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Notes -
Canada’s decline
Things are not going well in Canada. The hashtag #Canadaisbroken has been going around for a while, but the scale of the decline remains underdiscussed, especially in our media. Canada’s real GDP per capita is 2.5% lower now than it was in 2019. In the U.S. its 6.0% higher. For decades, Canada has had per capita GDP (adjusted for purchasing power) that was about 80% of the U.S. level, now its 72% and falling. Canada is rapidly becoming a European country in terms of living standards. This understates the problem because in Europe its easier to live on less: cars are not necessary in many places and, crucially, rent is much lower. Canada is in the midst of an unbelievable housing crisis. At current prices and interest rates, the ownership costs of a typical home would consume 60% of the median household's income, the highest ever recorded. I went to the U.S. southwest recently and my overriding impression is how much better off America is than Canada now.
The Liberal government’s response to this has been deficit spending. Their lack of fiscal responsibility was dramatic during Covid, but hidden under the guise of emergency they spent $200+ billion on new entitlements and spending programs which has resulted in Canada running a permanent structural budget deficit. When combined with our provinces (which unlike U.S. states are allowed to borrow) and measured as a % of GDP, the country is running Bush Jr.-tier fiscal deficits without wars. And what are these new programs? Almost all of them are means-tested benefits for behaviours progressives like. A new daycare program aimed at moms working 9-5 jobs (i.e. white collar) that does nothing for SAHMs, a dental care program which is only for families making under 90k (creating a huge marriage penalty and implicit tax rate), a carbon tax rebate which is income redistribution in disguise, replacing the modest but universal child benefit with a generous means tested one, etc. If you put it together, Canada has largely rebuilt our 1970s welfare state but will claw it back from you more than dollar for dollar as you earn more. We variously incentivize poverty and moms to work, stay unmarried and put their kids in daycare. Our taxes are high.
The other big push from our government is immigration. They occasionally frame it as a way to stop inflation, but usually they don’t defend it at all and assume the pro-immigration consensus is unshakable. The levels were shocking last year, but they keep rising. Over just the past 3 months, Canada admitted 430,000 new people. Canada now has an absolute annual level of legal immigration (including temporary migration) of about 1.2 million -- higher than the United States. We get about 500,000 traditional immigrants, but the big change from recent years is about 700,000 net “non-permanent residents” who form a new helot class. Canada now has 2.5 million temporary residents who come to study or work low-paid jobs and it has rapidly transformed the entire country. These people represent 6% of the population, but because they are highly concentrated by age, they are about 20% of adults aged 20-40. I spend time in a small town that is hundreds of kilometers from any major city and nearly every store now employs temporary foreign workers from India. Every worker at McDonalds. Every worker at Tim Hortons. They live 6+ to an apartment and have tightened the rental market pricing locals out. With population growth running at its highest ever pace, homebuilding is unchanged at about 250,000 units creating an incremental housing need of a quarter million units per year. Rent inflation is over 7% compared with approximately 0% month over month in the US.
What the past few years has made plain to me is how deep leftism runs in Canada and how dedicated it is to ignoring the effect of incentives on behaviour: We can just subsidize bad behaviour and punish good behaviour endlessly without actually changing behaviour. In many ways Canada is running on the fumes of vestigial British earnestness, politeness and self discipline which has made this work in the past, but I think we’re rapidly burning up our cultural capital and once its gone, I think we’ll tip into a much worse equilibrium. I have leftist friends whose perspective is: “sure things aren’t great, but would the conservatives do better?” which makes me sad. For most people, even smart people like my friends, seeing the bad consequences of things they support doesn’t move the needle at all in terms of their worldviews. And I didn’t get into spiraling crime and government celebration of the deracination of our traditional culture.
I think part of what is happening is Anglo culture’s seemliness has become our greatest weakness. Its unseemly to ‘punch down’ and blame an avalanche of mostly-poor international students for the rental market, or permissive and ‘anti-racist’ criminal justice policy for a huge increase in crime so we equivocate and people say things like “its so brutal, how sad” while continuing to vote in the same way. There is no transmission from failure in office to electoral results, so we end up with people like Trudeau for three terms. One astute observation I’ve heard about Canadian ‘niceness’ is that its fake: people are very cagey about saying what they think in public about anything controversial. Our entire country is a university campus. Canadians live in a world of feel good pablum as our way of life is destroyed. People rage about it, but there is no honest sensemaking apparatus in Canada – because talking about things plainly is unseemly – so rage is dissipated randomly. Even today, even after its failures, the combined polling share of the LPC-led ruling coalition (i.e. LPC+NDP) is nearly 50%.
One funny thing about the Daycare situation is that now everybody can afford to put their kids in, but there aren't enough daycares. My wife knows people who have been waitlisted for years in our small city. Of course, the proposed solution is to just import more workers to do this job nobody wants to, and also pay them more money which will increase the cost and competition for houses even further, and around and around we go.
The Quebec daycare system that this is copied from has the exact same problem. It's $7 a day instead of $10 a day, but this is a textbook example of the consequences of a price ceiling. Why they would copy a system where people have to sign up their children for daycare when they're still in the womb, I cannot understand.
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The daycare situation is a perfect example of what is wrong with Canada. The government got involved by subsidizing demand and restricting supply, so it all became worse. When the subsidy program was created, the conditions to receive the subsidy for the daycares entailed capping employee compensation. Demand exploded because prices fell by half and then half again, but supply was constrained by labour availability so much that today there are 15% fewer daycare spots than in 2019. So it is as you say, a windfall if you get a spot, but much worse than before if you can't. Statscan had a report in 2022 which admittedly was still a Pandemic year that 8% of kids aged 0-5 were waiting for a spot to open. Thats 200,000+ kids.
Everyone knows about the crazy long waitlists, which is an obvious and inevitable consequence of capping the price, but what I haven't seen anyone talk about are the dangers of giving your children to an insitution under these conditions. There is a shortage, so the daycare doesn't have to do anything to attract customers, and so they'll have every incentive to cut costs. Is this who you want looking after your children? People who are trying to do the worst job they can legally get away with knowing that there is a long line of children to take your spot if you leave, also knowing that many of the children's parents may not be able to easily afford an alternative?
Someone should do some reading on how such things worked in the Soviet Union or in other Eastern Bloc countries. I'm sure there are horror stories and I'm sure whatever they are will be repeated here.
The fact that this was such an obvious and inevitable consequence which was a widely known side effect of the system it was directly cribbed from should point to maybe "availability of childcare" not being a major motivating factor. I think the clue is in "while doing nothing for stay at home mothers"- this is intended to wag a finger at SAHM's and reward mothers who already have kids in daycare.
There was a very badly done (and not peer reviewed) paper that got a lot of media attention claiming that subsidized daycare in Quebec induced more women to enter the workforce, thus raising income tax revenue and resulting in the subsidies paying for themselves. To come to this conclusion, they made some ridiculous assumptions, such as that women who were induced to enter the labour market earned average wages.
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This is why I'm so suspicious of technocrats. They consistently do this.
This is populism. No competent technocrat would propose something so obviously at odds with basic economic theory. The problem is that programs like these are very popular. The whole point of putting technocrats in control is to avoid disasaters like this one.
Competent tecnocrats create problems that can't be solved so more technocrats need to be hired so that tey can get promoted to managing all the new technocrats creating new problems.
There is no difference between a technocrat and bureaucrat. It is the same jobs.
Technocrat is just the polite euphemism that's already taking on the tarnish that bureaucrat took on after being a euphemism for clerk.
(though clerk has more esteem now, being only used to refer to shopkeepers for so long
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Understood. And famous American would-be-technocrat Elizabeth Warren champions these causes. But perhaps she is a very bad technocrat and a decent populist.
Because technocracy is really hard- Lee Kwan Yew can do it but he was once in a generation. One of that hardest things is that you can only hit one goal at a time. Liz Warren knows that if we went back to female domesticity, we could solve like 50% of the economic problems she’s worried about, and her platform makes the most sense if you assume her real goal is to raise the female labor force participation rate. Subsidizing daycare makes sense for that goal; it isn’t a child benefit it’s a subsidy for mothers to work.
I don't think technocracy is once-in-a-generation hard, I just think our democracies are optimizing for something entirely incompatible
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Technocrats don't want to subsidise demand, they'd rather increase supply but the populists ensure we get demand subsidies instead.
Okay, they don't want to, but they keep doing it. What good are a bunch of technocrats if they just implement populist policies? At this point the (commonly regarded as) most thoughtful and informed would-be American technocrats are proposing wealth taxes. Warren wants to crack down on landlords not renewing leases, etc.
Mostly technocrats just don't get to decide policy. Positions like the Fed Chair are a rare exception. Mostly they advise and execute on behalf of politicians, who frequently ignore them because their advise is probably unpopular or operates over a time horizon that makes it undesirable to elected officials (nobody wants to implement a policy that loses them the election and that their successor gets to take credit for). The usual failing of technocrats is either than they're operating outside their subject matter expertise (see: the Soviet Union, where it turned out that engineers don't make particularly good political/economic leadership) or they're prone to galaxy-brained schemes due to overconfidence in their understanding (half the thesis of Seeing Like a State).
Warren isn't a technocrat. I'd be hard pressed to name a single elected official in the US who could be characterized as such. The technocrats are proposing things like carbon taxes, land value taxes, zoning and permitting reform, etc... And mostly getting ignored because these are unpopular.
I think Warren is a technocrat, just not one whose ideas are straightforwardly aimed at middle/working class standard of living increases; she wants to use government policy as a tool of social engineering for the kinds of things that an upper middle class Massachusetts progressive normie thinks people should be doing anyways and is disguising herself as a Bernie-style left wing populist.
See, I think this is reversed. Warren likes to adopt a professorial persona (maybe calling it a persona is unfair, given she actually has been a professor), but she is really just a lawyer (like most Members of Congress) and dresses up eat-the-rich populism in wonky clothes for the benefit of pseudointellectual liberals. Somewhat famously, she got Saez and Zucman (a pair of noted left-wing economists) to write up policy proposals for her campaign and then proceeded to ignore them when their recommendations weren't spicy enough for the audience she was courting.
Maybe we're using the world technocrat differently; to me "wants to use government policy as a tool of social engineering" isn't a distinguishing element. That could refer to almost any politician. My understanding of the term technocrat implies that they hold their position by dint of at least notional subject matter expertise. Supreme Court Justices are pretty much inherently technocrats, as is the Fed Chair. Conversely, I'm almost tempted to say an elected official can't be a technocrat, but that might be a bit too far. Nevertheless, it's rare (and even more unlikely in the specific context of Congress). It's just not how politicians win elections.
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The Trudeau government has been particularly bad (or deliberately bad?) at anticipating second-order effects.
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What system are you contrasting it with, the United States? I'm curious if you know what the situation there is like.
Sure, the supply is (mostly) there. In my corner of the US, I was on waitlists at somewhere between a half dozen and a dozen places and I started inquiring about 8 months before I'd need it. I was offered a spot at maybe three of them, and two were larger corporate style ones that were significantly more expensive. So definitely not close to Quebec tier where people wait years, but it's still non-trivial to find a spot.
Meanwhile, the prices per month that were quoted to me are 2500$-4000$. On the one hand, it's great that labor women have been doing forever is finally recognized as being valuable - a modern SAH parent of two is essentially providing labor worth ~70k per year. On the flip side, small comfort to the laborer making 50-75k a year and trying to raise a family who would probably appreciate Canadian daycare prices (if they could get them).
Similarly, you could make a parallel argument to the one that you made in your OP that the public Canadian healthcare system incentivizes risky behavior and overconsumption of resources because what the heck, it's free. And yet, somehow Canadians have longer life expectancies. People broadly agree that the American healthcare system is broken, although it seems likely to me that there are just different tradeoffs.
All this to say that most (all?) Western nations struggle with the things you describe. Or if they don't, I'd be fascinated to hear your counterexample of a developed nation with a functioning and cheap childcare system as well as an explanation of how they achieved it. Someone smarter than me will have to explain why this is the case; I'd assume much higher labor costs/CoL in general and higher standards. Modern daycares are strictly regulated in terms of capacity (teacher/child ratio) and safety whereas in the past (I assume) we just had gaggles of near-feral children roaming the streets.
She's not providing labour worth anything close to that. Daycare workers aren't paid that much and could be paid much less if we loosened our labour laws.
He was talking about value that stay-at-home mum provides (or saves if you wish) for the family. Between daycare, schooling, food preparation, house cleaning and other small tasks such as small repairs - the value of labor provided is really high. Labor itself may be less expensive than $70k a year for daycare center or even for restaurant, but the cost of the rest including rent, taxes and cost of additional regulation is just so high that it overrides any benefits of economies of scale in as much that the do-it-yourself approach makes a lot of sense.
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I’d be surprised if at least 75% of the difference in outcomes isn’t explained by obesity and related differences in population.
On the topic of child care, SF has the same problem. The buildings and providers alike are highly regulated, with subsidies galore and predictable results.
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Don't want to dogpile, but using life expectancies as a metric of societal health makes me curious how exactly one calculates how long people are going to live. Not curious enough to research it, unfortunately.
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I think the obvious answer to a better daycare system is to regulate it as lightly as possible consistent with safety and provide whatever subsidy you wanted to provide to parents directly as a transfer. That way you, at minimum, don't punish stay at home parents or parents who work shifts and therefore can't easily use daycares.
I agree its a hard problem because daycare labour is very expensive no matter how you slice it. In Canada we've decided the answer is cheap at point of use, but sharp rationing of availability to turn it into a lottery. Ration by luck rather than price, creating lots of bad downstream outcomes.
On Canadian life expectancy vs. the U.S., its true we live longer but I think thats more about demographic composition and obesity rather than health care.
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