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Election year or not, 2024 promises winds of change: Jack Mintz

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From the MacDonald Laurier Institute

By Jack Mintz

Governments are going to have to address sluggish productivity growth. Either that or get turfed at the polls

Last week, I summed up 2023 as a year of poor economic performance, with high interest rates, declining real per capita GDP and shortages of housing and health care. Should we expect more of the same from 2024 or something better and brighter?

Although high interest rates have made headway in controlling inflation, they come at a cost. BMO predicts Canada’s GDP growth will fall to 0.5 per cent (from just one per cent this year) even with continuing high immigration levels. Per capita GDP will thus likely take a hit again, falling by at least two per cent, and the unemployment rate could edge up by a point to 6.4 per cent. That means the “misery index” — the sum of the inflation and unemployment rates — will remain virtually unchanged (9.2 per cent in 2024 vs. 9.3 per cent in 2023).
With the Bank of Canada, like other central banks, focused on its inflation target, the crucial question becomes whether federal and provincial policies switch over to combating weak economic growth and productivity.

In the short term, the Trudeau government seems fixated on new redistributive programs such as denticare and pharmacare, rather than addressing the alarming decline in per capita GDP. Quite the contrary, its primary “growth” policy is to pursue a fast-paced energy transition regardless of the immediate GDP loss. Few plans are in place to improve private investment in innovation and investment, not unless you count extraordinarily reckless auto subsidies. And in Ottawa regulations grow like weeds, slowing the pace of development.

The federal government and most provinces, especially B.C. and Ontario, are facing a surge in deficits without any real plan to improve their own productivity. Working with various governments, I am struck by how far behind the times public-sector technology often is. At a recent meeting in Ottawa, I saw some highly skilled civil servants wrestle with old printers trying to print out materials for review. A friend relates how because of lack of digitization it took a surprisingly long time just to get a list of past property tax payments from the city of Toronto. Few hospitals seem to be spending on new technologies that can process patients more quickly in emergency wards. With such poor technology, governments instead simply add more workers to their bloated bureaucracies.

Maybe 2024 will be the year in which governments finally focus on growth. If they don’t, they may find themselves turfed out at election time. Around the world, 2024 is the year of the election, with the most national elections ever: in 40 countries covering 42 per cent of global GDP. The major ones are in Bangladesh, Belgium, India, Indonesia, Mexico, South Africa, Taiwan, the European Parliament and, of course, the United States. Even some authoritarian governments face their electorates this year, for instance, Iran, Russia and Venezuela.

Many of the genuine elections could have a big impact on geopolitics and the world economy. Paul Singer, founder of Elliott Investment Management, argues that “The world is now completely dependent on the good sense of leaders to avoid an Armageddon.” Stock markets should be priced to reflect this political risk. Political developments could erode global trade and co-operation and aggravate hostilities in Eastern Europe, East Asia and the Middle East.

For Canada, the critical election takes place in the United States. But whoever wins the presidency in November (or later!), we’re likely to be hit by increasing U.S. protectionism. And if U.S. per capita GDP continues to rise faster than ours, as it did over the last decade, we will either find a new economic path or watch skilled workers and business investment literally go south on us.

We aren’t due for an election until 2025 but rumours abound that the Jekyll-and-Hyde NDP will finally act out its criticisms of Liberal policy and pull the plug this year. The Liberals won’t trigger an election if they continue to trail the Conservatives by 10 points or more. But the NDP may figure it can pick up seats, especially in Ontario.

With the winds of change blowing, Canada may see federal and provincial governments try a different approach to economic policy, one focused on economic growth rather than just redistribution. Both levels of government need to address our falling per capita GDP. If they do, Canadians will have something to cheer about by the end of 2024.

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Cannabis Legalization Is Starting to Look Like a Really Dumb Idea

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The Audit David Clinton's avatar David Clinton

Back in March 2024, I wrote about some early indications that Canada’s legalization of cannabis was, on balance, causing more harm than good. Well it looks like we’ve now moved past “early indications” and entered the “nervously searching for the exit” stage.

The new concerns follow the recent release of a couple of groundbreaking Canadian studiesCannabis Use Disorder Emergency Department Visits and Hospitalizations and 5-Year Mortality which found evidence relating cannabis use to early death, and Convergence of Cannabis and Psychosis on the Dopamine System which describes a possible biological mechanism linking cannabis use to psychosis.

Canadian governments had very little moral liability for the medical consequences of cannabis use before they legalized it in 2018. However, legalization predictably led to a near doubling of consumption. In 2012, according to Statistics Canada, just 12.2 percent of Canadians 15 and over had used cannabis in the previous 12 months. By 2022, that number had climbed to 22 percent – representing nearly seven million Canadians. Cases of cannabis use disorder (CUD) treated in Ontario hospitals increased from just 456 in 2006 to 3,263 in 2021.

The government’s decision to legalize the drug¹ has arguably placed millions of additional people at risk of serious health outcomes.

Let’s take a look at the new evidence. The mortality study used hospital care and mortality data for more than eleven million Ontario residents. The researchers were given meaningful access to raw data from multiple government sources and were apparently compliant with all appropriate privacy regulations. They tracked 107,103 individuals who, between 2006 and 2021, were treated in an Ontario hospital for cannabis use disorder.

The main control group used for statistical comparison was all Ontarians. And the secondary control group was made up of individuals with incident hospital-based care for other substance use disorders, like alcohol, opioids, stimulants.

The primary outcome tracked by the study was all-cause mortality. The secondary outcome was mortality subdivided into alcohol poisoning, opioid poisoning, poisoning by other drugs, trauma, intentional self-harm, cancer, infection, diseases of the circulatory system, respiratory system, and gastrointestinal system.

The researchers adjusted for age, sex, neighborhood income quintile, immigrant status, and rurality (urban vs rural residence). They also controlled for comorbid mental health and care for substance use during the previous 3 years.

In other words, this looks like a well-constructed retrospective study based on excellent data resources.

What did they discover? People who received hospital-based care for cannabis use disorder were six times more likely to die early than the general population. And those CUD-related deaths lead to an average 1.8 life-years lost. After adjusting for demographic factors and other conditions, the added risk of early death was still three times greater than the general population. (Although people with CUD incidents were less likely to die young than those with other substance abuse disorders.)

CUD incidents were associated with increased risks for suicide (9.7 times higher), trauma (4.6 times higher), opioid poisoning (5.3 times higher), and cardiovascular and respiratory diseases (2 times higher).

The Convergence of Cannabis and Psychosis study was performed in and around London, Ontario. This one is a bit beyond my technical range, but they claim that:

Elevated dopamine function in a critical SN/VTA subregion may be associated with psychosis risk in people with CUD. Cannabis was associated with the hypothesized final common pathway for the clinical expression of psychotic symptoms.

Which does indicate that there may be more connecting cannabis to overall harm than just social or economic influences.

I’m not suggesting that the government should restore the original ban on cannabis. Like alcohol prohibition, the moment when that might have been possible is now long past. But I am wondering why politicians find it so difficult to wait for even minimal scientific evidence before driving the country over the cliff?

 

1 This should not be confused with the separate question of decriminalization – which has probably provided significant net value to society.
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‘Experts’ Warned Free Markets Would Ruin Argentina — Looks Like They Were Dead Wrong

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From the Daily Caller News Foundation

By Melissa O’Rourke

The current state of Argentina’s economy is a far cry from what “experts” predicted when they warned that President Javier Milei’s pro-free market leadership would devastate the country.

The chainsaw-wielding libertarian rose to power on promises to slash government spending, implement free-market policies and lift strict currency controls to rescue a nation crippled by inflation, debt and entrenched poverty. Though the pundit class warned that Milei’s policies would spark an economic collapse, the results so far have been a rebuke to those warnings.

Just days before the November 2023 presidential election, 108 economists from around the world signed an open letter claiming that Milei’s “simple solutions” were “likely to cause more devastation in the real world in the short run, while severely reducing policy space in the long run.”

“His policies are poorly thought through. Far from building a consensus, he would struggle to govern,” The Economist’s editorial board wrote in a September 2023 piece describing “Javier Milei’s dangerous allure.”

Well over a year into Milei’s presidency, Argentina is showing its strongest economic performance in years. The country’s gross domestic product (GDP) jumped 7.7% in April compared to the same month in 2024, far exceeding expectations.

The GDP is expected to rise by 5.2% in 2025, compared to declines of 1.3% in 2024 and 1.9% in 2023, according to the Organization for Economic Cooperation and Development (OECD).

Inflation, a long-standing hallmark of Argentina’s economic dysfunction, dropped to 1.5% between April and May, reaching a five-year low. Annual inflation has plunged from 160.9% in November 2023 — just before Milei took office — to 43.5% in May.

Meanwhile, poverty rates have also declined sharply, falling from 52.9% in the first half of 2024 to 38.1% in the second half of the year.

Argentina’s rental housing supply also increased by 212% between December 2023 and June 2024, after Milei repealed the country’s rent control laws, according to the Cato Institute.

“Against the background of a difficult legacy of macroeconomic imbalances, Argentina has embarked on an ambitious reform process, starting with an unprecedented upfront fiscal adjustment. Reforms have started to pay off. Inflation has receded and the economy is set for a strong recovery,” the OECD noted in its new analysis of the Argentinian economy. “Maintaining the reform momentum will be key to restore confidence, boost investment and productivity growth.”

Milei — a self-described anarcho-capitalist — has been an ardent supporter of President Donald Trump’s efforts to downsize the U.S. government, including the Department of Government Efficiency’s (DOGE) push to cut spending.

“I come from a country that bought all of those stupid ideas that went from being one of the most affluent countries in the world to one to one of the [poorest],” Milei said in a speech at the Conservative Political Action Conference in 2024. “If you don’t fight for your freedom, they will drag you into misery … Don’t surrender.”

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