Vampire Beaver or Cuddly Canadian? The ‘Maple Revolutionaries’ Face an Identity Crisis

Canadians collectively hold some USD $2.4 trillion in assets in funded and private pension arrangements, representing 160% of GDP. Over USD $420 billion of these assets are held abroad, and many of Canada’s largest pension funds invest a significant portion of this capital in illiquid, long-term assets, such as transportation and municipal infrastructure. Investors favour these assets, since they tend to generate solid, stable returns over long periods of time.

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Pension Funds, Financialization, and Lacklustre Investment

In recent debates over the reform of national pension systems, and especially the shift from pay-as-you-go (PAYGO) financing of public pensions to pre-funded arrangements, the labour movement has repeatedly stressed an important point. Regardless of whether pension costs are borne by contributors when benefits are paid or when they are accrued, future pension benefits are a claim on future production, and are ultimately paid out of future national income. That is, no matter how the pension scheme is financed today, future retirees’ consumption will be supported by allocating a portion of future output and income to pensioners.

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OECD: World Economy Stuck in a Low-Growth, Low-Investment Equilibrium

This week, the OECD released its twice-yearly Economic Outlook. Following the contraction of the Canadian and US economies in the first quarter of 2015, what was the weakest period of global growth since the Great Recession, the OECD downgraded its forecast for global growth to 3.1% in 2015, from 3.7% projected last November. Six years into the “recovery,” 40 million people in the OECD remain unemployed, 7.5 million more than the pre-crisis peak. The unemployment rate remains above 11% in the Eurozone. Summing up the global economy, the OECD writes, “in effect, many economies have become stuck in a low-growth and low-investment equilibrium, with persistent unemployment, stagnant wages, and non-robust consumption.”

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