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No matter the politics, Trump’s wall could provide jobs, stimulus if recession strikes: Don Pittis

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If a U.S. recession is around the corner, the construction of President’s Donald Trump’s wall on the Mexican border could be an economic godsend.

Last week, the world’s most powerful central banker, U.S. Fed Chair Jerome Powell, assured us that economic growth would continue in 2019. Bank of Canada governor Stephen Poloz has been similarly optimistic.

But the forecasts after that are more cloudy.

The International Monetary Fund has already warned that the world is unprepared for the next slowdown, and the Organization for Economic Co-operation and Development (OECD) has recommended countries dust off plans for fiscal spending when recession hits.

Self-inflicted illness?

It may be that for Trump, if such a slowdown comes, it will be an example of economic Munchausen syndrome — a self-inflicted condition caused by his “easy to win” trade war with China and others.

But whatever the cause, fighting recession with big infrastructure spending projects has a long tradition around the world. 

The creation of the Promenade des Anglais, in the French Mediterranean city of Nice in the 1800s, was an early example, when wealthy English residents contributed to build a shoreline walkway to provide jobs for the unemployed and to get beggars off the street.

In the Dirty ’30s, governments organized similar make-work projects, including the deepening of Regina’s Wascana Lake, using shovels, wheelbarrows and more than 2,000 labourers.

An early plan by English architect Thomas Mawson for a giant park in the centre of Regina at Wascana Lake. In the 1930s, the lake was deepened and reshaped using shovels as a make-work project. (Saskatchewan Council for Archives and Archivists)

More recent projects have been much bigger. Before the handover of Hong Kong to China in 1997, the Hong Kong government launched a multibillion-dollar infrastructure project to build a new airport, port and road connections, to boost the economy despite uncertainty during the transfer of power.

And according to Canadian research, such spending really works. In the construction phase alone, infrastructure projects multiply the value of the taxpayer money — ​or government borrowing — that’s spent.

“Spent money on infrastructure generates, in addition to economic benefits like short-term employment and things of that kind in construction, … positive net flow to the government,” said Michael Fenn, a visiting fellow at Western University’s Ivey School of Business and former head of Ontario transport agency Metrolinx, who has been described as an “infrastructure guru.”

“The fiscal dividend for infrastructure is something like $1.60 for every dollar spent,” said Fenn.

That doesn’t include such advantages as preventing the dispersion of workers or keeping their skills fresh during a recession. And it doesn’t include the future stream of benefits to society from the project after it’s completed.

Fiscal dividend of the wall

Even at $1.60 to $1, it’s still not clear how much stimulus constructing a wall would add to the U.S. economy — partly because the amount to be spent remains confusingly disputed.

Trump’s request of $5.7 billion means it wouldn’t make much of a difference to the gigantic U.S. economy during a recession. But then neither would it make much of a wall.

Research by the Brookings Institute puts the figure as high as $70 billion, which really would create plenty of make-work jobs.

Hong Kong’s Tsing Ma suspension bridge is shown under construction before the 1997 handover of the Crown colony to China. It’s an example of stimulus with a large, long-term return. (Reuters)

There are at least two problems with the wall as a make-work project. One is that if the project really did start soon, before recession hit, there might not be enough workers to build it. (The irony of importing labourers from South and Central America to do the job would be too much.)

With U.S. unemployment at the lowest it has been in nearly 50 years, building a wall now could very well drive up inflation, giving the Fed one more reason to raise interest rates.

The other issue to be considered is long-term value creation, which studies consistently show can be the biggest payback for infrastructure spending. On well-chosen projects, it dwarfs the immediate $1.60 to $1 ratio of the original stimulus.

Money well-spent?

Sometimes the stimulus itself is well worth the money spent. The long-term benefit — as in the esthetic advantage of the Promenade des Anglais or Wascana Lake — may be hard to measure. 

Jackie Schmidt, president of Heritage Regina, says the beautification of the enormous artificial lake in that Prairie city was worth the money. “I think the product was worth it, no matter how you paid for it.”

But it’s not clear if anyone would spend the money the same way now.

The economic payback of Hong Kong’s giant construction project was easier to measure, maintaining the former British colony’s place as a transport hub, even while mainland infrastructure grew up in competition.

The long term value of a wall?

Trump’s belief that it would be a barrier to drugs or terrorism has been widely discredited. There might be a certain economic advantage in making Trump supporters feel more secure — though that is hard to measure.

And should the existence of a wall prove to be a deterrent to would-be border crossers, the humanitarian benefit of reducing the number people who die in the desert would certainly have value.

Building a wall along the U.S.-Mexico border would create jobs, but it might not add as much value as other would-be infrastructure projects. (Kevin Lamarque/Reuters)

But even in a recession, the value of a make-work project must be assessed in many ways.

“The first question you would ask is, ‘Is this the best way to address the issue?'” said Fenn. The second critical question, he says, is among all possible projects, does this one provide best value for money?

“In Canada, a project like the wall would compete with a whole lot of other things in health care, education, transportation and telecommunications to see where the money was best spent.”

Andy Manahan, executive director of the Residential and Civil Construction Alliance of Ontario, says his members profit from construction spending — whether it is wise or not.

For the best projects, the value of doing such things as removing transportation bottlenecks or preventing costly flooding can be easily shown to pay their costs back many times over in increased business activity or reduced future expenses.

“On the other side of the coin, if you do short-term political thinking,” he said, “then you may be spending on projects that have a negative return, which you don’t want.” 

Based on his long experience in the industry, Manahan said he suspects that Trump’s wall is of the second variety.

“My personal opinion is that it’s a waste of money and time.”


Follow Don on Twitter @don_pittis

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Future of Ottawa: Coffee with Francis Bueckert

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Francis Bueckert: When it comes to the current landscape of coffee-roasting companies and independent cafes in Ottawa, I think we are at a really interesting moment in time. There are more local roasters that are doing artisanal small-batch production—with more attention to the quality and origin of the beans.

With larger corporations such as Starbucks closing locations, it has opened a bit of space for local players to grow. We have been lucky to work with many folks in the coffee-roasting community, and we have found that there is a willingness to collaborate among different coffee roasters. For example, when Cloudforest started back in 2014, we were roasting our coffee at Happy Goat and it was the expertise of their head roaster Hans that helped me learn how to roast. Other companies such as Brown Bag Coffee have also lent a hand when we needed extra roasting capacity. There are others, such as Lulo, Mighty Valley Coffee, Bluebarn, The Artery, and Little Victories that are also part of the growing local coffee community. It’s small roasters like these who have shown me what a coffee community can look like, and that we can help to elevate each other, rather than being locked in competition.

If you care to make a prediction… What’s happening to the local café industry in 2021?

We believe that there is hope and that 2021 can be a big pivot year for small roasters and cafes.

This year will not be ideal from a business point of view. However, it could create a shift in people’s attitude toward where they get their coffee. We are holding out hope that people will support the roasters and cafes that are local to help them economically survive what is in all reality a very difficult time.

It all depends on where consumers decide to go this year. People are starting to recognize that supporting large corporations at this moment will be at the cost of the local roasters and cafes. There is the growing realization that a future where there is only Amazon, Walmart, and Starbucks would be pretty bleak. So we have an opportunity this year to support the kind of local businesses that we want to see thrive.

In your wildest dreams, what will the landscape for local coffee roasters and cafés look like in your lifetime?

In my wildest dreams, all of the coffee roasters and cafés would be locally owned and independent. They would all be focused on direct trade and artisanal coffee. Each different coffee roaster and café would know exactly where their coffee came from. Ideally, each company would be a partnership between the farmers who grow the beans and the people here selling them. There would be a focus on how to cooperate and collaborate with the farmers in the countries of origin to share the benefits around. We would all work together and share orders of cups, lids, and other packaging so that we could get better bulk pricing. In this way, we would make our local coffee community so efficient that the large corporate coffee companies wouldn’t even be able to compete.

We would also like to see people use coffee as a way to create social good. For example, we started Cloudforest as a way of helping support farmers in Ecuador who were taking a stand against large mining companies. This remote community stood up to protect their environment, so that they could have clean drinking water and soil for the next generation. They started an organic coffee cooperative to help show that there are other models of development, and we are doing our part year after year to help support their vision. They have a vision of development that does not include mass deforestation and contamination, and organic coffee is a key (among others) to show that another way forward is possible.

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Special events in the Ottawa Valley dominate annual OVTA tourism awards

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The Ottawa Valley Tourist Association hopes that its annual tourism awards will provide a little sunshine during what is a dark time for local tourism operators because of the pandemic.

The Ottawa Valley Tourism Awards are presented annually by the Ottawa Valley Tourist Association (OVTA) to individuals, businesses, and events that recognize the importance of working together for the growth of the local tourism industry, as well as offering exceptional visitor experiences.

“After a year that saw a lot of businesses in the hospitality and tourism industry being challenged like never before, the annual Ottawa Valley Tourism Awards represent a bit of light on the horizon” said Chris Hinsperger, co-owner of the Bonnechere Caves.

The Ottawa Valley Tourist Association’s (OVTA) Awards Committee co-chairpersons, Meghan James and Chris Hinsperger, said they were very pleased with the recent nominations received, especially in the Special Events category. Submissions were received for The Farm to Fork Dinner Series at the Whitewater Inn; Light up the Valley; The Eganville Curling Clubs’ Rock the Rings; The Ontario Festival of Small Halls ; The Bonnechere Caves On-line Underground Concert Series; The Opeongo Nordic Ski Clubs’ Ski Loppet; The Tour de Bonnechere — Ghost de Tour 2020; and The Bonnechere Caves Rock ‘n Roll Parking Lot Picnic.

“During a time when communities were challenged, it is nice to see that people still made an effort to get together and celebrate, albeit under certain conditions. It just shows the creativity and resiliency of our tourism Community here in the valley” said Meghan James, director of sales at the Pembroke Best Western.

There are three Award categories: The Marilyn Alexander Tourism Champion Award, The Business of Distinction and The Special Event of the Year.

Hinsperger, is excited about this year’s awards.

“During this pandemic the hospitality and tourism industry was the first to be hit, was the hardest hit and will be the last of our industries to fully recover. As Valley entrepreneurs we owe it to ourselves, to our businesses and to our communities to be an active part of that recovery. Our livelihood and economic recovery depends on our efforts. And we will get back to welcoming people from all over the world to share a little bit of the place we are privileged to call home. This awards process leaves myself and others fully optimistic about our positive outcomes.”

Award winners will be announced at the Ottawa Valley Tourist Association’s virtual annual general meeting on Monday, May 31.

The OVTA is the destination marketing organization for the Upper Ottawa Valley and proudly represents more than 200 tourism businesses, comprised of attractions and outfitters, accommodation, food, beverage and retail establishments, artists and galleries, municipalities, as well as media and industry suppliers. The OVTA is supported by the County of Renfrew, Renfrew County municipalities and the City of Pembroke.

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Future of Ottawa: Farming with Jeremy Colbeck

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Jeremy Colbeck: Well first, let’s talk about what we mean by farming. Although farms, and farming as an occupation, are in decline across Canada, they are still a major part of our rural landscape. That’s even more true for a strange city like Ottawa which includes a LOT of rural areas and whose urban boundary takes, what, three hours to cross? About 40 per cent of the rural land in Ottawa is farmland. Most of that farming is corn and soybean cash-crop, as well as some dairy and livestock farming. That’s mostly conventional farming (the kind that is profitable but not exactly where you take your kids on a Saturday).

There are also a lot of agri-tourism businesses in Ottawa, which give you that oh-so-good Saturday spot for family donkey-petting and apple-picking. And it’s totally understandable from a business perspective, but sometimes surprising to find out, that even though they grow some of the Christmas trees they sell, they might also be reselling some that come from much larger farms far away. The farmland around Ottawa is also inflated in price because of its proximity to the city, where it is in demand by would-be hobby farmers—folks who want to do some farming on their property in their spare time but make their money (to subsidize their small-scale farming habit) elsewhere. Unfortunately, many of these properties will have large mansions built on them, which will then make them completely unaffordable for the average farmer

There’s also a segment of small-to-medium-sized Ottawa farms that grow “premium” (artisanal, unique, extra-fresh, ecologically- or organically-grown etc…) products that they sell directly to local eaters via farmers’ markets or other direct marketing channels, including on-farm stores and farm stands. That’s where BeetBox fits in.

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