April 13, 2021 – 9:30am Professor James Brander, Topic: Post-Pandemic Economic Recovery ZOOM

 Professor James Brander Asia Pacific Professor of International Business at UBC’s Sauder School of Business

James Brander is the Asia Pacific Professor of International Business in the Strategy and Business Economics Division of the Sauder School of Business at the University of British Columbia (UBC).

Professor Brander received a B.A. in Economics from UBC in 1975 and has Masters (1978) and Ph.D. (1979) degrees in Economics from Stanford University. He taught for four years at Queen’s University before returning to UBC as a faculty member, where he has been since 1983. He served as Associate Dean for Faculty in the Sauder School for the 1999-2003 period.

His main areas of research include international trade, business strategy and competition policy, and entrepreneurial finance.

Professor Brander served as managing editor of the Canadian Journal of Economics for a 4-year term and as a co-editor for the Journal of International Economics for two 3-year terms. He was President of the Canadian Economics Association for the 2009-2010 year.

Professor Brander has published widely in academic journals. Much of his early work focused on international trade theory and policy. He and his co-author, Barbara Spencer, received the Harry Johnson Award for the best paper published in the Canadian Journal of Economics for 1981. They were also honored in the February 2000 issue of the Journal of International Economics (JIE) as the authors of the most cited paper ever published up to that time in the JIE. A paper he wrote with Nobel Prize winner Paul Krugman was also 6th on that list. He has also published highly cited papers related to finance, competition policy, and other areas. His favorite paper is on the “Economics of Easter Island” (co-authored by Scott Taylor), which models and seeks to explain the rise and fall of the Easter Island (Rapa Nui) civilization prior to first European contact. He won UBC’s “premier award for research prize”, the Jacob Biely Prize, for 1997 and was named a Fellow of the Canadian Economics Association in 2018.

Professor Brander has taught in the areas of managerial economics, government and business, industrial organization, and international trade and undergraduate and graduate levels and has supervised 27 PhD students, 11 as principal supervisor. He is also the author of a widely used textbook entitled Government Policy Toward Business, now in its 5th edition (published by Wiley) and is the co-author of a leading textbook in managerial economics, Managerial Economics and Strategy (with Jeffrey Perloff and published by Pearson), now in its third edition.

He has also done a significant amount of consulting and policy advising to both government and private sector clients, especially in areas related to international trade policy, competition policy, and intellectual property issues. In addition, he has been frequently interviewed and quoted on matters regarding business conditions by the business media, including newspapers, radio and television.

Presentation.

Professor James Brander was introduced by Chris Finch.

Nearly 20% of the country is now vaccinated against Covid-19. While Canada is currently in its third wave of Covid-19 infections, there has been a sharp decrease in mortality rates as the highly vulnerable populations that were contributing to 80% of the mortalities during the first and second waves are now protected. Based on the countries that began vaccination early (e.g. Israel), it is predicted that the rates of infection and mortality will drop to 10% of the current rates by the end of August. Barring any changes with variants and lockdown policies, life should start looking more or less normal again by early Fall. With an end in sight, Jim A. Brander from the Sauder School of Business joined the Probus Club to talk about Canada’s economic recovery from Covid-19 and its associated effects, including excess mortality and other negative health effects, economic recession and unemployment, deficit spending and monetary expansion, and other aspects of well-being.

Covid-19 has resulted in both direct and indirect loss of life. In 2020, overall mortality exceeded the expected level by about 5% in Canada (i.e. 24,700 deaths per month versus 23,500). Because of Covid-19, Canada’s already congested healthcare system became even more clogged up. Surgeries and other medical procedures were either postponed or cancelled, resulting in a significant reduction in the quality of life of those who needed them. Health care workers are burnt out. People have been less willing to seek medical care for other conditions during the pandemic, and there has been an increase in deaths due to cardiovascular issues and cancer. The healthcare system that heals us will need to be healed itself, but the plan forward is currently unclear. Jim suggests that healthcare reform was already needed prior to the pandemic. Perhaps now is the time to consider some long-term changes. The federal government has used very aggressive fiscal and monetary policy to help maintain standard of living during the pandemic while protecting the nation’s health. Essentially, they have been paying people to stay at home. They are running a large deficit, much more so than during any other recession. As of now, the ratio of debt to GDP has dramatically increased to about 92%, and it is likely to go over 100% in 2021. By comparison, the US is currently at about 130%, and they are announcing even more expenditures. However, unlike the US, Canada doesn’t have much more room to raise taxes without risking the loss of entrepreneurial activity. Therefore, getting the budget back under control will likely require the government to restrain expenditures, which will also be difficult given that a lot of spending has been built into the recovery plan.

The big run-up in debt has been enabled by quantitative easing, a part of monetary policy. The government of Canada borrows money by selling bonds. With quantitative easing, the Bank of Canada buys those bonds from the private sector using an account that it just creates for itself. While it’s not literally printing money, it is very similar. The Bank of Canada is basically directly creating money that the government can then spend, primarily to buy government debt. It facilitates a deficit by keeping interest rates low. By buying bonds, quantitative easing puts downward pressure on interest rates. To a lesser extent, the Bank of Canada also uses quantitative easing to buy corporate debt, particularly in distressed sectors such as Air Canada, to prevent corporate insolvency. This move has been very important and successful at supporting the economy during Covid-19; however, this tactic may create some issues and cannot continue due to inflationary pressure. Currently, there is a lot of liquidity in the system. As a result, quantitative easing can become an inflation tax. High inflation can be really harmful to people’s well-being and to financial markets. The recovery will involve scaling back these fiscal and monetary policies, and the Bank of Canada has already begun to step back its spending.

Jim also briefly mentioned that recovery will also require considering the pandemic’s interaction with other pre-existing issues. Homelessness and the opioid addiction crisis both increased during Covid-19, but luckily not as badly as they could have, thanks to mitigation methods put in place by the government. High housing costs continue to be an issue with the decreased interest rates and foreign buyers. The world saw a decrease in greenhouse gas emissions during the pandemic, and environmental policy may change moving forward. Changing immigration policy is also being considered as a recovery tool. Additionally, specific industries such as hospitality, airlines, and energy were all hit hard and while there will likely be a significant recovery after the Fall, there probably won’t be a full recovery for quite some time. The government is keeping a close eye on these industries, although Jim’s opinion is to let things be and rely on normal market incentives. A thoughtful recovery plan may have significant benefits to the country and the world. There is an opportunity here to build back better than before. However, with these unprecedented times, it’s incredibly difficult and to predict the outcomes and know how today’s actions will impact the future.

Professor James Brander was thanked by Bob Nash.

Transcription of the Questions & Answers session coming soon


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