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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%.
I still cannot wrap my head around the idea of low/middle wage immigration to a country with billionaires and wealth inequality. All of the “economic efficiency” is just going to go to the very wealthy, whereas by restricting immigration you force the wealthy not just to pay higher wages and allow greater employer QoL, but to invest in the future of the citizens. If companies with longterm plans realize that they need to hire high-skilled Canadians to work as employees, suddenly you’ll find yourself with widespread maternity programs and more investment in education. Your companies will actually be lobbying the government to increase health and fertility.
No? Do you think that labor in general only helps the very wealthy? Does your job only help the very wealthy? At the very least, it helps you and everyone you buy anything from, not even considering whatever benefits whatever youedo accomplishes. Likewise, immigrants help themselves, help everyone they buy things from, and help those who they work those, and help those who buy from those whom they work for, by increasing supply, and so driving down the price. Is this bad for those currently in the niche that those people are in? Quite possibly, as long as it's disproportionately there, to an extent that it exceeds the benefits of the immigration. But everyone else benefits, at least.
Aren't you arguing that having more workers is bad?
In a scenario where there is not surplus labor, employees are paid more and (perhaps) prices increase. The price increase is spread equally to everyone, yet the “surplus resources” (the money that would ordinarily go to the top) are all given to the employees and not the top. The end result is that the people with the most amount of money have to pay more, which is a great result. The lower and middle class also have to pay more, too, but this counterbalanced with their increased pay and quality of life. In the end, they benefit the most.
If my business sells coconuts off the highway, I greatly benefit if I can pay my coconut sellers slave wages. What if there are fewer people willing to sling my coconuts off the highway? I simply need to pay them more to work for me, no questions asked, because if I don’t I lose all my money, but if I do I still make money. That part is obvious, but your take would suggest that I would attempt to make the same amount of profit by simply pricing my coconuts higher. This is absurd because there is clearly a ceiling where people will refuse to buy the coconuts. What actually happens is that I might try to sell my coconuts for more money, will probably fail, and ultimately will have to just give more money to my employees. Oh well, I will have to sell four of my six vacation homes.
In America there is a huge number of businesses that generate enormous absurd profits which have this same ceiling. An obvious one is Amazon, and another obvious one is Starbucks. There is a point at which people will refuse to shop online if the prices are too high. Sorry Bezos, you’ll have to sell your half a billion dollar yacht. Starbucks is milking the consumer dry with their overpriced drinks, but they honestly cannot price them at $14 a drink. So, the people in charge of Starbucks Corporate will have to make less money. This applies to so, so, so much of the American economy. It’s people who have a pseudo(?) monopoly and/or have amassed such industry/marketing knowledge that competition is effectively impossible, and they’re making absurd profits when we can just make take and give it to the middle class simply by decreasing the wage pool.
Sure.
Maybe? Depends on the industries most impacted. I'll grant it.
Wait, you're missing several factors here. If I understand what you're saying, your model is that more employees->wages down->employers pocket the difference. But what's left out is that often that money will go to hire more workers, to scale up the production, or the extra labor lets more firms do things. Competition should drive profits down towards zero, as firms have to drop their prices, so "the top" doesn't actually really benefit much. (And a large amount of low skill labor I would think would go into competitive industries).
No. The goal should not be to have people pay more. That's a loss. We want prosperity. Elon Musk or whoever taking a loss doesn't help you out.
Why do you think increased quality of life, given that you mention increased costs in the same sentence, with no attempt to compare the sizes of the effects?
Well, I'd need to raise wages to get more workers to sell more coconuts up until the point where the cost of raising everyone's wages outweighs the benefit of the extra coconuts sold. It's not exactly all or nothing, but what you're saying is roughly right.
Not exactly. It's actually supply and demand. Fewer workers means I can sell fewer coconuts, which means I can raise the cost because I don't need to try to sell to quite as many people—I don't need to appeal to the ones previously on the edge.
I guess I'm not exactly seeing why the selling of vacation homes is necessary, nor why that's a good thing.
You do realize that Amazon's only able to be so profitable by being enormously useful, right? There are some predatory practices here or there (see some of their pricing policies, in relation to other vendors), but on the whole, they're very good for you, the consumer?
Or, they'll buy from other vendors online or whatever. But yes, Amazon and its sellers do have to set prices at ranges that people will buy them at.
Do you think Amazon and Bezos have merged finances?
Supply and demand. If the price is to high, switch to alternatives, or don't buy (and people do, whether other stores, or prepared at home). Starbucks will only raise prices for as long as they think that the product of the customers at the higher price times the change in price is more than the product of the lower price times the additional customers. (Sorry, that's probably hard to read. It's the difference between two different rectangles on a demand curve. But I don't have a way to represent to you the diagram.)
This makes more sense for the Amazon example than the Starbucks example, because Amazon's a lot harder to compete with than Starbucks.
But remember, why is Amazon hard to compete with? In part, because of anti-competitive practices, but also in part by being really good for the consumer, in ways that you need huge, costly, scale to match. Amazon is skimming value, but it's value that they've created, that their competitors can't keep up with.
Nevertheless, you're right that in this case, you could presumably cut into Amazon's profits without any huge consequences, unless there's some factor I'm missing.
But keep in mind! If we kill/forcibly retire/cause never to have been born/outlaw a bunch of workers, Amazon can afford to maintain it's workers, but all the other companies that can't afford to do so now have to cut back on their workers, and scale back on what they're doing. And so you just increased Amazon's market share, because they, due to having more breathing room due to being more profitable, can handle the increased austerity when other firms cannot.
Forgive me if there are any errors in that analysis. My last detailed interaction with economics was only a basic principles of microeconomics course a few years ago, so I imagine there must be some.
You're confusing value added by Amazon by being efficient, and value from being big. Amazon has network effects and economy of scale that no competitior could match.
I think that's true, scale is a lot of what's happening.
Does that have any effects on the broader argument?
You complained about people thinking the market is zero-sum, but advantages from such things are zero-sum. If Amazon didn't have these advantages, someone else would, and only one company can have them at a time.
And it's possible that a competitor can't win against Amazon, yet if Amazon disappeared and the competitor took its place, you'd be better off.
A very fair point. Still, it's better off than no large company existing to make use of the scale. It's at least as good as the option of no company, even if there could be a better possible company.
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