The hits keep comin’ – NB style

Wow, did this make the news? I didn’t see it but I don’t read/listen to everything.

Statistics Canada published a study last week on the amount of people living below the low income cutoff (otherwise known as the poverty line). Here’s their definition:

Statistics Canada’s low-income rate measures the percentage of persons who live in a family with an income below the low-income cutoff (LICO). The LICO is a statistical measure of the income thresholds below which Canadians likely devote a larger share of income than average to the necessities of food, shelter and clothing.

According to the good folks at Statistics Canada, the percentage of full-time workers aged 16 to 64 years old that have an income below the low-income cutoff line has stayed about the same from 1999 to 2004 – at 14.4% of the total. In all provinces but two the percentage of ‘working poor’ has remained about the same or slightly higher/lower.

Can you guess the two?

Come on. You should know by now.

New Brunswick’s percentage of full-time workers aged 16 to 64 years old that have an income below the low-income cutoff line has increased from 24.4% in 1999 to 27.5% in 2004. Only Newfoundland recorded a faster rate of increase.

Two quick points:

1) Why? It may have to do with the shedding of high paying jobs in rural NB for retail sector jobs but that’s a hunch.

2) It almost makes you want to be a socialist. It just seems not right to have over one out of four New Brunswickers who have made the effort to work full time – to have to live below the povertly line. Cripes, it’s less than 15% in Quebec.

Why don’t we ask LeBreton or Al Hogan about it so we can get cheered up.

When in doubt, I revert back to what I know. Bring in more multinational firms which will lead to upward pressure on wages which might alleviate this stuff somewhat.

It is now abundantly clear why Bernard Lord would added this to his Five in Five (see below). He probably had advance warning that these numbers were coming out. Of course, given the lack of media coverage, he needn’t have worried.

It’s actually kind of a neat trick. The second fastest increase in poverty under the Prosperity Plan turns into the fastest decrease in poverty under the Five in Five.

Five in Five Initiative

Goal 1 – The smart province — the highest increase in workers with post-secondary education in Canada.

Goal 2 – The investment province — the lowest tax burden east of Alberta, and biggest decrease in the unemployment rate in Canada.

Goal 3 – The wellness province — the biggest increase in physical fitness participation of any province in Canada.

Goal 4 – The clean province — the greatest reduction in air and water pollution in Canada.

Goal 5 – The inclusive province — the biggest reduction of poverty rate in Canada.

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0 Responses to The hits keep comin’ – NB style

  1. Anonymous says:

    I liked those confessions “it makes one want to be socialist” and “falling back on what I know”. In fact, the VAST majority of the world’s populations are more socialist than market oriented, this is obvious from WTO meetings where even their representatives, who are usually heavily paid for by western industries, still refuse to open their markets further.

    In Canada, of course, much the same is true and is obvious from polls showing canadians want services restored,not tax cuts, and health care staying out of private hands. Actually, there is some evidence that the NDP would have had a far stronger showing had they been ever further ‘left’.

    However, that’s another story, first, here’s a few links that people can peruse, some are lengthy. The first, actually comes from India:
    http://www.indiaresource.org/issues
    /globalization/2003/
    themythofforeign.html

    And here’s the second which I’ll paste here, but its long:
    http://www.globalpolicy.org
    /socecon/ffd
    /fdi/2005/0702sixmyths.htm

    Ahem..
    Six Myths About the Benefits of Foreign Investment
    The Pretensions of Neoliberalism
    By James Petras
    CounterPunch
    July 2, 2005

    There are several myths about foreign investment propounded by orthodox economists, publicists for multinational corporations, and the press:

    Myth #1 – Foreign Investment (FI) creates new enterprises, gains or expands markets and stimulates new research and development of local technological ‘know-how’.

    In fact is most FI is directed toward buying privatized and profitable existing public enterprises and private firms, taking over existing markets and selling or renting technology designed and developed at the “home office”. Since the late 1980’s over half of foreign investment in Latin America was directed toward purchasing existing enterprises, usually at below market valuation. Instead of complementing local public or private capital, FI “crowds out” local capital and public initiative and undermines emerging technological research centers.

    With regard to market expansion, the record is mixed: in some sectors where public enterprises were starved for funds, like telecommunications, the new foreign owners may have expanded the number of users and enlarged the market. In other cases, like water, electricity and transportation, the new foreign owners have reduced the market, especially to low-income classes, by raising charges beyond the means of most consumers. The experience with foreign investment and technological transfers is largely negative: over 80% of research and development is carried out in the main office. The “transfers of technology” is the rental of sale of techniques developed elsewhere, rather than local design. The multinationals usually charge subsidiaries excess royalty fees, service and management costs, to artificially or fraudulently lower profits and taxes to local governments.

    Myth #2 Foreign invesement increases the export competitiveness of an industry, and stimulates the local economy via secondary and tertiary purchases and sales.

    In reality foreign investors buy up lucrative mineral resources and export them with little or no value added. Most of the minerals are converted into semi-finished or finished value added goods – processed, refined, manufactured – in home countries or elsewhere, creating jobs, diversified economies and skills. The privatization of the lucrative giant iron mine Vale del Doce in Brazil in the 1990’s has led to huge profits for the new owners and the sale of raw ore overseas, particularly to China in the 21st century. China converts iron ore to steel for transport, machine industries and a host of job-generating metallurgical enterprises. In Bolivia, the privatization of the gas and petrol industry in the mid 1990’s has led to billions in profits in the 21st century and the loss of hundreds of thousands of jobs in processing and conversion of petroleum and gas into value added goods, plus failure to supply local low-income consumers. The extraction of raw materials is capital intensive using few workers. Processing and manufacture is more labor intensive and job creating.

    Myth # 3 Foreign investors provide tax revenue to bolster the local treasury and hard currency earnings to finance imports.

    The reality is foreign investors engage in tax frauds, swindles in purchasing public enterprises, and large scale money laundering. In May 2005, the Venezuelan government has announced billion-dollar tax evasions and frauds committed by major overseas petroleum companies which signed on to service contracts since the 1990’s. The entire Russian petroleum and gas sector was stolen by a new class of billionaire robber oligarchs, associated with foreign investors, who subsequently evaded taxes, as illustrated by the trial and conviction of two oligarchs, Platon Lebedev and Mikhail Khodorkovsky for $29 billion in tax evasion facilitated by US and European banks.

    The impact of the multinational corporations on the balance of payments over the long run is negative. For example, most assembly plants in export zones import all their inputs machinery, design and know-how and export the semi-finished or finished product. The resulting trade balance depends on the cost of the inputs relative to the value of exports. In many cases the imported components charged to the local economy are greater than the value added in the export zone.

    Secondly most of the revenues from the export platform accrue to the capitalists since the key to success is low wages leading to the creation of personal empires. The Brazilian experience over the past decade and a half illustrates the negative external balances resulting from foreign investment and externally funded investment. In 2004 Brazil paid foreign bankers $46 billion (USD) in interest and principle while receiving only $16 billion dollars in new loans, leading to a net outflow of $30 billion dollars. (2) Between January and April 2005 Brazil was bled for $4.6 billion (USD) in interest payments, $3.7 billion in profit remittances by multinational corporations, $1.7 billion for ‘external services’ and $7.3 billion in payments of principle in the debt. (3) The total drain of $17.3 billion dollars far exceeded the positive commercial trade balance of $12.2 billion dollars. (4) In other words, the FI-led export model led to new indebtedness to pay for the shortfall, the loss of employment by small and medium farmers at the mercy of the agro-business elites and the destruction of the environment.

    Myth #4 – Maintaining debt payments is essential to securing financial good standing in international markets and maintaining the integrity of the financial system. Both are crucial to sound development.

    The historical record reveals that incurring debt under dubious circumstances and paying back illegally contracted loans by non-representative governments jeopardized the long-term financial standing and integrity of the domestic financial system and led to a financial collapse, as displayed in he Argentine experience between 1976-2001. A substantial part of the public external and internal debt was illegally contracted and had little development utility. A lawsuit launched by an Argentine economist, Olmos, against payment of the Argentine foreign debt revealed that the foreign private debts of Citibank, First National Bank of Boston, Deutsch Bank, Chase Manhattan Bank and Bank of America were taken over by the Argentine government. (5) The same is true of debts of subsidiaries of overseas banks. The Olmos lawsuit also documented how the Argentine dictatorship and subsequent regimes borrowed to secure hard currency to facilitate capital flight in dollars. The foreign loans went directly to the Central Bank, which made the dollars available to the rich who recycled the dollars to their overseas accounts. Between 1978-1981 over $38 billion USD fled the country. Most of the foreign loans were used to finance the “economic” openings
    , luxury imports and non-productive goods, especially military equipment. The Olmos case pointed to a perverse source of greater indebtedness: the Argentine regime borrowed at high interest rates and then deposited the funds with the same lender banks at lower interest rates leaving a net loss of several billion dollars, added to the foreign debt.

    Myth # 5 Most Third World countries depend on foreign investment to provide needed capital for development since local sources are not available or inadequate.

    Contrary to the opinion of most neo-liberal economists, most of what is called foreign investment is really foreign borrowing of national savings to buy local enterprises and finance investments. Foreign investors and MNCs secure overseas loans backed by local governments, or directly receive loans from local pension funds and banks drawing on the local deposits and worker pension payments. Recent reports on pension fund financing of US MNCs in Mexico shows that Banamex (purchased in the 21st century) secured a 28.9 billion peso (about $2.6 billion USD) loan, American Movil (Telcel) 13 billion pesos ($1.2 billion USD), Ford Motor (in long-term loans) (9.556 billion pesos) and one billion pesos (in short term loans), and General Motors (financial sector) received 6.555 billion pesos. (6) This pattern of foreign borrowing to take over local markets and productive facilities is common practice, dispelling the notion that foreign investors bring “fresh capital” into a country. Equally important, it refutes the notion that Third World countries “need” FI because of capital scarcity. Invitations to FI divert local savings from local public and private investors, crowd out local borrowers and force them to seek ‘informal’ money lenders charging higher interest rates. Instead of complementing local investors FI compete for local savings from a privileged position in the credit market, bringing to bear their greater (overseas) assets and political influence in securing loans from local lending agencies.

    Myth #6 The proponents of foreign investment argue that its entry serves as an anchor for attracting further investment and serves as a ‘pole of development’.

    Nothing could be further from the truth. The experiences of foreign-owned assembly plants in the Caribbean, Central America and Mexico speak to the great instability and insecurity with the emergence of new sources of cheaper labor in Asia, especially China and Viet Nam. Foreign investors are more likely than local manufacturers to relocate to new low-wage areas, creating a “boom and bust” economy. The practice of FI, in Mexico, the Caribbean and Central America, faced with competition from Asia, is to relocate, not to upgrade technology and skills or to move up to quality products. Finally, a long-term study of the impact of foreign investment on development in India has found no correlation between this foreign investment and growth. (7)

    In sum, reliance on foreign investment is a risky, costly and limiting development strategy. The benefits and costs are unevenly distributed between the “sender” and receiver. In the larger historical picture it is not surprising that none of the early, late or latest developing countries put foreign investment into the center of their development scheme. Neither the US, Germany and Japan in the 19th and 20th century, nor Russia, China, Korea and Taiwan in the 20th century depended on it to advance their industrial and financial institutions. Given the disadvantages cited in the text, it is clear that the way ahead for developing countries is through minimizing it and maximizing national ownership and investment of local financial resources, skills and enlarging and deepening local and overseas markets through a diversified economy.

    Because the negative economic, social and political costs of foreign investment are evident to increasing numbers of people in the Third World, particularly in Latin America, it is a major detonator of mass social movements, and even revolutionary struggles, as is the case in Bolivia during 2005. Since FI is a direct result of political decisions adopted at the highest level of government, mass social struggles are as much or even more so directed against the incumbent political regime responsible for promoting and mollycoddling foreign investment. The increasing turn of social movements toward political struggles for state power is directly related to the increasing recognition that political power and foreign investment are intimately connected. In the 21st century, at least in Latin America, all of the electoral regimes, which have been overthrown by popular majorities, had deep structural links to foreign investment: Gutierrez in Ecuador, Sanchez de Losada and Mesa in Bolivia and Fujimori in Peru. The leader with the greatest sustained support in Latin America, President Chavez in Venezuela, is precisely the only one who has increased regulations and taxes on foreign investment and redistributed the increased revenues to the poor, working class and peasants. The question still remains whether this new infusion of energy and class awareness can go beyond defeating pro-FI regimes to constructing a state based on a broad alliance of class forces, which goes beyond ‘nationalization’ and toward a socialist economy.

  2. Anonymous says:

    After reviewing the report I find it humerous that the highest peak ever for NB was from 96(32.2) to 98(29.6). Not saying that we can’t do better, but we have done slightly better under Lord than Frank…

     Low wage, by province

    Nfld, PEI, NS, NB, Que
    %
    1993 26.7 32.1 24.0 22.3 16.8
    1994 26.2 32.4 27.1 29.1 16.9
    1995 23.8 29.4 22.4 23.6 16.5
    1996 29.8 41.0 26.2 32.2 21.3
    1997 28.2 39.7 25.3 30.0 18.1
    1998 28.5 33.5 23.9 29.6 17.9
    1999 27.2 32.4 23.0 24.4 15.8
    2000 27.2 32.1 23.3 24.4 15.1
    2001 28.7 31.7 20.5 25.0 15.7
    2002 29.3 33.9 23.2 25.9 14.6
    2003 31.3 34.1 24.4 25.7 15.8
    2004 32.2 33.4 23.9 27.5 14.6

  3. David Campbell says:

    That you, Al Hogan? LeBreton? In 1996, 32% of NBers FT workers were under the poverty line but every other province was also considerably higher (Alberta 25% then 13.7% now). Even using your measure, New Brunswick’s relative poverty position is worse today than in 1996. It’s bad all around.

  4. David Campbell says:

    Quick draw FDI-bashing Anonymous. With one or two exceptions, your ‘myths’ are directly related to third world countries (debt payments, et. al.). I prefer a micro approach for New Brunswick. My experience with dozens of FDI projects here is that they pay more, offer more benefits, offer career tracking, career mobility, etc. – all more than local firms. Local firms up until recently were paying $8/hour for highly qualified manufacturing workers but the tightening of the labour market has pushed this wage up over $10/hour. The CFIB might get cranky but ultimately economic development should be about reasoned and rationale economic progress.

  5. scott says:

    It almost makes you want to be a socialist.

    I always said, as a tory, that the best thing that New Brunswickers could do right now in the current economic situation is either:

    a) Elect a slew of NDP members to the House of Commons as a protest to the traditional governing parties lack of action.

    or

    b) Go the full nine yards and do a “Preston Manning” and create your own protest party which addresses the regions real concerns.

    Either way, we have to send a strong message to Ottawa that they need a strong maritime union in the current federation. We will not be ignored.

    footnote: I bet our friendly neighbourhood anonymous commentor would like the first one. Ha! Ha!

  6. Anonymous says:

    Actually, I quite like both, in fact, I”ve been working on exactly the second one, which you’ll hear about shortly, the NDP is like any other party, they SAY they are ‘for the people’, until they get elected.

    However, foreign investment is foreign investment, there is no difference. New Brunswick’s economy IS third world, as its major exports are raw materials and most jobs are those either in government or that support the first one. The only difference is subsidies and market access. In the third world they complain about our agricultural subsidies and closed markets. These benefit NB, yet still we see the state of the province. In forestry the province had five years where forest exports tripled, yet as soon as the duties came off Quebec and Ontario, the forest industry collapsed. The similarities are still quite apparant.

    It might be nice to think that ‘our’ example of Foreign Direct Investment would be different. Let’s look at that then. Was Belledune? Was Nackawic? Of course in many cases we simply have no idea of the TRUE cost, only what the governement tells us, and as you’ve pointed out, they aren’t the most reliable.

    But let’s look at one of the biggest new ‘investments’, namely Repsol. That CLEARLY is not going to accomplish the trade offs one would hope from FDI.

    Molson, well, we don’t really know about. However, we can most definitely say that it isn’t good news for Moosehead or the Pumphouse. In fact, the government would be far better off bankrolling massive expansion for Pumphouse. Worker per income, they supply far more jobs. As mentioned before, Molson simply sacked their union people to move to ‘third world’ New Brunswick. Pretty bad when your province looks even better than Mexico!

    Elsewhere I’ve read that Nackawic simply ships pulp to India, no value added products whatsoever. I suspect that like the Newfoundland deal it would be cheaper for the government simply to write these guys a check.

    And of course we need not comment on FDI in the resource sector, anybody who thinks have UPN in the Miramichi is a boon to the region (relative to what they are getting out of the deal) should go back to business school.

    My point in posting those is simply to show how the ‘mantra’ of FDI serves no benefit. When you race to the bottom to attract anybody, you’re going to get the worst.

    However, economics is NOT separate from public policy. When we see ideas like luring a high tech animation firm to Miramichi for its cheaper labour, then there is definitely something to that. However, just saying give us more FDI doesn’t do that. In fact, as mentioned elsewhere, a young animation company may well also need money, which costs the government, but in exchange for a good.

    However, HOW do you decide whether the details have people paying for yet another lumber industry?

    The FDI mantra seems similar to the other posters remarks about needing some ‘messiah’ to come and save us from our misery. That, of course, is why socialism is so popular, because contrary to belief, people are not lazy and want to work to better themselves and their communities. Socialism empowers people in a way that our current market driven forces do not.

    When the liberal party says they will make public insurance available, it is recognition of those facts mentioned elsewhere. That the people are better off paying money into New Brunswick, rather than Ontario.

    In dairy farming its much the same. Co-ops provide a far better business model, which is why corporations go out of their way to get rid of them. In NB, the Doha Agreement is coming down the pike which will change what is left of farming in the province terminally.

  7. Anonymous says:

    I never said we were doing great, just better under Lord. The StatsCan numbers prove that. I do expect a sharp rise in the future due to higher energie cost.

    BTW, NB is not like oil rich Alberta because we do not have oil and we lack a true visionairy that has the guts to tranform this province into something great. Perhaps a comparison to Saskatchewan would have made your argument stronger.

  8. scott says:

    New Brunswick needs less talk and more action.

  9. David Campbell says:

    Okay, okay you got me. Let’s compare to Saskatchewan. 18.3% below the poverty line compared to 27.5% in New Brunswick.

    Ooops.

    There’s not much that can be done to sugar coat that my friend.

    By the way, I don’t blame the government or Premier for poverty. These things existed well before Lord and will exist long after. I blame them for not trying harder.

  10. Anonymous says:

    I’ll let you off the hook. At least your talking about it and willing to debate the issues. That’s the problem with this province, we have no voice in the media to challenge the status quo. Viva la revolution blog!

  11. MartinP says:

    I think the comparison to Alberta is still apt, it is still Canada. Per capita and size the province has as much oil as Alberta. Technically we should be doing better because the reality is that crude is a natural resource which usually provide the fewest jobs.

    The only difference is that the oil isn’t in the ground in NB, but it is refined in NB in the largest refinery in Canada. This was paid for primarily using tax dollars, and it is NB highways and rails that ship it. We’ve seen here before how much oil adds to the province’s GPP. The difference is, the province has decided it would do all those things with minimal recompense from Irving.