Chretien Government policies raised income inequality, real income and happiness while Trudeau Government did the opposite

 

The most widely used metric of income equality is the Gini Coefficient, named for its inventor, the Italian statistician and sociologist Corrado Gini (1884-1965). The Gini coefficient takes the value zero when equality is perfect — everyone has exactly the same income or wealth — and is equal to one when one person has everything. Statistics Canada publishes Gini coefficients regularly. Their path over the years reveals some interesting facts that may be important in assessing the merit of the policy platforms of parties competing in upcoming elections.

From 2015, when the Trudeau government came into office, through 2023 the Gini coefficient fell (from .314 to .288). That means inequality fell and equality rose, which was the government’s plan. In contrast, between 1993 and 2003, when Jean Chrétien was prime minister, the Gini coefficient rose — from .289 to .316. Inequality rose, equality fell. That probably wasn’t the government’s plan. But that is what happened.

Over these two periods, the growth in real per capita income also differed — markedly. During the Chrétien years real per capita economic growth averaged 2.4 per cent per year. Under Trudeau it has averaged one-eighth that, just 0.3 per cent per year.

Many factors determine the rate of economic growth and degree of income equality in a country, too many to discuss here.  But it is useful to consider some differences in the legislative agendas pursued by the two Liberal governments, Chrétien’s and Trudeau’s, that economists consider relevant.

Chrétien’s policies were focused on eliminating the large fiscal deficits he inherited on taking office in 1993. They did so by reducing spending on social transfers, including by restricting eligibility for and the generosity of employment insurance. Such measures likely affected the incomes of the poor and may well have increased income inequality. Cuts to the civil service, streamlined regulation, replacing income taxes with value-added taxes (i.e., the GST) and encouraging free trade all reduced the role of government in the lives of Canadians and strengthened the role of markets and incentives in the economy. The reforms generally were not as drastic as their opponents claimed but their effect was real.

In contrast, Justin Trudeau’s policies have focused on equalizing incomes and preventing climate change and they have substantially increased the role of government in the economy by raising social security spending and subsidies to individuals and businesses, increasing regulations and raising taxes, especially at the top end. To administer all the new spending and regulation, the civil service has expanded rapidly.

In short, increased reliance on markets, which Chrétien’s policies brought about, raised income and inequality. On the other hand, reducing the role of the market economy, as Trudeau’s policies have done, increased equality but has also reduced economic growth. These correlations, though simple and without further analysis mainly suggestive, are consistent with economic theory and historical experience.

It’s also interesting to look at what happened to the self-assessed happiness of Canadians during the two periods. Both governments presumably wanted to raise happiness, but during Chrétien’s time the index of happiness rose from 6.8 to 7.1 on a scale of one to 10 while during the Trudeau years it has fallen — from 7.4 to 6.9.

All sorts of things presumably affect how happy people are feeling. The negative effects of dealing with both the pandemic and climate change may well have contributed to the decline in well-being among Canadians during the Trudeau years. On the other hand, those were global phenomena so they don’t explain why Canada fell from fifth to 15th happiest country among 135 countries ranked.

These changes in happiness in the two periods are a puzzle. Income is an important determinant of happiness and there are more subsidized poor Canadians than there are taxed rich Canadians, which suggests average income equality and happiness should have risen together as the Trudeau government raised taxes on the few and increased subsidies for the many. That happiness fell instead may be the result of policies that have affected Canadians’ lives for the worse but not brought offsetting benefits: environmental and other regulations, increased taxation, inflation and, finally, rapid immigration that has contributed to housing unaffordability and the overcrowding of health care and other public facilities.

In addition, a new source of unhappiness may have resulted from innovative policies that have worsened the inter-personal relationships that research has found to be  “the most significant predictor of overall happiness, life satisfaction, and wellbeing.” These policies encouraged the formation of identity groups based on sexual preferences, skin colour, ethnic origin, age and gender.

The rationale for such policies is found in Karl Marx’s theory that under capitalism the bourgeois owners of property oppress the proletariat of labourers, which leads to an ever-growing gap in the income of the two groups. This idea has now morphed into the “woke” view that the below-average incomes of members of identity groups are caused by the oppressive, discriminatory policies of other Canadians, but mainly white males.

To eliminate the effects of this discrimination and raise the equality of income the Trudeau government has imposed “diversity, equity and inclusion” (DEI) requirements in Canadian organizations and institutions. Such requirements can involve preferential employment, student admission, salary benefits and promotions and so on, all of which come at the expense of Canadians who find that merit as the primary determinant of success is now replaced by the possession of personal characteristics whose value is rewarded by bureaucracies.

The adoption of DEI policies has led to what very likely are happiness-decreasing divisions among Canadians in general, among identity groups and even among the members of such groups, who may have expected more benefits than the system has brought them. Dissatisfaction and division resulting from these “woke” policies may help explain the decline of happiness among Canadians.

Let us hope voters consider all this when they assess the merit of competing parties’ platforms in upcoming elections.

Herbert Grubel, professor emeritus of economics at Simon Fraser University, was MP for Capilano-Howe Sound 1993-97.

This article was published in Canada's Financial Post on May 21, 2024, without the graphs below.

 

Bank of Canada missteps helped fuel today's inflation

 According to Statistics Canada’s latest consumer price index report, in February the annual inflation rate fell to 2.8 per cent, raising the prospect of interest rate cuts by the Bank of Canada sometime this year. “Inflation is caused by too many dollars chasing too few goods” used to be the traditional diagnosis of the cause of inflation, prompting central banks to fight it by slowing the growth of the money supply. This approach is based on what is known as the “monetarist” theory of inflation, which suggests that supply shocks such as those associated with the COVID pandemic do not cause inflation but only a temporary increase in the price level, which is reversed once the cause of the shock ends—unless the money supply has increased.

In recent decades, central banks have fought inflation using interest rates instead of monetary growth. This switch followed the postwar success of Keynesian theory, which blames inflation on excess aggregate demand, which higher interest rates are supposed to curtail.

Targeting interest rates can work if central banks simultaneously pay attention to money growth, but too often they’ve failed to do so. Equally, targeting the money supply can create inflation-fighting interest rates. However, interest rate targeting in practice has a serious shortcoming. Aggregate spending is influenced by real interest rates while central banks can set only nominal rates and real rates are beyond their control because they cannot change inflation by any direct policy.

This important problem arises because, for example, a nominal interest rate of 6 per cent turns into a real rate of minus 2 per cent if the expected inflation is 8 per cent. At that rate, investors can borrow $1 million at 6 per cent, use the money to buy real estate, sell it a year later after it has appreciated at the expected 8 per cent, repay the $1 million and take home a capital gain of $20,000. In other words, the high expected inflation rate incentivizes consumers and businesses to borrow more, which results in faster money growth and risks even higher inflation.

The expected rate of inflation exists only in peoples’ minds and is determined by many factors. The Bank of Canada collects as much information as it can, drawing on the results of public surveys, the information contained in the prices of so-called Real Return Yields, and sophisticated economic models produced by the Bank’s economists. But these efforts do not result in reliable information, as evidenced by the uncertain and speculative nature of economic forecasts found in its economic updates.

The problems associated with not knowing the real rate of interest have persuaded some economists, called “monetarists,” to urge central banks to target the money supply including famed economist Milton Friedman whose monumental study of the history of U.S. money supply and inflation inspired many including David Laidler, emeritus professor at the University of Western Ontario, and Britain’s John Greenwood who maintains a large database he used to create the accompanying graph.

This graph shows Canada’s annual rate of inflation (measured on the left axis) and the annual rate of growth of the money supply (M3) (measured on the right axis) for the years 2014 to 2024 using data published by the Bank of Canada and Statistics Canada, which require little manipulation. The annual percentage change in the money supply is averaged over 12-months, as is done widely to smooth data that fluctuate much over short periods; and the resultant time series is shifted forward 18 months, to achieve the best fit between changes in money growth and changes in inflation in the monetarist tradition, which has found the lag to have been variable historically between 12 and 18 months. (Thus, the peak smoothed money supply growth rate of more than 13 per cent occurred in February/March 2021, but is shown as occurring in August/September 2022, some 18 months later and close to the peak of inflation in June 2022.)

The correlation between the quantity of money and inflation shown is not perfect but strong enough to justify the conclusion that Canada would have avoided the inflation starting in early 2021 had the Bank not increased the money supply so dramatically during the first year of the pandemic.

In 1994, John Crow, then-governor of the Bank of Canada, presented to a parliamentary finance committee a report on the economic outlook. One of the authors of this op-ed (Grubel) was at this meeting. In response to his question, Crow said that the Bank’s econometric forecasting model did not include data on the money supply but that he always looked over his shoulders to ensure it does not get out of line. If his successors had followed his practice, perhaps Canada’s present inflation would have been avoided.

But then it would not be possible to test the usefulness of the model, which draws on money supply growth data over the last 18 months to predict that inflation should fall to 2 per cent near year-end 2024 or early 2025.

If the prediction is realized, however, Canadians should not expect the lower inflation rate to result in lower costs of living. That would happen only if the Bank made the money growth rate negative, something history suggests is unlikely because it usually resulted in recessions. How much better it would have been if the inflation genie had never been allowed out of the lamp.

Herbert Grubel and John Greenwood

Published by the Fraser Institute Blog :

 https://www.fraserinstitute.org/blogs/bank-of-canada-missteps-helped-fuel-todays-inflation

A GREAT CAFP TRIP TO TAIWAN, HONG KONG AND MACAU

 My wife Helene and I just returned from a two-week trip to these three areas. We were members of a group of 7 former members of the Canadian parliament (all Conservatives, except for one NDPer) and 6 of their spouses and friends. 

The trip was managed by the Canadian Association of Former Parliamentarians (CAFP), which you should know, did not subsidize it. The CAFP secretary Carolina Moore accompanied us and made sure we made all our appointments and that all the bills were paid.

The itinerary and logistics of the trip were handled by Chungsen Leung (CS), with the assistance of Dorothy Dobbie. CS was Parliamentary Secretary in the Stephen Harper government, serving Jason Kenny, the Minister of Immigration, Citizenship and Multiculturalism. Dorothy Dobbie was Parliamentary Secretary with for different ministers in the Brain Mulroney government. Both CS and Dorothy lost their seats in the 2015 election.

CS was born and raised by a family that came to Taiwan with Chiang Kai-shek who fled the mainland of China after his defeat by Mao in 1949. CS earned degrees in political science and commerce at Carleton University and engineering at the University of Southern California, pursued a successful career in business that often took him to the three countries we visited. He became a Canadian citizen in 1976 and in 2011 he was elected to parliament.

CS drew on his personal and professional background to arrange this trip that he believed would increase our understanding of the culture, politics, and economics of the region and lead us to share this information with friends, family and importantly, influential Canadian politicians we know. His effort created a most informative and interesting itinerary involving a good mix between visits to interesting tourist spots, cultural landmarks, economic establishments, and meetings with political office holders and government officials.

THE FLIGHTS AND OUR GUIDE

The trip’s flights were on EVA Airlines of Taiwan (its privately owned national airline), which used seemingly brand new Dreamliners and the world’s longest plane the 777, very efficient staff and fine meals to serve us. For the first time in ages, we got to use real steel knives and forks to eat our meals. I guess we were just lucky. No one tried to use the knives to hijack the plane.

The overnight nonstop flight to Taipei took eleven hours from Vancouver and 15 hours from Toronto. Somewhat disoriented after landing, we were met by our mother hen, Ting, who provided us the best tour service any of us had ever experienced. She spoke English well, was superbly organized, helpful and informed about the places we visited. Museums tend to bore me after a short time, but Ting made near three hours at the National Palace Museum of Taiwan fly when she took us to a limited number of culturally important items and explained their historic and artistic significance. This museum is an unrivaled collection of the best Chinese artifacts in existence. Chiang Kai-shek had brought them to Taiwan when he fled the mainland in 1949.

Early during the trip, we learned the value of having Ting as a guide. She made us leave the hotel for the museum at 8 am to avoid the large crowds arriving there later in the morning. When we left the museum in the middle of the day, about 20 large buses were in the parking lot, all on tours organized by gigantic cruise ships in the harbor. The exhibits in the museum by that time were uncomfortably crowded.  

HOTELS AND TRANSPORTATION

During our trip, a large comfortable bus (built by MAN, a German company) took us everywhere in Taiwan. We stayed in first-class hotels there and Hong Kong, except for one in a national park in the mountains of Taiwan, which is run by an indigenous tribe and was slightly less luxurious. It is known for serving a dish of meat of farm-raised wild boar, Taiwan spotted deer, wild pheasant, and rabbit. We all much enjoyed the barbecued boar.

All hotels we stayed in served great breakfast buffets with dishes for both Chinese and Western guests. I did not become a fan of Chinese breakfasts, but Helene did.

The Grand Hotel in Taipei was home for nine days. It is one of the grandest hotels we have ever seen, no less stayed in. Its design is based on a Chinese palace with decorations in red, gold, and purple, which were used traditionally in palaces of Chinese emperors and many temples.

The hotel was built in the 1950s, has 12 floors, a 10-lane swimming pool and four tennis courts, overlooking Taipei from a small incline. It can hold 600 guests in very large and modern rooms with gigantic porches. It has a very large dining room. The decoration is classic Chinese, with as we were told, over 210,000 images and sculptures of dragons of all sizes.

We visited a tunnel that was built to allow Chiang Kai-shek, who lived there for many years, to escape in case of a Chinese invasion. Photos along a wall show the many celebrities who have stayed there in the past, Eisenhower, Lee Quan Yew, Elisabeth Taylor, Richard Burton, just to mention a few. On a weekend we witnessed the wedding of 50 couples who were employees of Taiwan’s largest telephone company, an event sponsored by the company and taking place periodically. The company has a supply of Western wedding dresses that are used for the purpose.

Ting took us to lunch regularly in large restaurants with sometimes more than 300 seats used by Taiwan’s flourishing tourist trade. We sat at turning tables large enough for all 13 of us. The many dishes from a pre-set menu were good, even for my Western taste.

I think that the set menus unfortunately usually provided more food than we needed.  CS explained the reason for this. The Chinese feel that if there is any food left over, not enough was served and they are ashamed for not having given guests their money’s worth. I have learned that in fact left-over food is usually packaged and sent to the less fortunate but is destroyed for sanitary reasons if it has been picked over.

Evening meals, most of the time, were arranged in more sophisticated venues and served more reasonable amounts of food, along with wines and the usual, good Taiwanese beer, which is brewed using German recipes that first reached Asia in the early 19th century.

The best evening meal was served in the China Club in Hong Kong, where we had our farewell banquet. It is an old, British style colonial club that did not allow Chinese patrons until after WWII and is now owned by the Bank of China. CS somehow managed to get us invited. The food and drink were excellent, the club’s décor transported us to the 1930s with interesting historic pictures on the wall, (many showing Mao), the waiters wearing colonial style uniforms and a small band playing Western music. The food and drinks were a nice fusion of Chinese and Western cuisine.

THE COUNTRY AND ECONOMY

Taiwan in an island the size of the Netherlands with a population of 23 million, 95 percent of which are ethnic Han Chinese, 2.5 percent are native and 2.5 Pacific Islanders, the same stock of people as the indigenous New Zealand Maoris and the Malays.

The climate is tropical-to-temperate with average temperature of 18 degree Celsius in January and 29 Celsius in July, when day temperatures can be in the upper 30s with high humidity. Portuguese sailors from Europe visited the island in 1400s and are believed to have named it Illa Formosa, the beautiful island. The land outside the cities and cultivated areas are covered with a thick growth of tropical vegetation. 

Taiwan is on the Pacific ring of fire and has many earthquakes, which explains why all larger buildings and the many elevated freeways have concrete columns that are one to two meters thick, and very deep foundations reaching bedrock. The collision of the earth’s plates is responsible for a high mountain range that covers the eastern third of the island, with the highest peak reaching 3,000 meters, occasionally sporting snow enough for skiing.

The country’s economy during the last 50 years or so thrived under democratically elected governments and free markets with protected property rights and wise public investment in infrastructure, education, science, and technology. It has 137 universities and colleges with 172 thousand students in Masters, and 29 thousand in PhD programs. According to the Ministry of Education, the country’s total number of doctoral degree holders in 2015 was estimated to be over 130,000. This number has grown steadily over the past decade.

Several important indicators of free markets and the success of its government policies encouraging the development of science-based industries are that the country ranks 6^th on Economic Freedom and 7^th on Competitiveness in the world; its per capita income is equal to that of Poland and Sweden, per capita income adjusted for PPP is equal to that of Austria and the Netherlands at US$59,398.  In the second quarter of 2023, Taiwan Semiconductor Manufacturing Company (TSMC) recorded a market share of 56.4 percent in the global semiconductor foundry market. Taiwan ranks 14th in global trade, 4th largest trading partner for Canada after the United States, China, Japan, and South Korea.

Cars on the road in Taiwan are about half each from Japan and Korea, with a few German luxury cars. The traffic is heavy during the day and very congested during rush hours, despite an abundance of freeways, some subways and many public buses. The traffic is disciplined. Blowing horns are rarely heard.

We noted one interesting technical innovation guiding traffic. A tunnel through the mountains about 10 kilometers long was opened recently. Every 250 meters, a sign indicates the minimum speed of 70 km per hour. Ting told us that cars travelling at a slower speed are reminded of their violation over a loudspeaker at the next sign. The purpose of the system is to maintain the tunnel’s optimum flow-through. Maximum speed limits are not posted!

Taiwan’s downtown streets are lined with small stores serving many goods and services. One of them has a large sign in front saying GOD. I was unable to discover what it was selling but we have a photo of it taken from a distance. The 7-Eleven chain of stores in very large numbers meets most of the public’s demand for groceries and simple meals. McDonalds and Pizza Huts also operate some restaurants. We saw signs advertising Amazon and Costco.

One of my interests as an economist is in the way countries organize their universal public health care systems. Canada has one of the costliest systems operating with the longest wait times for diagnostics and treatment. In Taiwan and Hong Kong our guides told us that their populations were satisfied with the services they received from their systems. For me, the most important difference is that these countries charge patients modest visiting fees while Canada does not. This information is available in relevant publications but I found it interesting to have people with actual experience using the health care systems report how it works and how it affects them. My belief in the benefits of user fees received another boost.

VISITING TOURIST SPOTS

During the first two days after our arrival in Taiwan, we were deliberately treated to sightseeing trips that put little burden on our brains and energy and allowed them to recover from jetlag caused by the long hours of flight from Vancouver and the 8-hour time difference.

The mountains in the north-east of the country are spectacular with slopes so steep that in the Alps they would cause serious avalanches. In Taiwan they cause raging floods during the monsoon season and occasional typhoons. We visited some places where the sides of the mountains were near vertical, some hundreds of meters tall and close together, creating most spectacular canyons through which rivers rage with tremendous force during the rainy season. During the current dry season, we saw many large white boulders at the bottom of the rivers. They are marble, which used widely in construction and artwork. We saw many varieties of beautiful birds and butterflies that exist only in Taiwan.  

The tallest building by far in Taipei is the “101”, an office tower, you guessed it, 101 stories tall and for a while the largest building in Asia. We rode to the top in a fast elevator and had a good view of the city, but the facilities were much the same as in tall towers in other cities of the world. The only difference was that, because of Taiwan’s frequent earthquakes, near the top of the building a huge ball made of iron was hanging there to keep the building steady when the earth shakes. At the end of our trip, we visited Macao, whose landmark tower boasts the world’s highest bungy-jumping facility, which we watched with interest as the jumpers flew past our window at free-falling speed, with the mouth open, probably emitting a long scream we could not hear. No one in our group took the opportunity to acquire bragging rights for having done the world record bungy jump. We all lived.

Another tourist spot visited was a small coal-mining town that lost its industry and was about to be abandoned, when someone came up with a very profitable idea. Produce, and for $20 sell paper bags about four feet tall and two feet across, use a small frame to keep them open, put some flammable material at the bottom of a frame to keep them open, light the flame, see the bag bulge with hot air, rise and get carried away by the wind.

The four sides of the balloon carry requests written by the buyers: Happiness, Riches, Babies etc. that their launch is expected to fulfill. Helene and I can report that all our wishes were met. And we are glad to know that residents of that town are paid for finding and returning the scarred remains of the balloons from where they had landed, preventing pollution of the environment. Many tourists launching balloons are saving the town from oblivion.

A trip to the coast north-east of Taipei brought us to spectacular geological formation shaped by the ocean but also to a spot with a disturbing history – a recently abandoned copper mine with some of its buildings still standing. The river flowing from the mine site into the ocean is so polluted with mine tailings that it discolors the water over a large area. The discoloring attracts many tourists for which a tall viewing stand has been built at the water’s edge. Apparently, no plans exist to clean up the mine-site.

Equally memorable is one part of the mine’s history. During the Second World War, the Japanese government used prisoners of war to produce copper needed for the war effort. 1,600 prisoners became mine workers, only 200 left the mine alive. The rest died from hard labor, illnesses, and starvation.

TAIWAN INDUSTRY

One day we visited Hsinchu, the region about an hour drive southwest of Taipei in which the semiconductor industry is located. CS arranged for us to get there by a high-speed train, which left us impressed by the sophistication of Taiwan’s transportation infrastructure, much as he had planned.

Our bus had driven to the local train station and took us to the area in which the semiconductor plants are located, the most prominent of which is TSMC. The landscape is flat and served by a large network of roads used by few cars. It is dominated by large, cube-shaped buildings set wide apart, virtually without windows and built of the concrete seen everywhere in the country. Grand driveways lead to imposing entrances.

The configuration of these buildings is dictated by the need to produce semiconductors in rooms where the interior air is 20 times cleaner than ambient air. The production of each of these electronic marvels in this super clean air takes about 10 to 15 days and involves embedding millions of tiny transistors in as many as 100 layers of silicon. They are in great demand by industry around the world, including weapons manufacturers.

The production process requires much electricity and water, but most important, highly skilled workers. The high income of these workers explains why fancy passenger cars from Germany are seen much more often than they are in the rest of the country.

Our group visited a large, gleaming, modern office building housing the Hsinchu Science Park. The director of the institution told us about the key role played by research and development in the maintenance of the local industry’s global leadership. This work is coordinated by the institution he heads and is financed by the independent chip producers and by the government.

Brought up was also the important role played in the success of the industry by the availability of highly trained scientists, many of which have PhDs in science and engineering. Despite large university training programs and opportunities for study abroad, the industry is booming so much that seemingly there always is a shortage of workers.

It is interesting to note here an abbreviated account of the role played by Morris Chang in the creation of TSMC and the semiconductor industry in Taiwan. He was born in China in 1931 and emigrated to the United States in 1949 where he studied at Harvard, MIT and Stanford. He earned a PhD degree in electrical engineering at the last university. He was employed by Texas Instruments, where he became the head of the engineering division. In 1987, after having served as the leader of a government sponsored research institute in Taiwan for a few years, he founded TSMC, drawing on his research experience and work with Texas Instruments. The outstanding, global success of the Taiwan semiconductor industry owes much to Morris’ leadership.

The importance Taiwanese society attaches to high levels of education became clear to us as we had the privilege to have a meeting with the mayors of Hsinchu and Taiwan. The former is a woman with a PhD in electrical engineering from the University of Cincinnati. The latter is a man with a law degree from the University of Pennsylvania and a PhD in Business from Drexel University. Both spoke informally in perfect English, but interestingly, during the formal address, they spoke mandarin translated into English for us, which according to CS is practice commonly used in all Asian countries.

While it was interesting to see the meeting chambers for city politicians and observe the ceremonial process around their talks, as well as their skillful handling of questions, the substance of their talks was not particularly informative and more suitable for possible investors and future residents of these cities than for me and most in our group.

We visited two successful businesses that were started about 40 years ago by courageous local entrepreneurs. One produces Scotch whisky sold under the Kavalan label. The production facilities are modern and large. We saw enormous stainless-steel vats and rooms filled with hundreds of barrels containing aging whisky. Sales of the whisky are in Taiwan and mainly other Asian countries. This commercial success is explained officially by the factory’s access to a reliable supply of good water flowing from the large mountain range nearby. Helene and I bought samples of whisky from barrels of different age and wood at rather high prices, but since we are not connoisseurs of the brew, we could not decide that the company’s success is based on superior quality. Still, we were impressed that a semi-tropical Asian country could become as successful as it did in an essentially Scottish industry.  

The second factory we visited also was founded about 30 or 40 years ago. It produces carvings made of jade and marble, stones which are found readily in the nearby mountains. These stones are used in jewelry and in artistically stunning figures of animals, buddhas, other humans, vases, and furniture. The color of the carvings ranges from the deep green of jade to multi-colored, mostly white marble.  

These carvings are displayed in large showrooms and many of them are of a quality suitable for museums. Their prices are not displayed but we discovered quickly that we could not afford any of them, no less pay the cost of shipping them back to Canada. The parking lot for the show room is very large, the staff is numerous, well-informed, and courteous. The commercial success of the firm is great and obvious. I wished I knew who the buyers are and where they live. Nouveau riche from China, who came to Taiwan in large numbers before the development of recent political tensions?

MEETINGS WITH POLITICIANS AND CIVIL SERVANTS

I already described our meetings with the two politicians who serve as mayors of Hsinchu and Taipei. After we left the meeting in Hsinchu, we learned that its mayor was under investigation for corruption, allegedly for having her husband on the payroll for work he was not doing. Her demeanor did not reflect her troubles, which are alleged to reduce her chances to becoming a major player in national politics.

Mayors of Taipei have several times in the past become the Presidents of Taiwan. The appearance and manners of the present mayor who addressed us suggested to me that he may well end up in this highest political office.

We had a meeting with several employees of the Taiwan Ministry of Foreign Affairs and former, now retired ambassadors to Canada. They told us about the country’s achievements and challenges. I was much impressed by their accounts, but the most fascinating topic discussed involved the threat of invasion by the PRC.

The important conclusion I took away from these discussions is that highly educated and sophisticated people cannot agree on the seriousness of the threat. On one extreme is the view held by some that no invasion will ever take place because the costs to the PRC would be too high and the returns not worth it.

On the other extreme is the view that an invasion could take place if China suffers major domestic problems, which cause its leaders to use foreign conflict to rally the population, as political autocrats have done many times in the past. This conclusion was given weight by the observation that China currently suffers serious problems in the housing industry, slow economic growth, and youth unemployment at around 30 to 40 percent.

All commentators suggested that, at any rate, the government of Taiwan would be wise not to provoke China unnecessarily with domestic and foreign policies that challenge the status quo.

In the end, I did not learn anything that was new to me concerning the basic issue, but the widely differing views expressed by people who should be well informed about it led me to appreciate, more than before, that we live in a complicated world of great uncertainty and many risks, and to be sceptical about the wisdom of anyone who thinks he or she knows when and how it all will end.

TRIP TO HONG KONG AND MACAO

Hong Kong is two hours from Taipei by plane. We flew there on November 4^th and were once again met by a competent professional guide and a bus. The HK airport is as impressively large and modern as I remember it from previous visits.

We were taken to the Harbor Grand Hotel in Kowloon, a recently renovated, modern high-rise building at the edge of HK harbor with a great view of the city and ship traffic. It is a couple of kilometres from downtown Kowloon and was chosen by CS because the rooms cost only $300 rather than the $500 there.

The city was much the same as it was during my last visit, when Jimmy Lai took me for a ride on his yacht for a lunch, swim, and discussions with a group of prominent local politicians. I was saddened knowing that Jimmy was now languishing in a Chinese jail, accused of subverting some laws China had passed to control its politics and development, and that his publishing empire had been destroyed.

We visited some local tourist spots and had an emotional ceremony at the Canadian War Cemetery a few days before Canada’s Memorial Day. The highlight of the Hong Kong visit involved a trip to a small, remote fishing village known as Po Doi O in Cantonese, located in the New Territories, at the end of a windy road to a small scenic bay.

We reached this place driving through an area in which are located some single-family homes on a single lot, resembling conditions found in North American cities. We walked a short distance from the end of the road to a wild set of small buildings seemingly in need of repair, surrounded by fishing gear and boats. In the center of the village are two restaurants. They are totally untouched by the modernity of Hong Kong and operate large aquariums filled with live, locally caught fish, lobsters and mollusks thriving in a heavy flow of water from the bay.

These creatures were the main ingredient in an unforgettably tasty menu of seafood in one of the two restaurants, served in a simple room open to the flow of air from the bay. The restaurant’s reputation is warranted, and its commercial success was obvious to me when I saw a large rack of wine bottles imported from Europe, obviously for many guests like us rich enough to buy them. A few bottles of these wines complemented the outstanding dinner dishes. The simple environment was a nice change from that in the more sophisticated and efficient restaurants we had visited in Taipei and Hong Kong.  Special thanks to CS for taking us to this place.

Richard Wong, Professor of Economics at the University Hong Kong, who earned a PhD in economics from the University of Chicago, a few years after I had left there, and whom I had met on several occasions at international gatherings of economists. He gave us an informative talk about conditions in Hong Kong while we all ate breakfast at the Harbor Hotel. The highlight of this talk for me was his explanation of the existence of a labor shortage in the country, which is responsible for the shortage and high cost of local hotels.

He blamed the labor shortage on severe restrictions on immigration from the mainland, which in turn have been imposed to limit the shortage of public and high prices of private housing. Efforts are under way to remedy the housing problems using a unique strategy.

All land in HK is owned by the crown. Private builders are invited to develop building projects that involve the construction of two 30-story (or more) towers for public housing (mostly 150 square feet per apartment), and the construction of one such tower for private apartments, which the developer can sell in sizes and at prices determined by free market competition. The government does not charge the developers for the land but expects them to use the profits from the sale of the private housing units to pay for the cost of constructing the public housing. Richard stressed that while this model works in HK, it cannot work in other jurisdictions where suitable building land is owned privately.

A major cause of the labor shortage in HK is rooted in its history. According to Richard, some years ago, when it became possible, many unmarried HK male residents travelled to China and married young women, most of which lived in rural areas. The newly married couples lived in public housing. Recently, the husbands in these marriages have died of old age and left the wife the owner of the apartment, which they are unable to sell for a profit under existing regulations. These women pay very low rents, enjoy a public pension and income from assets left by their deceased husbands. They do not have to work. Richard considers them to be rentiers. The labor shortage is also increased by the fact that many young people are working as real estate agents, where they are earning high incomes, living also like rentiers.

One morning while in HK we travelled to Macao, a former Portuguese colony, now a part of China but with limited autonomy and borders controlled by the PRC. A few years ago, I had visited Macao, travelling there from HK on a high-speed ferry. This time the trip was on a bus using the world’s largest bridge, which is 52 km long with a few tunnels constructed to allow the passage of vessels going to and from Chinese harbors.

The hour-long drive was boring but the infrastructure serving bus passengers at both ends of the drive is very large and modern. Macao government agents deal with visitors and returning citizens in a hall in which 50 customs agents can do their work, facing possible line-ups of thousands of travellers.

Alas, this facility was virtually empty. Covid had stopped all visits. Our guide told us that we were the first group of more than ten visitors his company has serviced since the end of the epidemic. However, the many casinos with names indicating Las Vegas ownership appear to do well. They now charge visitors $100 even if they just wish to see the gaudy facilities. We skipped that opportunity, which during my visit a few years ago cost nothing.

The tourist part of town is small and very touristy around the ruins of an ancient church and Portuguese fortification. An ancient temple turned out to provide most interesting experience. Parked outside in a no-parking zone was a white Bentley with a driver at the wheel. The car was probably owned by an actor involved in filming in the plaza in front of the temple.

The Taoist temple offered an interesting contrast. It contains many opportunities to buy and burn incense, some several inches in diameter and tall as a human. A small oven, shaped like a pagoda, provided a young couple the opportunity to burn in it fake paper money and replicas of a car and house. We were told that his custom is to provide a recently deceased person with things for the afterlife that he or she had most treasured while alive!

From the top floor of Macao’s tallest tower, the guide pointed to concrete pill boxes lining at regular intervals the Chinese shore of the river dividing the two countries. These facilities were staffed by soldiers with rifles, who shot anyone trying to cross the river into Macao. Border guards on the Macao side of the river are authorized only to send back anyone making to their side. This practice shows again the irony that the socialist/communist workers’ paradise with perfect equality of income faces the need to prevent their citizens from leaving for capitalist countries where workers are allegedly exploited by employers and incomes are criminally unequal.  

A visit with Rachael Bedlington, Consul General of Canada in Hong Kong and a senior member of the consulate’s staff provided us with interesting information about conditions in the territory under the new laws imposed by China but was unwilling to give us her personal views on the likelihood and timing of China ending the special status of HK and annexing Taiwan using military force.

THREE NOTABLE CHINESE CUSTOMS

I came back from our trip impressed by three interesting, uniquely local customs.

First, we visited the Lin Manson Mansion and Garden in Taipei. It was built in the middle of the 19^th century. Ting explained that many of its architectural features were shaped by the desire of its owners to obey rules of Feng Shui, which translates into Wind and Water, both important elements of life and designed to create balance between ying and yang, good and evil, and to appease malevolent spirits.

This desire is alive today and, as one example, leads to the absence of the 4^th floor in our hotel, the towers we visited and other buildings. The number 4 stands for “death”. On the other hand, the number 8 stands for “good fortune, wealth and prosperity”. I already noted the burning of paper money and effigies to please deceased relatives.

I find it surprising that the modern HK and Taiwanese society relies on such examples of what I would call irrational practices when, on the other hand, it fully embraces modern science and rational analysis of real-world phenomena. I wonder how widespread, economically costly, and important in practice is the use of Feng Shui in Taiwan, HK, and China and among the Chinese diaspora in Canada, where dwellings with street numbers containing the number 4 can be found to sell for less than comparable dwellings in the immediate neighbourhood and sometimes the number is replaced with the permission of local authorities by such hybrid number 3-5.

A second surprising cultural feature of the country is that every member of our group was presented with a gift at the end of every visit, for example attractive wooden boxes containing cans of expensive tea, electronic gadgets, ceramic cups and saucers, and neckties for men and scarves for women. The gifts are meant to be enjoyed and a lasting memory of our visit to Taiwan. Helene and I had to buy an additional suitcase to take home the loot. We are still trying to decide what to do with it.

Finally, Helene and I for the first time in our lives attended an event that closed with karaoke singing. It took place in a large building of the Overseas Chinese Association, which provides a cultural link with the Chinese diaspora in many countries of the world, which has a common culture, and educational, family and clan relationships. At the end of a fine dinner and drinks, the host sang a Chinese song with recorded background music playing, and the song’s words and a sexy dancer appearing on a 30-foot-wide screen.

We could not sing along but felt the room’s atmosphere getting lighter and happier. After many invitations to take a turn singing and with the encouragement of some wine affecting my judgment, I responded by offering to sing “I did in my way”, hoping that they did not have the song in their library. In the end, they did, and I belted out the words appearing on the screen and accompanied by a good jazz band. Everyone in the room joined the singing at volumes so high that I am certain no-one actually heard my singing. My reputation as a singer has survived.

We all left the venue on an emotional high. Helene and I will try to get our family at the upcoming Christmas gathering to join in a rendition of “I did it my way”, hoping to make this Christmas even more memorable than those in the past.

We enjoyed this CAFP study trip very much, just as we had previous trips to Malta and Vietnam. Our experience made us appreciate even more the privilege of living in our great country but also raised our understanding of the complexity and richness of the world we live in, and how really small part of it we are. Some of our current politicians in government might benefit from such a learning experience.

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