Some history of economic incompetence

[licks2nite]

No discussion about the Canadian economy, or lack of economy, would be complete without a discussion about taxation. Can anything be so hairbrained and myopic as to tax exports and make your own industries uncompetitive? In 1920 a manufacturers' sales tax was imposed that didn't come off until 1991. By that time the manufacturers' sales tax didn't make much difference to government revenue since the revenue generating entrepreneurs had since long departed for the States and the foreign branch plants, although not providing any import revenue at least stopped some revenue from leaving, were now gone. Clearly, or not so clearly, Canadian government has had and perhaps still has an odd concept of what "revenue" means and only counted the money in its own coffers, failing to either notice or care that those who produced were gone, leaving only those that consume. Canadian economy seems to have gone past a tipping point. In the 29 years since elimination of the manufacturers' sales tax, the vast majority of Canadians are still only consumers, upsetting Canada's balance of trade with virtually every job done in Canada.

Source:
https://www.thecanadianencyclopedia.ca/en/article/taxation

 

[appleomac]

No discussion about the Canadian economy, or lack of economy, would be complete without a discussion about taxation. Can anything be so hairbrained and myopic as to tax exports and make your own industries uncompetitive? In 1920 a manufacturers' sales tax was imposed that didn't come off until 1991. By that time the manufacturers' sales tax didn't make much difference to government revenue since the revenue generating entrepreneurs had since long departed for the States and the foreign branch plants, although not providing any import revenue at least stopped some revenue from leaving, were now gone. Clearly, or not so clearly, Canadian government has had and perhaps still has an odd concept of what "revenue" means and only counted the money in its own coffers, failing to either notice or care that those who produced were gone, leaving only those that consume. Canadian economy seems to have gone past a tipping point. In the 29 years since elimination of the manufacturers' sales tax, the vast majority of Canadians are still only consumers, upsetting Canada's balance of trade with virtually every job done in Canada.

Source:
https://www.thecanadianencyclopedia.ca/en/article/taxation

Are you equating the old MST with an export tax? The MST was never an export tax, it was (effectively) a tax at every stage of the value chain. It is basically a VAT that was "hidden" and made domestically produced goods "more expensive" vis a vis foreign produced goods (assuming those foreign produced goods didn't have a similar MST at their location of production). As global trade proliferated, it basically put Canadian producers/manufacturers at a competitive disadvantage against their foreign made competition; therefore it was replaced. Interestingly, it was replaced with the GST - and not surprisingly, the general public at the time was highly opposed to the GST because no one truly understood what the government of the day was trying to accomplish by introducing the GST and eliminating the MST. It's quite funny to think about it now. Understand that this all didn't happen in a vacuum: an MST's negative effect on domestically produced products could be negated by tariffs on imported goods. But proliferation of global trade also means free-trade agreements and therefore the MST becomes more negative for domestic producers, ergo more reason to get rid of it - as Canada did and replace it with a more "equitable" single final consumption tax i.e. the GST!

 

[licks2nite]

Are you equating the old MST with an export tax? The MST was never an export tax, it was (effectively) a tax at every stage of the value chain. It is basically a VAT that was "hidden" and made domestically produced goods "more expensive" vis a vis foreign produced goods (assuming those foreign produced goods didn't have a similar MST at their location of production). As global trade proliferated, it basically put Canadian producers/manufacturers at a competitive disadvantage against their foreign made competition; therefore it was replaced. Interestingly, it was replaced with the GST - and not surprisingly, the general public at the time was highly opposed to the GST because no one truly understood what the government of the day was trying to accomplish by introducing the GST and eliminating the MST. It's quite funny to think about it now. Understand that this all didn't happen in a vacuum: an MST's negative effect on domestically produced products could be negated by tariffs on imported goods. But proliferation of global trade also means free-trade agreements and therefore the MST becomes more negative for domestic producers, ergo more reason to get rid of it - as Canada did and replace it with a more "equitable" single final consumption tax i.e. the GST!

Canada's 1920 manufacturers' sales tax evolved with manufacturers' complaints. The years 1924 and 1954 saw adjustments that amounted to complexities and name changes. The process was always hidden from public view. By whatever name, Canadian manufactured products were taxed and the tax was passed hidden to foreign and domestic consumers alike. By 1991 many in parliament and particularly the Canadian Senate didn't either understand or care that the manufacturing tax stifled Canadian competition in international trade. The Mulroney government was so desperate to eliminate the manufacturing tax, and bring in the General Service Tax (GST) that could directly tax consumption of most any imported or domestic product equally and free Canadian manufacturers to export without a tax, that Mulroney temporarily installed 8 like minded Senators in the Senate to pass legislation approving tax reform.

Something that was ignored was that most provinces and territories, except Ontario and Quebec weren't allowed to legislate their own corporate tax laws. I think that we all know that that resulted in nearly the entire Canadian manufacturing base being concentrated in Ontario and Quebec. Canadian manufacturers couldn't compete effectively at home and didn't learn enough to compete internationally.

 

[appleomac]

Something that was ignored was that most provinces and territories, except Ontario and Quebec weren't allowed to legislate their own corporate tax laws. I think that we all know that that resulted in nearly the entire Canadian manufacturing base being concentrated in Ontario and Quebec. Canadian manufacturers couldn't compete effectively at home and didn't learn enough to compete internationally.

Where are you getting your information??? There is nothing the Canadian Government can do to stop a Province from enacting taxes. A Provincial Government's taxation mandate (i.e. it's ability to impose taxes) comes from the Constitution - technically speaking, a Provincial Government has near unlimited taxation powers.

Taxes have nothing to do with why one region has more manufacturing than another. In fact, if you understand how industries and regions develop you would understand that although North America developed (i.e. industrialized) roughly at the same time - that does not mean each region industrialized/developed at the exact same time and in the exact same manner. Even as Canada industrialized some regions remained more agricultural based and same industrialized. As those regions that industrialized earlier and more quickly, as other industries emerge, they tend to congregate together (i.e. like attracts like) - as there are numerous reasons why this would be beneficial (closer to vendors, supply lines, etc.). Water hauling is important in the oil and gas industry, ergo if you want to start a water hauling business, be closer to Alberta (if not in Alberta). If you're a heavy duty mechanic that specializes in servicing water hauling trucks, be closer to the water hauling businesses. If you sell water hauling trucks - I think you can get the point.

 

[licks2nite]

Where are you getting your information??? There is nothing the Canadian Government can do to stop a Province from enacting taxes. A Provincial Government's taxation mandate (i.e. it's ability to impose taxes) comes from the Constitution - technically speaking, a Provincial Government has near unlimited taxation powers.

Taxes have nothing to do with why one region has more manufacturing than another. In fact, if you understand how industries and regions develop you would understand that although North America developed (i.e. industrialized) roughly at the same time - that does not mean each region industrialized/developed at the exact same time and in the exact same manner. Even as Canada industrialized some regions remained more agricultural based and same industrialized. As those regions that industrialized earlier and more quickly, as other industries emerge, they tend to congregate together (i.e. like attracts like) - as there are numerous reasons why this would be beneficial (closer to vendors, supply lines, etc.). Water hauling is important in the oil and gas industry, ergo if you want to start a water hauling business, be closer to Alberta (if not in Alberta). If you're a heavy duty mechanic that specializes in servicing water hauling trucks, be closer to the water hauling businesses. If you sell water hauling trucks - I think you can get the point.

Taxing powers of provinces and territories isn't nearly as unlimited as you think. As an aside, the alternative media has been full of comments in recent years about how there's nothing like a crisis for central powers to consolidate power. Please, don't try to tell me that taxes have nothing to do with where an industry locates. I read the part about how businesses tend to cluster in grade 9 or 10 Social Studies.

Getting back to the topic:

In 1941 the provinces agreed to surrender the personal and corporate income tax fields to the federal government for the duration of the war and for one year thereafter. In 1947, contrary to the 1942 plan, federal control was extended to include succession duties as well, but Ontario and Québec opted out, choosing to operate their own corporate income tax procedures.

Constitutional law prohibits the “imposition by a Province of any tax upon citizens beyond its borders.” (CIGOL v. Saskatchewan, [1978] 2 S.C.R. 545). This is now a central explanation why provinces are limited to direct taxation.

 

[licks2nite]

From my perspective, provinces and territories that administer their own corporate tax laws are in a better position to negotiate favourable terms to attract industry. Currently only 2 provinces do that.

 

[80watts]

After the GST items got more expensive. They should of went down in price, due to the hands they went through (levels of distribution). The Manufacturers tax was 13 % the GST was 7%. Prices stayed the same.
No the real cost of the manufacturing was in the labour cost. Which is why all the industries moved to China and Indonesia and India.
Now cars are made in Mexico instead of Canada due to labour cost.
Car manufacturing are shutting down in Canada, its too expensive. Unless you have high performance and expensive cars like BMW, Range Rover, Mecedes. Cars that cost high and have high maintenance costs. Only Rich people can afford them!!
Canada is known as a resource country. Raw resources, we sell cheaply to other countries and recieve their manufactured good back at a loss...... lumber is a prime example. Raw logs cross the border and we get shit lumber back.
Coal, Lumber, Oil.
Meanwhile the only people who have decent jobs are in some sector of government or the raw resource industry. Any manufacturing we have in Canada is slowly being abandoned by our industry. There is no heavy industry the last of it is in Alberta for the oil industry. Transportation is another big factor. By ship or rail. Which cost money when not in bulk. Like container ships. Our steel industry is in decline despite the large amount of raw material we have in Canada. Look at how industry was slowed down by blocades in the last year.
Look at the bridge in Victoria, had to wait for steel from China to finish the bridge, why because Canadian steel (made mostly by scrape metal) was too expensive.
Look at the states, a certain % has to come from the US. All shipping from multiple ports in the US have to be under US flag, while in Canada anyone can go port to port. Ships from Europe are in the Great lakes waiting to take consignments of Canadian Wheat (when the prices fall) at their convienance.

To put it plainly we are getting walked over by every other country we deal with in manufacturing because of the cost of labour....
Canada can produce its own in food (wheat, vegetables and fruit), raw materials for construction (wood and steel); but most of this is imported from other countries because it is cheaper. So the jobs go to the countries with a lower paying labour force.
Canada needs to revamp its steel industry and make its own ships, and it has to be renewable contracts to keep the industry going. Not order 12 warships every 40 years.
Politicians and industry leaders have sold Canadian workers out along time ago (somewhere in the mid 1970's).

Make new laws, all steel in highrises from Canada made in Canada.
Only 20% raw material out. Lumber and steel.
Make all plastics in Canada (after all plastic comes from oil). Look at the plastic barriers in supermarkets at the check outs. They weren't there 3 months ago. the cost of this plastic has went up. Check the prices in Texas from a few months ago compared to Canadian prices and you can see the consummer in Canada are being ripped off, even with the exchange rate....

One price for all, no contractors special pricing. That is just price gouging.

 

[80watts]

Another thing about cars. The average person earning less than 20/hour cant afford to fix his car at 100/hr shop rate plus parts. Parts that are designed to be expensive. Like an 30 cent diode in a alternator (used to replace the diode only but that changed). Now a replacement alternator cost 150.00 the diode cemented into the alternator.
Cars are designed only to last for just beyond warranty of 7/8 years; then things begin to break on them. They are designed to wear out after a specific amount of time. Who makes the profit from that, the countries making the parts and the stockholders.... not the public.

 

[licks2nite]

Decades now, certainly labour costs have been a huge factor depleting Canada's industries. Right-to-Work in the States and nothing that could tax exports drew the best entrepreneurs and talented labour from around the world including Canada.

Retailers typically mark up the price of a product 100 percent over the wholesale price. Eliminating work that doesn't produce wealth such as the complexity of the 1920s era manufacturer's sales tax could have gone a long ways if eliminated sooner when Canadian labour costs were cheaper to aid Canada's beleaguered export manufacturing sector. As it was in 1991 the cheap Asian labour markets were just opening up.

 

[licks2nite]

Something else, Canadian judiciary repeatedly sided with Canadian unions. Canadian labour got too much, too soon and lost good jobs as revenue generating entrepreneurs from Canada headed to the States for right to work.

Weep, Canada. Today, 20 June 2020, Canada lost its triple 'AAA' credit rating due spending for Covid-19.

 

[licks2nite]

Never been right to work in Canada and no union busting in Canada beyond Canadian unions busting themselves and losing their members' jobs that left Canada. Unions always eventually got what unions wanted in Canadian courts. I'm not into conspiracy theories but if you're looking for folks in the States to blame you might go looking at U.S. unions egging Canadian unions on.

 

[masterblaster]

Never been right to work in Canada and no union busting in Canada beyond Canadian unions busting themselves and loosing their members' jobs that left Canada. Unions always eventually got what unions wanted in Canadian courts. I'm not into conspiracy theories but if you're looking for folks in the States to blame you might go looking at U.S. unions egging Canadian unions on.

Don’t mind me but it’s “losing”

 

[masterblaster]

Free Trade and Globalization's favourite catchphrases, "labour costs" and "right to work". What a crock of shit.

The reason Canada and the US (largely) manufacture very little, in comparison to the "good old days" is indeed labour related; because corporations found they could exploit loopholes in labour laws as well as tax law, by becoming a multi-national corporation and "diversifying". Company nominally based in Michigan, factories in Mexico and Asiatic locals, banking done in Panama (or which ever little haven for despots is in vogue) and suddenly, you can charge the same amount you used to for your "product(s)" but make a much larger profit.

Breaking the unions was step one. Then offshoring the labour force, because let's face it; why would any company want to pay "locals" good money when they can scab things out to some third world manufacturing hub with no labour laws whatsoever - okay, quality might decline markedly, but as long as the shareholders get paid it'll all work out.

Look at an agreement like NAFTA, it was designed entirely to break Canadian manufacturing and ensure that "we" are a net exporter of raw goods. Do you think the Yanks actually want a Canada with a strong manufacturing base?

One needs to look no further than the Avro Arrow debacle ti see the truth in that.

 

[masterblaster]

Another thing about cars. The average person earning less than 20/hour cant afford to fix his car at 100/hr shop rate plus parts. Parts that are designed to be expensive. Like an 30 cent diode in a alternator (used to replace the diode only but that changed). Now a replacement alternator cost 150.00 the diode cemented into the alternator.
Cars are designed only to last for just beyond warranty of 7/8 years; then things begin to break on them. They are designed to wear out after a specific amount of time. Who makes the profit from that, the countries making the parts and the stockholders.... not the public.

I would dispute that cars are designed to last just beyond the warranty period of 7 or 8 years. Plenty of vehicles in the road older than that.

 

[80watts]

No designer or engineer today would design anything that will last 100 years. It has to do with making a company profitable. If you designed a car to last 100 year, you would have to design it to be up-gradable for new technology. Also you would never need another car in your lifetime. The car company wants you to buy the car over and over again to make profit. Most people are buying cars every 7 to 10 years. After an warranty on a car expires it is prudent to get rid of it and get a new car with a new warranty. Or buy second hand (usually those are 6 Plus years old and limited warranty.
Sure there are cars on the road older than 7/8 years, but they are the exception (ie the manufacturer fucked up someplace).
Now you have a 5 year warranty. If something breaks on the car within 5 years its replaced. But if something broke at 3 years and another part broke at 4 years. At 6 and 8 year you can expect the same parts to go. At your cost. These parts aren't cheap they cost around 400.00 or more. That is 400.00 most people can't afford to ignore, but have to scrap by because they need a car to get to work. (don't talk about public transit- ever see a plumber take public transit)....

Over the last 20 year the federal government has slowly been taking away benefits the federal union have negotiated. In return for pay raises (period from mid 90's to now)they unions have given up sick days (used to be able to accumulate them and payed out at end of employment). Annual leave accumulation ( now I believe its use it or lose it). The military People lost severance pay (used to be 1 week for every year served) now that is gone. Military Medical pension used to be 70% of wage, now you get a one time payment up front. That's it. In the long run its cheaper that way. Good for taxpayers, bad for veterans that lost something. That the tip of the cuts....

As for the credit rating, all countries and states credit ratings will fall. Canada big thing is the tons of natural resources.

 

[masterblaster]

No designer or engineer today would design anything that will last 100 years. It has to do with making a company profitable. If you designed a car to last 100 year, you would have to design it to be up-gradable for new technology. Also you would never need another car in your lifetime. The car company wants you to buy the car over and over again to make profit. Most people are buying cars every 7 to 10 years. After an warranty on a car expires it is prudent to get rid of it and get a new car with a new warranty. Or buy second hand (usually those are 6 Plus years old and limited warranty.
Sure there are cars on the road older than 7/8 years, but they are the exception (ie the manufacturer fucked up someplace).
Now you have a 5 year warranty. If something breaks on the car within 5 years its replaced. But if something broke at 3 years and another part broke at 4 years. At 6 and 8 year you can expect the same parts to go. At your cost. These parts aren't cheap they cost around 400.00 or more. That is 400.00 most people can't afford to ignore, but have to scrap by because they need a car to get to work. (don't talk about public transit- ever see a plumber take public transit)....

Over the last 20 year the federal government has slowly been taking away benefits the federal union have negotiated. In return for pay raises (period from mid 90's to now)they unions have given up sick days (used to be able to accumulate them and payed out at end of employment). Annual leave accumulation ( now I believe its use it or lose it). The military People lost severance pay (used to be 1 week for every year served) now that is gone. Military Medical pension used to be 70% of wage, now you get a one time payment up front. That's it. In the long run its cheaper that way. Good for taxpayers, bad for veterans that lost something. That the tip of the cuts....

As for the credit rating, all countries and states credit ratings will fall. Canada big thing is the tons of natural resources.

Have you heard of the wonderful one-hoss shay, That was built in such a logical way It ran a hundred years to a day, And then, of a sudden, it — ah, but stay

Poem by Oliver Wendell Holmes

 

[licks2nite]

No union busting in Canada? Remove the rose coloured glasses, and take a look around. Every government, be it Provincial or Federal with a Conservative bent (large or small "C", it doesn't much matter, same with fiscal conservatives, and any other flavour of the rainbow) has made it their mission to break or otherwise knock down unions.

All that you've said here is that fiscal conservatives are on the other side. Fiscal conservatives didn't bust anybody. Canadian unions demanded more than revenue generating entrepreneurs were willing to give for the risks involved in trying to complete for market share against international competitors. Year after year, decade after decade, Canadian judiciary and Canadian unions were content watching skilled manufacturing jobs disappearing with revenue generating entrepreneurs heading to the States to work alongside governments that cooperated with agreeable tax and labour laws.

 

[licks2nite]

One needs to look no further than the Avro Arrow debacle ti see the truth in that.

John Diefenbaker cancelled the Avro Arrow because intercontinental ballistic missiles (ICBM) were coming online and Diefenbaker thought the Arrow obsolete that was designed to intercept bombers. Little did Diefenbaker know that the Soviets would eventually run bombers up to Canada's northern border on a routine basis while the Americans did the same to the northern Soviet border throughout the duration of the Cold War. In those days media credited managers of A.V. Roe the responsibility for the decision to destroy the prototypes. Recent analysis claims that Diefenbaker himself ordered the prototypes destroyed. Either way, a bad move destroying Canadian voters' property.

The precedent for the loss of Canadian aircraft manufacturing industries came several years earlier. Boeing Aircraft Company, created on the shores of False Creek in Vancouver to build aircraft to fight World War ll disappeared after the War was over. Boeing moved across the border to Everett WA. I had family working in Boeing and later had family working in Jordan Unitized Television manufacturing right here in British Columbia when a booming television broadcast industry in North America was coming online, but was gone before the Avro Arrow.

 

[licks2nite]

One needs to look no further than the Avro Arrow debacle ti see the truth in that.

If you like conspiracy theory, controlling the narrative about the coming use of intercontinental ballistic missiles served the cancellation of the Avro Arrow and transfer of the A.V. Roe engineering team to the States.

 

[masterblaster]

John Diefenbaker cancelled the Avro Arrow because intercontinental ballistic missiles (ICBM) were coming online and Diefenbaker thought the Arrow obsolete that was designed to intercept bombers. Little did Diefenbaker know that the Soviets would eventually run bombers up to Canada's northern border on a routine basis while the Americans did the same to the northern Soviet border throughout the duration of the Cold War. In those days media credited managers of A.V. Roe the responsibility for the decision to destroy the prototypes. Recent analysis claims that Diefenbaker himself ordered the prototypes destroyed. Either way, a bad move destroying Canadian voters' property.

The precedent for the loss of Canadian aircraft manufacturing industries came several years earlier. Boeing Aircraft Company, created on the shores of False Creek in Vancouver to build aircraft to fight World War ll disappeared after the War was over. Boeing moved across the border to Everett WA. I had family working in Boeing and later had family working in Jordan Unitized Television manufacturing right here in British Columbia when a booming television broadcast industry in North America was coming online, but was gone before the Avro Arrow.

I know perfectly well the history of the Arrow. Don’t kid yourself, there was American meddling in the decision to cancel the Arrow. They could not have a Canadian built jet superior to anything they were building at the time.