Sunday, June 15, 2014

New York Times Article "The Downward Ramp" and Ontario

There's a good New York Times article called "The Downward Ramp" about a study about negative happenings in the US employment market, especially for college graduates. The whole article is good, but I was interested in these two particular paragraphs:

"This possibility has been explored from various angles by Robert Gordon, an economist at Northwestern; Lawrence Summers, the former secretary of the Treasury, now at Harvard; and Erik Brynjolfsson and Andrew McAfee at M.I.T. who wrote “The Second Machine Age.”

Gordon’s prognosis is perhaps the bleakest: “The future of American economic growth is dismal, and policy solutions are elusive.”"

One of the themes of this blog has been that Ontario's GDP growth per person (related to productivity growth) has been dismal since the Mike Harris years and that a lot of Ontario's economic growth has just been from an increasing population.

Considering that if the US is struggling with the same problems, that's not good news for Ontario. First Ontario still depends a lot on US economic strength for its economy. Second, if anything Ontario is probably doing worse with regards to productivity growth than the US, as government policies during the Liberal era have focused on increasing the contribution of the provincial government to the overall economy and our manufacturing portion of the economy (often a source of productivity gains) has basically collapsed (partly due to high electricity prices engineered by the Ontario government although most is due to factors the government can't control like 9/11 and global outsourcing). Hiring more teachers per pupil is obviously bad for productivity and there's not a lot of evidence that more teachers per pupil has improved student performance considering the most recent PISA results (actually judging by PISA results it appears to make them worse).

I particularly like the quote “The future of American economic growth is dismal, and policy solutions are elusive.” To me that describes what has been happening in Ontario. Economic growth has been dismal and the Liberal government has been flailing around trying to deal with this reality and has tried everything from "green energy" to funding MaRS, which are ultimately peddled by modern day snake oil salesmen (i.e. Richard Florida) trying to get some money out of a fading economic power desperate for a magic bullet.

The safer assumption is that these policies will not work and Ontario's GDP growth per capita will be weak. Compounding the problem will be people voting with their feet to move to the greener economic pastures of Alberta, driving down economic growth from population growth. Taking the advice of Public Enemy, don't believe the Ontario finance department's hype of Ontario's growth over 2.5% in the next couple of years.

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