Quack economics run amok



Sometimes, you think to yourself: hey, this might not be true, but it feels like it should be true.


Enter Louis-Philippe Rochon, associate professor at Laurentian University and co-editor for the Review of Keynesian Economics.  He wrote this truly awful column for the CBC.

I’m sure Rochon is a perfectly respected and valued academic.  But he has posited something that may well be the most patently unproven vile of snake oil that I’ve seen in some time.

“We are no longer a prosperous country.”

Now, if you’ve read anything I’ve written on this blog, you’ll know how incredibly stupid I find that idea.

But, for the sake of recap: Canadians’ income, household wealth, and confidence in their finances are all on the upswing.  Contrary to Rochon’s contention: Canada is more prosperous than it has ever, ever been.

Rochon must have evidence, right?

“A staggering 14 per cent of the population is now considered low-income, according to Statistics Canada.”

Now, you might think: oh boy!  14%!  That’s terrible.

And it is.  Obviously, 14% is a low-income rate that is too high.  But let’s understand just what that means.

See, low-income is not an absolute.  Obviously, over time, inflation moves the goalposts.  Problem is, Statistics Canada only recalibrate the measures every 20 years.  It so happens that 2012 was that year.

So, in 2012, the after-tax low income measure was 13.8%.  That’s by the newly-recalibrate measurement — one that adjusts for inflation.  In 2011, it was 12.6% (using the 1992 levels.)

That’s for families.  If we apply the same standards for individuals, 1992’s standards would give us a low-income level of about 12%.

StatsCan says quite clearly that you can’t compare this year’s data with previous years.  Furthermore, they repeatedly insist that low-income measures are not intended to indicate poverty.

Let’s ask Citizens for Public Justice, a lefty poverty-fighting group that studies this sort of thing.  By their metric, a mere 5.5% of Canadians were living in poverty in 2011 — that’s a 3.3% decline over 1981, a 0.7% decline over 2008 and 0.4% decline over 2010.  (Their after-tax calculations are a bit less rosy, putting the rate at 9.9%, which is still virtually as low as it’s ever been.)

That’s actually pretty remarkable.

Nevertheless, this professor chooses to conflate low-income with poverty, concluding “clearly, this poverty is widespread.”


“With numbers like that, we can no longer call ourselves a prosperous country.”

Actually, we can.  By the very definition of prosperous, we are quite prosperous.

But, hey, maybe the poor aren’t catching up?

That’s certainly true to a degree, but it’s hardly a crisis.

In 1998, the market income for the lowest quintile of Canada was $4,700.  In 2011, it was $6,800 — if you don’t want to do the math, there, that means that incomes grew about a third faster than inflation.

Now, since then, things haven’t been great.  Incomes for the bottom fifth of Canada surged forward around 2007, then fell off in 2009 and are still recovering.  (We’ll know more when 2012’s data is in.)

But there’s no new crisis that we’re discovering.  Things, by just about every metric, are improving (albeit not as fast as they could be.)

So let’s talk about that, rather than just leveraging statistics to beat the war-drum.

Like he does when he writes: “recent unemployment numbers from Statistics Canada released last week showing the Canadian economy shedding 10,700 jobs last month.  We are heading in the wrong direction.”

Well, actually, if you look at the long-term trend: we’ve added 100,000 jobs since August (seasonally adjusted.)  Wrong direction?

As if the flimsy premise wasn’t painful enough, the professor then launches into an absurd flight of fancy, calling for full employment, demanding that the government revert its current anti-jobs policy to a pro-jobs policy (if only they’d thought of that sooner!) and hike the minimum wage by “at least” 30% (full employment, here we come!)

He also thinks we should multiply our infrastructure spending my ten, ignore the deficit, artificially deflate the Canadian dollar to $0.80, keep interest rates at 1%, tighten lending rules, and lessen income inequality (ostensibly, by making it illegal to be rich or poor.)

We’d have a bigger debt and pay more to service it, more money in the system but with more rules about how banks can give it out, huge new payroll costs as well as massive barriers to exports, and no preventative measures for the inflation that our $10 billion spending spree will cause.  Great.

I say this with no reservation: this is the stupidest article I’ve ever read.

There’s nothing wrong with being a Keynesian or, hell, even a Marxist.  By all means, advocate for a fairer society.

But, to do so, don’t trot out tortured statistics and flimsily-premised moralized demagoguery.

There are plenty of perfectly smart left-wing economists who have very sound theories that very well might work.  Sometimes they’re in need of critique.  Sometimes they’re better alternatives than the let-the-car-drive-itself approach of the Harper Government.

This is not it.

While “full employment” sounds nice, it’s also about as likely as a perpetual motion machine.  And while raising the spectre of the 2008 collapse may make good propaganda, it does not explain why we need “stricter bank lending regulations” (especially when you do not define what those are.)

And, of course, there’s that old income inequality chestnut.

I’ll now take a moment to note that income inequality is not, in and of itself, a bad sign (unless a country has finite wealth) and is often more an indicator that the rich are getting rich, not (necessarily) that the poor are getting poorer.  Indeed, as rich Canadians get richer, the rest of the country tends to get richer, just at a slower rate.

Anyway: Canada’s gini coefficient (the measure of income inequality, where 0 is equality and 1 is absolute inequality) is around .316, though it really depends on how you measure it.

In the OECD, Chile is the most unequal state, with .503, while Slovenia is the most equal, with .245. France is at .309, America is .380.

Canada, in other words, is right around the OCED average.  And according to those numbers, Canada’s inequality hasn’t risen in over a decade.

So you know what, spare me the pop economics.

Click here for more political news headlines.



Fantino’s career is like a mangled tire that a clueless motorist won’t stop pumping air into
Income splitting… dumb but not for the reasons you’re thinking of
Stupid things said this week. Heros, zeros and cheaters.
Let’s just call it terrorism


Follow Justin Ling on twitter: @Justin_Ling

Share this article