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The End of Growth

Alumnus Jeff Rubin returns to Innis College

Jeff Rubin at Innis College for the launch of his latest book (photo by Randy Lee)

University of Toronto alumnus Jeff Rubin is an award winning author, resource analyst and former Chief Economist and Managing Director, CIBC World Markets.

U of T News caught up with Rubin recently to chat about his new book, The End of Growth, and what it was like to return to Innis College for the launch.

Tell us a little about the new book.

I wrote The End of Growth as a sequel to my first book Why Your World Is About To Get A Whole Lot Smaller but it can certainly be read as a stand-alone work.

Among other things, my first book, which is really about de-globalization, argued that we would see a return of those fatally high oil prices very early into an economic recovery simply because without those prices, today’s oil doesn’t flow. True enough, world oil demand, just like a jack in the box, sprang back with the first signs of a global economic recovery. Brent crude prices, effectively the world benchmark price for oil, climbed back into triple digit range by the beginning of 2011, and began once again to put a choke hold on world economic growth.

The quick return of those high oil prices shows us that our past encounter with $147 a barrel wasn’t some speculative accident. Instead, triple digit oil prices are needed to access tomorrow’s oil supply whether that supply is coming from deep water, shale or tar sands. But if we are living in a world of triple digit oil prices and our economies run on oil, what does that mean about economic growth?

I think the answer is becoming pretty clear with every passing day. From the once powerful BRICs (Brazil, Russia, India and China) to the crisis- ravaged PIIGS (Portugal, Ireland, Italy, Greece and Spain), every economy in the world is gearing down. And that includes Canada and the rest of North America as well. Figuring out what kind of economic policies and practices are sustainable in this new world of much slower economic growth is the subject of my new book.

The events of the past few years have been tumultuous but how likely is it that we’ll ever see a return of the principles laid out in the Glass-Steagall Act?

You might have thought that taxpayers around the world would have insisted on sweeping regulatory changes after bailing out supposedly too big to fail financial institutions following the subprime mortgage fiasco. But whether it’s JP Morgan writing off billions of dollars in losses from its proprietary trading desk or news that Barclays was caught rigging LIBOR (London Inter-Bank Offer Rate), absolutely nothing has changed. There is little to stop the casino like mentality in the world’s financial centres when the gains from good bets can be paid out to managing directors of investment banks while the loses from disastrous bets can be socialized through taxpayer bail-outs.

But those days are numbered. We are going to see that just as financial institutions all around the world owned a little piece of the US subprime mortgage market, those same institutions are all going to own a piece of a Greek or Spanish default. And once against taxpayers are going to be asked to pick up the tab. Only this time they are going to insist on a return of the regulations that divided investment banking from traditional banking - regulations like the Glass-Steagall Act that resulted in fifty years of financial market stability until President Reagan began the process of financial market deregulation in the 1980s.

(In Canada, Glass Steagall type regulations prevented cross ownership between banks, trust companies, brokerage firms and insurance companies)

Do you see a connection between the themes of your books and the sense of growing public discontentment or dissent we see with protests such as those in Quebec or the Occupy Movement?

They very much relate to the themes of the book and they are the thin edge of the wedge when it comes to social disenchantment with the status quo. Financial market deregulation hasn’t worked for the 99 per cent of the population. And now the population is going to mobilize and demand political and legislative changes, beginning with bringing back the traditional barriers that once separated brokerage activities from deposit taking institutions.

 I think we are also going to see a return of power to local communities as the process of globalization breaks down and capital becomes much less mobile than in the past. It will be much more difficult for multinational corporations to play off one jurisdiction against another, whether it comes to corporate taxes, wages, or environmental standards. In a world where triple digit oil prices means distance costs money, it becomes imperative to locate production much close to markets.

Whenever the economy takes a downturn, the very idea of higher education is called into question and students are urged to pursue studies focused on a specific job or perceived growth area of the economy.

Slower growth means less job creation and the part of the labour force that historically bears the brunt of less employment growth is youth.

In countries like Spain, youth unemployment has reached as high as 50 per cent. Fortunately that’s not the case in North America but even here double-digit rates of youth unemployment may become much more common in the static economy around the corner.

Far from being an impediment to university education, I see a slowdown in economic growth leading to a big increase in post-secondary enrolment. Young people are likely to delay their entry into the job market while at the other end of the labour force, declining pension benefits are will encourage people to work past the formal age of retirement, which hasn’t changed in decades even though life expectancy continues to rise.

What was it like to return to Innis?

I was honoured to speak at my alma mater as I was for the event the college hosted when my first book came out. What made this time particularly special was that I asked my son Jack to attend. Jack will be following in my footsteps and will be attending Innis College as a freshman in September. He will be the third generation of the Rubin family to attend the University of Toronto. My father, Leon Rubin, received his PhD in Chemical Engineering and later taught at the university. There is a scholarship in his name in the Department of Chemical Engineering.

From filmmaker Ron Mann to lawyer Lesra Martin and Dr. Stanley Slotkin, Innis seems to have given the world many creative, independent thinkers.

Perhaps that is only fitting, given who the college is named after. Harold Innis was a pioneering and innovative spirit, both in his home field of political economy, where he is the author of the staples theory of economic development, but as well for his later work on communication theory.

July 17, 2012