Friday, August 21, 2015

Six Questions About Science and Technology

How government funds science and how it treats the information that scientists produce says much about the direction a society is taking and the vision that the government has for that society. Here are six questions that an engineer and researcher named Vallen Rezazadeh has been asking the candidates about science and technology. In response, I offer the best suggested answers that I can come up with.

1. What actions do you think the federal government should take to accelerate economic diversification in Canada?

A diversification strategy should emphasize (1) making strategic investments in infrastructure; (2) ensuring the availability of high quality labour (by investing in education and training, enhancing the quality of life, and improving the structure of opportunity for First Nations and immigrants); and (3) the encouragement of growth clusters through the funding of pure research at universities and the creation of generally hospitable environments for business.

2. Would you support measures such as Public-Private Partnerships and tax breaks to entice hi-tech companies to establish operations in Canada?

 As a general theoretical presumption, no. As a pragmatic response to what our competitors are doing, sometimes a qualified yes. Much of the research on P3s confirms that all too often government simply replaces an up-front capital expenditure with a series of recurring payments under a lease agreement that ends up costing even more. In return, private investor is too often shielded from competition.  As for tax breaks, if they are too targeted or discriminatory, they have economic effects that are not unlike those of business subsidies (which are supposed to be an economic no-no). But where such policies (1) are generally being promoted in our competitors' markets; and (2) there are no practical alternatives in terms of either direct public provision or regular private contracting , and (3) proposed projects have been vetted for moral hazard, they may be the best option.

3. What is your opinion on recent changes to the structure and mandate of the National Research Council of Canada by the Harper government?

I hate them. They are anti-science. Shifting the NRC away from funding pure science to supporting industry is ideological policy-making in the worst sense. It is also bad economics. The first role of government, economically speaking, is to supply those public goods that are under-supplied by the market--to do what markets cannot.  Pure research is such a public good.

4. As an MP, would you push for increased funding for the National Research Council of Canada?

Yes. I would look at what the world leaders in science are doing at the national level and look to at least match them, as part of our overall societal fitness and competitiveness. But that increase in funding is not as important as un-tying the funding from the ideological yoke of the Conservatives'  pro-business agenda, as mentioned in the previous paragraph.

5. As an MP, would you push for increased funding for the Canadian Space Agency?

Yes. Canada spends less than 3/10th of 1 percent on its civil space program. Several nations with smaller GDPs spend more as a percentage than Canada does.

6.  As an MP, would you push for increased funding for the Natural Sciences and Engineering Research Council of Canada?

 Yes. In this envelope there is a little more room for "applied " research and for the funding of partnerships with business, and for the promotion of centres of excellence in science and engineering across the country.  But otherwise, what I said about the National Research Council applies to NSERC as well.

Mark Crawford  teaches political science at Athabasca University.

Monday, May 25, 2015

The Debate About the Debates

“Pick your battles” is a wise adage for life, especially in the intensely competitive and adversarial arena that is politics. That is why we have a certain tolerance and even admiration for leaders who display this wisdom in their campaign strategies.

But what if that campaign seems never-ending,  and the battles avoided include major issues of the day and time- worn avenues of democratic accountability?  I am referring of course to the prime minister’s recent decision to not attend the traditional debates put on by the consortium of Canada’s major broadcasting networks.  These debates have become known as “the” debates and one the key focal points of the election campaign: in 2011 the first English-language debate drew 10 million viewers.  The only problem, from Mr. Harper’s perspective, is that he can’t control them. And that is why he prefers to have a Google/Globe and Mail debate on the economy in Calgary and a Munk debate on national security in Toronto instead. Smaller, more fragmented audiences looking at debates focusing on his preferred agenda, in his preferred context, suits him better.

By pulling out of the traditional consortium debates, the government has cleverly conflated two issues: one is that the idea of a broadcasting consortium effectively monopolizing and determining the debate format is no longer acceptable; the other is that it is acceptable for the government to unilaterally change the rules 5 months before an election. The government pretends that the former consideration legitimates the latter; it does not. All it suggests is that we should supplement the broadcasters’ debate with others, and then agree after the election to establish a Debates Commission to set the rules for the following election. 

Perhaps the prime minister’s audacity wouldn’t seem so bad if it weren’t part of an even larger pattern of audacity that has characterized his entire tenure in power. We don’t have First Ministers’ conferences anymore, even though healthcare reform and battling climate change are of immense concern to Canadians and require a very high level of federal-provincial coordination. We don’t have wide open press conferences anymore either.  Instead, we now have personal attack ads between elections, prorogations of parliament whenever a government is in danger of losing a vote of confidence, and omnibus budget implementation bills as the primary vehicle for unpopular measures that are neither budgetary nor about mere implementation.  All of this has become simply routine.

If Mr. Harper is rewarded with another majority and becomes the most successful Conservative PM of modern times, his behavior will become the template for Conservatives, the unspoken political playbook for all politicians, and the 'new normal' for all young and immigrant Canadians, and even for a large number of older Canadians who don't bother to remember the honour system that once was.  Is this the role model we want for politics in the future?

Friday, May 15, 2015

Why Are Drug Prices High?

Canadians now spend $34 billion per year on pharmaceuticals. That is almost a thousand dollars for every man, woman and child--- considerably more than most citizens of other OECD countries spend on comparable or better drug plans. In New Zealand, for example, a national drug formulary aggressively pursues the most cost effective drugs and negotiates the best obtainable prices.  Even countries such as France, Italy and Spain spend less than Canadians do for the same basket of drugs.  According to a recent study conducted by several experts on drug policy published in the Canadian Medical Association Journal, Canadians could save $8 billion dollars per year on prescription drugs  (well over 20% of our total costs) if we had a single–payer system of pharmacare.  More people would be covered—thereby making drug policy more consistent with the basic principle of universal medicare-- and administrative costs would be lower.  Economies would be realized through three different mechanisms: the benefits of bulk purchasing; the negotiation of lower prices; and the substitution of generic drugs for more expensive brands.  So why hasn’t it happened?

It almost did. In 2004, B.C. ‘s Liberal premier Gordon Campbell, Alberta’s Conservative premier Ralph Klein, and Saskatchewan NDP premier Lorne Calvert all agreed that the federal government was more able than the provinces to finance a national pharmaceutical plan. All of the other premiers readily agreed (with Quebec premier Jean Charest of course insisting on the right of Quebec to opt out and run its own parallel plan). Unfortunately,  the new Liberal prime minister, Paul Martin , had too much on his plate and too little time to deliver it. The death blow came when Stephen Harper’s Conservative government was elected in 2006, and began its policy of implementing targeted tax cuts rather than “expensive” social programs. But what if the “expensive social program” actually saved billions per year by lowering drug costs? Let’s just say that Stephen Harper did not enter politics to save medicare, but rather something closer to the opposite.

The Conservatives’ role in driving up drug prices was not just due to this act of omission, but also to a considerable act of commission that came a few years later with the negotiation of the Canada-European Trade Agreement  (CETA).  Canada needs to encourage investment in research, development and manufacturing, but that neither explains nor justifies our history of higher prices.  Remember when Brian Mulroney first  angered seniors by improving patent protection for drugs and making generic drugs more expensive, way back in 1987? At that time, the pharmaceutical industry promised to spend 10% of sales revenues on R&D in exchange for higher prices. What happened? Research spending has been well below 10% since 2002.  How can we be confident that drug companies will serve consumers any better under CETA? 

Friday, April 03, 2015

The REAL Problem with Jim Prentice's 2015 Budget

The "historic" Prentice budget is an historic missed opportunity. Instead of simply and boldly correcting a regressive tax system that relied too much on nonrenewable resource revenue to subsidize current consumption (both public and private) -- something that could have been done simply by returning to the personal and income tax rates  that were in place before 2000-- the government nickel-and dimed the taxpayers with increased fees and minor tax increases. While a graduated approach was recommended by government economists (on account of the fragility of the provincial economy) -- even by 2018-2019 the income tax system will only generate about $730 million more in revenue.  When you take inflation, economic growth and population growth into account , that means that the goal of building up the Heritage Trust Fund will still be critically dependent upon a substantial rise in oil prices.

We should all welcome Premier Prentice's commitment to getting off the energy-revenue roller-coaster and his plans to replenish Alberta's savings. But two things bothered me about  the premier's pre-budget TV broadcast and Finance Minister's speech last week.  First, he gave sketch of Alberta political history that commended Premier Lougheed for creating the Alberta Heritage Trust and Premier Klein for his "financial rigour" and implied that Alberta's fiscal problems were created elsewhere by less responsible politicians. This does not accord with my observations. Ed Stelmach was committed to correcting the infrastructure deficit that was hugely evident in the mid 2000s. He also tried to correct the problem of royalty rates that were 20% too low according to several expert studies. These were problems he inherited from the Klein government and from nowhere else.  Alison Redford , like Stelmach suffered from a lack of support in caucus and a fear of the Wildrose Alliance; she was likewise incapable of following through on a corrective strategy because a proper corrective strategy means confronting the uncomfortable truth that "real"  fiscal conservatism (of the kind exemplified by Ralph Klein) is the problem.

The second thing that bothers me about the Prentice government's approach is that, when I look at the factors that made an energy revenue savings strategy work in Alaska and Norway , what really stands out is presence of bi-partisan support in the former and formal all-party agreement in the latter.  Could even the Wildrose Alliance sign a declaration committing to restoring the Alberta Heritage Trust, while agreeing to disagree about whether those savings should come from reduced spending  rather than increased taxes?  The Government should strive to get all parties in the Legislature to commit to such a proposition; but since this is Alberta (and there will always only be one party in power) it simply does not bother.

Instead of trying to pander to people like Lorne Gunter, Prentice should have the courage to point out why they are wrong.  Stelmach and Redford weren't the problem; they failed to correct the problem created by Ralph Klein and Stockwell Day. The latter increased our dependency on the nonrenewable energy-revenue roller-coaster and created an infrastructure deficit. Gunter focuses on the least-meaningful stats (total spending) and ignores the most meaningful ones (spending in relation to GDP, spending per-capita).  There should be an intelligent consensus that a substantial proportion of non-renewable energy revenue be saved -- then people on the left and right can argue about whether those savings should come from spending cuts or tax increases. Government economists advised Prentice that going too hard in either direction at this time  could push a fragile economy into recession, and he was wise to listen to them. Another thing to bear in mind is that counter-cyclical funding for infrastructure and for higher education is a smart thing to do, especially if you  happen to live in a province that has a below average participation rate in higher education and at a time when interest rates are historically low.

By catering to Klein's personal popularity, and  by failing to gain all-party consensus for the idea of committing at least half of energy revenue to replenishing the Heritage Trust Fund, Prentice may be failing to entrench Alberta's collective commitment to saving.  That means that the policy could change when some future leader decides that it is politically more expedient to offer tax cuts instead of collective savings and investment.  In other words, history may be doomed to repeat itself.

Monday, March 30, 2015

Why the NDP Has the Best Position on C-51


I cannot recall any  party ever getting  elected nationally by bragging about the number and quality of its lawyers.  Nevertheless, the record of our current government has been a perfect illustration of what the lack of legal knowledge and procedural values can lead to: the waste of time and money that went into legislation that was bound to be struck down, as evidenced by the  Supreme Court’s reversal of the Onsite Clinic closure; the Court’s unanimous rejection of several criminal justice reforms that obviously violated the Charter; and the incredible mess that was the Fair Elections Act (since when does a government respond to something like the Robo-Calls scandal  by going after the referee? Since Stephen Harper became prime minister, I guess). 

The latest example is Bill C-51, The Anti-Terrorism Act, which goes way beyond what is needed to update our existing security legislation. It has faced mounting criticism from former Supreme Court justices, law professors who have specialized in national security matters, and the Canadian Bar Association. The 8 days allotted to this bill for parliamentary scrutiny is totally inadequate for what is really an omnibus bill affecting every aspect national security. (And will the Government please let the Privacy Commissioner, Mr. Daniel Therrien, speak to the Parliamentary Committee on Bill C-51? Is that really too much to ask?)  And of course the recent exchange in Question Period, in which the Leader of the Opposition Thomas Mulcair simply asked whether the government had gone through the process of sending a letter to the U.N. justifying incursions into Syria under Article 51 of the UN Charter, caught the prime minister flat-footed. It is further evidence of government's lack of legal acumen.

The Liberals showed a lack of courage in not opposing this bill on principle, but just weakly saying they would amend it later.  Although the bill initially had 82% support in the polls, that was obviously because people had only seen  the  title of the bill and not its contents. After all, who isn’t against terrorism? It is revealing that the Liberals’ only distinguished jurist, MP and McGill Law Professor Irwin Cotler, has abstained from voting on this bill, just as he was missing in action last October when the Liberals voted against the ISIL mission.

If the NDP got C-51 right, it was primarily because of the lawyers in its caucus: Craig Scott (Osgoode Hall law professor), Murray Rankin (Q.C. for his courtroom work in B.C. in constitutional litigation), Thomas Mulcair, Linda Duncan, Eve Peclet, Romeo Saganash, Don Davies, and Justice critic Francoise Boivin.  I know, you don’t like lawyers. But when it comes to keeping government from enacting overly-broad laws that needlessly impinge upon our civil liberties, they are indispensable. This federal government has few accomplished lawyers, and it shows.

Monday, February 23, 2015

Alberta's Disadvantage

“Stop mortgaging our future” has been a catch-phrase for several decades. Usually, it has been directed by conservative fiscal hawks at the perceived excesses of the “tax and spend” liberal or social –democratic welfare state of the 1960s and 1970s. Yet in recent years, the worst culprits, in both the United States and Canada, have been on the right side of the political spectrum. And the worst of all may be right next door in the conservative paradise of Alberta.

Do you think I am kidding?  The much-touted “Alberta advantage” has consisted largely of using most of its resource wealth to subsidize both lower taxation and higher spending on services than found elsewhere in the country.   Since the first full year of the Alberta Heritage Trust Fund in 1977, $216 billion in revenue accrued from non-renewable energy went into the Fund;  but  of that amount less than 6% of it has actually been saved. The latest reported total for the Fund is just $17.4 billion—little more in real terms than it was when Peter Lougheed left office in 1985.

In 2011, the Calgary Chamber of Commerce calculated  that if Alberta had continued to save 37 per cent of resource revenue, as was the case under Peter Lougheed, the Fund  would be worth $128 billion.   A reasonable rate of return on that amount of money annually could fully cover even the current "crisis" deficit of $7 billion.  The left-leaning Canadian Centre for Policy Alternatives and the right-leaning Fraser Institute have both published reports arguing that Alberta should be saving more of its non-renewable resource revenues.  So has the Parkland Institute at the University of Alberta . But governments over the past quarter-century have not listened.

Savings started to be reduced during the Getty government in 1987, after which  resource revenue was no longer added to the Heritage Fund.   “King Ralph”  did everything with oil revenue between 1992 and 2007 except use it  to build savings: eliminating public debt,  giving voters pre-election “Klein bucks” when revenues were high, and using the Fund to pay for  special projects for economic diversification (some of which took the form of loans to private companies that had to be forgiven);  the elimination of sales taxes,  the lowest corporate taxes in the country and the country’s only 10% flat income tax . The contrast with other jurisdictions is striking: Alaska for example continued to deposit 25 percent of its royalties from 1982-2011 and Norway contributed 100 percent. If Alberta had followed the Alaskan formula, by 2011 the Heritage Fund would have had $42.4 billion instead of $9.1 billion. By the Norway rules Alberta would have had $121.9 billion by 2011.

Now that the Alberta government is having to scramble because of low oil prices, premier Jim Prentice needs to show that he is another Peter Lougheed and not another Ralph Klein.  Future generations of Albertans are counting on it.

Wednesday, January 21, 2015

Alberta's Tax Dis-Advantage

A recent poll showed that only 9% of Albertans want to have a  sales tax to help deal with the province's fiscal woes, preferring taxes that either others will pay or that they will only have to pay occasionally, like a medical premium ( See , for example, “Albertans Say no to Sales Tax ", Huffington Post, January 19).

Partly, this reflects a reasonable desire to ensure money is spent where they want it (i.e. on health care), but mostly it is just wishful or short-term thinking: the preferred options are not sufficient to wean the Alberta government off its unhealthy and short-sighted dependency on revenue from depleting conventional oil supplies.

I favour raising  $2 billion through moderately progressive income, corporate and royalty payments (all of these taxes would still be the lowest in Canada, by a considerable margin).  We might also wish to consider  raising an additional $2 billion through  temporary sales taxes (i.e. a 7% HST)    That way , the progressivity of one tax would balance out the regressivity of the others for a common cause:  the well-being of future generations whose oil we are selling.  Or perhaps a medical services premium and a gasoline surtax....

To help sell the sales tax idea, it could include a sunset clause --for example,  for five years. Or better yet that would see the tax disappear if/when the Heritage Trust Fund reaches $100 billion, or fall to  2% when the Fund reaches $50 billion, etc.

In that way, Albertans can be nudged, fairly and gradually, toward a more sensible and sustainable future.