Paul Samuelson: The Greatest Economist Since John Maynard Keynes

A week ago I gave a paper at Erasmus University in Rotterdam, the alma mater of Jan Tinbergen, the first winner of the Nobel Prize in Economics. As I passed a memorial to Tinbergen in the centre of campus, I remarked to a colleague that I thought it was Paul Samuelson who had been more deserving of the honour of being the Prize's first recipient. This sentiment is no doubt being echoed around the world following Samuelson's death yesterday, at the age of 94.

No one did more to make economics a rigorous analytical discipline than did Paul Samuelson. For that very reason, some people blame him for making economics inaccessible to ordinary folk (somewhat true, but most of the basic ideas taught at the introductory level still require little math to understand) and for reducing the vagaries of social life to black and white formulas. This latter complaint is unfair, however, because Samuelson always prized subtlety and eschewed simple ideological answers. It was his near-contemporary and sometimes intellectual rival, Milton Friedman, who was far more guilty of a living in a "black and white" universe.

I can only agree with what Samuelson earlier this year in an interview with Forbes magazine:

"Today we see how utterly mistaken was the Milton Friedman notion that a market system can regulate itself," ... Everyone understands now, on the contrary, that there can be no solution without government. The Keynesian idea is once again accepted that fiscal policy and deficit spending has a major role to play in guiding a market economy. I wish Friedman were still alive so he could witness how his extremism led to the defeat of his own ideas."

(For A Christmas Coda: http://www.youtube.com/watch?v=kQES16MmFNI )

Note to NDP, Taxpayers: Two Can Play the Revenue Neutrality Game

Whether it is Ignatieff, Dion or Campbell calibrating the cost of their carbon tax proposals, or President Obama costing healthcare reform, "revenue neutrality" seems to be the new gold standard for measuring tax policy. I reject this assertion, because (1) it assumes that current levels of taxation are somehow the right ones, no matter what the policy goals at stake; and (2) it assumes what philosophers call a utilitarian ethic--focusing on a global assessment of utility while ignoring the distributive consequences of a tax. Both of these assumptions ignore too many factors for 'revenue neutrality' to be a sound standard of evaluation.

Nevertheless, if "revenue neutrality" insulates a government from the charge that it is taxing society more, then the NDP can play that game too. Simply reduce the HST by 2 or 3 points , and then increase personal and corporate income taxes a corresponding amount, so as to ensure that total revenues are unchanged. There will be howls of rage on the right, of course, since "their" money will have been taken away again and given back to those middle and lower-income people. But it would not be increasing the total tax burden on society: it will simply be reversing the thinly-veiled redistribution of wealth that Gordon Campbell has been undertaking for the last 8 years.

Harper's Climate Change Strategy: Stay Just Behind the Curve

Yes it is PROBABLY RIGHT to say that something is better than nothing--although it could be worse than nothing if it lulls people into thinking that it is enough. I am also willing to believe that Canada did play a constructive role in putting together a minimal agreement--since that is all that Harper and Prentice wanted in the first place.

I am a Canadian, and as such am frustrated by my government's attitude that it will only do what the Americans do--in order to avoid the economic cost disadvantage that Canadian industries would suffer if we did better. Accordingly, the only green technology that Canadian governments have invested heavily in is carbon sequestration--because that is an investment in the oil industry.

These are the actions of government that doesn't really believe in climate change. If it did, it would recognize that costs of adapting to catastrophic climate change completely dwarf the costs to industry that it is apparently most worried about. It would also recognize that there are economic benefits and opportunities galore in being ahead of the curve, instead of staying doggedly just behind it.

A Windfarm Might Be Appropriate for Boundary Airport--ALR area

I recently travelled from the Amsterdam airport to Rotterdam via a high-speed train. The 20 minute journey reminded me of the drive from Tsawwassen to downtown Vancouver--except that, in addition to the quaint Vander Zalm windmill there were also several modern wind turbines and what looked like hydroponic farms. It made me wonder: am I having a glimpse of the Lower Mainland's future?

Certainly, the value of agricultural reserve/farm land cannot continue to diverge from speculative land development value forever; in addition to doing more to support agriculture per se, the provincial government might wish to look at wind farming. If it is not feasible for privately-owned lands, then it might be considered for the public lands around Boundary Bay, Boundary airport or Burns Bog (?). If, of course, it is compatible with the wild fowl who like to fly through these areas.

If a country as small and densely populated as Holland can find space for numerous "wind farms", surely British Columbia can as well? I suspect that deep down Campbell & Co still harbour a land developer's desire for commerical and residential propoerties springing up from the farmland. Which is why they don't invest the effort to think of ideas like mine, but will throw out incentives galore for less environmentally sound projects like fish farms and mini-hydro.

Carole James on Cruise Control

There is nothing especially deplorable about the cautious centrist business-friendly tack that Carole James took at the recent BC NDP convention. I agree with Rod Smelser's comment on Bill Tieleman's blog that "[n}o professional political strategist in any nation in the democratic world has ever recommended any strategy other than a pragmatic, centrist one for any party that is on the doorstep of winning power and wants to go that last, extra mile." I also agree that Carole has performed acceptably well in both of the last two election campaigns--well enough to win in 2013, just as Mike Harcourt performed well-enough in 1988-1991.

My criticism is of how many NDPers are dependent on what political scientists call the "absent mandate"-i.e. the mandate that comes not from genuinely persuading the voters to support the NDP platform, but simply from waiting until the normally governing party rots from within and its ability to win local pluralities in a majority of ridings collapses. Since many MLAs and operatives can count on this happening 3 or 4 times during their working lives (i.e. enough times for their favoured legislation to pass and for their public pensions to vest), they don't bother doing the really hard job of selling their ideas to a majority of constituents. Nor do they favour an electoral system that would give them more incentive to do so ( a degree of proportionality will force governments to care about every voter). "Carole will probably win anyway, so don't worry about it."

The problem with the absent mandate is that it quickly dissolves once in office, like a castle made of sand. It was frustrating to watch the Harcourt government, with its bright youthful cabinet and impressive policy agenda, struggle to explain their policies and mobilize support from the public. I predict that Carole James, who reminds me of Harcourt in more ways than one, will experience a similar fate, even if she does succeed in being the first woman to lead a party to victory in a B.C. general election.

What Obama Should Have Said to Israel

President Obama has the right priorities and he articulates them well. For that reason alone, he merited his election, and probably merits re-election as well. But he also came out of the starting blocks compromising, instead of using his power and prestige to make others compromise. He thereby wasted some of the political capital he had when he was elected, and has encouraged his opponents and adversaries at home and abroad to paint him as being 'weak'. This mistake was understandable, at least in the area of domestic policy, because he was trying to learn from the examples of Presidents Carter and Clinton, who ran into trouble after antagonizing Congress. But a President is upposed to have more latitude in foreign policy than in domestic policy---even if foreign policy touches upon some important domestic constituencies.

At the outset, President Obama should have set a new, tougher tone with Israel in order to expedite the peace process. Specifically, he should have listed a set of penalties for Israel for continuing to build settlements anywhere in the occupied territories, including East Jerusalem:

1) witholding government loans;
2)deducting the amount of aid money to Israel in proportion to the amount of money that Israel spends on settlements; and
3) indicating that henceforth the US will not automatically wield a protective veto over UN resolutions that are hostile to Israel.

Now, it is true that Israeli P.M. Netanyahu has recently ordered a temporary freeze on settlements in the West Bank ,but not East Jerusalem. That is because he was embarassing and angering the President of the United States, who had been under growing pressure to apply sanctions. So he deftly avoided that eventuality by "voluntarily" agreeing to stop some of the settlement building.

But it should be President Obama letting Netanyahu off the hook, not the other way around. And then only if all , and not just some, of the settlement building is stopped.

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It was amusing to hear former Vice-President Dick Cheney accusing Obama of "dithering" over his decision about Afghanistan. This certainly doesn't appear hypocritical when you consider how "decisive" Bush and Cheney were about Iraq in 2001-2003. But it is hypocritical when you consider that the proper focus of the War on Terror--Afghanistan and Pakistan--has been neglected for six years. All the more reason to call the Bush presidency one of the worst in history.

David Vickers, R.I.P. : The Best NDP Leader We Never Had?

Did you ever wish that we could have a premier who could combine the practical intelligence and self-confidence of Glen Clark with the moderation, procedural values and common sense of Mike Harcourt? With an extra dollop of character, vision, and good judgment to boot? It nearly happened in 1969, when Tom Berger led the NDP into an election that was called early by W.A.C. Bennett precisely to prevent the electorate from getting to know the new leader. It could have happened again in 1984 when David Vickers was passed over for the likeable but soon-to-be overwhelmed stalwart Bob Skelly. "Seniority without substance is a dangerous thing," would have been an unkind cut, but the truth is, the NDP was just as prone to make the wrong choice as its Social Credit opponents were. And that is exactly what both parties did.

David Vickers had paid his dues--as an outstanding lawyer, as a briliant young Deputy Attorney-General in the Barrett government, as a tireless advocate for the homeless, as a prominent Solidarity spokesman, and later as a distinguished judge on the B.C. Court of Appeal. That he never became premier is a shame.

British Columbia still awaits its first, badly-needed Allan Blakeney.

Who Deserved the 2009 Nobel Peace Prize?

1. George Soros and Bill Gates, for channelling business philanthropy in some new and highly constructive directions; or
2. Bob Geldof and Bono for channelling popular music in some new and highly constructive directions; or
3. President Barack Obama, for the intellectually defensible reason that simply having a President of the United States with the right priorities for a change is more important at this juncture than just about anything that anybody else could do.

President Obama's Show of Un-Strength

If President Obama continues to try to please his opponents and to let others push him around, he will not be as successful as JFK or Reagan. That's too bad, because he has all the other qualities of being a great president.

First, he gave ground to conservatives on government health insurance. He was right and they were wrong. SO why the give?

Second, he gave ground to leftist trade unionists by needlessly provoking the Chinese on tire imports.

Then he allowed his White House to get drawn into a verbal spat with FOX news--a can't-win scenario that only boosted FOX's ratings and made his Administration look petty.

NOW he's giving in to the Israelis on settlements--allowing them to consolidate the expansion of major settlements--and 900 new homes in East Jerusalem--without a whiff of sanction.

Obama may yet get his health care bill signed into law and a climate change treaty ratified--but I am afraid that they will surface in such watered down forms that they will be vulnerable to attack from both sides-- by the Left as insufficiently drastic and by the Right as being expensive with little tangible benefit.

When the President was sky-high in the polls, he could have been bolder on all of these issues. Now that his ratings have fallen to ordinary levels, he is even more likely to behave in an 'ordinary' manner. He must resist that temptation. Be BOLD, Mr. President. Be BOLD.

The Alberta Disadvantage

If a televised leaders' debate were held in Alberta today, Danielle Smith would likely mop the floor with Ed Stelmach, while making Liberal leader David Swann and NDP leader Brian Mason look like helpless waffling bystanders. She comes across as a bright, energetic, young, and knowledgeable about business and the oil patch. In pure political terms, she could be the next Peter Lougheed.

The problem is that she is not Peter Lougheed. Her party's basic message--that Alberta's problems stem from the ruling Progressive Conservatives having drifted away from the populist low-tax free-market philosophy of Ralph Klein and the Reform Party---is fundamentally flawed. Ralph Klein was the problem, not the solution. "The Alberta Advantage" largely consisted of using revenues from nonrenewable resources to subsidize current consumption. Unless of course you really believe that it was low taxes, and not high international oil prices, that was the principal source of Alberta's prosperity. Levelling the income tax and eliminating the sales tax and giving away Klein bucks merely made Alberta's public services, health care and infrastructure more completely dependent on oil revenues, accentuating the terrible rollercoaster of the past 3-5 years.

But if I am right, even if the government woke up to the truth tomorrow morning and fully corrected its policies (e.g. by bringing back medical premiums, a small sales tax and a more progressive income tax, in addition to the new royalty regime), it would only drive that many more voters into the arms of Danielle Smith and Company. Furthermore, the lower tax regimes recently put in place in Saskatchewan and BC, and improved capital and labour mobility due to the TILMA, mean that threats by business and professionals to move are not quite as easy to ignore as they once were. An avoidable situation has hardened into a dilemma for the government.

It's policy versus politics, and I think we all know which force is the stronger. For Ed Stelmach, "smelling the roses" has just taken on a whole new meaning.

The Limitations of Monetarism

It seems to me that the current economic recession and the financial crisis that precipitated it are distinguished by the extent to which they were created by conservative ideology and created by misguided conservative economic policy. The events of the past year have also laid bare the limitations of monetarism, the economic credo which holds that the most important instrument of economic policy is monetary policy, and that the objectives of monetary policy are best met by targeting the growth rate of the money supply. Monetarists (most famously Milton Friedman and Alan Greenspan) advocated a central bank policy aimed at keeping the supply and demand for money at equilibrium, as measured by growth in productivity and demand. Neo-Keynesians such as Jospeh Stiglitz and Paul Krugman have argued that the relationship between inflation and money supply growth is weak when inflation is low; and, as Lord Keynes himself pointed out, monetary policy is bound to be less effective (and fiscal policy correspondingly more important) when interest rates are low. While monetarism gained credibility in the 1970s and 1980s, when inflation appeared to be the biggest problem (and high interest rates were deemed to be part of the solution), its limitations have been made all-too-apparent in the past year.

In the first place, the attitude of monetarist central bankers that they should concentrate on getting the money supply right and controlling inflation and otherwise be non-interventionist played right into the hands of financiers bent on leveraging more and more money in an ever-expanding speculative bubble that was bound to burst.

In the second place, exclusive reliance on monetary stimulus while keeping budgets balanced when interest rates are near zero would guarantee a much worse recession.

Clearly, right-wing monetarists have as much reason for humility in the face of this crisis as Keynesians did in the inflationary crisis of 25-30 years ago.

An Expert Agrees With Me (Sort of):

Hi Mark,

I’d more or less agree. The term Monetarism is used in the profession to describe monetary targeting. As there are no central banks that do that, the term isn’t used much anymore. Inflation targeting is the new approach. However, it is “monetarist” in the sense that central banks have concentrated on inflation and have advocated that it should be the only goal of monetary policy. In the abstract, this is a compelling position provided there are in place other mechanisms for controlling credit. David Dodge at the Canadian meetings argued for an umbrella institutional structure for dealing with the various dimensions of credit. In the absence of such a structure, the Bank should have been cognizant of asset price targeting.

---M.E. (UVIC Economics Department)

Is Kevin Milligan wrong about VATs being compatible with progressive outcomes?

In the course of the VAT/HST debate in British Columbia, professor Kevin Milligan of the UBC Economics department made an important point.

He referred to this table of VAT rates around the world. ("VAT" or value-added tax, of which the HST is the latest example) is the term Europeans use to describe their consumption tax, which is levied on any value that is added to a product--unlike the simple sales tax, it is not levied on the entire value of a good and service at every stage as it passes from original producer to final consumer.) Milligan noted that in France the rate is 19.6%. In Sweden it is 25%. We know that these are two of the most equal countries in the world, with respect to incomes.

So, how is it that these countries have this huge VAT and yet have a very equal income distribution? Milligan suggests that the pre-tax income distribution is less extreme in those countries (e.g. executive pay is much less) and that their income tax systems are more distributive.

"So, it strikes me, looking at that VAT table, that the barrier to a more equal society is not avoiding a large VAT, it is having progressive tax rates and less pre-tax income inequality.
VATs present no barrier to having more equal economic outcomes."

I agree. I first became interested in consumption taxes as an undergraduate student over a quarter of a century ago. (Some would say that was the beginning of my indoctrination.) But the people I was reading--economists Albert Hirschman and Arthur Okun and philosopher John Rawls were three that I remember most clearly--were anything but neoconservatives. They reasoned that the trade-offs between equity and efficiency could be reduced if (for a given level of taxation revenue)the tax did less harm to incentives to invest, work and save. And there was an additional, more practical reason for liking consumption taxes: they were more difficult to evade. Income taxes are festooned with loopholes, which are exploited by corporations and affluent professionals but not by workers who are taxed at source in their payrolls. With consumption taxes, the loopholes are for the poor and the workers: on basic groceries, basic accommodation and so on.

SO, when the NDP returns to power in B.C., it should look to (1) broaden these HST exemptions and rebates, if necessary; and (2) make the income tax more progressive, if that is possible. (In fact, that could be the Left's version of a revenue -neutral tax change--use the latter to offset the former.) But I do not see the need to scrap the HST or to raise everyone's income taxes an enormous amount.

Is Bill Tieleman RIght about the "Elephant in the Room'?

Bill Tieleman's criticism of my previous column makes me wonder if I don't try too hard to read the broader "public interest" in my academic tea leaves, perhaps because I wish to avoid the uncomfortable truth that much of what Campbell's Liberals do is done to advance the material interests of Vancouver's commercial elite. (The HST and carbon tax are both more easily handled by affluent Vancouverites than by us regular folks, and much preferred by them over higher progressive income taxes and corporate taxes.)

Here, in case you missed it, is what Bill said:

"Mark - I fundamentally and totally disagree with your basic premise. And as a left-wing commentator I approved of Stephen Harper's cuts to the GST.

You state almost off-handedly the central problem: "(Even though expenditure taxes are regressive compared to income taxes, that feature can be rectified by devices like the GST tax rebate for people earning lower incomes, and more targetted spending in certain areas.)"

In other words, even though there's a bloody elephant in the room, maybe we can find him some peanuts!

I can't figure out why you and other smart folks are not recognizing the obvious - consumption taxes like the GST and the proposed unfair BC HST are inherently regressive, harmful to lower and middle-income earners despite any "rebates" and are a drag on consumer spending."

All I wish to say in my defence at this moment is that (1) I don't like Harper taking his ill-timed
pro-cyclical tax cut and then, when the recession hits, dressing it up as an Economic Recovery Program; and (2) I think that $12 billion in lost revenue could be better spent elsewhere, at least for the purposes of fiscal stimulus during this recession.

But Bill's comments do make me wonder sometimes whether I try too hard to find a common public interest, simply because I am emotionally and intellectually reluctant to see an unpleasant truth about BC politics: that issues like the carbon tax and expenditure vs. income taxes and the HST are actually reducible to pure, zero sum, distributive struggles and class interests. That people who latch on to the idea that pollution and expenditure taxes are more efficient or socially optimal and harder to evade than income taxes are merely providing cover for elite interests at the expense of working people, whether they realize it or not.

In other words, they refuse to see the elephant in the room; and the positive sum game they are reaching for is, if not exactly illusory, then, as Bill puts it, just peanuts.

GST cuts are STUPID,STUPID, STUPID

Well, I am not running for office, I am not an apologist for any political party, so I can say what I think. The federal government's insistence on cutting sales taxes is not a great idea.

In the short run, insisting on GST cuts merely makes a record federal deficit bigger, cuts into the EI surplus, necessitates the increase of EI premiums, and hampers the government's ability to help Canadians weather the recession.

In the medium term, (i.e. the duration of the recession), the majority of academic economists are surely right when they say that GST cuts are not the most effective way of delivering counter-cyclical stimulus (number 1 is EI , number 2 is infrastructure). When Harper is dismissive of the economics profession saying that "retailers are in favour of it", he is talking about a segment of the population that can only capture a small part of the benefits of alternative spending, but a large part of the benefit of the sales tax cuts. THEIR INTERESTS ARE NOT IDENTICAL TO THE LARGER PUBLIC INTEREST.

In the long run, surely we want to build a taxation system that 20 years from now has both (1) met the challenges of an aging population and the need for wise social investments; and (2) has shifted the burden of taxation away from earned income, savings and investment and towards pollution and expenditures. Our society will be more equitable and efficient as a result. (Even though expenditure taxes are regressive compared to income taxes, that feature can be rectified by devices like the GST tax rebate for people earning lower incomes, and more targetted spending in certain areas.)

The GST cut maybe not stupid politically though---if opposition parties were as strident as I am in this blog, Tories could then say that the Opposition favours "higher taxes"--which is misleading (under the Conservatives' GST cut, Canadians simply will pay out of their other pocket with deficit that is $12 billion higher, EI premiums that are higher and benefits that are smaller, etc.), On the other hand, if the opposition declines to take the bait, it becomes harder to distinguish their policies, or pay for all of their promises.

Pre-recession policies like GST tax cut and $1200 child tax credit feature prominently in Tory ads as part of Canada's "Economic Recovery Plan". What's wrong with that? It certainly saves money to dress up old policies in new clothing, but it makes you wonder if maybe other countries are doing more to use the crisis as an opportunity to build green infrastructure, etc. I suspect that this political management of the recession--just like the Liberal management of Kyoto--is penny-wise and dollar poor.

{BY the way, isn't it remarkable that Stephen Harper can be so responsible for giving minority government a bad name--and then use that effectively as an argument for giving him a majority? It's not that he is so terribly clever; it's simply that he has a huge structural advanatage that comes from having a unified party on the right and a high degree of fragmentation on the centre-left. May I suggest once again that the Green Party step down in 30 Liberal-designated marginal seats and in 15 NDP marginal seats, in exchange for the Liberals and NDP giving Elizabeth May a clear shot at Gary Lunn in Saanich and the Islands?}

This time, Jack Layton Should Talk To Elizabeth May

Jack Layton has been a reasonably good leader for the NDP, if only because he has brought the kind of energy and forceful presence to the national stage that Ed Broadbent said that he would. But if he wants the NDP to challenge the Bloc Quebecois for third place--much less challenge the Liberals--he needs to soften his attitude towards Greens on the Left and social liberals on the right. Rumour has it that before Elizabeth May approached Stephane Dion , she approached Jack Layton with the idea of not running candidates in a pair of ridings (i.e. allowing the other party's leader to run unopposed by their party). Layton rebuffed her, saying the NDP was Canada's green party and that all 308 ridings would have NDP candidates.

But with May now taking aim at Gary Lunn, the NDP should ask whether it also has a strategic riding that could benefit from vote-swapping with the Greens. Until we get some degree of proportional representation (or some kind of Democratic Party of Canada is formed out of a merger of the NDP, Greens and Quebec progressives) this may be the best way out of the current vote-splitting impasse.

{P.S. Note the comment on this blog by Julian West at http://www.facebook.com/n/?note.php&note_id=129904416591&comments&mid=110e12aG26c845ebG28d3995Gd }.

Mr. West is correct in saying that the NDP should not simply allow a one-for-one seat swap, which would permit the Greens to split the progressive vote all over Canada as well as getting a clear run at Gary Lunn. Since the Greens only have an outside chance of winning a single seat, while the NDP has a corresponding chance of winning 40-60 seats, the NDP should offer to support Elizabeth May solely on the condition that the Greens step down in at least a dozen seats that are potentially winnable by the NDP.

There should be a focused, pragmatic, achievable goal for this election, which is to be able to form a stable minority government (LIberal or NDP) without Bloc Quebecois support. The Greens and NDP could then extract a green social contract for change that would spare people another election for at least two years.

P.S.S. Current party standings are Conservative 143; Liberal 77; Bloc 48; NDP 36; Independent 1 and 3 vacant. Liberals plus NDP need 30 seats between them to unseat the Tories and an additional 12 seats to gain an over-all majority and obviate the support of the Bloc. Since the ideal result would be about 30 seat gain for Liberals and 15 for the NDP, the Greens should offer to step down in approximately that same number of ridings in exchange for Liberal and NDP support for May in Saanich and the Islands. (A deal with the Liberals as well as the NDP, while extremely unlikely, would be sweet.)

An Unnecessary Federal Election? That was in 2008

Before you get mad at the Liberals and the NDP and the Bloc for pulling the plug and triggering another fall election, remember this: it was the October 2008 election that was unnecessary, and it was orchestrated by the Conservatives, not the Liberals. Steve and the boys in the PMO saw the recession coming, and figured this was this was their last best bet for a majority government. So they wrote up guidebooks for their MPs instructing them on how to make Parliament and parliamentary committees not work. And they stepped up their personal attack ads on Stephane Dion---a new low in Canadian politics, since such ads had never been seen before between elections, before the writ was even dropped.

In contrast, the fall election of 2009, if there is to be one, is actually necessary. It will be a referendum on the way this government has managed the recession, but I suspect that the government will actually want you to believe that the issues are much smaller than they really are: that this election is about the GST tax cut and the home renovation tax credit; about the "sensible" way that this government has "managed" these issues; and about Michael Ignatieff's resume. The election really should be about the appropriateness of such a government in the middle of the worst ecological crisis in human history; in the middle of the worst recession in 75 years. The contrast between Harper's long years of denial about climate change and hostility to Kyoto and his sudden enthusiasm for responding to one of the symptoms of climate change by militarizing the arctic is, well, unseemly. In its response to the recession, the Harper government not only stumbled badly out of the starting blocks with its attacks on real and imagined opponents and talk about selling public assets. It made our politics seem smaller than they really were.


The coming election should actually about whether this government has (1) effectively responded to these crises and (2) more importantly, whether it has effectively seized the opportunities that these crises contain. Canada, as a signatory to the Kyoto Accord in 1997 and a country rich in both human and natural resources, should be a leader in building green infrastructure and pioneering green technology. Is it? Is the government using the recession as an opportunity to promote our human capital, our scientific and research potential, and diversifying our energy mix? My sense is that we are not--that we are falling behind Germany and United States while our governments "manage" the economic crisis. And that is just a shame.

The American Choice: Swiss or Dutch-Style Managed Competition or Australian Two-Tier. So Why All the Right-Wing Blather about Canada?

The winner of the 2008 Nobel Prize in Economics, Paul Krugman, has again hit the nail on the head in his NY Times op-ed column, "The Swiss Menace". Krugman points out that (1) most of the talk about the UK and Canada is misleading; and (2) it's also besides the point, because really all that Obama is trying to do extend basic public sector care a la Australia and/or mandate more private insurance a la Switzerland or the Netherlands. So why all the talk about Canada? Because right-wing propagandists are aware of how ignorant most of their fellow citizens are about Canada, and are selfish and unethical enough to take advantrage of that fact.

As Krugman nicely (and bluntly) puts it,

"So where does Obamacare fit into all this? Basically, it’s a plan to Swissify America, using regulation and subsidies to ensure universal coverage. "

"If we were starting from scratch we probably wouldn’t have chosen this route. True “socialized medicine” would undoubtedly cost less, and a straightforward extension of Medicare-type coverage to all Americans would probably be cheaper than a Swiss-style system. That’s why I and others believe that a true public option competing with private insurers is extremely important: otherwise, rising costs could all too easily undermine the whole effort.
But a Swiss-style system of universal coverage would be a vast improvement on what we have now. And we already know that such systems work. "

"So we can do this. At this point, all that stands in the way of universal health care in America are the greed of the medical-industrial complex, the lies of the right-wing propaganda machine, and the gullibility of voters who believe those lies."

The only reason private health insurance works---SOMETIMES

2008 Nobel Laureate in Economics Paul Krugman sums up the U.S. debate over health care very nicely in his current New York Time column, "Health Care Realities":

"Right-wing opponents of reform would have you believe that President Obama is a wild-eyed socialist, attacking the free market. But unregulated markets don’t work for health care — never have, never will. To the extent we have a working health care system at all right now it’s only because the government covers the elderly, while a combination of regulation and tax subsidies makes it possible for many, but not all, nonelderly Americans to get decent private coverage.

Now Mr. Obama basically proposes using additional regulation and subsidies to make decent insurance available to all of us. That’s not radical; it’s as American as, well, Medicare."

The Top 6 People to Replace Carole James

NO, not him! And not her, either. There are only 6 people who can build and improve upon Carole James's leadership and also be acceptable as leader and premier.

1. Joy McPhail
2. Andrew Petter
3. Leonard Krog
4. Gregor Robertson
5. Mike Farnworth
6. Bob Simpson

Clealry, if Gregor Robertson proves to be a popular and successful mayor, he could rise to the top of this list. But for now, this is a better ranking. People who have raised families, succeeded outside of politics, and proven themselves in the legislature.

The U.S. Attack on Canadian Health Care

Brian Day and Shona Holmes have appeared in U.S. TV ads funded by opponents of President Obama's health care reform plan in order to criticize the Canadian system. Most Americans never get to see or hear the opinions of the vast majority of Canadians, who would never want to trade their system for the American one. However well-intentioned Mr. Day and Ms. Holmes are, their messages are misleading on several different levels.

In the first place, the number of Canadians who are so sick of waiting lists that they go to the US is miniscule compared to the number of Americans who are uninsured–or the number of Americans who go north on “drug vacations” to buy cheaper medicine. Secondly, the fact that the Canadian Supreme Court required minimum wait list times isn’t an indictment of the system–it is just an example of how judicial review has helped to improve the system. Thirdly, it’s all a red herring anyway because Obama isn’t talking about creating a Canadian single-payer system –just about moving from a system of unmanaged competition (which is good for insurance companies, lawyers, pharmaceuticals and almost nobody else) to a system of managed competition.

Although Australia’s “two-tier” system isn’t great from a Canadian perspective, (since the research shows that waiting lists and quality of care in Australia actually are not improved in areas where the private system is allowed, since the private system siphons off nurses and doctors from the public system) the Australian system would still be a huge improvement for the United States. Simply extend the public Medicare and Medicaid systems in America to the 50 million or so who are now uninsured, and then let the rest buy better service from a managed private system if they wish. To denigrate that as “socialism” is just plain silly.

Is Gordon Campbell playing Divide-and-Conquer with Natives and Environmentalists?

As I point out in Chapter 10 of the upcoming book BC Government and Politics , Gordon Campbell deserves credit for preventing a unified coalition of labour, environmentalists, First Nations and NGOs from coalescing. His strategic initiatives vis a vis First Nations and Environmentalists contributed to his ultimate victory. But a survey of his career suggests that this is no 21st-century triple-bottom-line Stephane Dion kind of politician. The treaties and the New Relationship with First Nations were instrumental to removing roadblocks to economic development. The carbon tax was attractive, not just because of the temporary salience of global warming in the polls, but because of the strategic aim of reducing income taxes for affluent Vancouverites. Campbell was quicker to conclude the Tsawwassen Treaty than the NDP was, not because he cared more about the Tsawwassen people, but because he cared less about the Land Reserve.

All of which suggests that many First Nations people and environmentalists may be in for a rude awakening over the next couple of years. The basic thrust of the native legislation currently being prepared for the legislature is to accelerate the painstakingly slow process of determining native title and rights--which may mean that many interests which had been staked on either litigation or negotiation are in danger of being downgraded or ignored. All so Gordon Campbell can get on with---what? He hasn't been as clear about his "vision" as either WAC Bennett or Dave Barrett were.

But then, neither has the NDP. Instead of playing electoral juijitsu with Liberals over issues like the carbon tax, the NDP needs to rebuild its red-green coalition and stake out a vision for prosperity, sustainability and justice that is just as practicable and just as comprehensive as the government's, (much as the NDP in fact did in the 1980s and early 1990s). Or it will deserve to lose--again.

Corporate Investment in Africa is Lacking

Check out the following website, which investigates corporate activity ( or the lack of it) in Africa. What it has to say about Boardroom Attitudes toward Africa should raise a few eyebrows:
http://www.usafricainvestment.com/

One Sentence About B.C. Energy Policy

Instead of paying private companies a premium to dam rivers, BC Hydro should pay private citizens a premium for any solar, wind and geothermal power they can generate, as Germany does.

Post-Election Analysis (2) : Is electoral reform dead or is it just STV that is dead?

Of the 48% of the electorate who bothered to vote, 2/3 said they weren't interested. It sounds like the punch line to a bad joke.

Two ironies jump out at me from the long electoral reform process that we have just been through. First, it was ironic that even though the underlying premise of the whole exercise was that government was in a conflict of interest in deciding issues of electoral reform , Liberal backbenchers prevailed upon the premier to have a 60% threshold for approval--not needed to decide conscription or Quebec independence or Newfoundland's entry into Confederation, but necessary when MLAs jobs are at stake! Interesting! Second, it was ironic that the vote that finally defeated BC-STV was based on a turnout of about 48% of the population--an historic low which merely underscores the need for electoral reform. Bill Tieleman and others have proffered the solution of compulsory voting, but one gets the feeling that that solution is only treating a symptom and not the disease. To the extent that the problem is that voters are just too busy nowadays, compulsory voting is a satisfactory answer; to the extent that declining sense of voter efficacy, cultural shift, paucity of meaningful choices and unrepresentative legislatures are behind voting decline, more drastic measures are needed.

That being said, BC-STV is dead. The surprisingly low support for the system recommended by the Citizens' Assembly (39%, down from 58% in 1995), has even caused me to reconsider my own preferred solution, STV-lite. I was prepared, in the event of a "moral victory" of a 50% +1 vote, to wage an extensive campaign for a system that would be less proportional than BC-STV, but better at local representation ( 3-member ridings for big cities; dual ridings for southern interior and small cities; single rdings for the north). But perhaps the fatal flaw in STV was that its very name drew attention to a complicated vote-counting system. Perhaps the Citizens' Assembly should have understood that the perfect was the enemy of the good and that reaching for proportionality through STV was going to be a difficult sell. Better to drop the preferential ballot altogether and go back to the drawing board.

Specifically, we should go permanently back to 60 single -member constituences. The rest of the Legislature would consist of "at large regional MLAs", 4-6 larger electoral districts of 4-6 members each, depending on population densities and so on. An open list could still give voters the option of ranking the individual candidates of their preferred party, if they so wished; the "dual ballot" would be a simpler concept to understand than STV. Parties would be motivated to field lists that are ethnically and gender-balanced; local representation would hardly suffer and would arguably improve from having a "regional" dimension as well as a local one. Proportionality would be improved mildly. And minor parties would have a slightly better chance of getting elected (voter thresholds for 6-member seats being in the 16% range). Would a referendum be needed to validate such a proposal? I don't thinks so, but if so, then only a 50% threshold should be needed for this less drastic, and ultimately more sensible compromise.

Post-Election Analysis (1): It's the Economy, Stupid

Vaughn Palmer hit the nail on the head in his column of May 13: " Given the paramount importance of the economic issue, would any plausible strategy have won this election for the NDP? Probably not." But wait a minute--if the Liberals take credit when times are good, and are "the best stewards" when times are bad, isn't that a "heads I win, tails you lose" sort of proposition? It sure is.


There is a fundamentally un-level playing field in this province, as this year's election results remind us. And give Campbell credit--he succeeded in pressing his advantage. Besides doing everything he could to stimulate growth in the private sector, his U-turns on First Nations and the Environment prevented a Solidarity-like United Front of interest groups from forming behind the NDP.


But there was a time in this province--in the 1980s and early 1990s--when the NDP not only fronted such a broad coalition, but had an answer to the Right's economic policies. As you may recall, the Socreds were heavily criticized by the economics profession for making the last Great Recession worse than it needed to be by "Restraining the Economy", as the title of the book put out by UBC's Institute of Economic Policy put it. These economists also argued that the province ought to place greater emphasis on human capital and less on mega-projects. As the 1980s wore on, the NDP added another leg to its economic strategy, namely the idea that by drawing upon its roots in the labour and environmental movements , engaging in wide-ranging stakeholder discussions, ending the "war in the woods" and undertaking land-use planning and treaties with First Nations, the province could move forward toward sustainable and socially just economic prosperity. This bore some fruit until external conditions hit hard, just as external conditions are hitting hard right now.

There is plenty to criticize in Gordon Campbell's economic policies. Virtually none of them have achieved the results hoped for, and few have even come close. The so-called Heartland Strategy, TILMA, privatizing BC Rail, BC Ferries and BC Hydro, the tax cuts, the fish farms, the tax shift behind the carbon tax and the compromising of the Land Reserve, the "e-government initiative", and so on have not generated much employment or growth. The key to growth remains external markets, especially resource prices. That is why a different strategy focusing on human capital and environmental sustainability as a better way to capitalize on the potential generated by external factors is still a viable option.

I have a hunch that environmentalists and First Nations are going to feel disappointed--maybe even betrayed--by the next Campbell government. The NDP should aim not only to be a vehicle for their discontent and the discontent of other members of civil society, but to be an actually better vehicle for economic policy that is also attractive for small communities and middle-class voters as well. Let's get to it.

Final Thoughts on the 2009 B.C. Election

Congratulations to NDP leader Carole James for winning the TV leaders' debate. Now, after she loses the election next Tuesday I don't expect a headlong rush to replace her. Indeed, if she can improve NDP standings in the Legislature even slightly I would encourage her to stay on for at least a couple more years. But there are a couple of lessons that I hope are not lost on New Democrats and small "d" democrats as they sift through the debris of this electoral defeat.

First, let me make one last comment on the NDP's approach to the environment and the carbon tax issue. The best policies made in this province by the NDP arose during the 1980s and 1990s when the party drew on its deep roots in both the labour and environmental movements to thrash out compromises which informed the CORE process, the Land Use Plans, the parks and Forest Practices Code, the Treaty process and so on. They didn't come from some operatives in the premier's office reading political opinion polls. Making policy to appeal to average voters when gas prices and party approval ratings are fluctuating up and down is a bit like playing the stock market. It would have been wiser to forge a compromise that would have kept the red-green coalition together. I have suggested a carbon tax that would serve as an effective floor price rather than as a regressive duty on all fuel in all situations. Might environmentalists have gone along with such a proposal? Probably enough to have prevented Campbell from splitting the progressive vote.

Second, a last comment on electoral reform. It appears likely that for the second election in a row, electoral reformers will win a moral victory (i.e. between 50% and 60% of the vote). A large number of voters and representatives of minority groups have been torn in this election between the potential for greater representation of diversity allowed by BC-STV and the greater local representativeness and stability promised by our current system. I have suggested that what these election results mean is that there is a mandate for a more moderate type of electoral reform. What I have called "STV lite" would give MLAs manageable constituencies, give voters a manageable size of ballot, and ensure continued majority government most of the time. But it would also force parties and governments to worry about the majority of voters' preferences. And it would improve the representativeness of the legislature.

3-member STV in the major metropolitan areas , 2-seat STV in the southern interior and smaller cities, and single seats with preferential ballots in the North would be a far cry from perfect proportionality, to be sure, but that would be a good thing. For the demand function for proportionality is not the same as the demand functions for voter choice and local representation. Ideally, voters would like to represent themselves if time and resources permitted; they would also ideallly like an infinite variety of choices. But proportionality is an indubitable good only in small amounts; extreme proportionality backfires in the parliamentary context by giving small parties too much leverage and blurring accountability for decisions.

Another simple reform is suggested by the growing size of the legislature (now up to 85 seats). Just have 60 seats elected as they are now (when I entered college there were 57 seats in the legislature, so this represents an historically normal level of constituency representation)--and have 25-30 seats from open lists. The open lists could be split into 4 or 5 geographical regions (greater Vancouver, Island & mid-coast, southern interior and north). These at-large members would afford voters a greater degree of choice in casting their ballots and a greater degree of proportionality and fairness in the results.

CAW Wisely Agrees to a $19 Wage Cut at Chrysler--Another I TOLD YOU SO

Should a trade union accept a painful $19 per hour wage cut when we are in the middle of the worst recession in 75 years, when all of the Big Three auto-makers are teetering on the edge of bankruptcy? Of course it should! As I said last November , unionized workers in Detroit make make 15% more than non-unionized workers in the sunbelt, while Canadian workers make 15% more than workers in Detroit, thanks to Canadian medicare system that makes such a wage dividend possible. That's a total wage gap of 30% more than the closest financially healthy major auto maker (Toyota or Honda). Unsustainable in these circumstances, and probably unsustainable in the long run under any circumstances.

Who has the best environmental policy?

Alan Durning's recent posting in the Sightline Daily neatly summarizes the NDP's position in the environmental community as a result of its attack upon Campbell's carbon tax. For years, the NDP has received--and by and large deserved--high profile endorsements from David Suzuki, activists like Tzeporah Berman and academics like Marc Jaccard. One doubts Suzuki or Berman will even vote for the NDP on May 12, and there is little doubt that Jaccard won't.

As Durning points out, to describe the carbon tax as a gasoline tax makes about as much sense as calling the GST and excise taxes gasoline taxes. It is a comprehensive tax paid by everyone, and about 2/3 of B.C. families will get ALL of their money back in income tax reductions.

Furthermore, the BC Liberals recognize, and I agree, that carbon taxes and cap and trade are complementary strategies, not mutually exclusive ones.

But is it fair to run down the NDP on this issue alone? Surely, there are other aspects of climate change policy besides those relating to pricing and taxation. And there are other aspects of environmental policy besides climate change (as the NDP's strange bedfellow on this issue, Stephen Harper, likes to point out.) It is true that there is something very cynical about Campbell's focus on the carbon tax. He aimed to take a bow in environmental circles and in the eastern media, and to use carbon taxes to do his favourite thing---namely reduce progressive income taxes on affluent Vancouver voters. Other regulatory policies aimed at curbing emissions have not been as spectacular as his carbon tax. The continuing subsidies to gas and oil production, the twinning of the Port Mann and parts of the Cariboo Highway suggest that the Liberals seen more automobile traffic as a good thing.

But Campbell has also perhaps learned from the mistake of the sudden 20% income tax cut---i.e., that it is better to phase things in gradually and allow time for adjustment. That is what the carbon tax does. I have argued elsewhere in this blog that a floor price for fuel might be better, but that is still closer in spirit to the Liberals at this point than it is to the NDP.

It is all a little sad. There are many people in the NDP who have devoted decades of their lives to the environmental movement, (and to First Nations issues as well, that matter). The NDP could have responded to the Liberals' volte face by using its deeper roots in the First Nations community and the environmental movement to come up with better policies. Instead, it is hoping to win more votes by going after the middle class gas-consumer and taxpayer.

It may work, but probably not. Had Campbell continued his tightfisted ways, his opposition to treaties and his indifference to the environment, there would be a United Front of interest groups against him, which in the context of a sputtering economy would likely have spelled his electoral demise. Instead, he has split the Opposition beautifully.

BC-STV lite would have been an easier sell---especially in rural and northern B.C.

A more modest version of BC-STV would have simply divided the province into electoral districts of 3 different magnitudes: 3 member districts in metropolitan areas, 2 member districts in the southern interior, and single member (AV) districts in the north. This would yield improved voter choice, with recognizable and manageable constituency sizes. Yes, there would be only a modest improvement in over-all proportionality under my preferred scheme. But I would argue that a modest increase in proportionality is really all that is desireable, and all that is necessary, in order to shake up the Legislature and make it more representative of the population.

It is really difficult to say whether BC-STV will improve representation for the "typical" rural voter (whoever he or she is). On the one hand, the argument has been made that, since rural and northern ridings will have fewer MLAS, they will constitute a larger proportion of the caucuses of the two major parties than will their southern and urban counterparts. This could spell more, not less influence. Furthermore, the Citizens' Assembly did their homework and looked at the evidence from Ireland, Malta and the Australian Senate: sure enough, representation in multi-member STV constituencies does tend to be evenly distributed geographically. On the other hand, it is difficult to guarantee the town council of McKenzie or 100 Mile House that they will be as sought after or as listened to in a geographically much larger riding. And then there is the simple math: the number of representatives per capita will be approximately the same under both systems.

I would have preferred to split the difference-- keep the northern ridings much the same size as they are now, but with a majoritarian preferential ballot (also known as Alternative Vote). That would improve voter choice and have the intended moderating effect upon candidates as they compete for second and third preferences. A degree of genuine proportional representation in the province would still come from the multi-member ridings in more densely populated areas, raising the bar somewhat for the creation of majority government, but not opening the door to perpetual minorites or too many Green-Party balance of power scenarios.

Having 3-member seats in Greater Vancouver and Victoria and 2-member seats in the southern interior would have two further advantages. First, the resultant constituencies would more clearly correspond to the boundaries of actually recognized communities than either the existing First-Past-the Post system or BC-STV: the Richmond riding would contain all of Richmond; the Surrey riding would contain most of Surrey; North, South and West Vancouver constituencies would facilitate the discussion of most local neighbourhood interests; while the double ridings of Kamloops and Cariboo would correspond to most residents' perceptions of where those communities are. Second, constituencies of magnitude 1-3 would present most voters with choices between a manageable number of candidates and facilitate the formation and expression of well-considered preferences.

That being said, "STV-lite" is not on the ballot. All things considered, I am still willing to follow the recommendation of the Citizens' Assembly and support BC-STV on May 12. I hope that all of my readers will do likewise.

Lest We Forget: the 2003 Bush Tax Cuts and the Folly of Economic Conservatism

One of the worst examples of conservative economic policy-making in recent years was the 2003 Bush tax cuts. W and his supporters in Cabinet, Congress and the business community were reaching for that winning Reagan formula of feeding the fat cats to generate prosperity while foolishly asserting that the cuts would "pay for themselves". They were also using the recession as a pretext for trying to ideologically engineer permanent changes to the tax structure--at the same time that a very expensive war in Iraq was just getting underway. The case of the Bush tax cuts is instructive now as we watch governments deal with the 2008-2009 economic crisis, a crisis largely triggered by Bush's financial deregulation and no doubt made worse by his fiscal policies.



Not surprisingly, a prestigious group of 450 leading economists signed a statement urging Bush not to enact the cuts. The list had ten American Nobel Prize winners on it, including the two greatest living economists since John Maynard Keynes, Paul Samuelson and Kenneth Arrow.



The statement was printed as a full-page ad in The New York Times and released to the public through the Economic Policy Institute. According to the statement, the 450 plus economists who signed the statement believe that the 2003 Bush tax cuts will increase inequality and the budget deficit, decreasing the ability of the U.S. government to fund essential services, while failing to produce economic growth.


The statement reads as follows:



"Economic growth, though positive, has not been sufficient to generate jobs and prevent unemployment from rising. In fact, there are now more than two million fewer private sector jobs than at the start of the current recession. Overcapacity, corporate scandals, and uncertainty have and will continue to weigh down the economy."


"The tax cut plan proposed by President Bush is not the answer to these problems. Regardless of how one views the specifics of the Bush plan, there is wide agreement that its purpose is a permanent change in the tax structure and not the creation of jobs and growth in the near-term. The permanent dividend tax cut, in particular, is not credible as a short-term stimulus. As tax reform, the dividend tax cut is misdirected in that it targets individuals rather than corporations, is overly complex, and could be, but is not, part of a revenue-neutral tax reform effort."


"Passing these tax cuts will worsen the long-term budget outlook, adding to the nation’s projected chronic deficits. This fiscal deterioration will reduce the capacity of the government to finance Social Security and Medicare benefits as well as investments in schools, health, infrastructure, and basic research. Moreover, the proposed tax cuts will generate further inequalities in after-tax income."


"To be effective, a stimulus plan should rely on immediate but temporary spending and tax measures to expand demand, and it should also rely on immediate but temporary incentives for investment. Such a stimulus plan would spur growth and jobs in the short term without exacerbating the long-term budget outlook. "

Signatories
Over 450 economists signed the statement, including the following ten Nobel Prize Laureates:



George Akerlof, University of California – Berkeley
Kenneth J. Arrow, Stanford University
Lawrence R. Klein University of Pennsylvania
Daniel L. McFadden University of California – Berkeley
Franco Modigliani Massachusetts Institute of Technology
Douglass C. North Washington University
Paul A. Samuelson Massachusetts Institute of Technology
William F. Sharpe Stanford University
Robert M. Solow Massachusetts Institute of Technology
Joseph Stiglitz Columbia University

Lobbying in B.C. : What are the Next Steps in Accountability and Transparency?

{The following responds in part to a major historical pattern of BC politics: the tendency of measures to improve transparency and accountability to come from newly elected governments, and not from re-elected ones. It is based on a section of a chapter I wrote for the forthcoming book, BC Government and Politics (Emond Montgomery 2009). In that chapter I also look at another historical pattern, the tendency of re-elected governments to reward client groups by expanding or contracting the scope for collective bargaining in the Labour Code}.

Gerry Kristianson’s 1996 article on lobbying and private interests in BC politics began by observing that the small number of visible lobbyists in Victoria as compared to Washington state or other American jurisdictions was a misleading indicator of the level of pressure group activity: “the half-dozen or so people who are to be found around the legislative buildings on a daily basis while the house is in session are only the advance guard of a host of individuals and groups who attempt to influence provincial government decisions on behalf of an endless variety of private interests.” (Kristianson 201). Kristianson’s point, echoed by more recent academic literature (e.g. Montpetit 307), was that the parliamentary state organizes a lot of interest group activity out of public forums such as US-style legislative committees or other apertures afforded by the separation of powers and into the offices of public servants and cabinet ministers, “away from the glare of public attention and media scrutiny” (Kristianson 202). To some extent, parliamentary government replaces lobbying with governance; to some extent lobbying is merely cloaked by the realities of party discipline and cabinet solidarity.

Despite the growing consensus that a registration of lobbyists, similar to the ones required by the federal government and several other provinces, was desirable in order to have a more comprehensive list of groups attempting to influence decision makers, there was also concern expressed that such a registry would still fail to resolve the issues of transparency, equality of access and the implications of partisanship, due to the many links, both informal and formal, that would continue to exist between the private sector and public officials beyond the purview of legislation. Kristianson, himself the dean of ‘government relations’ specialists working in Victoria in the 1980s and 1990s, suggested that true transparency might require something more:

"Instead of asking lobbyists to register and even to disclose their their specific contacts with public officials, it might be better to require public officials to disclose the sources of information upon which they base their decisions. Weekly or monthly disclosure of a log of contacts between decisionmakers and the public would shed a great deal more light on the flow of political influence than does the registration of lobbyists. Reducing the level of secrecy in the BC political system would be an effective way of ensuring greater transparency (214). "

The Lobbyists Registration Act (LRA) of 2001 has confirmed both the realistic hopes of its proponents and the reasonable fears of skeptics. Created early in the Liberal government’s first term in office as part of its “New Era” platform commitment to open and accessible government, the LRA established a registry in the Office of the Information and Privacy Commissioner requiring “registration of anyone who is paid to lobby the government to influence government legislation, regulations, programs, policies, the awarding contracts or the awarding of benefits.”(Plant 2001). The Act covers both “consultant” and “in-house” lobbyists, and section 4 requires not only their registration but the filing of names and business addresses of their clients/employers, as well as particulars to identify relevant legislative proposals, regulations or contracts, as well as the name of any ministry and public office holder lobbied or whom the lobbyist expects to lobby during the relevant period. The Information and Privacy Commissioner is designated as registrar, who maintains the registry and makes it available to the public and online. The LRA does not make the fees received by lobbyists available to the public, however; nor does it count as “lobbying” a wide range of actions by public office holders, or citizens or businesses contacted or consulted by public office holders, or constituents’ communications with their MLAs. It does make the contravention of the Act an offence punishable by a fine of not more than $25,000, but has not yet given the registrar clear enforcement powers, such as the ability to levy administrative penalties or ban persons who fail to comply with the Act from lobbying.

A perusal of the Lobbyists Registry permits a clearer picture to emerge of the size of the industry, the names of the most important lobbyists and their clients/organizations, and the policy issues and ministries that attract the most lobbying activity. At the time of writing, there were over 450 active lobbyists currently registered under the Act (210 senior officers of organizations,135 consultant lobbyists, and 109 In-House lobbyists), engaged in over 3300 “current lobbying activities”. Fully 243 of those activities were with MLAs, followed by 211 with the Office of the Premier. Other agencies attracting large numbers of lobbying activities include Finance (176), Environment (131), Attorney-General (116), and Energy, Mines and Development (109). Currently, the most active business lobbyists evidenced by the Registry include consultant lobbyists Michael Bailey, John Moonen, Gary Ley, Bruce Young, Kimanda Jarzebiak, Andy Orr, Andrew Wilkinson and Christopher Smith, and Senior Officers Jock Finlayson and Ed Wong of the Business Council of British Columbia. Many more are in-house lobbyists working either as public affairs specialists or lawyers for particular firms and organizations, including organizations that engage in public interest advocacy on behalf of broader social causes. Of course, this information does not indicate which contacts are most influential, but does help to point us in the right direction (one suspects that, ceteris paribus, a meeting with the Premier’s Office carries greater potential for influence than with most backbench or opposition MLAs, and that a close advisor to Gordon Campbell such as Wilkinson or spokespersons for the larger business community like Wong and Finlayson are more likely to gain an influential audience than other lobbyists.)

The Opposition New Democratic Party (NDP), although supporting the LRA as a continuation of their own policy commitment to transparency and accountability, nonetheless raised concerns at the LRA’s inception that, while trade unions and public interest NGOs would have to register in order to gain access to government officials, those whom the government asked for advice (disproportionately from the business community in the case of the Liberals—via such bodies as the Progress Board of BC , and the Premier’s Council on Science and Technology) were exempted, thereby leaving important channels of influence uncovered and creating inequities between interest groups. These criticisms may have been overstated in the sense that the vast majority of business interests that make specific claims upon the state have had to register or hire registered lobbyists to speak on their behalf, and the vast majority of entries in the register refer to specific business interests.

Nevertheless, the claims that there are inequities of influence between interest groups, and a lack of enforcement and investigatory powers on the part of the registrar, have proven to be warranted. At least two subsequent incidents clearly illustrate this. Ken Dobell was the deputy minister to the premier from his election in May 2001 until he resigned in June 2005, when he began a consultancy business through his company Dobell Advisory Services Inc. As part of that business he accepted, later in 2005, a contract as special advisor to the Premier in various areas and he also accepted, in April 2006, a contract as advisor to the City of Vancouver and the City Manager respecting development of a cultural district and social housing. Each job paid Mr. Dobell about $250 an hour. Since the LRA requires a consultant lobbyist to file a return within 10 days after entering into an undertaking to lobby on behalf of a client, and Dobell did not do so until October 28, he was clearly in contravention of the Act.

Dobell explained that he had not considered himself to be a lobbyist but rather a “content consultant” engaged in the “substantive work of policy and process analysis” (Loukidelis 2007, 2), but chose to register anyways in the interest of transparency and in order to quell controversy surrounding the question of compliance with the LRA. He also indicated that his communications with provincial government officials were much more in the nature of public policy discussions or debate than lobbying, and maintained that there was an important distinction between his services to government, which he said were in the public interest, and consulting services to private interests. The following spring, Dobell pleaded guilty in a Vancouver provincial court to the charge of failing to register as a lobbyist under the LRA and was granted an absolute discharge. His successor as deputy minister, Jessica McDonald, wrote the premier a memorandum clearing Dobell of conflict of interest.[1] The Information and Privacy Commissioner and Registrar of Lobbyists, David Loukidelis reviewed the question of Dobell’s registration and found that he while he was indeed a lobbyist within the meaning of the Act, “there was no intention by the City or Mr. Dobell to hide the consulting contracts” and that there needed to be a greater commitment to “simple and unstigmatized disclosure” and candid acknowledgment that the current system is not geared or funded to undertake active––much less extensive––compliance and enforcement measures”(Loukidelis 2007, 4).

An even greater embarrassment to the government and the Lobbyists Registry came in October, 2008 when Patrick Kinsella, former principal secretary to Social Credit premier Bill Bennett and longtime Liberal campaign advisor, refused to cooperate with the Privacy Commissioner’s investigation that he improperly lobbied the government. The investigation was triggered after Sean Holman, the legislative reporter for the Vancouver newspaper 24 Hours, obtained copies of records obtained under Washington state’s Freedom of Information legislation, which included a May 2006 contract between the Washington State government and Kinsella’s firm, The Progressive Group, in which the firm committed to "facilitate opportunities for Washington State to develop important relationships" with "key individuals within target business, political and Olympic circles" -- including cabinet ministers and senior bureaucrats. (In a 2004 interview, Kinsella had stated, "I don't consider myself a lobbyist. I hold myself up as a communications consultant. I don't do any lobbying. They don't need me to pick up a phone and talk to the government or any members of the provincial government. I make it very clear to my clients that I don't do that.")

In September 2008 Kinsella’s lawyer Paul Cassidy published a review of the LRA which found that the Registrar of Lobbyists had “no legislative or other power to accept complaints, or to conduct any investigation or reporting on the activities of individuals alleged to have contravened the Act” and that , accordingly, any investigations by the Registrar concerning the alleged lobbying activities of our client have no legal basis”. Loukidelis once again wrote to the attorney –general, pointing out that previous investigations taken unde the LRA had only been possible with the cooperation of those being investigated—i.e. that the BC system was essentially an honour system. The Kinsella case showed that the LRA needed amendments, similar to those found in the Alberta Lobbyists Act, the federal Lobbying Act, and Quebec’s Lobbying Transparency and Ethics Act, that gave the responsible officer powers to investigate non-compliance, including the power to compel production of records and testimony. The Commissioner added that in the meantime, he would no longer investigate complaints against lobbyists because of the de facto veto that lobbyists under investigation have (Loukidelis 2008, 4-5). The Opposition NDP responded by stating that in the future it would therefore ask the RCMP to conduct such investigations, starting with the “Kinsella affair”.

Largely as a result of the complaints concerning Dobell and Kinsella, both of BC’s major parties have signalled that the LRA will be expanded and improved in line with the leading legislation elsewhere in Canada. But besides providing an impetus to legislative reform, these cases also illustrate that the lines between “lobbying”, “communications” and “governance” can be very fine. The growing institutionalization of interest group influence and legalization (in the sense of growing proceduralism and use of legal norms) of the political and policy environment is continuing to alter the way that the state interacts with society and the context in which policy decisions are made.





Endnotes
[1] McDonald, Jessica. Memorandum to the premier of British Columbia, April 27, 2007. “I remain satisfied that Mr. Dobell fulfilled his obligations with respect to managing potential conflict of interest, and that the discussion he and I had and the procedure we agreed to effectively safeguarded the Province’s interest.”

Capitalist Fools

Recent Nobel laureates Joseph Stiglitz and Paul Krugman have long been known as left-liberal critics of conservative economic dogma. I offer here my own summary of Stiglitz's recent article in Vanity Fair , entitled "Capitalist Fools", both because it might benefit someone who doesn't have time to read the original article, and because it accords nicely with several of my own recent commentaries.

Stiglitz's column singles out five key mistakes by policy makers which contributed to our current malaise.

1. Firing the Chairman (Replacing Paul Volcker with Alan Greenspan)

In 1987, former president Ronald Reagan This meant replacing a noted pragmatist and believer in the need for financial regulation with an ideological follower of ultra-libertarian philosopher Ayn Rand. The timing of the appointment helped to obscure the fact that it was Volcker, not Greenspan, who had done most of the work in wringing inflation out of the economy.

No. 2: Tearing Down the Walls (The Deregulation Philosophy)

The deregulation philosophy would pay unwelcome dividends for years to come. In November 1999, Congress repealed the Glass-Steagall Act—the culmination of a $300 million lobbying effort by the banking and financial-services industries, and spearheaded in Congress by Senator Phil Gramm. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest.

Stiglitz opposed the repeal of Glass-Steagall, for reasons that now seem obvious:

"The proponents said, in effect, Trust us: we will create Chinese walls to make sure that the problems of the past do not recur. As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest—toward short-term self-interest, at any rate, rather than Tocqueville’s “self interest rightly understood.”

"The most important consequence of the repeal of Glass-Steagall was indirect—it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money—people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking.

There were other important steps down the deregulatory path. One was the decision in April 2004 by the Securities and Exchange Commission, at a meeting attended by virtually no one and largely overlooked at the time, to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process. "

"In agreeing to this measure, the S.E.C. argued for the virtues of self-regulation: the peculiar notion that banks can effectively police themselves. Self-regulation is preposterous, as even Alan Greenspan now concedes, and as a practical matter it can’t, in any case, identify systemic risks—the kinds of risks that arise when, for instance, the models used by each of the banks to manage their portfolios tell all the banks to sell some security all at once. "...

"As we stripped back the old regulations, we did nothing to address the new challenges posed by 21st-century markets. The most important challenge was that posed by derivatives. In 1998 the head of the Commodity Futures Trading Commission, Brooksley Born, had called for such regulation—a concern that took on urgency after the Fed, in that same year, engineered the bailout of Long-Term Capital Management, a hedge fund whose trillion-dollar-plus failure threatened global financial markets. But Secretary of the Treasury Robert Rubin, his deputy, Larry Summers, and Greenspan were adamant—and successful—in their opposition. Nothing was done."

No. 3: Applying the Leeches (The Bush Tax Cuts)

Then along came the Bush tax cuts, enacted first on June 7, 2001, with a follow-on installment two years later. The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease—the modern-day equivalent of leeches. The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity. The war in Iraq made matters worse, because it led to soaring oil prices. With America so dependent on oil imports, we had to spend several hundred billion more to purchase oil—money that otherwise would have been spent on American goods. Normally this would have led to an economic slowdown, as it had in the 1970s. But the Fed met the challenge in the most myopic way imaginable. The flood of liquidity made money readily available in mortgage markets, even to those who would normally not be able to borrow. And, yes, this succeeded in forestalling an economic downturn; America’s household saving rate plummeted to zero. But it should have been clear that we were living on borrowed money and borrowed time.

No. 4: Faking the Numbers (Dishonest Accounting)

The Sarbanes-Oxley Act that followed on the heels of the Enron scandal failed to deal with stock options; it also failed to deal with a collateral problem with stock options: that they provide incentives for bad accounting. Top management has every incentive to provide distorted information in order to pump up share prices.

The incentive structure of the rating agencies also proved perverse. Agencies such as Moody’s and Standard & Poor’s are paid by the very people they are supposed to grade. As a result, they’ve had every reason to give companies high ratings, in a financial version of what college professors know as grade inflation. As Stiglitz puts it "the rating agencies, like the investment banks that were paying them, believed in financial alchemy—that F-rated toxic mortgages could be converted into products that were safe enough to be held by commercial banks and pension funds. "

NO. 5: Letting It Bleed (The Bush Bailout)

The crisis started when the US Treasury bailed out Bear Stearns--but then did not bail out Lehmann Brothers. "The original proposal by Treasury Secretary Henry Paulson, a three-page document that would have provided $700 billion for the secretary to spend at his sole discretion, without oversight or judicial review, was an act of extraordinary arrogance. " But while the purpose of this act was to "restore" confidence" , how could it do that without addressing the cause for the lossof confidence--that too many bad loans had happened and too many foreclosures were happening.

The initial bailout plan was a failure. As Stiglitz puts it, "When he finally abandoned it, providing banks with money they needed, he did it in a way that not only cheated America’s taxpayers but failed to ensure that the banks would use the money to re-start lending. He even allowed the banks to pour out money to their shareholders as taxpayers were pouring money into the banks."

Stiglitz concludes by saying that the fundamental problem was an ideological one: a naive faith in the Self -Regulating Market:

"The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, “I have found a flaw.” Congressman Henry Waxman pushed him, responding, “In other words, you found that your view of the world, your ideology, was not right; it was not working.” “Absolutely, precisely,” Greenspan said. The embrace by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today."

enough, already: STOP THE F***ING TAX CUTS!

Conservatives. They think that money grows on trees. And they think that all they need to do to make the money tree grow is prune it with tax cuts and sprinkle it with tax expenditures and tax incentives. And that is the part of their Economic Action Plan that they actually believe in. The rest is even worse: that just consists of reluctant scattergun spending on various political constituencies without any intellectual coherence. They give more money to culture ("after all we got burned by Quebecers in the last election for not doing so") but give less to social science research ("most of them are against us"); they say that they're on board with Barack Obama and the G-20 in providing economic stimulus, but then avoid investments in the green economy and wind and solar power that would keep Canada in the lead on climate change (guess where the research and development jobs in wind and solar and renewables will be?); they deal with child care and First Nations issues through more "targetted spending".

• Remember when Gordon Campbell campaigned to reduce income taxes by 20% and reassured us that the cuts "would pay for themselves" and therefore would not impair social spending? Not only did he blow a huge hole in revenues and create the largest deficit in BC history, but within a few years he and Carole Taylor were claiming that "health care costs were getting out of control". Actually, international comparisons showing France spending 1.1% more of its GDP on health care than Canada and the US spending 5% more of its GDP on health care than Canada suggest that it is private and two-tier systems that are "out of control"; Canada at 10% and Britain at 8% are doing just fine (although they should spend more). So why all the bullshit? The Conservatives are leading us down the same path as the BC Campbell Liberals: cut, cut, cut, cut taxes and then complain that single-payer health care is "unsustainable".

• Economists frequently make cogent arguments for shifting taxes away from income taxes (or taxes on productive activity) to expenditure taxes (in order to promote saving and investment) and Pigouvian taxes (to discourage pollution and other negative externalities). So why was the Conservative priority to have $12 billions in reduced GST instead? Because it was ideologically congenial, politically opportunistic, and the business lobby wanted it.
• If most economists place less stress than the government does on tax cuts for stimulus (because tax cuts mean larger deficits, and spending on students, EI recipients and low-income households yield a larger multiplier effect), why did the government persist? Because it was ideologically congenial, politically opportunistic, and the business lobby wanted it.
• If childrens' sports tax credit has been criticized because it disproportionately benefits middle-class suburbanites and doesn't help the most needy 1/3 of children; if the childcare tax credit has been criticized for not doing enough to either stimulate supply or guarantee high quality of universal early childcare learning; if 95-97% of those being subsidized by the public transit tax credit were riding public transit anyway and a consultant's report told them that the cost of the tax credit would be a wasteful $800 per tonne of greenhouse gas eliminated and would have little impact on transit usage, why did the government persist? Because it was ideologically congenial, politically opportunistic, and the business lobby wanted it.
• If the Commissioner of the Environment and Sustainable Development has dismissed the $1.5 billion Clean Air and Climate Change Trust Fund as being little more than a transfer payment ot the provinces "conducted [with]almost no analysis", why did the government persist? Because it was ideologically congenial, politically opportunistic, and the business lobby wanted it.
• If reliable analysis backed up by extensive international research suggests that every dollar spent on early childhood intervention can save 8 or 9 dollars down the road in improved productivity and reduced social costs; or that preventing a single fetal alcohol syndrome child can save society a million dollars in costs to health, education, and criminal justice systems; or that strategic investment in scientific research, universities, and alternative energy can make Canada a more competitive and productive country in the future, why didn't the government go for it? Because it wasn't ideologically congenial, wasn't politically opportunistic, and the business lobby didn't want it.

It's such a shame--all those years when we were light-years ahead of the conservatives in Washington and could have led the world in productive social investments. Pretty soon we'll be playing catch-up to the Americans, all because the Liberals didn't believe in half or what they were saying, and the Conservatives didn't believe in half of what they were doing.

Billions for Carbon Sequestration?

From the ringside seat to the oil sands project that we have in Athabasca/Edmonton, it would be easy to take comfort in the $2billion plus committed by governments in Canada to finding improved cost-effective carbon sequestration ( or "carbon capture and storage", CSS). But, personally, I would find the announcement of two or three new nuclear reactors for northern Alberta and Saskatchewan to be more comforting. There is absolutely no guarantee that a cost-effective and sustainable CCS will ever come into being; the search for CCS also represents public resources diverted from the search for greener and more sustainable forms of alternative energy. Indeed, I am cynical enough to believe that this expenditure of money is as much about public relations as anything else.



On this subject, the recent leader in the Economist of March 7 (pp.22 and 74-75) put it quite well:



"With the private sector sitting on its hands, Western governments are lavishing subsidies on CCS. Some $3.4 billion earmarked for CCS found its way into America’s stimulus bill. The European Union, which already restricts greenhouse-gas emissions through a cap-and-trade scheme, unveiled further incentives for CCS last year. Britain, Australia and others have also vowed to help fund demonstration plants partly because they reckon the private sector is put off by the huge price-tag on a single CCS power plant, and also in the belief that the cost of CCS will fall with experience.


Burning cash
The private sector, however, is reluctant to fork out not just because of the upfront cost of power plants, but also because, tonne for tonne, CCS looks like an expensive way of cutting carbon. The cost of it may fall, but probably not by much, given the familiarity of the technologies it uses.

Politicians should indeed encourage investment in clean technologies, but direct subsidies are not the way to do it. A carbon price or tax, which raises the cost of emitting carbon dioxide while leaving it up to the private sector to pick technologies, is the better approach. CCS is not just a potential waste of money. It might also create a false sense of security about climate change, while depriving potentially cheaper methods of cutting emissions of cash and attention—all for the sake of placating the coal lobby."

Alberta could teach BC a thing or two about Climate Change Policy

Using the selling and trading of carbon credits to develop viable alternative energy projects is already a reality in BC's greener neighbour to the east--Alberta.

Alberta? If you don't believe me, just visit http://www.carbonoffsetsolutions.ca/ . That is where Alberta companies can peruse offers of carbon credits that have been earned through the curtailment of Greenhouse Gas (GHG) emissions. As journalist Sheila Pratt has written in a couple of important articles in the Edmonton Journal in February , this carbon-trading system has made it easier for a company named Highmark Renewables to profitably turn almost any kind of organic waste -- slaughterhouse waste, sugar beet waste, municipal sewage -- into biogas. Not only can the energy be sold, but so can the carbon credits they earn for reducing GHGs. And--even better--Highmark's ethanol plants need not take land out of food production, since they are powered by manure from adjacent feedlots.

This is an idea that could be useful in the Cariboo, where the ranching industry could benefit from power generation by feedlots, or even elsewhere in British Columbia, by helping to make farmland more profitable, thereby reinforcing the viability of the Land Reserve. And that is no B.S.