Monthly Archives: October 2014

Helmut Pastrick talks Sunshine Coast Economy: and my response…

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Recently, we had the great opportunity to listen to a distinguished economist, Helmut Pastrick, tell us about his economic forecast for the Sunshine Coast (linked here).  Pastrick is a serious economic heavyweight: he leads the analysis team for Credit Unions across BC and Ontario (no small matter).  He is also a former employee of CMHC, a current member of BC’s Economic Forecast Council, and a sought-after expert in the analysis of housing markets in BC and Ontario.

I felt compelled to issue my take on Pastrick’s economic outlook for the Sunshine Coast.  He presented his views as being ‘cautiously optimistic’ as we head towards a sustained recovery in 2016.

Investment economists, employed by banking entities, are often ‘cautiously optimistic’, after all their fiduciary obligation is to sell investments.  In contrast, a development economist, in charge of Government policy and budget oversight, needs to be far more realistic, and less prone to undeserved optimism.

For me, many clear downsides exist in the picture Pastrick presented.  Below, I discuss why I feel the numbers are worse than some believe, and what that means for Sunshine Coast residents, and our local governments.

Pastrick’s Model of Recovery

Pastrick is an admitted optimist and that is clearly presented in the slides; on nearly every key recovery determinant, he projects slightly higher than consensus.

For those of you unfamiliar with the inner workings of economic forecasting, a forecast is an economist’s ‘best guess’ about what will happen, and can often be wildly wrong.  Take for example that economic consensus missed forecasting the 2009 financial crisis, and thus were wildly off the mark as a group.

The model that Pastrick presents is quite orthodox, and is agreed upon in economic consensus.  A global recovery, if underway, will pull all economies upwards, and some above ‘zero-growth’, thus ending recession.  The world’s largest economies lead the way in any recovery, these being: USA, China, Japan, and the European Union.

In these terms, it can be explained that Canada will resume growth and be able to raise interest rates, but only if the global economy leads the way.  The BC economy is thus hinged on what happens across Canada, and the SCRD upon what happens in BC.  It’s a familiar picture.

There are, however, two plausible outcomes for growth in G8 countries after a housing crisis.  One is a pattern of renewed growth, spurred on by measures such as stimulus spending, interest rate declines, and improvement of exports.  The other is a pattern of repeating recessions, continued export weakness, and stagnant growth in the midst of inflation (stagflation).  This is the pattern exemplified by Japan after their housing crash in the early 90’s, where a ‘real growth’ pattern has not since returned to Japan.

Global recovery, in real terms, has not happened since 2009.  Even propped up by the lowest interest rates the world has ever known, the G8 countries have not responded with real growth patterns, based on rising exports.  If you were to push interest rates back up to levels seen in 1999, the current ‘marginal recovery’ would flounder nearly immediately. The pattern exemplified by Japan after their housing crash could potentially be realized in G8 countries, and persist unless some change occurs.

My take on the numbers

Slide by slide, Pastrick presented a very difficult pattern emerging for the Sunshine Coast.

Let’s take the following 8 local measures, listed in his slides, as exemplary:

  • Housing starts are at their lowest in 2 decades (page 62)
  • 4 years running of population declines in SCRD (page 39)
  • Dependency ratio projected to reach 80% within 10 years (page 6)
  • Large outflow migration of people aged 15-34 (page 41)
  • Less people now working within the SCRD, GVRD workplaces are growing in weight (page 46)
  • Declining employment in resources, manufacturing and construction (page 49)
  • Shift towards service sector (decidedly low-wage) in employment (page 48)
  • Lowest housing sales seen since the mid 1980’s (page 56)

Taken together, these numbers present a picture that I would not assume is ‘cautiously optimistic’.

Marry these numbers with the qualitative responses contained in the 2014 Vital Signs survey, where 75% of respondents indicated the state of the local economy was of concern and in need of attention.

It shows a story of very real weakness, decline and atrophy in the key areas of population growth, job creation and housing investment.

According to Pastrick, we need to see growth elsewhere, in the US and across Canada, before we’ll see any positive response in our local numbers.

In question period, I asked a pointed question, that I felt gets to the heart of the issue: “Since we’re waiting for exports to lead growth, this points to ‘current accounts’ deficit as the key determinant for recovery.  What plausible mechanism do we have in BC to improve this?”

In response, Pastrick shrugged his shoulders “we haven’t been able to get a handle on that for 17 years, and it’s a serious problem” and wondered aloud “perhaps LNG?”  (He’d already mused about the probability that BC LNG would struggle previously in his presentation).

I took it to mean that there continues to be no plan, at the very highest levels of economic thought, to improve our export base (beyond raw energy extraction).

This does not make me even cautiously optimistic that we’re headed for a sustained recovery.

What can our local government do?

For starters, all levels of government need to help ‘drive the bus’ towards better economic outcomes for everyone.  The picture painted by Pastrick is not one in which individuals will be able to have influence on their own; it’s not even a picture where individual governments have enough influence on their own.  We need governments, business, community groups and individuals to come together and focus on workable solutions for everyone.

We’re going to need a stronger community than we have now.  Local government can be a part of creating that: but in order to have a strong community, you need people that want strong community.

We need to recognize that we are in a period of austerity, and act accordingly.  We need to trim our personal spending, pay down debt, introduce cost saving mechanisms to government, and invest in education.

We need to prepare for future growth, but have systems in place that address the potential for downside: in this way we improve our resilience.

We need to open up the coordination of business and government, and support each other, with the primary focus being on employing local residents.

We need to focus on export growth, and the improvement of our trade balance.  Value added exports are of primary importance, and must be encouraged by all levels of government.

If we can do all that, I’ll certainly begin to be ‘cautiously optimistic’!

-Noel Muller

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What to expect from Councillor Noel Muller

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So far the 2014 Municipal Election has been an amazing experience for me.  I’ve had my eyes opened to some positive opportunities to build a better local government.

I’ve also been able to listen to my cohort, and get a better understanding of what they need.  Along the way I’ve challenged some of my own long-held views, and hopefully come up with better ones to bring to council this November.

It’s certainly been made clear to me that we have a long way to go towards engaging the youth in politics and serving them with government function.

How do we start connecting?

Citizens of all generations will become more engaged when our discourse becomes more practical and less politicized.

Using ideology, fluffy language, and veiled accusations will not serve to communicate the practicality of any candidate or platform.  Likewise it will not work to inspire the upcoming generation to vote or be involved.

It’s the primary reason why I’ve chosen to stay out of political debates focussed on persons alone.  I’m also actively speaking to all participants in a collaborative and practical fashion, as I feel all candidates should.

Furthermore, I have not chosen sides on any issues of politicization, but rather focussed on principles I know I can stick to over the next 4 years.

I’ve also found it’s a good exercise to de-politicize my own language, so I’m going to start with my previously stated 4 points (link), which are my guiding principles.

The practical measures outlined below are the ‘nuts and bolts’ of how I will actually do this, in each and every vote, if elected Councillor.

I further challenge other candidates to ‘de-politicize’ their content, and offer clearly communicated measures for voters to choose.

 Fiscal Responsibility

I have a clear idea of what I want future budgets to look like: balanced operating budget with room for infrastructure investments.

I will not vote for a budget if it contains less than 10% total investment in infrastructure, and likewise if it isn’t balanced in the near term, or uses reserves without a clear ‘path to payback’.

I’ll be working collaboratively over my term to push infrastructure investments higher in weight towards 25% of total budget.  I think the single best way to serve all generations, is by making sure we keep investing in facilities, and replacing and improving aging infrastructure.

I believe there are other opportunities to further trim the operating budget of the district.

Along these lines, I’d like my first resolution brought forward in council to be a 5% pay cut for all Councillors and Mayor.

We can afford a pay cut, but the measure is more symbolic than substance.  By doing this, we can set the tone early that we’re here to re-work the budget towards improving our service delivery.  Let’s start with our own wages, and work over the next 4 years to see if we can further remove 5% cost off the top of everything we do at the District.

Transparency

I will be open and forthcoming about my intentions behind every single council vote.  Feel free to ask me, and I will happily tell you why I voted a certain way on any item.

In fact I’ll go further by listing reasons on my webpage for all major budget items.  We may not always agree, but I will be open to communicating the information that influenced my vote.

With practice, I hope we can make this the ‘new normal’ for all members of council.

Green Values

There is an opportunity at every juncture to ‘tweak’ council decisions to correspond with green values, and that includes the functioning of council itself.

These are meant to be practical measures, and should extend to all levels of function in District activities e.g. forgoing hard-copy printing whenever possible, ‘idle-free’ vehicle policy, energy efficiency upgrades to District infrastructure.

Fresh Perspective

My personal goal for my first year on council is to arrive having done the most research of any Councillor at every meeting.  This is partly to combat my disadvantage as a first-time councillor, but foremost to ensure that my perspectives are based in solid and substantial research.

I aim to be pragmatic, and offer workable solutions that can help all generations meet their needs.  Specifically by targeting young people, I believe we can renew our whole system, leading to benefit for the entire community.

I will always engage with respect, and keep debate focussed on the issues.

I will bring in-depth knowledge of economic systems and the built environment to the table, and make sure I listen to all sides before I act.

Noel Muller

Thanksgiving Message

IMG_5612The stage is now set for Sechelt’s November 15th Municipal Election!

I’m writing first and foremost to thank the 14 other Councillor candidates and 3 Mayoral Candidates as well as congratulate our 2 School Board Trustees.

Running for any government position, and putting your name and credibility on the line, is no small matter.  We need to thank each and every citizen of our town that has the courage to put their hat in the ring to serve on our respective councils.

I’d like to thank Councillors Moore and Hockley for their contributions to council as they have now chosen to finish their service.

Even if we may disagree from time to time, we’re all working together to improve the daily life of Sechelt’s residents, visitors, ratepayers, entrepreneurs, and property owners.

I’d also like to thank the many passionate citizens of our District that maintain an active interest in our local government.  You help guide and inform civic process, and are essential to the ongoing function of our municipal government.

Furthermore, I’d like to thank the dedicated staff at the District of Sechelt for their daily contribution to the service of the District’s citizens.  Governments are only as good as the staff that carry measures through.

Last but not least I’d like to send a heartfelt thanks to all my friends and family that continue to support me in all my endeavors, without you, nothing I do would be possible.

On this thanksgiving weekend we will come together to share a feast in recognition of mother nature’s abundance.

May she always feed us, clothe us, and give us all we need to thrive.

Happy Thanksgiving!

-Noel Muller

Bringing Value to Local Government

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Recently I’ve felt compelled to address the concept of ‘value’ and how that relates to Municipal Government.

In Sechelt we have a situation developing where people are divided, and the debate is being focused on persons, rather than issues or ideas.

I’ve made it clear that I won’t be getting into any of that, I’ll be focusing instead on how to bring ‘value’ to our community.  To me, that’s the only question any candidate should be addressing in this election.

Without a clear picture of that, anyone can reasonably assume their interest is to serve political careers, rather than the town and its citizens.

What is Value?

Jeffrey Sachs is a real-world economist, with real-world experience of improving the daily lives of people in a variety of countries.  He’s the person you hire to lift 20 million people out of poverty over 10 years by enacting proper economic oversight.  Over the years, he’s helped 50+ countries around the world get on a basic footing to enact government services.  That, my friends, is value.

Everyone knows that governments tax their citizens.  Anyone focused on ‘value creation’ is going to ask what these citizens get in return for their money.

To quote the BC Community Charter, the purposes of Municipal Government are:

  1. providing for good government of its community
  2. providing for services, laws and other matters for community benefit
  3. providing for stewardship of the public assets of its community
  4. fostering the economic, social and environmental well-being of its community.

In a legal sense, these purposes are open to interpretation, but the intent of the law is clear and not open for debate: it is to create value for community benefit.

Threats to ‘value creation’

After the financial crisis of 2008, economists of all stripes were rushing to explain, as Alan Greenspan put it: “how so many people, in so many places, got it all wrong” (himself included).  In his latest saga on the subject, Greenspan writes considerably about “animal spirits”: the things that get in the way of markets producing optimal value creation, at every level of the economy, including governments.

Sachs put it another way, and summed it up in one sentence: “the economic and political elite have lost their moral compass”.  They became more focussed on personal gains, rather than their own pivotal position in ensuring general prosperity.  Consequently, the system faltered dramatically.

The shockwaves of the 2008 Financial Crisis touched everywhere on earth: including the District of Sechelt.

Housing has long formed the backbone of the coastal economy, and has been in the doldrums ever since 2008.  If it weren’t for the careful oversight of the Bank of Canada during those times, Sechelt would be in serious financial trouble today; the sort of trouble that makes daily life miserable, and community development a non-starter.

Municipal governments across the country face an uncertain future.  It’s lost on the average person that in the very near term, service delivery from local governments could become untenable.  Yes, it’s that serious.

The very same problem extends upwards to provincial and national levels: a direct result of our focus having ignored the concept of ‘value creation’.

What’s the fix?

One major economy has hummed along relatively untouched by the 2008 Financial Crisis and its aftershocks: Germany.  We can learn from the characteristics of what they have done and improve our situation.

They have a committed focus on ‘value creation’ that exists at every level of the economy:  for customers, employees, taxpayers, businesses, and governments.  Consequently, their system is thriving.

How thriving?  One important measure, the current accounts balance, is the definition of how much an economy sells versus how much it buys.  A positive number is what you look for to say an economy is experiencing real growth and health.

We should all become familiar with the concept of ‘current accounts’, and what it means.  As an isolated ‘ferry bound’ economy it does much to describe our collective predicament.

Germany’s current account surplus per person is 15X the closest competitor (China), and by ‘orders of magnitude’, the highest in the world.  By comparison, governments in North America are achieving among the lowest scores, historically and currently, in the ENTIRE world.

German governments, as the “drivers of the economic bus”, are doing a great many things that ours in Canada are not doing.  We need to understand what they are and get to work on changes.

How do we bring ‘the fix’ to Sechelt

There are many practical steps we can implement to get on a better footing at the very core of ‘value creation’ in our local economy.

The basic idea is: we need the most skilled people working in the most efficient workplaces, producing goods that have a customer.

To achieve this, we need to focus on three key areas:

  • Exploring value added production. By turning low value products into higher value end uses, we move further up the commodity chain, e.g. producing value added wood products from our community forests.
  • Enacting efficiency gains to government and business. By producing more service more cheaply, or with better end use, we can discover and grow our local competitive edge, e.g.  cost saving analysis of Municipal service delivery.
  • Getting serious about education in our community. Focus on our youth, and the technical apprenticeship and mentorship WE KNOW leads to gainful employment and a chance at middle class life, e.g. high school trades apprenticeship programs.

Governments in positive association with businesses, community groups, citizens and unions can do a great deal to spur productive outcomes for everyone.

However, that won’t be possible until we achieve basic personal respect and collective will to do good for our communities.

Let’s start by changing the nature of our debate from persons to issues, and understanding that value is the basis of what we do.

-Noel Muller