Posted Mar 10, 2012, 4:49 PM UTC
What we need to do is move to high-tech manufacturing. Using robots, CAD, CNC machines and 3D printing we can do local manufacturing in local plants rather than national distributors.
There is no reason to ship a plastic widget when it can be made in house.
I agree entirely, and hacker spaces will play a big role in stimulating this kind of industry.
Then why don't you found a business here that does that?
I have a video game addiction to attend to.
This is largely the American model and you can easily see that in the long run it displaces working class jobs, except for the few highly skilled operators. If you only have a small proportion of the workforce employed then you lose demand. As people become poorer (employment market substitution occurs in low paying service jobs with 'race to the bottom' dynamics) you lose market share to lower cost imports (ie. Walmart). Eventually you get priced out of the market for your products. Then your manufacturing collapses under the debt incurred to pay for the machines (I'm abbreviating obviously).
In the automated manufacturing model you see rises in productivity but not rises in labour income. This drives down demand and consumer spending.
So the solution then is to keep people in factories.. forever?
I don't like that solution.
Forget manufacturing as a way for people to support themselves. We should be working on economic models that are sustainable. Lets employ people by having 10 students per teacher. How about enough doctors so everyone can have the time to sit down with a professional for a few hours and really get to the bottom of health issues. What about teaching basic programming in elementary school so robot programming becomes a McJob?
Stop trying to force the future into a consumer spending model.
I'm not advocating Dickensian factories. I think we need to maintain a broad and diverse level of skills and infrastructure in the primary economy (areas where energy and raw materials are converted directly to goods). Overspecialization and offsetting of skills to technology is a bit dangerous because it relies on the idea that we will be able to maintain the same level of complexity and globalized trade that we currently enjoy. I think the world will get much smaller in this century and we have lost a lot of the infrastructure and skills we need to off shoring.
While teachers and doctors are important it's public sector spending so it comes down to your tax base. Tax revenues are dependent on income so if employment income shrinks then so does your tax base. Then you don't have money to higher public sector workers. You could deficit spend your way into that economy but it's awfully close to how Greece got itself into it current situation.
I would hardly advocate consumer spending as any kind of ideal to drive the economy. I was just trying to sketch out a fairly standard economic model to show you the role of working class jobs and how the solution you proposed has some flaws we are already seeing in the parts of the world that have adopted it.
If i were to truly advocate something I believed in it would be a radically localized circular (steady state) economy where the majority of goods and food are produced within 100 km of where they are consumed with minimal environmental footprint (sort of a Herman Daly economic model). I have somewhat heterodox views of the economy, however, and ideas about the future that not everyone shares.
You Sir, get my upvote.
I'm Australian, but I think the situation here is comparable.
If you look here.
http://www.alankohler.com.au/home/20120307
You can see that manafacturing has been slowly employing less and less people over the years. What's interesting is that it's still making roughly the same amount of stuff.
Mining might get a lot of press here. But employment wise it's pretty flat, almost insignificant. It's services sector that employs the most people by a long way. And is on an upward trend.
This is pretty much South Western Ontario... We have the buildings, tools, skills and relationships but no one wants to take a chance on anything.
So they just keep churning out what they know, cars.
They would rather see a reduction in business year over year then take a chance and produce goods that will be in demand globally.
If you can get them to change over to manufacturing for the space industry, I will send you $10 in the mail.
No fooling.
Doesn't Dyson just take other peoples ideas, retool them, then market them as his own?
The reason we can't compete with South East Asia is human and labour rights.
Canada's not abandoning it, we just can't compete. Some of the reasons we can't compete can be addressed (taxes) and others can't be addressed (climate, geography).
So ultimately we can either subsidize manufacturing to hold on to it, or let it go and focus efforts elsewhere. Primary resources will keep us rich but concentrates the wealth in the hands of few.
Quebec's investments in high tech seem to have paid off, but I don't know that for a fact. Maybe that's the way out.
Your suggestion that the corporate tax rate has an influence on business investment is unfounded. The period of greatest business capital investment was the late 1960s when the effective CIT was over 40%. And since cuts in the CIT began in the early 2000s, business capital investments has not increased proportionally. In fact, corporate liquid assets as a percentage of GDP have increased from 15% to almost 25% in the last decade.
While I can't speak for Captcha_Imagination, "taxes" refers to a lot more than just corporate taxes. It can also refer to the various taxes associated with the sale of goods, income tax affecting labour costs (I don't know enough about this to say for sure whether or not it's a significant factor), and the various taxes associated with certain activities, such as the carbon tax in BC.
Ever wonder what it would look like if we had kept it at 40%? We might be Greece.
Greece has too much corruption so they couldn't actually collect the tax that was owed.
If a business makes money and the tax rate is for argument, 99%, the shareholders are not going to get much anyway, so you might as well invest to outgrow your tax bill. If your tax rate is 1% then you might as well give a 99% dividend. I think that low business tax rates create perverse incentives.
I'm not sure taxes are the reason Canada's uncompetitive - in fact, our corporate tax rate is quite low. And geography, if anything, works in our favour - we're next door to the world's largest consumers of just about everything.
Where we're uncompetitive is on wages - and frankly, trying to out-China China in that regard isn't a winning strategy. Highly skilled tech manufacturing is a potential opportunity for us, but it's going to require a ton of investment in R&D.
Do what China does then, make special cities. Keep the wages low, the Crown land can be leased for 100 years and build cheap housing on it. People who work in these factories can buy fuel tax free, have special mortgages, special credit cards. These could be set up in the north or economically depressed areas.
Housing costs, fuel and debt costs are what kill people in this country.
It might be hard to fight off smuggling cheaper items to surrounding areas. The pilot city would cost a lot but it could be a great social experiment.
T4 slip 2020 - Do you live in Special Economic Zone 3A? If so, claim $20,000.
A little "red" perhaps but it might just work. Look at how badly Fort MacMurray is set up.
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Yes economic enclaves have worked so well in South America, Africa and Asia. It`s not like those countries had to implement those things at gunpoint while torturing labour leaders into submission.
A bit part of China's model is actually why places like Montreal used to be manufacturing centers. A huge part of it is having all of your suppliers concentrated into a small geographical area. For example in the garment trade you used to have everything in one place, notions, fabrics, machines, labour. You could change and retool, resupply very quickly. This allows for lower opportunity costs. You see a market for a new product and you can turn it around in 2 weeks.
Globalization actually makes importers less competitive in many respects. It takes a year to turn around a design, which means more reliance on the same trending services the rest of the industry is using to forecast. Niches are harder to fill and you are very limited in what you can communicate with your suppliers, who often speak very limited English. It's also very easy to make errors so getting a container load of misinterpreted designs.
In my opinion what needs to be done is to create the conditions for creative proximity effects to happen. When you have deep manufacturing infrastructure it is easy and cheap to be innovative. When everything you need is on the other side of the world and requires 1000 to 2000 piece minimum orders it gets very hard to start small and built up a new idea.
Since when is Canada competing in wages? It doesn't happen. This is a fallacy perpetuated by politicians who don't understand economics. You need to learn the difference between competitive advantage (no such thing when it comes to trade) and comparative advantage, which is what you should concern yourself with.
I think a big reason is that we squelch entrepreneurship with employee contracts. If I build/design a better mouse trap, then technically it is my employer's even if I do it on my own time, etc. So why should I build a better mouse trap if my "corporate tax rate" is 100%?
I have a growing suspicion that allowing domestic companies to offshore manufacturing will prove to be highly destructive to countries.
Let's take the iPhone as a good example. Apple had 2 routes to cutting assembly and manufacturing costs: improve the productivity of domestic workers or find cheaper workers. They took the latter route.
This results in 3 negative effects:
The end result is that manufacturing will return when the relative wealth of the US and Canada vs China are the inverse of what they were in 2000.
Canada only has to compete with Canada. Countries don't compete with each other.
Canada abandoning manufacturing? That doesn't sound right to me.
Ontario has shed around a half million manufacturing jobs in the past decade.
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I think that one element that has to be considered is that, by turning a blind eye to offshoring, we have given up on manufacturing jobs. The economics are such that it will take a massive increase in fuel prices or Canada's standard of living will have to fall tremendously for them to come back. (Canada will have to be as to China as China is to the US.)
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I'd have to agree with you, considering all the fuss that gets made over the various manufacturing jobs in the Golden Horseshoe.
We need to research, design and manufacture [edit at least] one, count 'em one, technology better than any other nation on the planet, and that in a very macro sense we effectively trade with other nations for the technologies that we can't / don't produce domestically.
I vote for solar panel technologies. I would like Canada to be the leader in photovoltaics.
Nothing like putting all of your eggs in one basket to secure your future.
Hey if you can do more, all the better. But I'm not sure if we're a leader in anything.
But yes, should have said "at least one".
The problem with this idea is that it makes our economy extremely susceptible to fluctuations in the price and demand of this one technology, leaves us extremely vulnerable to any other nation ever figuring out a way to do it better or more cheaply, and that there aren't many technologies which have both sufficient demand and sufficient prices to bolster our economy.
As I said to 'MechaBlue', I more meant at least one, and I wouldn't say we're a leader in any particular product. If we're banking on Bombardier and RIM, we're in trouble.
Might want to edit your original comment. There is a huge difference between "one" and "at least one".
Done.
Meh, its pretty much impossible for a government to pick winners and losers that effectively. Even if a government got the general idea right, they could get everything else wrong. Solar cells may seem like a great idea, but there are soo many complications. Look at the nuclear industry. Canada made the (very reasonable) choice that nuclear power would be an important industry. CANDU's been a bit of a flop compared to BWR and PWR reactors. The same thing could well happen to solar, or any other field.
Even succesful examples of this kind of industrial planning are way more nuanced. The Japanese government fucked with Honda at every turn because it felt it would undermine Toyota.
It's really, really difficult for a government to pick winners. It's also impossible for it to recognize when its picked a looser since most govts don't like closing businesses and firing people.
Ever heard of the service sector? How about innovation and R&D? They're only the main drivers of ALL developed economies, hence the name "knowledge-based economies". Developed countries must evolve into relying more on innovation instead of labour now that globalization has made cheap foreign labour available. Happened to agriculture during the Industrial Revolution must happen to manufacturing in the Information Age. It must become smaller, more efficient, and more high grade. The government should help move unemployed blue-collar workers to new white-collar jobs because we simply can't (and shouldn't) compete with cheap foreign labour.
Ya, but a lot of 'white-collar' jobs suck. Some people like doing blue-collar work. They just wish it would pay more comparatively.
The white color jobs that suck are the equivalent to standing on the line and assembling widgets (this also sucks).
There are plenty of good white collar jobs and many companies invest into IT for the sole reason to help automate manual/tedious tasks out of the equation so that these workers can spend the majority of the time performing analytic tasks.
A lot of people liked agriculture and craftsmanship before the Industrial Revolution. Most of them got unemployed as technology improved and they had to get new jobs in factories. Now their descendants make far more money than they could ever make. The economic cycle continues....
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How is our manufacturing sector being abandoned? As far as I know we're still making cars, toys, clothes, parts for these things, nuclear reactors and not to mention several places like P&G still exist...
We have far more land, more natural resources and the United Sates directly beside us for massive, easy trade who are more than willing to buy our natural resources from us....
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Who are you talking about? Most of the big manufacturers haven't announced any plans that I've heard of to pull out of Ontario?
Post, GM, General Mills, Hala, P&G, Autosystems are all either adding jobs or building new plants.
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Your example is of one company.... meanwhile it lends to my point by stating:
"Ironically, at least 42 of the largest companies in the province are exempt from the GA.
The McGuinty government quietly gave Imperial Oil, most large mining companies, Suncor and other large consumers of electricity a break from it in 2010."
I'd say our manufacturing industry is a far-cry away from being abandoned. If it were, wouldn't we have not bothered exempting those companies? It sounds like a good contingency plan to me.
edit: clarity
I thought our weakness was our politeness.
Canada has 'abandoned' manufacturing because other countries can do it cheaper. When those other countries see an increase in their standard of living and their wages increase in step, manufacturing will become more expensive in those countries and we will see it return to Canada in some form.
Poor countries tend to produce things that only require unskilled, and therefore low-payed, labour. There is nothing wrong with this. Poor people are happy to have jobs, richer people are happy to have cheaper products to buy. Poor people are happy to sell their cheaper products to the rich people and the rich people are happy to trade their money for cheap goods.
The poor people now have money from the rich country which is, of course, only good for buying stuff in the rich country. This, people, is called TRADE and it benefits both parties.
It will be a long time before "see it return to Canada". As wages rise in China, manufacturing gets shifted to poorer countries, and will keep shifting for a while. There's still Vietnam, India, another other densely populated Asian countries, before it moves to Africa. Unless you're counting on large-scale regional instability, wage foreign wage growth won't help. Expensive oil to produce and transport goods is a possibility however.
My point is that we don't need it to return if we can't do it at a price that people want to pay. If the Vietnamese can produce the same product at a similar quality at a lower price, then why wouldn't we buy from them?
Remember that when we buy goods from another country, they are left with Canadian dollars to spend. They have to buy SOMETHING from Canada or sell our dollars to someone else. Either way, we end up selling something Canadian in return for buying something Vietnamese. Again, this is TRADE. It is a good thing.
Don't worry, our resources are infinite. Albertan oil will never cease to produce a net energy gain, so our economy will always be able to grow exponentially forever. Praise the Harper government!
There is a big difference between Canada and Britain that is overlooked, Canada has plenty of natural resources, while Britain has very little.
Canada is the country that shouldn't be moving away from manufacturing, exporting unrefined natural resources is just throwing away money.
The problem is Canadians don't really see these upgrading jobs as viable/wanted. Take for example the coking of a lot of the coal in BC. It gets shipped to Asia to be coked because our environmental regulations make its cost prohibitive to compete (its hard to compete with no regulations). If say we wanted to keep these jobs in Canada the government would have to subsidize the industry (Which would be political suicide). Also, the labour rates, standards and unions in these jobs are pretty established in Canada. How do you justify paying people +$40/hr for the same job that costs you a tenth of that in china?
In general though, natural resource/upstream jobs are seen as "old/traditional" (not really the right words) which people don't really assume have a future. Take for example engineering jobs. There are thousands of people fighting over jobs in "green energy" fields but there's pretty much no one going into mining/metallurgy (where there's tonnes of jobs).
There are very few people who've grown up in urban centres (toronto, vancouver, montreal) who are willing to move to small towns and work these jobs. These jobs and industries are (in general) looked down on in Canada and there's a sense these jobs are being filled as a last result by the people filling them. Canadians are horribly removed from these sectors (how many of you can name 3 Canadian mining companies?) and until that changes we're not going to be meeting the demands or creating more upstream processing jobs in these industries.
Not to mention it would also be economic suicide. Pay more for a job that what you get in return is quite ridiculous.
Very true. Why not mine and refine and make money in multiple ways?
Canada is also seeing manufacturing rising in the Western Provinces like Alberta and Saskatchewan due to the amount of people moving their for said raw resources.
we do though. its not like a lot of our resources can be refined anyway. wtf are we supposed to do with lumber aside ship it? coal? urianium? we already refine all our fuel here, ironically we'll need to build pipelines if we want to refine any more to ship it. its not near as simple as u claim.
Lumber: Lots of different products from construction materials to paper to furniture.
Coal: Is used in the creation of coke in a steel factory.
Uranium: Is unusuable as a raw product and needs to be refined to become fuel.
And while I didn't say anything regarding pipelines, the XL pipeline (or the pipe to the BC Coast as I assume you're referencing) is a very different pipeline compared to the ones needed to transport crude to a refinery. I merely said refining can bring extra money to Canada rather than sell the raw materials.
PS: As a fun fact, it is easier, and therefore cheaper, to transport refined oil through long distance pipelines compared to crude.
The transportation of refined oil products for fuel and engines is a tricky business because oil products have a shelf life. It much more economically sound to refine it where the market is them to refine it then ship all the way across the country, or the USA, to it's respective packaging plants or distribution points which there are literally millions of. It's a logistical nightmare. Which is why places that have no oil have their own refineries and distribution networks.
It would be nice if the country got a big chunk of the profits of it's resources.
If you believe that a government run entity could be operated more efficiently then the oil and gas companies are run now you'd be surprised.
Its likely we get far more back in tax money then we would if we tried to nationalize it.
All the big oil companies do is contract out the work anyways. They hire a smaller company to do the drilling, transportation and alot of other tasks. What's the diff if the country itself contracts the work out and keeps the major profits? Sure things won't run as smoothly at first but with time we all will see the benefits instead of a select few.
Our goverment argues that it is better for business to not manufacture here. I'm sure it is. That just shows you where their alliances are.
If your talking about oil, shipping gasoline is insanely more difficult/expensive so were not throwing any money away.
Sending it to the US and using there extensive supply lines to fuel the majority of our population sitting on the border.