Economics textbooks generally begin with a simple model in which prices of goods and services are determined by supply and demand in competitive markets and firms are “price-takers.” Yet it is much closer to reality to view the world we live in as one in which a handful of very large companies dominate most markets and have the power to administer prices so as to earn well above average profits or “rents.”
While Canadians are understandably focused on what the election of President Trump means for our bilateral trading relationship and the future of NAFTA, a much bigger issue for the global economy is the pending clash between the United States and China.
The major challenge for the federal government in the budget was to maintain its commitment to progressive social and economic policies in the face of criticism from the right for its supposedly profligate fiscal policies and unwise promises to make the tax system more progressive. The government was also urged to trim its sails in the face of pending tax cuts in the United States.
Donald Trump’s ascension to the US presidency is being hailed by some as the end of globalization as we have come to know it in the last four decades. Others see in Trump’s electoral victory the end of neoliberal economic policy, which promoted free trade and free markets, and limited the scope of government. But German sociologist Wolfgang Streeck discerns in the demise both of globalization and neoliberalism the end of capitalism itself, at least the variety of capitalism that exists in North America and Western Europe.
Special tax treatment of dividend income costs a lot in terms of foregone government revenues, mainly benefits the very affluent, and thus merits serious re-consideration as part of the federal government's current review of tax expenditures.
The election of President Trump and the potential imposition of border taxes and other protectionist measures is clearly of great concern to Canadian exporters, the workers they employ and the communities they support. This underlines just how much NAFTA and the wider liberalization of trade with rising economic powers such as China have shaped our economy and made us highly vulnerable to forces outside our control.
It is no secret that big, global cities like London and New York are highly unequal and display harsh extremes of wealth and poverty. This is increasingly true of Canada's largest cities, as shown by recently released Statistics Canada data on the geographical distribution of high income earners.
Economists and pundits are at odds over medium term prospects for the global economy. Pessimists see stagnant growth, rising inequality and growing unemployment and underemployment, widely held to be responsible for the rise of right-wing populists such as US President elect Donald Trump.
Meanwhile, techno optimists such as Erik Bryjolfsson and Andrew McAfee, the authors of The Second Machine Age, argue that the digital economy will drive rapid productivity growth and underpin the gradual emergence of a post scarcity economy capable of providing prosperity for all.