:LPE:

Here is the latest report from Stats Can on major sector breakdown of growth. Combined, they show zero growth in October, following a contraction in September. Note that the major drivers of growth are financial services and extraction, particularly natural gas and oil. Oil is driven by the spike in commodity prices, the $64k question being, have they peaked?

Month to month statistics cannot show trends - it is faulty to attempt to draw conclusions from them, and at times they get revised due to caculation errors.

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Originally uploaded by Simon Archer.

from Sunday’s sing-along Messiah at Massey Hall. You’re looking at the bass and part of the soprano section.

A relatively recent stat from Stats Can, the net flow of investment Canada vs R.o.W. It continues the trend seen earlier in this space, the trend toward net exporter of capital, as Canadians buy more securities abroad and those abroad buy fewer securities here. Some would connect this trend to R&D spending in Canada, but query the strength of that connection.

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Originally uploaded by Simon Archer.

Yes, an attempt at special fx with a phonecamera. Milly hamming it up at Aunties and Uncles one day this fall.

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Originally uploaded by Simon Archer.

It’s true this blog is about the most boring blog you could hope to find. Tax policy and securities regulation are pretty low on most people’s social radar. I feel like I have to apologize for this space.

Instead, I’ll try to put up more pictures. Better use of words. This one is Old City Hall lit up by some coloured light-show thing, the name of which I forget. The arcs are from the skating rink in front of New City Hall, a.k.a., the Clamshell. Old City Hall is now a courthouse.

From one of the listerserve convos, a statistic that Doug Henwood trotted out recently, so I believe it but can’t do any more to provide accurate citation. Household debt as a percentage of income, average family, in the US. I don’t think this statistics is debt as a percentage of *wealth*, but of income, year over year. Unrealized capital gains would not be included, which means house values. But interesting trend nonetheless.

1945 19.5%
1950 34.8%
1960 56.0%
1970 63.1%
1980 69.3%
1990 84.3%
2000 103.3%
2006 135.5%

On the seasonal and Dickensian theme of wealth and poverty, note the new development in corporate journalism south of the border, a series of new lifestyle magazines targeted at the very, very rich. A new phenomenon, we’ll see what happens to it.

I took a look at the first issue of The American (surely, a little Everymanish for the superich), and the lead article gives you a lovely flavour for what is coming: Link. Thomas Frank is going to cream his pants.

Yes, it is entitled “Why Do We Underpay Our Best CEOs?” This title is not intended to be ironic, or some seasonal hoax. In a time of unbridled greed and fecklessness at the highest echelons of the corporate hierarchy, it asks for more and it doesn’t even say please.

It makes the argument that the best CEOs are typcially those who do corporate finance really really well, and they could easly get jobs with hedge funds or private equity houses and earn even more money, so, therefore, they need to be paid more in their present jobs before they do something “less socially useful”. It also makes the tired and entirely faulty comparison to pro sports atheletes and media stars, who may make more than CEOs. On that last analogy, it is more or less the same as a factory foreman saying that he should make as much as a hockey star - yet no-one seems to take that claim seriously, because the foreman doesn’t play hockey.

As to the former, well, then, maybe there is a functioning market for CEOs, contrary to accumulated evidence of the 1980s and 1990s, when the question was studied again and again.

But as the article acknowledges, we are pretty syre there is no correlation between CEO pay and firm performance. To my mind, this sinks the entire proposal for higher pay. We have no idea whether CEO skills are related to positive outcomes for the corporation, and they may well not be. We have no idea whether CEO skills are related to *share price* outcomes, let alone general corporate performance. So, really, this article says one thing, and yet contains the exact point, established by empirical testing, that shoots down the whole argument. It is as if the author was unconscious.

And you can see where this leads. This is why so many ‘underperforming’ CEOs don’t get fired or don’t seem to take wage reductions. The better question is, Why Do We Continue To Pay Underperforming CEOs? or even better, What Do CEOs Do That Warrants Pay 300 Times The Average Guy? Do They Work 300 Times as Hard?

So, in the end, the article makes the rather wierd argument that because CEOs who have good finace skills can go and make bets with hedge funds, and potentially make a lot of dough doing this, they ought to be paid more as CEOs (or else they will do something “less socially useful” - the irony!) Ummm, no, because we have no idea whether those skills actually translate into positive outcomes for corporations. I mean, it is just stupid, this ‘market’ argument for higher pay. If they can make more dough speculating with rich investors’ money, go for it!

As a result, they argue, we ought to pay them more to stay. I don’t see it. That doesn’t mean (a) they have the appropriate skills to manage a corporation, although the article asserts that this is the case (in fact, it may be what is *wrong* with management culture in the US) and (b) that it will imrpove outcomes for corporate America, because we know pay is not related to firm performance.

But this magazine is not really about the academic exercise, it is about culture, lifestyle, “ideas” and really, ideology of the elite corporate class. We have to take a Veblenesque view of this stuff: what does it say about the people who read it (other than they don’t mind self-serving junk science)? How do they see themselves? What do they aspire to, how do they see social relations? All very interesting, someone should be doing an ethnography.

Here is the history of the Gini co-efficient in Canada, where 0.0 means all families share equal amount of wealth and 1.0 means one family has 100% of the wealth.

Looks like plutocracy is back indeed.

Stats Can today released a second report on wealth distribution: Link.

Some highlights:

+ Between 1999 and 2005, the median net worth of families in the top fifth of the wealth distribution increased by 19%, while the net worth of their counterparts in the bottom fifth remained virtually unchanged.

+ The median net worth of the families in the bottom fifth stagnated between 1984 and 2005: the value of their assets never exceeded the value of their debts during the 1984 to 2005 period.

+ The top 20% of families held 75% of total household wealth in 2005, compared to 73% in 1999 and 69% in 1984.

So, the vast majority of the increase in wealth over the past 5 and 20 years have gone to the top 20% of income earners. No-one else was receiving a benefit from improvements in productivity, etc. That’s quite a story. My bet is this has something to do with the tax system being made less progressive, as a whole.

But note too, presentation biases of this survey, which is otherwise useful. The top 20% really lumps a lot of people together here, people in the 81st percentile, who might make $65,000 a year, are lumped together with people in the 95th, 99th and 99.9th percentile, who might make anywhere from $500,000 per year to many millions per year. It would be very useful to have the top 5%, 1% and 0.05% broken out, to determine what share of the national income available they are taking.

Second, the survey reports that the major driver of household wealth in the top quintile was housing price increases. We know that there has been a housing price bubble, so query how real this gain is: however, once again, this might explain the 81st to 91st percentile’s gains in wealth, but is far less likely to explain the top decile, and expecially top few percentile’s gains in wealth. These folks are far more likely to receive income from other investments. It would be useful to see where all that money is coming from and going.

UPDATE: The survey does indirectly account for, or break out, top income earners by re-stating the “all families” data with “top 5% excluded” and “top 1% excluded” comparison statistics, although no thorough treatment of the income and wealth of those 5% and 1% are presented. If I’m doing my numbers right, by one measure (share of wealth), the top decile of “all families” held 58% of total wealth (i.e., 20% of the people held 60% of the wealth), and at a rough guess, the top 5% held 18% of total wealth, and the top 1% held 10% of total wealth. All those numbers have increased since 1984, as in, folks at the top have gotten richer, folks at the middle and bottom have stayed the same or gotten poorer.

So, pick your issue: free trade, deregulation, lower taxes, whatever: it didn’t work for the vast majority of Canadians, and it worked for a select rich few. The past 25 years have seen the rich get richer, and the poor get poorer. These are what vulgar marxists call the development of objective conditions.

Just came across a juicy quote from the old master on those who trade in securities:

The vast majority of those who are concerned with the buying and selling of securities know almost nothing whatever about what they are doing. They do not possess even the rudiments of what is required for a valid judgment, and are the prey of hopes and fears easily aroused by transient events and as easily dispelled. This is one of the odd characteristics of the capitalist system under which we live, which, when we are dealing with the real world, is not to be overlooked.

Collected Writings, vol. VI, p. 323.