Economy Reopening the Economy Unionization US

Leave a comment »
Apr 25

CEOs Continue to be Overpaid Despite Significant Layoffs in Several Sectors

by bcurry

A recent New York Times report notes that Chief Executive Officer (CEO) pay remains stratospheric, even at companies battered by pandemic.  For years now, I have been studying how CEO compensation has steadily been on a ridiculous climb whereby, according to the Economic Policy Institute, CEOs of big American companies now make on average 320 times as much as their typical worker.  The report notes that in 1989, that ratio was 61-1.  From 1978 to 2019, compensation grew 14% for typical workers.  During the same period it rose 1,167% for CEOs.  The same situation holds true in Canada where, for example, between 1995 and 2007 there was a 444% compensation increase for top Canadian CEOs.

Add it all up and it’s clear that executive pay is on the rise once again despite the millions of workers affected by layoffs due to the pandemic.  Executive compensation is again rising at a much higher rate than employee pay, inflation or even corporate performance.  The old justification that they deserve it based on performance doesn’t wash in many cases.  The Times article noted the following companies’ CEO compensation for last year.  Boeing’s CEO, David Calhoun, was rewarded with some $21.1 million in compensation despite Boeing having had a historically bad 2020.  Norwegian Cruise Line barely survived the year, but the pay of Frank Del Rio, its CEO, was doubled to $36.4 million.  Hilton’s CEO Chris Nassetta received compensation worth $55.9 million in 2020 despite nearly a quarter of the corporate staff members being laid off as hotels around the world sat empty and the company lost $720 million.  General Electric’s CEO, Larry Culp, received $73.2 million last year and could collect well over $100 million more, thanks to a recently updated pay plan.  GE is still reeling from years of mismanagement.

The above noted examples are just a few in a continuing saga of CEOs being outlandishly paid for simply being CEOs, despite companies having difficult times as a result of the pandemic.  Firms will argue that much of this ridiculous situation is a result of how the market has evolved over the years regarding competition for so-called top managers.  They pay lip service to the importance of supporting their workers, but still believe that their CEOs deserve more than 300 times the compensation of those very same workers.  In Japan, and throughout much of Asia for that matter, there’s a much more balanced approach.  In 2007, Japanese CEOs were making on average only 10 times to 15 times more than their base level employees.  When their companies don’t do well, Japanese CEOs insist on taking a comparable pay cut unlike most American and Canadian CEOs.

A sad part about this pandemic on the economic front is that it continues to contribute to the growing societal inequalities that have needlessly evolved over the several decades.  To deal with the economic impact of the pandemic and the deficits incurred by governments at all levels, there needs to be an increase in taxes on multi-millionaire CEOs and billionaires, most of whom have evidently benefited from soaring stock markets.  Failure to deal with increasing inequities will result in more societal pain and poverty.

Canada Corporate Welfare State Economy Economy US

Leave a comment »
Feb 20

There is little doubt that Walmart is part of an oligopoly

by bcurry

As supplier of produce and goods, you don’t have much choice now but to deal with one or more of the large retail distribution firms in Canada and the U.S.  In recent years the choice of which retail outlets to deal with has greatly narrowed.  What the pandemic has highlighted economically is that certain sectors in both countries are basically controlled by a few large companies who make up oligopolies.  The Oxford English Dictionary defines “oligopoly” as “a state of limited competition in which a market is shared by a small number of producers or sellers.”  Today, as a supplier, one has little choice but to deal with the likes of Walmart, Cosco, Loblaws, Amazon, etc.

These large enterprises in turn are increasing their sales through online ordering, a somewhat costly transition but a necessary one.  The pandemic and changing customer preferences for shopping have speeded up this process.  In the meantime, these companies have recently introduced new higher supplier fees, arguing that they are intended to help cover the cost of modernization plans, especially those related to improvements in e-commerce and to help pay for upgrades.  The introduction of these higher fees set off a prolonged conflict between manufacturers and supermarket chains, a few of which like Loblaws Canada sought to charge similar supplier fees.  Walmart for one said the fees were a fair trade-off for suppliers, since the proposed investments would lead to sales growth.  Walmart and Loblaws have now set a dangerous precedent in the sector by asking suppliers to help cover the costs of new investments.

It’s understandable that suppliers are enraged by these new fees, wondering why they are being forced to subsidize the likes of Walmart and Loblaws to modernize their businesses.  Given the nature of oligopolies and their desire not to increase their retail prices to consumers, what’s frustrating is that the suppliers may not have any choice but to accept the additional costs and reduce their profit margins accordingly.  Several may even find it difficult to survive by doing so, including some of the independent grocers.  What’s even more frustrating, due to the pandemic’s impact resulting from the frequent closures of medium and small retail businesses, these larger companies have significantly increased their overall profits for the last year.  For example, Walmart reported record revenue worldwide of over US$152 billion in the fourth quarter of 2020, a 7.4 percent increase over the previous year. 

Governments have legislation regulating “monopolies” which inevitably reduce competition in the economy, affect the normal operations of the free market and increase costs to consumers.  Perhaps it’s about time that governments take a closer look at oligopolies as suggested by a number of industry organizations.  In addition, maybe corporations like Walmart and Loblaws could reintroduce or increase hazard pay to their employees as long as the pandemic continues.   Through the end of 2020, the total additional COVID-19 compensation Amazon and Walmart provided to their frontline workers represented only a small fraction of the companies’ extraordinary earnings, and an even smaller percentage of the stunning, pandemic-fuelled wealth created for their richest shareholders. 

Canada Economy Economy US

Leave a comment »
Jan 30

Did the U.S. and Canadian Economies Hit Bottom in 2020?

by bcurry

Starting back in March/April of last year, economists began to see that the lockdowns and restrictions caused by COVID-19 were beginning to show a detrimental impact on both the American and Canadian economies.  The economic decline is clearly shown by the Gross Domestic Product (GDP) statistics which are used as a comprehensive scorecard of a given country’s economic health.  As a broad measure of overall domestic production, the GDP is defined as the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.

The U.S. GDP shrank by 3.5 percent last year as the novel coronavirus upended American businesses and households, making 2020 the worst year for U.S. economic growth since 1946. Similarly, the real GDP in Canada decreased 5.1 percent in 2020 (from the 2019 annual level to the 2020 annual level), compared with an increase of 2.2 percent in 2019.  In addition, unemployment rates in both countries climbed and continue to climb to this day with new layoffs by major companies being announced daily.

The real question now is as to whether the economies have hit bottom?  Or will things just get worst as we continue to battle the current coronavirus outbreaks, especially the new variants, and the rate of vaccinations continues to lag behind?  Optimistically, economists surveyed by the Wall Street Journal predict a strong rebound in 2021, with the economy growing by 4.3 percent.  Looking forward in the long-term in Canada, the GDP growth rate is projected to trend around 2.70 percent in 2021 and 1.70 percent in 2022, according to several econometric models.  Nothing really to brag about!  The Chinese GDP is expected to grow by over 6.0 percent this year.

While GDP projections are all good and dandy, there are several issues of concern when it comes to both economies.  The longer the pandemic reigns, the biggest concern continues to be the impact on small businesses.  Many small businesses in the retail and service sectors will not survive.  Remember that small businesses are still the biggest creators of new employment.  Travel, hospitality and recreational sectors have also been hit hard, and their survival will greatly depend on how quickly their customers feel safe enough to once again travel.  One must ask also just how well our health care systems will cope with rising COVID cases?  In addition, the economy will emerge in a very different form, especially when it comes to the make up of the labour market and the increasing use of new technologies.  We more than likely will continue to see high unemployment rates in the near future, especially among women, youth, minorities and vulnerable groups.  Given continuing job security concerns, will people begin to once again consume at normal rates?  My feeling is that our economies have not as yet really hit bottom.  Unfortunately, it may be months before one really sees any kind of actual turnaround.

Canada Economy Economy Reopening the Economy US

Leave a comment »
Newer Entries »
Blog at WordPress.com.