Articles

Grandfathers

Toronto Real Estate Prices – Five Factors To Consider

Geopolitics in Canada: Politics, Economics, and Future Technologies

Oil and the Ouroboros

Spanish Geo-Economics: Past, Present, and Future

A Look Back At Barack Obama’s Foreign Policy

Presidential Beginnings and Regionalism in America

In Politics, the Triple Crown is Even More Elusive

Political Dynasties and their Discontents

Guest Post: Babbit, by Sinclair Lewis

Electoral College Blues

Canada Needs A Red-Green Party .

The Blessings of St Catharines

Night Moves: The Future of Charging Electric Vehicles in Ontario

Ontario: The Borderland Economy

The Geopolitics of Saudi Arabia

Morocco the Outlier 

Robots and the Middle East

Complacency over Coal’s Collapse: Five Factors to Consider 

Fasten Your Snowbelts: Technology and the Great Lakes

The Giving Tree: Tu Bishvat and Israeli Economics 

Guest Post: Political Turnover in the United States 

Labour Strikes in China

Finally Passing Gas: 10 Winners and Losers of the Panama Canal Expansion

Eurozone Geopolitics (and the Future of “Czechia”)

Seniors Discount? Oil Prices and Old Rulers

Expect the Unexpected: 10 Reasons North Korea Could Finally Change Course

US Politics: The Real Swing State

The Other Greek Economy

The Provincials

The Physics of Japanese Economics

Bricks, Mortar, and Wireless Headphones

The Geopolitics of Cheap Energy

Examining China’s M&A Boom

The Case For A DVP Relief Subway (And Gondola) In Toronto

Northeast Asian Trade

Forest and Farm 

Geopolitics in Iraq

Islands of the Pacific

The Return of the Atlantic

Europe’s Mountain Lands

The Eternal Question

Germany at a Crossroads 

Satellite Geopolitics in Eastern Europe

Canada Goes to Vote! 

US Politics: Unique New York

Turkish-Russian Geopolitics

Why Iraq is Still So Important

The Day After Tomorrow, in Morocco

Europe and Arabia: A Geopolitical Perspective

China’s Hidden Regionacracy

Legal US Immigration

Russia, Turkey, and Greece: Clash of “Civilizations” 

Motor Vehicle Production

Capital Idea

5 Challenges for Canada’s Economy in 2015

New Website: Investors Aloud

America’s Domestic Environmental Geopolitics

10 Consequences of US-Iranian Reengagement

Why Israel Won’t Let the West Bank Go 

The Geopolitics of Ukraine 

Internal Chinese Geopolitics, part 1

Iran’s Weakening Position

 Greek and Mediterranean Islands

Estonia in 2015: Energy, the Euro, and Elections

Germany’s Trade Empire

The 10 Largest Relative Trade Networks 

The PIPEs are Calling

New Jersey: The Densest State

China’s North-South Split

The Not-So-Tiny Baltics

Now That’s A Basin!

US Politics: Changing Electoral Demographics

Regional Canadian Politics 

Why Iraq?

The Coming US-Argentine Tango

The Uncertain Future of Bulgaria

Turkish-Israeli Geopolitics

8 Reasons Canadian Home Prices Might Fall

Japan from 1995 to 2035

What if Syria Fragments

10 Myths About the Global Economy

You Didn’t Build That

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East Asia

Oil and the Ouroboros

Today, at $45-50 a barrel, the price of crude oil has risen significantly from the $30 lows it reached around the start of 2016. Still, it remains quite far below the $80-110 range in which it resided during most of the past decade, prior to its crash in mid-2014. Gas and coal prices, meanwhile, have in most areas of the world fallen even more than those of oil has. China, because it is the world’s largest net importer of oil and of fossil fuels in general, has often been viewed as a country that is likely to benefit from these cheaper prices.

This view may be incorrect. Not only do China’s energy imports not equal a large share of its GDP, but the growth of China’s energy imports going forward may be slower than many predict. Moreover, there is an enormous discrepancy in the amount of fossil fuels produced by various regions and provinces within China. As such, the crash in energy prices may excacerbate, or at least influence, some of China’s preexisting geo-political divisions.

Energy Imports

China may be the world’s largest energy importer, but it is has also become its second largest energy producer, and as such only relies on energy imports for an estimated 15% of its total energy consumption, in contrast to 94% in Japan, 83% in South Korea, 33% in India, 40% in Thailand, and 43% in the Philippines. In 2014 imports of oil were equal in value to just around 2.4 % of China’s GDP, according to the Wall Street Journal, compared to 3.6% in Japan, 6.9% in Korea, 5.3% in India, 5.4% in Thailand, 4% in the Philippines, and 3.3% in Indonesia.

South Korea and Japan also imported more than two and four times more liquified natural gas, respectively – the prices of which tend to track oil prices more closely than conventional natural gas prices do – than China did. China’s LNG imports barely even surpassed India’s or Taiwan’s. China’s imports of natural gas in general, meanwhile, were less than half as large as Japan’s and only around 20% percent greater than South Korea’s.

China, furthermore, tends to import energy from the most commercially uncompetitive, politically fragile, or American-hated oil-exporting states, such as Iran, Russia, Iraq, Angola, and other African states like Congo and South Sudan. In contrast, Japan and South Korea get their crude from places that will, perhaps, be better at weathering today’s low prices, namely from Kuwait, Qatar, the UAE, and Saudi Arabia. (Granted, China gets an enormous amount of oil from Saudi Arabia too; however, Saudi oil does not count for nearly as large as share of China’s oil imports as it does for Japanese or South Korean oil imports). Similarly, China gets much of its natural gas from Turkmenistan, Uzbekistan, and Myanmar, whereas Japan imports gas from Australia and Qatar and South Korea imports gas from Qatar and Indonesia. China’s top source for imports of high-grade anthracite coal, and its third largest source for coal in general, is North Korea.

China has, in addition, invested capital all over the world in areas hurt by falling energy and other commodity prices, both in developed countries like Australia and developing economic regions like Africa. With energy prices cheap, it may get low returns on these expenditures.

Energy, History, and Politics

Another mistake the financial media makes is looking at China as if it were a country, rather than what it really is: both a country and a continent. Continents contain deeply-rooted divisions along regional, linguistic, and ethnic lines. China is no exception. China’s main division, roughly speaking, is between  areas south of the Yangtze River, which tend to be mountainous, sub-tropical, and dependent upon importing fossil fuels, and areas north of the Yangtze, which tend to be flat, more temperate, and rich in fossil fuels.

China’s Physical Topography                     China’s Population Density

Northern China, stretching over 1000 km from Beijing southward to Shanghai on the Yangtze, is the country’s political heartland. It is densely populated and home to most of China’s natively Mandarin-speaking, ethnically Han citizens. When compared to southern China, the north has historically been somewhat insulated from foreigners like the Europeans, Americans, and even Japanese. Beijing’s nearest port is roughly 5000 km away from Singapore and the Strait of Malacca; Hong Kong, in contrast, is only around 2500 km from Singapore and Malacca. Beijing is rougly 2600 km from Tokyo by ship, whereas Shanghai is 1900 km from Tokyo and Taipei (in Taiwan) is 2100 km from Tokyo.

Japan’s Ryukyu island chain and the Kuroshio ocean currents historically allowed for direct transport from Japan to Taiwan and the rest of China’s southeastern coast; the Japanese controlled Taiwan for more than three and a half decades before they first ventured into other areas of China in a serious way during the 1930s. Even today, Japan accounts for a larger share of goods exports to Taiwan than do either China or the US.

Southern China has often depended on foreign trade, since much of its population lives in areas that are sandwiched narrowly between Pacific harbours on one side and coastal subtropical mountain ranges on the other. In northern and central China, in contrast, most people live in interior areas rather than directly alongside the Pacific coast.

People in the northern interior often did not engage in as much foreign trade as those on the coast, as, in the past, transportation in the interior was often limited by the fact that northern China’s chief river, the Huang-he, is generally unnavigable and prone to flooding northern China’s flat river plains, destroying or damaging roads and bridges in the process. In southern or central China, by comparison, even people living far inland could engage with the coast by way of the commercially navigable Yangtze and Pearl Rivers, which meet the Pacific where cities like Shanghai, Guangzhou, and Hong Kong are located.

Northern China, however, was most directly exposed to the land-based Mongol and Manchu invaders who ruled over the Chinese for most of the past half-millenium or so, prior to the overthrow of the Manchu-led Qing Emperor in 1912. Today, of course, the north continues to retain China’s political capital, Beijing, and a disproportionally large majority of Chinese leaders were born in northern China — including Beijing-born Xi Jinping and Shandong-born Wang Qishan, a former mayor of Beijing). This is in spite of the fact that most of China’s leading political revolutionaries in the twentieth century, including Mao Zedong, Deng Xiaoping, Sun Yat Sen, Chang Kai-Shek, Zhu De, Ye Jianying, Hong Xiuquan, and the writer Lu Xun, hailed from southern or south-central China.

At present, out of China’s seven Standing Comittee top leaders, only seventh-ranked Zhang Gaoli was born in southern China; whereas five of the seven were born in northern China and one, Premier Li Keqiang, was born in central China. Zhang Gaoli may in fact be the first person born outside of northern or central China in thirty years to have made it to the Standing Committee. He is also the only person currently in the 25-member Politburo born outside of northern or central China. Meanwhile, among the 11-man Central Military Commission, seven were born in northern China, while two were born in north-central China and two in south-central China. By my count, out of the 205 active members of the Party Central Committee, fewer than 15 seem to have been born south of central China.

Indeed, the southern half of China, stretching from islands in Taiwan, Hainan, Hong Kong, Xiamen, and Macau in the east to the plateaus of Yunnan, Sichuan, and Tibet in the west, seems to be politically peripheral. It is home to a majority of China’s 120 million or so non-Han citizens (most of whom are not Tibetan or Uyghur, though those two groups recieve almost all of the West’s attention), as well as home to China’s 200-400 million speakers of languages other than Mandarin, and to China’s tens of millions of speakers of dialects of Mandarin that are relatively dissimilar to the Beijing-based standardized version of Mandarin, and to most of China’s 50-100 million recent adopters of Christianity, and, finally, to most of China’s millions of family members of the enormous worldwide Chinese diaspora.

Southern China is closer to Southeast Asia, a region with an enormous, economically active Chinese population (many of whom speak southern Chinese languages like Cantonese), than is northern China. Southern China’s Fujian province, in particular, is both linguistically and economically close to Taiwan, and southern China’s Guangdong province—the largest province in China—to Hong Kong. A large share of China’s GDP comes from the coastal areas of China from around Shanghai south to Guangdong, particularly if you include Taiwan as part of the country. Guangdong alone accounts for an estimated 10% of mainland China’s GDP and over 25% of its exports. This creates, arguably, an unbalanced dynamic: China’s political periphery is also its main economic engine.

Fossil Fuels

As it happens, northern China produces almost all of China’s fossil fuels. Most Chinese energy is, in fact, produced in and around the province of Shanxi, 300 km or so west of Beijing, where a tremendous share of China’s (and, indeed, the world’s) coal is mined. Shanxi has also seen the biggest political shakeup of any province from Xi Jinping’s anti-corruption campaign thus far. When combined with the northern “Autonomous Regions” of Inner Mongolia and Xinjiang, as well as China’s north-easternmost province Heilongjiang, Shanxi produces a gigantic of China’s fossil fuels in general. Other northern areas, such as Shandong, Liaoning, and Tianjin, are also significant oil producers.

Southern and central China, in contrast, account for most of China’s imports of fossil fuels—especially if you include the economy of Taiwan as being part of southern China. Taiwan, in fact, may be more dependent on oil imports than any other significant economy in the world, according to data from the Wall Street Journal. Falling energy prices may weaken the historical political heartland of China relative to its periphery, in that case. Whether or not this will generate political instability going forward remains to be seen.

Looking Ahead

If (a big if) energy prices remain low for a sustained period, then the question of China’s future dependence on imported energy also becomes relevant, as does the question of the future dependence on imported energy of China’s most important neighbours. In that case, how dependent on energy imports will countries like China, Japan, and India be in a decade or two from now?

While it is impossible to know what the future will be like, it is not difficult to imagine that China will remain less dependent on energy imports than India and/or Japan during the years or decades ahead, as a result of India’s still-emerging economy and Japan’s still-roboticizing economy.

China is not likely to be a major adopter of energy-intensive robots, in per capita terms, because China has a far larger cheap labour force than any country in the world apart from India. Japan, in contrast, will likely help lead the robot revolution, as its labour force is expensive and aging rapidly. This could make Japan even more dependent on importing energy, as machines that are both highly mobile and capable of sophisticated computation require an enormous amount of energy to run — and indeed, one of their main advantages over human labour is that they can and frequently will be tasked to run 24-7, without even taking any time off for holidays or sick days.

China is not certain to increase its energy imports nearly as much as less-developed economies like India, meanwhile, as the Chinese inudstrial sector is facing challenges as a result of its past generation of energy-intensive growth. China faces rising labour costs in many of its cities; a pollution problem; a US that is concerned with Chinese industrial power; and countries throughout the world afraid of China’s world-leading carbon emissions.

In addition, China is located much further away from the Persian Gulf and Caspian Sea oil and gas fields than the Indians and other South Asians are, and so might have difficulty accessing them in a pinch.

China may also, for the first time, have to face industrial competition from resource-rich economies such as Australia, Norway, Canada, Texas, or even the Gulf Arab states,which may be able to use energy-intensive robots of various kinds to build up their manufacturing sectors in spite of their small, expensive domestic labour forces.

All this could make China’s industrial growth rate slip, which in turn might reduce China’s resource imports and thus prevent China from becoming the leading beneficiary of low energy and commodity prices.

Such a shift will be especially likely if the United States or European economies decide to enact tariffs on goods coming from places that generate power by using coal in inefficient ways, a prospect that has become increasingly likely as a result of America’s triple-alliance between environmentalists opposed to coal consumption, shale gas producers competing with coal miners, and energy companies trying to pioneer more expensive but cleaner ways of consuming coal and other fossil fuels. China may then have to focus on growing its service sectors instead of its energy-intensive industrial sectors.

China, Japan, and Siberia 

Japan, lastly, might benefit from Russia’s energy-related woes more than China will. This is not only because the Chinese have to a certain extent often looked to Russia as an ally against the West, but also because the areas of Russia that China is close to are mostly irrelevant to China: they are landlocked, Siberian, and for the most part located far from China’s population centres.

Pacific Russia, in contrast, which is located next to the Sea of Japan on the East Asian side of Russia’s Pacific mountain ranges, has a far more liveable climate than does most of the continental Siberian interior. It is home to several small or medium-sized port cities, such as Vladivostok and Petrapavlovsk-Kamchatsky, which are very, very far away from Moscow. This region accounts for much of the oil and nearly all of the Russian gas exports to Asia—especially energy-rich Sakhalin Island, which is just 40 km away from Japan and was half-owned and inhabited by the Japanese prior to the Second World War.

Russia may, in fact, be somewhat better prepared to fight another border war with China like it did in 1969—which might not be too different than the many other wars Russia has fought within or near its borders both prior to or since then—than it would be to face off against Japan again within the far-eastern, mountainous, archipelagic and peninsular Pacific Russian region, as it did in 1905 and then again during the 1930s and WW2. Of course this does not mean Japan will attack Russia — though it has certainly toyed with the idea of eventually making some bolder moves in the Southern Kuril Islands, which both countries claim as their own. Even the remote, unstated possibility of conflict, however, may help grant Japan leverage in any negotiations with Russia regarding commercial or political issues.

Conclusion

All of this is not to be bearish on China’s future. Energy-intensive industrial growth, after all, woud not necessarily mean an improved quality of life for Chinese citizens. Ideally Chinese standards of living will rise at a considerably faster pace than its energy usage. It does seem, though, that China’s economy may not turn out to be a major beneficiary of the fall in energy prices. The PRC’s neighbours on the other hand, such as Japan and Taiwan, which are less rich in fossil fuels or in labour, may benefit greatly. So too might the poorer countries that depend on energy imports, like India and the Philippines. Just as important, however, yet often overlooked, are China’s domestic geopolitics. Internal Chinese divisions—including along north-south and east-west lines—have been, and might remain, of paramount importance. Energy prices could impact them too.

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Europe, North America

Grandfathers

 

Politics obviously effects all our lives, sometimes for good and sometimes not. All of my grandparents were born in Poland and experienced hard times during WW2. One of my grandfathers, who passed away the year before I was born, wrote a memoir of his experience as a Jew during the war, which has just been republished for the first time in many years. You can read a free preview of the first chapters, or buy the book, on the link above.

My other grandfather, who was born on the exact day that WW1 ended in 1918, and who spent most of the war in northern Russia rather than in Nazi-occupied Poland, passed away a month ago. He suffered no less for spending the war in the Soviet Union rather than in Poland. Of the more than 100 members of his extended family, only he and two of his second cousins survived. Later, in Canada, he and his wife went on to start a new family that today has nearly 40 people in it. His obituary was published this morning: http://www.cjnews.com/trending/might-have-fallen-tribute-community-legend-philip-zucker

Thanks,
Joseph

 

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North America

Toronto Real Estate Prices – 5 Factors To Consider

I do not know what will happen to Toronto housing prices. I do think, though, that if you look at five of the big things happening in Canada’s economy at large — namely, automation, digitalization, Baby Boomers nearing their 60s or 70s, rapidly rising home prices in some major cities, and the fall in fossil fuel and other commodity prices — all suggest that Toronto land values are likely to rise more slowly than other assets in the coming years.

1. Automation

— Many people are drawn to Toronto because of its strong employment market, so if automation causes employment rates or real wages to rise relatively slowly, some people may decide to move to other places where housing prices are more affordable

— If automation causes transportation to become more convenient because of self-driving vehicles, people may also find it easier than ever before to live further away from downtown Toronto

—The process of building homes or buildings might itself increasingly be carried out by machines, computers, or robots, which could reduce the time and money involved in construction

— If automation makes it easier to live in lands that have rugged geographies — for example, if self-driving vehicles or autonomous snowplows make it easier to live in Lake Huron Snowbelt cities like Owen Sound, which gets three times more snow per year than Toronto on average — it could cause home values of those lands to rise more quickly than those of established cities like Toronto

        Great Lake Snowbelts                              Great Lake Cities
     great lake pop

2.Digitalization

— The Internet might allow people to “e-commute” to work in some circumstances, thus making it easier to live outside of major employment centres like Toronto

— The Internet might put downward pressure on real estate in general by, in effect, using cyberspace as a substitute for real space. For example, if more people shop online, then there may be less of a demand for retail real estate, as more goods are taken direct from warehouses to consumers

 — The Internet might lead some jobs to be outsourced to other countries with cheaper labour, which in turn could cause wages or employment rates in Canada to rise relatively slowly, causing employment to become less of a determinant in people’s housing preferences, and home affordability to become more of a determinant instead

— The Internet could make it easier than ever before for new immigrants to Canada to live outside of major immigrant clusters like Toronto

— The Internet might make it easier to live in geographically rugged areas like the Lake Huron Snowbelt, for example by allowing people to e-commute or buy their groceries online in the wake of a snowstorm

3. Demographics

—Canada’s demographic profile is quite different today than it was a decade or two ago. Not only is its biggest cohort, the Baby Boomers, made up of individuals who are now nearing or have already reached their 60s, but also there are now no longer very many Canadians younger than the ages of 15-20

—Baby Boomers may now be somewhat more likely to sell, and less likely to carry out a major renovation, of their homes than they were a decade ago

—Fewer children means that parents don’t need as large houses. It also means there may be fewer jobs available in day-care, child-care, or education. And it means that, in the decade or so ahead, there may be fewer first-time home buyers or home-renters entering the market

—While there are fewer kids and fewer people in their 40s than there were a decade ago, there are still plenty of people between the ages of 20-70; in other words, there is still a lot of competition for jobs and wages. Areas of Canada with fewer people in the labour force, and with more elderly people who need doctors or nurses, could do better at attracting immigrants or new residents

—Many bilingual, bicultural second- or third-generation immigrants have recently or will soon come of age. These populations can more easily move to areas of outside immigrant clusters like Toronto than could their first-generation parents or grandparents. In doing so, they  create new, smaller clusters which can in turn attract new first-generation immigrants. This has already occured to some extent with white immigrant groups that have been in Canada for several generations. When, for example, Soviet Jews came to Canada a few decades ago, they largely skipped the typical immigrant stage of moving to downtown Toronto (as European Jews had done after WW2) and instead linked up with second-generation and third-generation Jews who were living uptown or in Vaughn.

—A caveat here would be if Canada was to allow an immense increase in immigration, well above the 0.59 percent net annual migration (which is already high by global standards) it allows today. If that were to happen, then Canadian real estate prices could be expected to continue rising rapidly

4. Gravity 

— Given the extent to which cities like Vancouver and Toronto have seen their real estate markets increase, many people are being priced out, or are on the verge of being priced out, of those markets. This may make it less likely that these markets will continue increasing as rapidly as others going forward

— A graph from this week’s Economist magazine has Canada’s housing markets among the most overpriced when viewed in comparison to rent costs or income levels:


5. Commodities

— After a decade or so of very high energy and other commodity prices, in 2014 prices crashed, and they remain low today. Inexpensive commodity prices should put downward pressure on Canadian home prices in two ways

— First, by weakening the Canadian economy in general, as the Canadian economy is an enormous commodity exporter. Toronto, as the commercial capital of the country, may not be immune to this

— Second, by making suburban sprawl cheaper. Nearly every aspect of suburban living is much more energy-intensive and commodity-intensive than is urban living

— There is, not surprisingly, a historical correlation between commodity prices and Canadian real estate prices. When commodity prices reached their modern-day lows during the mid-1990’s, Canadian home prices declined by roughly 5% in spite of strong growth occurring in the general economy at the time. When, on the other hand, commodity prices reached their modern-day highs between 1979 – 1983 and between 2007 – 2014, Canadian home prices went up by roughly 10% and 35%, respectively, in spite of the fact that the country’s two most severe postwar recessions took place during the years 1982 and 2008-2009

So, What’s A Guy/Gal To Do? 

Well, you could rent. Or, you could buy in a different city or town. Or, if you are wealthy enough to afford it, you could rent an apartment in Toronto and buy a home somewhere else.

On the Other Hand…

Of course, that I could be entirely wrong about all this. The counter-theory to the one I have put forth is one that you might call “the Manhattan project”: namely, that Canada is bound to develop a city that is at least somewhat comparable to New York City at some point, and that city is likeliest to be Toronto. Today, the City of Toronto’s population density is 4,150 per square km; Manhattan’s is approximately 27,000, Brooklyn’s 14,200. The Greater Toronto Area’s total population, at 6.4 million, is only around a quarter the size of the New York Metropolitan Area’s. Viewed in that comparative manner — and Torontonians do have a reputation for seeing their city as a New York-in-waiting — Toronto has plenty of room to continue growing. (Though, on yet another hand, Canada’s population is only around a tenth of the US’s…). Indeed, as was mentioned above, a big wild card for the future of Canadian real estate is the future of Canadian immigration. There are 7.5 billion people in the world, but only 36 million in Canada. If we are willing to accept immigrants with open arms — far beyond the numbers we presently allow — the population of Canada could soar, and its home values too.

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North America

Geopolitics in Canada: Politics, Economics, and Future Technologies

Canada is often considered to be a haven from geopolitics, a nation relatively free from economic want or political cant. But if by geopolitics we refer simply to the influence of geography upon politics, Canada may in fact be a prime place to study it, if only because the country posseses so much of the former when in comparison to the latter.

The basic fact of Canadian geopolitics is this: more Canadians live in the city of Toronto than live in the 2500 kilometer-wide expanse of land separating Toronto from Alberta. (Or, to put it in the most Canadian way possible, there are a heckuva lot more people who would like to see Auston Matthews win the Calder Trophy than Patrick Laine). Canada is in this way divided in two: between Alberta and BC on the one hand, in which around 25 percent of Canadians live and 30 percent of Canada’s GDP is generated, and Ontario and Quebec on the other, which account for roughly 60 percent of Canada’s population and GDP.

Source: Future Economics

These two halves, in turn, can also be divided into two parts. Alberta is separated from BC by the Rockies; Ontario from Quebec by the Anglo-French divide. (The debate is still open as to which of these two barriers is the more venerable). However, while the BC-Alberta split is pretty well balanced — Alberta’s GDP is a bit larger than BC’s, but BC’s population is a bit larger than Alberta’s — the Ontario-Quebec divide is tilted strongly in support of Ontario. By itself, Ontario accounts for an estimated 38.6 percent of Canada’s population and 38.4 percent of Canada’s GDP.

These are large figures not just in Canadian terms, but also in global ones. Few provinces or states within major countries represent such a bulk of their respective nations. Ontario’s provincial government has a budget that in recent years was larger than those of Quebec and Alberta combined, and also close to half that of Canada’s federal government (the capital of which, Ottawa, happens to be located in Ontario). The Ontario provincial budget is higher than those of any states in the US apart from California or New York. It is higher than the budgets of 15 EU nations.

Among other things, this makes the provincial election of Ontario that is scheduled to occur by 2018 a matter of some significance. According to current polls (yes, I know, polling cannot be trusted…), the Ontario Liberals likely will be thrown out of office for the first time since 2003, to be replaced with the Progressive Conservative party. This would be noteworthy given that, at present, only Manitoba is led by a Conservative government. The rest are governed by Liberal parties with majorities in provincial parliaments, or else by the New Democratic Party (in Alberta) or Saskatchewan Party (in Sasketchewan, of course), both of which enjoy majority governments too.

In Canada, due to the country’s vast size and diffuse population, provinces possess a high measure of capital and clout. The combined budgets of the ten provincial governments, for example, is larger than the federal budget. (In the US, by comparison, the 50 state budgets amount to less than half the US federal budget. And in Britain, the central government is far more prominent still). So, if provincial Liberals lose upcoming elections in provinces of considerable size—Quebec may have an election in 2018 too, and BC will likely have one this year— it might unsettle provincial relations with Justin Trudeau’s federal Liberal majority; a federal majority likely to remain until at least 2020.

It is not however only Ontario’s size which tends to make it the fulcrum in Canadian politics. Ontario is also centrally positioned, both economically and politically, within the country. Economically, the four provinces west of Ontario have around one-third of Canada’s GDP, while the five provinces east of Ontario have around one-quarter of Canada’s GDP. The median line of longitude of the Canadian economy — the place where the GDP to the east equals the GDP to the west; the Prime Median, as it were — runs directly through the city of Toronto, Ontario’s capital.

Ontario trades nearly seven times more with Quebec than does any other province, and trades three times more with Alberta than does Quebec. Ontario also trades more with Canada’s four Atlantic Maritime provinces than Quebec does. Politically, moreover, Ontario shares a long border with French-speaking Quebec — a border Ottawa abuts and Montreal is just 60 km from — yet shares a language with most of the rest of Canada.

We’ve left out any mention of Canada’s three Territories, Yukon, the Northwest, and Nunavut, for the sake of simplicity. Combined, they have a population of 113,000; smaller than the smallest province, PEI, and just 0.32 percent of the overall Canadian population. (By comparison, Alaska accounts for 0.23 percent of the population of the United States)

This is where we get to the real bacon of Canadian geopolitics: the somewhat uncanny reflection of geographical realities within Canada’s electoral outcomes; specifically, in the ability of Ontario to “swing” between either Quebec or western Canada during federal elections, or else for Ontarians to vote for a party supported in neither Quebec nor in western Canada and yet still manage to have that party win (or at least, manage to avoid having any rival party acheive a majority government).

The four most recent elections, which saw Trudeau emerge with a majority government in 2015, Stephen Harper win his first-ever majority in 2011, and Harper gain only minority governments in 2008 and 2006, are ideal examples of this:

The three major candidates in the 2015 election, Justin Trudeau, Stephen Harper, and Thomas Mulcair

In 2011, Harper’s Conservatives won a majority by uniting Ontario and western Canada — including receiving 27 out of 28 seats in Alberta — even as they won only 5 out of 75 seats in Quebec. In that election Ontario and every province west of Ontario gave a large majority of their seats to Harper’s Conservatives, while, with the exception of New Brunswick (the westernmost Atlantic province), none of the provinces east of Ontario came even close to giving a majority to the Conservatives.

Quebec, in contrast, gave 59 seats to the NDP, allowing that party to become one of the two largest in Parliament for the first time in its history. 2011 was a good example of Ontario swinging to the west. (Harper, not incidentally, was born in Toronto, attended university in Edmonton, and represented a Calgary riding in Parliament).

In 2015, on the other hand, Trudeau’s Liberals won an even larger federal majority by winning most of the seats in both Ontario and Quebec, even as they were crushed in both Saskatchewan and Alberta. The Liberals won a large majority of seats in Ontario and in every province east of Ontario—except Quebec, where they won only a narrow majority—and also won exactly half the seats in Manitoba, the easternmost Prairie province. But the Liberals did not come even close to winning a majority in any other province west of Ontario.

The large victory of Trudeau (who, by the way, was born in Ottawa, went to university in Montreal, and represents a Montreal electoral district in Parliament) is a good example of Ontario swinging east. While BC did give a plurality of its votes to the Liberals in 2015 too, it only amounted to 17 out of the 42 seats in that province; in contrast, in the Atlantic Maritimes the Liberals swept all 32 seats in the four provinces of the region, and in Ontario the Liberals won 80 out of 121 seats.

In 2008 and in 2006, Ontario did not give a majority of its seats to any party. Moreover, in neither of those elections did Ontario and Quebec give a plurality or majority of their seats to the same party. This resulted in both cases in federal minority governments.

In 2008, Ontario gave a plurality of seats to Harper’s Conservatives, who won big majorities in every province west of Ontario but who lost in every province east of Ontario except New Brunswick. Quebec meanwhile gave a large majority to the Bloc Quebecois that year. In 2006, when Harper’s minority victory was much narrower than in 2008, Quebec also gave a large majority to the Bloc Quebecois, but Ontario gave a plurality to the Liberals rather than to Harper.

In 2006 the Alberta-BC divide was also larger than in 2008 or 2011: the Conservatives swept Alberta but won only a plurality in BC. (New Brunswick however did fall in line with its fellow Maritimers in 2006: all four gave a majority of seats to Liberals). In both the 2006 and 2008 elections, every province west of Ontario gave majorities or pluralities to the Conservatives, while none to Ontario’s east (except, again, New Brunswick in 2008) did so.

While geopolitical patterns such as these vary over time and so are not certain to endure, still it is clear they run deep.

In Part 2 of this 4-Part essay, we will take a more detailed look back at Canada’s past elections and the (geo)politics of Canada’s provinces. In Part 3 we will attempt to analyze the modern Canadian economy, and in Part 4 we will discuss how technological changes in robotics and communications may impact the country.

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Europe

Spanish Geo-Economics: Past, Present, and Future

Link: spanish-geo-economics-past-present-and-future-january-2017

(If some the pictures on the link above are too blurry, you can see them clearly on the link below….however some of the text paragraphs in the link below are out of place. Sorry for the inconvenience).

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Africa, Middle East

The Giving Tree: Tu Bishvat and Israeli Economics

As in most religions, there is a tradition in Judaism to relate contemporary events to scriptural tales and holidays. In the story of Chanukkah, two miracles are celebrated: the Jewish Maccabbees winning over the Syrian Greeks in spite of the Jews being heavily outnumbered, and the Jews getting a lot of light out of a little bit of oil. Many therefore see the existence and economic success of modern-day Israel as a similar miracle. The Israelis are outmanned more than 40 to 1 by the inhabitants of the Arab world, and out-oiled more than 1000 to 1. Yet Israel has managed anyway not only to survive, but also to join the  small class of 25 countries in which per capita incomes have reached above 30,000 dollars per year. For many, this is thought to be not just a secular or national miracle, but also a true, God-given one.

Such Channukah analogies tend to be drawn mainly by conservative supporters of Israel. When it comes to Purim, however, it may be that liberal Jews will have more fun this year, when they realize that Trump’s public persona seems to  be similar to that of Achashverosh. Trump, after all, appears to be a superficial, misogynistic, ostentatious and retributive insomniac, who values loyalty in his servants, public nudity in his wives, and is an ally of Jews against Persian rivals more out of happenstance rather than as a result of any moral consideration. (Trump’s Orthodox son-in-law Jared Kushner would, I guess, have to be Mordechai in this comparison; Ivanka is clearly Esther, a beautiful young woman who conceals her Judaism and is the only person at court who is able to make the king see any sense. And certainly, many liberals already believe that Steve Bannon is a modern-day Hamman).

About a month before Purim however, and about a month after Channuka, is Tu Bishvat, a more earthly and apolitical holiday than either of the two which flank it. Whereas Channukah commemorates right-wing values such as conviction, traditionalism, and militarism, and Purim left-wing values like diplomacy, feminism, and secularism, Tu Bishvat celebrates only natural, as opposed to man-made, forces. Tu’Bishvat could be a fitting metaphor not only for the fact that political truths in Israel  may lie somewhere between left and right-wing perspectives, but also for the fact that Israeli success is due more to natural forces than many realize.

With Tu Bishvat approaching this weekend, let’s take a closer look at why this may be the case.

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When I was in Hebrew school, we were frequently shown maps of the Arab world, meant to display to us just how tiny Israel’s territory is. This was meant to bolster our view of Israel as an underdog; a “start-up nation”, which had first helped to make the desert bloom and later helped to make the Nasdaq boom. Israel certainly is an underdog country in many ways, but still these maps were hugely misleading. They did not differentiate between relatively useful and relatively useless land. The Arab world owns a huge amount of beautiful but uninhabited desert or rugged mountains, but Israel enjoys the advantage in terms of the amount of arable coastal land it possesses, on a per capita basis.

The area of Israel outside of the Negev is roughly 8000 square kilometres in size, most of which is a part of the country’s Mediterranean coastal plain. 8000 square kilometres is very small, of course–only not when compared to most of Israel’s neighbours. The West Bank, which is 3.7 times smaller than Israel, is landlocked, mountainous, and most of its eastern half is desert. Gaza, which is 57 times smaller than Israel, is nearly a desert as well. Gaza receives about half the rain that most of Israel’s coastal plain does, per square foot of land, and only a third of the rainfall that many areas in the Galilee in northern Israel receive.

Lebanon, which is half as large as Israel, has a coastal plain that extends only a very short distance inland in most areas, before meeting the high mountain ranges and mountain valleys which make up most of the Lebanese terrain.

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Topography of Israel (left) and Lebanon (right)

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Yet Lebanon also shows the importance of being a coastal country, even if only a very small one. Lebanon’s per capita income is around $10,000, which is substantially higher than most other Arab countries apart from oil-rich Gulf Arab monarchies. Israel’s is an estimated $36,000; Egypt’s is just $3600.

In Syria too, the coastal plain — where lives most of the minority Alawite population from which the Al-Assad family comes — does not extend very far inland before it reaches mountain ranges. Syria’s coastline is also only  around 90 km in length from north to south; Israel’s is around 110 km long.  Eastern Syria, meanwhile, is largely a desert, so that approximately half the country’s territory is unpopulated.

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Jordan, in spite of having a remote, tiny coastline along the Red Sea’s Gulf of Aqaba, is effectively landlocked. Most of its population lives far from Aqaba, in the relatively small part of the country that is not a desert. Jordan is separated from Israel, the West Bank, and the Mediterranean by the Jordan Valley, a steep-walled, incredibly deep canyon containing a number of the points on earth that are the furthest below sea level, through which the Jordan River flows into the salty Dead Sea.

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While the Jordan Valley is not an impenetrable barrier, its usefulness as a defensive line does help to make Israel more insulated from its neighbours than the country may seem to be. The border of Israel and the West Bank with Jordan is significantly longer than Israel’s combined borders with Egypt, Lebanon, and Syria.

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Finally there is Egypt, a country with a population twice as large as those of Israel, Palestine, Syria, Lebanon, and Jordan put together. Egypt’s territory is 48 times larger than Israel’s. However, when you strip away the deserts of both countries, then Egypt’s territory is only a little more than four times larger than Israel’s. Moreover, Egypt is capital-poor in the extreme. Because it receives virtually no rainfall (see map below), its population has to live immediately next to the Nile. More than 20 percent of the Egyptian population lives five metres or less above sea level. In Israel, by contrast, only around 1 percent of the population lives five metres or less above sea level. This presents several significant challenges for Egypt, including flooding and the need to build expensive bridges and irrigation networks. Egypt remains potentially more powerful than does Israel, but not by as much as one might assume.

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There is, also, a tendency among some analysts to overestimate Israel’s economic achievements. Although Israel’s dynamic mix of intellectual ability and entrepreneurial chutzpa is rightly admired, Israel’s success in technology sectors and in launching start-up companies is sometimes wrongly confused with general economic success. For instance, Israel and Italy have basically equivalent per capita incomes, yet Israel is often considered an economic miracle whereas Italy today is seen as something of a basket-case. Israel’s per capita GDP level is pretty much boilerplate Mediterranean: Spain, southern France, and Italy are all at relatively similar levels, and even coastal cities in Turkey and Lebanon are closer to Israel in terms of their wealth levels than they are to many other areas in the Middle East.

When talking about Israel, economics, of course, is political. The Left often claims that Israel is at an unfair advantage in its relationship with Arab states, as Israel has access to capital in Europe and especially America that has empowered it. The Right, on the other hand, usually claims that if Israel’s Arab neighbours would stop being so obsessed with Israel and instead concentrate on bettering their own societies, they would not be lagging so far behind the Israelis in terms of economic development.

There may or may not be a decent amount of truth in both these claims, yet both are predictable in that they highlight the personal values each side prizes most highly in general — for the Left, equality (or, at least, equity), for the Right, competence (or, at least, conscientiousness). This tendency of each side to bring their own ethics to the debate often leads both to overlook one of the most significant and obvious, but least ethically relevant, foundations of Israel’s economic development when compared with that of its neighbours: that Israel has much more useful land than they do. With Tu’Bishvat being celebrated this week, now is the time to appreciate how the land itself has contributed to Israeli success.

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North America

Canada Needs A Red-Green Party

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Watching the candidates for leader of the Conservative Party debate in Halifax last week was interesting. Thirteen out of the fourteen leaders in the debate argued against the implementation of any cap-and-trade systems or carbon taxes, on the basis that the Conservative Party should remain against tax increases in general.

Quebec MP Steven Blaney said: “they say you can put the lipstick on a pig and it’s still a pig, well you can add Green to tax and it’s still a tax. So no, there is no need to have such a tax in Canada…we’re all conservative after all.”

Brad Trost said: “taxes must go down. Taxes do not need to go up on anything, particularly not on heating and driving and lighting our homes”.

Andrew Saxton said his first act as Prime Minister would be to “axe the tax”. He did also say that he would try to work with Trump toward a “harmonized” North American solution to climate change. Of course, that may be trickier than he suggests, given that Trump often claims to be a climate change denier and is not known for pursuing harmonies of any kind.

When Michael Chong, the sole dissenter on the issue, pointed out that it might be more desirable to adopt a revenue-neutral carbon tax model similar to the one that exists in British Columbia, calling carbon taxes “the most conservative way, the cheapest way, to reduce greenhouse gas emissions”, he was challenged by several of his fellow candidates.

Rick Peterson, for example, told Chong that the BC carbon tax is not truly revenue-neutral, because it disproportionately hurts residents in towns like Dawson Creek, who lack the alternative means of transport like “SkyTrains and bike lanes” that Vancouverites have access to. Yet this was an unsatisfying rebuttle even if one does accept Peterson’s premise that small towns should drive Canada’s tax policies, since other types of taxes could still be reduced in order to fully compensate small towns for any new carbon taxes they have to pay.

Kevin O’Leary, meanwhile, argued that carbon taxes are not needed because Canada’s forests mean that it is already a net carbon sink for the world. In other words, that because we as Canadians are blessed with forests that we did not build, we have the right to emit lots of greenhouse gasses from power plants and cars we did build.

O’Leary also argued that we should not have carbon taxation because Canada only contributes a small portion to global emissions. This same argument was also mentioned by a number of the other Conservative candidates in the debate, none seeming to be aware of the existence of straws or of camels’ backs. Yet not a single candidate seemed to think it relevant enough to point out the fact that, on a per capita basis, Canada has the highest emissions of any significant economy in the world, apart from Saudi Arabia, the United States, or Australia. (Canada emits an estimated 1.5-2 times more carbon dioxide per person than is emitted in the European Union or Japan, 2.5 times more than China, and 9 times more than India).

The debate drove home a certain point about Canadian politics: there is no way of voting for a party or party leader who is Conservative on issues like government spending but at the same time Green on issues concerning the environment. While left-wing voters are given at least one, and arguably three, Green parties to vote for —most obviously the Green Party, but also arguably the Liberals or the NDP, and certainly the Leap Manifesto faction within the NDP — right-wing voters are presented with no such option.

A Red-Green voter — a voter who loves the outdoors as much as he or she hates tax increases or having to debate young social activists; the type of voter that a character like Red Green would himself probably approve of — has nobody to vote for in today’s system.

(This assumes that Red is the colour of the Right as in America, rather than the Left as in Europe. I know, I know, Canada tends to use the European colour code, but I’m willing to look past that for a moment because I really want this reference to the Red Green show to hold up…)

This is a real shame, and not only because left-wing parties may not win enough MPs to enact Green policies on their own. It is also a shame because it might, at least in certain circumstances, be the case that right-wing policies would actually serve the cause of environmentalism more usefully than left-wing ones do.

Most economists, for example, would be in support of a conservative proposal to use carbon taxes to reduce other taxes such as sales taxes, capital gains taxes, or corporate taxes, rather than use carbon taxes to grow the overall size of government budgets as some left-wing leaders might be more inclined to do.

Trudeau’s plan, in contrast, which is to allow cap-and-trade rather than carbon taxes in provinces like Ontario and Quebec, and also to allow the provinces to decide on their own whether or not their systems will be revenue-neutral, most economists are less thrilled about.

Ontario’s cap-and-trade plan, for example, will not be revenue neutral, for a number of reasons including that Ontario is going to spend some of the revenues on projects like wind farms rather than give the money back to the population of Ontario in the form of tax rebates.

An even more pressing environmental issue than carbon taxes is animal welfare. It is, sadly, the case that the food industry in Canada tortures or mistreats tens of millions of mammals and birds each year, and that poor treatment of animals can be dangerous to humans as well because of the overuse of antibiotics and risk of poor farm conditions allowing dieases like Avian bird flu to spread. The environmentalist Left, however, which cares about this issue dearly, is not large enough to have yet made animal welfare a government priority. And some of the solutions that many on the Left champion, namely vegetarianism, veganism, local farms, and small-scale farms, may not be the most practical courses of action, even if they are the most laudable ones.

A more conservative approach, such as mandating that large-scale industrial farms adopt humane methods — the “large pastoral” approach championed by Canadian writer Sonia Faruqi in her excellent and hilarious book, Project Animal Farm — may prove to be more successful in providing a more effective model for animal welfare than would the promotion of small or local farms. Yet among the modern Conservative Party, the issue of animal welfare is generally not even viewed as urgent or worthy of discussion. If only there was some sort of barbaric cultural practices hotline we could call to report the Conservative Party for such a cruel negligence…

An environmental issue that the Left has been particularly negligent on, meanwhile, but which the absence of a Red-Green movement means that the Right has not at all stepped in to fix the Left’s mistake, is the marijuana industry. Because the Left has long seen smoking weed as being cool and weed prohibition as a bad policy — and, by the way, they are correct on both those points — it has for the most part turned a blind eye to the vast environmental destruction that marijuana production often causes. This destruction is actually needless in most cases: it stems from the desire among consumers for weed that is both cheap and blemish-free, rather than for coarser “shwag”, even though the former is of only slightly higher quality. (Read Stanford professor Martin Lewis’s article on the topic to get a fuller picture of this key issue).

With legalization impending, this issue should be addressed in government. But instead what we have mainly gotten from leaders like Trudeau is tough talk on the need to keep THC away from the developing brains of young adults. The truth, though, is that it would be far easier to prevent needless environmental destruction than it would be to stop students from taking drugs.

There is, finally, the issue of local pollution and quality of life. It seems odd that the party that claims to best represent salt-of-the-earth Canadians puts relatively little priority on maintaining landscapes that these same Canadians might otherwise be able to enjoy themselves. It would, again, seem only sensible that Conservatives should prefer taxing things like air pollution, noise pollution, and visual pollution, rather than taxing sales or middle-class income. That way at least Canada’s GDP can grow, even if its oil sands or suburban sprawl grows too.

The argument you frequently hear Conservatives imply, that the economy and environment are at odds with one another because eco-taxes would imperil economic growth, misses the point entirely. The status quo —the Harper majority government status quo — is one of medium-high taxes in general, which limits economic growth, and intensive resource extraction and suburban sprawl, which harm the environment. A Red-Green movement would ideally serve market-lovers as well as nature-lovers. Today’s Conservatives, in some respects, often do neither.

Who will lead this new movement? I hereby nominate Robert Herjavec, the self-made business mogul and surfer with Trudeauesque hair, who sits to O’Leary’s right in the Tank/Den. (If nothing else, a sharkfight between Herjavec and O’Leary could raise Canada’s profile south of the border). While a Red-Green Party might have little chance of electoral success at first, the creation of such a party by a prominent Canadian could help to chip the Conservative Party towards the Green. It’s time to step up and serve your country Robert!

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