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A study on NAFTA's impact in Canada: 1% and top 60 corporations vs. the rest

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  • A study on NAFTA's impact in Canada: 1% and top 60 corporations vs. the rest

    A very interesting paper along the lines of "Capital as Power" as voiced by Nitzan and Bichler.

    Key quote

    TAIL serves as an institutional mechanism that effectively restricts the policy choices available to states. Ruling elites have used these international obligations to impose policies that would not otherwise acquire domestic approval and many of the institutional mechanisms are
    ‘supraconstitutional’ in function, meaning they are so broad in scope and have such unusual judicial authority that they are capable of transforming the domestic political order from the outside-in. The ability of these agreements to shape government behaviour even though they do not fall under the constitution has led some to claim that ‘NAFTA tied the government’s hands…a clear illustration of how international agreements can be used to constitutionalize a domestic
    ideological position’ (Clarkson 2002, 51-52). The new rights capital acquired also make it extremely difficult to bring public and social services back into the public sector once they have
    been privatized, thus giving practical significance to Thatcher’s ideological acronym, TINA (there is no alternative).
    The point being made here is that 'free trade' as exemplified by NAFTA (called TAIL in Canada) is used to circumvent domestic law and domestic lawmaking.

    Some key graphs:

    wage density vs union Canada.png

    one percent and corporate profits Canada.png

    labor vs capital ratio and one percent Canada.png

    dominant capital pre and post TAIL Canada.png

    pre vs post TAIL top 60 Canada.png

  • #3
    Re: A study on NAFTA's impact in Canada: 1% and top 60 corporations vs. the rest

    Update: I previously made this post but made an error in chart utilization. The correction changes the conclusion I made quite substantially--the author of the article is even more incorrect than I had originally thought.
    Originally posted by c1ue's new article View Post
    It turns out that the popular discontent with the TAIL regime is well placed. Contrary to the
    received economic wisdom the TAIL regime has brought enhanced prosperity for the few and
    income and wage stagnation for the many. The great philosopher of science, Imre Lakatos,
    reminds us that ‘in scientific reasoning, theories are confronted with facts and one of the central
    conditions of scientific reasoning is that theories must be supported by facts’ (1978, 2). The facts
    do not appear to support existing theories of TAIL and its connection with the level and
    distribution of income. Orthodox economics is compelled, then, to generate what Lakatos calls
    ‘rescue hypotheses’, namely an account of the failed prediction and rationale for why it should be
    thought of as an ‘anomaly’. But we don’t need to generate rescue hypotheses, much as science
    does not need ‘sacred tenets’, once we step into a new theoretical framework. Thinking of capital
    accumulation as a broad power process enables us to simultaneously explain the assimilation
    and deepening subordination of the state to capital via NAFTA and the dramatic distributional
    gains made by the highest income echelons. After 100 years of protectionism and economic
    nationalism Canada’s ruling elites, at the behest of dominant capital, inaugurated a TAIL regime.
    Twenty years into this regime has given us the perspective we need to evaluate this politicaleconomic transformation. Much as we may dislike having to agree with that great Florentine
    political thinker, he thought deeply about power and perhaps had it right when he said:
    …men are inclined to think that they cannot hold securely what they possess unless they get
    more at others’ expense. Furthermore, those who have great possessions can bring about
    changes with greater effect and greater speed (Machiavelli 1517, 118).
    This article makes conclusions that it does not back up with facts. Hell, it utilizes metrics like "Top Percentile Income Share" [sic] and "Wage Share of National Income" [sic] so it is a very nuanced and almost meaningless report on its face. You cannot use such metrics to make the conclusion that there is "income and wage stagnation for many," which the author has. These metrics aren't normalized to the only factor that matters when making such a claim--the income and wages of the many that are being referred to!

    Shrinking Pieces of a Growing Pie Means What?
    Take the life of a standard laborer and locate the income and wage stagnation--it will be predominantly where expected, in career lulls or national recessions.

    Take, for example, just the first graph that c1ue posted, and only the "Wage Share of National Income" [sic] portion of it. From the period of about 1994, which is five years after TAIL passage, to about 2001, for a total of about seven years, did the "Wage Share of National Income" [sic] fall noticeably. That is what you could call the "most devastating" effect of TAIL on "Wage Share of National Income" [sic]. The [terribly] chosen metric that the prospective Doctor chose dropped from about 54.5% to about 51.5%, in theory losing about 6.5% of its value. However, according to what I gather from the Trading Economics website I will link below, Canada grew by about 8.8% during the same time period. The effective (and ugly averaged) change is about 2.3% over the period of seven years. A period of 2.3% growth over seven years is moderately low, but in truth the worst effects were felt in the second through fifth years of that period, while the first year was actually a modest gain and the two tail years were slightly more modest gains.

    The rest of the time of the TAIL era--forget about it. Labor wages suffered no other times of stagnation except at the last year measured, in which the Canadian economy was in a recession. So of the "more than two decades" of TAIL that Mr. (or Ms.?) Brennan analyzed, only six to eight years meet the claim of "income and wage stagnation for many" and one of those was due entirely to a recession. Apparently statistics take upon themselves their own lives, and will catch unwary Doctoral Candidates with their pants down when they don't take into account that decreasing "shares" of a growing pie does not imply growth, stagnation or decay. A downward sloping or flat line on a chart doesn't mean decay or stagnation if the flat line is "normalized" to a moving target that is almost always increasing. I, for one, am surprised that c1ue didn't catch this. Oops.

    The Real Conclusion
    It would appear that Jordan Brennan suffers from being a PhD Candidate at the Department of Political Science, York University in Toronto. Permanent head Damage is a serious condition, and I think Jordan would be well served to lay off the socialist- and nationalist-colored lenses when viewing economic policy.
    Last edited by Ghent12; 01-03-13, 11:41 PM.


    • #4
      Re: A study on NAFTA's impact in Canada: 1% and top 60 corporations vs. the rest

      Let's look at Ghent12's latest effort to defend the multi-national corporation.

      Assertion 1: The use of Top Percentile of Income Share and Wage Share of National Income is worthless.

      Certainly I can agree that there are circumstances where this is meaningless, but frankly your failure to use any actual numbers means that your complaint is suffering from the same problem.

      Let's see some actual numbers: What is the inflation adjusted income growth in Canada in the past 30 years?

      Well, the direct numbers aren't easily available to me. But there are all sorts of indicators elsewhere:

      lower half wage growth world.png

      According to this - Canada lags even the US in lower half wage growth for 25 years.

      Sure, Canada has grown - no one disputes that. However, when the economy grows x%, but wages grow x/y%, clearly something funny is going on.

      Thus to the root of your comment: lives are better in Canada. Agree.

      But the article didn't say that lives were worse. It said that the post NAFTA growth in the economy has been mostly expropriated by the multinational corporations rather than 'trickling down' to the majority of the population of Canada.