FROLITICKS

Satirical commentary on Canadian and American current political issues

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

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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

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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

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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

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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

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