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The Expendables

The Expendables

How the Middle Class Got Screwed By Globalization
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You could see the pandemic coming. It wasn’t as though there was no warning. It started in China, but it hit North America before we were ready, and it landed with the destructive force of a tsunami. Record-setting consumer spending hit a brick wall as shoppers stayed home. New car sales went over a cliff. Just like clockwork, unemployment went through the roof, as shops and factories shut down. An unprecedented bull run on the stock market quickly turned into panic-selling, and the Dow cratered, seemingly overnight. The S&P dropped 20.7 percent, and the result was a global recession that seemed to come out of nowhere. More than 116,000 people died in the United States.

In other news, Elvis Presley appeared on the Ed Sullivan Show that year, the Frisbee was invented, Ford introduced the Edsel with great fanfare, Canada unveiled the Avro Arrow jet fighter, the USSR launched Sputnik, and Dwight Eisenhower was sworn in as president of the United States. It was 1957.

By the way, the world recovered almost immediately from the Asian Flu, as that pandemic was known. After a staggering 10 percent decline in GDP in the first quarter of 1958, by the third quarter growth had spiked to 10 percent—a 20 percent swing. So, no big deal, right? The economy got the flu, it took some time off, and it went right back to churning out jobs and profits. In fact, when economists and historians talk about the “Eisenhower Recession,” they seldom even mention the Asian Flu as a cause.

It would seem to follow that we have a model to predict what the recovery from COVID-19 will look like. Just look at 1958, and wait for the jobs and the markets to return to form, and the good times to resume—not quite the catastrophe we feared.

But if you’re thinking that what was true in 1958 is true today, this book is for you. Because while consumer spending, consistent GDP growth and a record-breaking bull run on the stock market may make it feel as though we’ve wandered into the Eisenhower (or Diefenbaker  if you live in Canada) era, that is a dangerous illusion, especially if you are a member of the rapidly shrinking middle class. Because consumer spending, GDP growth, and stocks have almost nothing to do with your economic health.

In fact, as you will see, those things actually measure only rich people’s economic health. And of late they haven’t been getting rich by making more Edsels or engineering more Arrows. Those cars and planes belong to a different world, when factory jobs paid a middle-class wage, when the products on the shelves came from factories down the road. When local labour was so essential to produce things that jobs were secure. And when taxes were so progressive that the rich actually paid their freight. That was a long time ago.

Looking backward in politics is usually considered poor form. It’s much safer to be considered progressive. But the fact is that the late 1950s and early 1960s may have marked the greatest economic equality in history. And that economic health was like immunological health. The economy got better quickly because it was already healthy.

But two other things happened in 1957 that give us some sense of why the recovery from the COVID-19 recession might be a lot harder than shaking off the Asian Flu.

First, the Treaty of Rome was signed in March of that year, establishing the precursor of the European Union (the European Economic Community). Though the tight political and economic integration of a “United States of Europe” was still just a dream in 1957, the Treaty of Rome was an important step in creating a common market. Up to that point, each country had the ability to impose tariffs to protect key industries and the associated jobs. From that moment on, France, West Germany, Belgium, the Netherlands and Luxembourg would give up that ability in exchange for the right to sell in each others’ markets without facing tariffs. The hope behind lifting tariffs was that in a world of economic expansion, workers and industries wouldn’t need protection. There would be so much wealth to go around, that everyone would be better off.

In other words, it was a form of free trade and a precursor of what was to follow. Free trade was an idea that was sweeping the world. As we will see, the General Agreement on Tariffs and Trade (GATT), a treaty designed to increase international trade by removing protections for industry and labour, was signed into law in 1947, and went through several rounds of updates, each slashing more tariffs. In 1956, the so-called Geneva Round (because it was negotiated in Geneva), eliminated $2.5 billion of protections between 26 countries. So, globalization was swirling in the air as the Asian Flu was making its way across the Pacific.

The other thing that happened in 1957 was another near miss. In 1986, it was revealed that a United States Air Force B-36 bomber had accidentally dropped a hydrogen bomb on New Mexico in May of 1957. In fact, it was the most powerful nuclear bomb ever built. At 10 megatons, it was bigger than anything in today’s nuclear arsenal, and about 625 times more powerful than the bomb that was dropped on Hiroshima. Though the 42,000-pound bomb did not detonate, it left a crater 12 feet deep and 25 feet wide. If it had gone off, it would have vaporized the air base where the bomber was scheduled to land.

An investigation revealed that a safety mechanism had been removed.

You would think the Air Force would be a little more careful with warheads by 1957. They had already jettisoned one bomb off the coast of British Columbia, and another in the St. Lawrence, in addition to crashes of nuclear bombers in the Atlantic and in the mountains of New Mexico. Another two nuclear bombs fell out of the sky in 1961 over North Carolina. Removing protections when so much is at stake, even to increase efficiency, can be more than dangerous. It can be apocalyptic.

None of those bombs detonated, but the slow fuse of GATT and globalization has left an industrial landscape every bit as cratered as the destruction left by a nuclear warhead. If a worker from 1957 could see Detroit today, what would he think? The shuttered factories across North America, the boarded-up main streets, the empty union halls—the physical toll of globalization would be inescapable.

Which brings us back to the flu.

Early on in the COVID crisis, the scale of the required government response was often compared to the Second World War. It was time for our ingenuity and industrial might to be put to good use and mobilized, much in  the way it was a couple of generations ago. The United States built over 2,700 Liberty-class freighters between 1941 and 1945. That’s two 14,000-tonne ships every three days. (Or over 39 million tonnes of ship.) Surely, the world’s biggest economy could make some N95 masks.

Well, not really. On March 19, Taiwan announced that it could spare 100,000 masks per week for the United States (their sole military ally, which has been protecting them from Communist China for generations at immense cost). That’s out of a weekly output of 7,000,000 masks. So the Taiwanese were willing to set aside 0.14 percent of their mask capacity for their much larger ally.

The EU also adopted a policy of “every man for himself.” In March, Brussels banned the export of medical equipment even to other European countries. Exasperated Serbian president Aleksandar Vucic stood in front of television cameras and said “European solidarity doesn’t exist. That was a fairy tale on paper.” Shortly thereafter, Serbia shut its borders. The only foreigners allowed to enter the country? Chinese doctors. Vucic called China “the only ones who can help.”

He did have a point (though Russia also sent several transport planes full of equipment and medical personnel). Before the crisis broke, half of the world’s masks were made in China. Since then, the country increased production 12-fold. By the end of March, factories in China were pumping out 115 million a day (which puts the Taiwanese gift in perspective). But there is more to the story than Chinese manufacturing output.

Because many of those Chinese factories are making masks for international companies. On paper, Canadian company Medicom was making 3 million masks a day at its Shanghai factory. But rather than being shipped to Canada, they were all claimed by the Chinese government. American chemical giant 3M also has mask plants in Shanghai, but according to American trade officials, the factories had effectively been “nationalized.” They may have been under contract to the American company, but when push came to shove, the Chinese government had priority. According to Canadian entrepreneurs on the ground in China, government officials had been posted to factories producing medical equipment like ventilators and protective suits to police where they are being shipped.

In other words, our companies still make things. It’s just that the factories are somewhere else. And the jobs are somewhere else. And, when we need them, the masks are somewhere else too. 

While the Chinese government is controlling the world supply of crucial commodities, Canadian diplomats are reduced to sending out messages on social media, hoping that Chinese alumnae of Canadian universities will be willing to help find a few boxes of gloves and masks. Hardly the commanding heights of the global economy that globalism promised.

What the COVID crisis has shown us is that questions of economic theory aren’t just about economic health. They’re about health. Period. Because it’s not just masks and protective gowns the Chinese government effectively control. For years, lax regulatory control and low wages have made China a major source for the majority of component chemicals that go into generic drugs—that is, nearly all of the drugs Canadians and Americans are prescribed.

The same goes for antibiotics. In the 1980s, the United States had far-ranging emergency-response readiness, including antibiotic manufacturing capacity spread across the continent. The US produced 70 percent of the world’s supply. Now it is dependent on imports from China. North Americans face the same dependency for a wide variety of health-related products, from Vitamin C to chemotherapy drugs.

In a world described by globalization, that’s not supposed to matter. The magic of just-in-time-delivery, combined with efficient labour markets and economies of scale, are supposed to provide us with whatever we need, in abundance and at the best prices. But as it turns out, that may work for flip-flops and lawn furniture, or whatever globally sourced product you buy at Walmart, but it doesn’t work in an emergency. It doesn’t work when you absolutely need it to work.

It didn’t take a bat meeting a pangolin in Wuhan to teach us this lesson. The evidence has been piling up around us for years. But tragedy has a way of focusing one’s attention. Global deregulation was always a bad idea. It was always set up to benefit a small number of people, at immense cost to everyone else. Exactly what that cost is becomes clear when we compare today’s economy with 1957’s.

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Empty Planet

Empty Planet

The Shock of Global Population Decline
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It was a girl.

On Sunday, October 30, 2011, just before midnight, Danica May Camacho entered the world in a crowded Manila hospital, bringing the human population of our planet to seven billion. Actually, the scales could have tipped a few hours later, in a village in Uttar Pradesh, India, with the arrival of Nargis Kumar. Or it might have been a boy, Pyotr Nikolayeva, born in Kaliningrad, Russia.

Of course, it was none of them. The birth that took us to seven billion people was attended by no cameras and ceremonial speeches because we can never know where or when the event occurred. We can only know that, according to the United Nations’ best estimates, we reached seven billion sometime around October 31 of that year. Different countries designated certain births to symbolize this landmark in history, and Danica, Nargis, and Pyotr were among those chosen.

For many, there was no reason to celebrate. Indian health minister Ghulam Nabi Azad declared that a global population of seven billion was “not a matter of great joy, but a great worry. . . . For us a matter of joy will be when the population stabilizes.” Many share Azad’s gloom. They warn of a global population crisis. Homo sapiens is reproducing unchecked, straining our ability to feed, house, and clothe the 130 million or more new babies that UNICEF estimates arrive each year. As humans crowd the planet, forests disappear, species become extinct, the atmosphere warms.

Unless humankind defuses this population bomb, these prophets proclaim, we face a future of increasing poverty, food shortages, conflict, and environmental degradation. As one modern Malthus put it, “Barring a dramatic decline in population growth, a rapid decrease in greenhouse gas emissions, or a global outbreak of vegetarianism—all of which are trending in the opposite direction at the moment—we’re facing nothing less than the end of plenty for the majority of the earth’s people.”

All of this is completely, utterly wrong.

The great defining event of the twenty-first century—one of the great defining events in human history—will occur in three decades, give or take, when the global population starts to decline. Once that decline begins, it will never end. We do not face the challenge of a population bomb but of a population bust—a relentless, generation-after-generation culling of the human herd. Nothing like this has ever happened before.

If you find this news shocking, that’s not surprising. The United Nations forecasts that our population will grow from seven billion to eleven billion in this century before leveling off after 2100. But an increasing number of demographers around the world believe the UN estimates are far too high. More likely, they say, the planet’s population will peak at around nine billion sometime between 2040 and 2060, and then start to decline, perhaps prompting the UN to designate a symbolic death to mark the occasion. By the end of this century, we could be back to where we are right now, and steadily growing fewer.

Populations are already declining in about two dozen states around the world; by 2050 the number will have climbed to three dozen. Some of the richest places on earth are shedding people every year: Japan, Korea, Spain, Italy, much of Eastern Europe. “We are a dying country,” Italy’s health minister, Beatrice Lorenzin, lamented in 2015.

But this isn’t the big news. The big news is that the largest developing nations are also about to grow smaller, as their own fertility rates come down. China will begin losing people in a few years. By the middle of this century, Brazil and Indonesia will follow suit. Even India, soon to become the most populous nation on earth, will see its numbers stabilize in about a generation and then start to decline. Fertility rates remain sky-high in sub-Saharan Africa and parts of the Middle East. Even here, though, things are changing as young women obtain access to education and birth control. Africa is likely to end its unchecked baby boom much sooner than the UN’s demographers think.

Some of the indications of an accelerating decline in fertility can be found in scholarly research and government reports; others can only be found by talking to people on the street. And so we did. To gather research for this book, we traveled to cities on six continents: to Brussels and Seoul, Nairobi and São Paulo, Mumbai and Beijing, Palm Springs and Canberra and Vienna. There were other stops as well. We talked to academics and public officials, but more important, we talked to young people: on university campuses and at research institutes and in favelas and slums. We wanted to know what they were thinking about the most important decision they will ever make: whether and when to have a baby.

Population decline isn’t a good thing or a bad thing. But it is a big thing. A child born today will reach middle age in a world in which conditions and expectations are very different from our own. She will find the planet more urban, with less crime, environmentally healthier but with many more old people. She won’t have trouble finding a job, but she may struggle to make ends meet, as taxes to pay for healthcare and pensions for all those seniors eat into her salary. There won’t be as many schools, because there won’t be as many children.

But we won’t have to wait thirty or forty years to feel the impact of population decline. We’re feeling it today, in developed nations from Japan to Bulgaria that struggle to grow their economies even as the cohort of young workers and consumers diminishes, making it harder to provide social services or sell refrigerators. We see it in urbanizing Latin America and even Africa, where women are increasingly taking charge of their own destinies. We see it in every household where the children take longer to move out because they’re in no rush to settle down and haven’t the slightest intention of having a baby before they’re thirty. And we’re seeing it, tragically, in roiling Mediterranean seas, where refugees from wretched places press against the borders of a Europe that is already starting to empty out.

We may see it, very soon, influencing the global contest for power. Population decline will shape the nature of war and peace in the decades ahead, as some nations grapple with the fallout of their shrinking, aging societies while others remain able to sustain themselves. The defining geopolitical challenge in the coming decades could involve accommodating and containing an angry, frightened China as it confronts the consequences of its disastrous one-child policy.

Some of those who fear the fallout of a diminishing population advocate government policies to increase the number of children couples have. But the evidence suggests this is futile. The “low-fertility trap” ensures that, once having one of two children becomes the norm, it stays the norm. Couples no longer see having children as a duty they must perform to satisfy their obligation to their families or their god. Rather, they choose to raise a child as an act of personal fulfillment. And they are quickly fulfilled.

One solution to the challenge of a declining population is to import replacements. That’s why two Canadians wrote this book. For decades now, Canada has brought in more people, on a per capita basis, than any other major developed nation, with little of the ethnic tensions, ghettos, and fierce debate that other countries face. That’s because the country views immigration as an economic policy—under the merit-based points system, immigrants to Canada are typically better educated, on average, than the native-born—and because it embraces multiculturalism: the shared right to celebrate your native culture within the Canadian mosaic, which has produced a peaceful, prosperous, polyglot society, among the most fortunate on earth.

Not every country is able to accept waves of newcomers with Canada’s aplomb. Many Koreans, Swedes, and Chileans have a very strong sense of what it means to be Korean, Swedish, or Chilean. France insists its immigrants embrace the idea of being French, even as many of the old stock deny such a thing is possible, leaving immigrant communities isolated in their banlieues, separate and not equal. The population of the United Kingdom is projected to continue growing, to about 82 million at the end of the century, from 66 million today, but only if the British continue to welcome robust levels of immigration. As the Brexit referendum revealed, many Brits want to turn the English Channel into a moat. To combat depopulation, nations must embrace both immigration and multiculturalism. The first is hard. The second, for some, may prove impossible.

Among great powers, the coming population decline uniquely advantages the United States. For centuries, America has welcomed new arrivals, first from across the Atlantic, then the Pacific as well, and today from across the Rio Grande. Millions have happily plunged into the melting pot—America’s version of multiculturalism—enriching both its economy and culture. Immigration made the twentieth century the American century, and continued immigration will define the twenty-first as American as well.

Unless. The suspicious, nativist, America First groundswell of recent years threatens to choke off the immigration tap that made America great by walling up the border between the United States and everywhere else. Under President Donald Trump, the federal government not only cracked down on illegal immigrants, it reduced legal admissions for skilled workers, a suicidal policy for the U.S. economy. If this change is permanent, if Americans out of senseless fear reject their immigrant tradition, turning their backs on the world, then the United States too will decline, in numbers and power and influence and wealth. This is the choice that every American must make: to support an open, inclusive, welcoming society, or to shut the door and wither in isolation.

The human herd has been culled in the past by famine or plague. This time, we are culling ourselves; we are choosing to become fewer. Will our choice be permanent? The answer is: probably yes. Though governments have sometimes been able to increase the number of children couples are willing to have through generous child care payments and other supports, they have never managed to bring fertility back up to the replacement level of, on average, 2.1 children per woman needed to sustain a population. Besides, such programs are extremely expensive and tend to be cut back during economic downturns. And it is arguably unethical for a government to try to convince a couple to have a child that they would otherwise not have had.

As we settle into a world growing smaller, will we celebrate or mourn our diminishing numbers? Will we struggle to preserve growth, or accept with grace a world in which people both thrive and strive less? We don’t know. But it may be a poet who observes that, for the first time in the history of our race, humanity feels old.

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