Monday, January 30, 2012

Two Ways in which the Federal NDP should be improved

{Back in  May 2010 I was asked to contribute a short column to The Mark News as part of a series on "How to Fix Canada's Political Parties".  I reproduce it here for  your consideration in light of the current NDP leadership race.}

The legacy of New Labour in Britain is not one of complete failure, but it is very mixed. Specifically, it was disappointing to see a Labour government look to market-based solutions in health care almost as a panacea; it was shocking to see Blair follow Bush into Iraq with an alacrity that pleased Mrs. Thatcher. Meaningful politics needs a clear adversary (besides terrorism); that adversary for any social democratic party has to be a corporate capitalism that asserts a perfect identity of interests with the wider society even as its pathological pursuit of profit and power fouls the ocean and melts the poles. The NDP must not abandon its role as the representative of the underdogs in corporate-societal relations.

Nevertheless, if the NDP wishes to be more than just an important parliamentary umbrella group for social movements , it will need to make two improvements that do borrow more than a little from New Labour. The first is a more aggressive Social Investment Strategy that justifies social spending in economic terms: not just to protect indebted and under-employed workers and growing numbers of seniors from change, but to improve their capacity to change. This need not mean large tax cuts, the abandonment of public schools, or privatized health care; on the contrary. But it will mean recognizing that middle-class buy-in is the linchpin of the Canadian welfare state. Even the taboo subject of raising productivity (often code words for either shedding labour or making it work harder) can be given a green and social democratic slant---after all, Canada’s chronic problems in that area have a lot to do with branch-plant economics, the abysmal failure to recognize the future economic importance of climate change, and under –investment in research and development. If there is both a high road and a low road to comparative advantage, then the NDP should stand for taking the high road, even if doing so sometimes necessitates higher taxes.

The second, political change that is needed is a greater willingness to cooperate with other parties and groups outside of the NDP’s core constituency. Since the NDP is already committed to coalition–building by virtue of its support for proportional representation, one would expect this to not be a problem. But it is. Before Green Party leader Elizabeth May forged her agreement with Stephane Dion in 2008 to not run opposing candidates in each other’s riding, she was rumoured to have approached Jack Layton , but was rebuffed. In the coming election, it would be reasonable for the NDP to ask a dozen vote-splitting Green Party candidates to step down in exchange for giving May a clear run at Gary Lunn in the constituency of Saanich-Gulf Islands, but that won’t happen either.

Another example illustrates the need for both of these improvements. Paul Summerville, the former chief economist for RBC Dominion Securities who in 2006 ran for the NDP in the Toronto riding of St. Paul's, later left the party for the Liberals, complaining that the leadership would not counter the strong "anti-market rhetoric" coming from the party’s grassroots. He had a good point. Recognizing the most egregious instances of market failure, such as the private health insurance trap and deregulated financial markets in the United States, or the burgeoning crisis of global warming, need not mean blinding ourselves to the value of markets as the principal means of everyday economic coordination for ordinary Canadians, or ignoring the value of international trade as the key to our standard of living. A sophisticated appreciation of markets and the limitations of government is an appropriate starting point for better public policy, even if it should not be allowed to become the ultimate arbiter. It is also the basis for rapprochement with greens and progressive liberals—something that will be necessary in any case, should the NDP hope to be part of a governing coalition in the future.

Sunday, January 29, 2012

What Canada's Pipeline Policy Should Be

The problem with the government deferring to the pro-business logic of "the market" is that it ignores the truth that Albertans, as the owners of the resource, and Canadians, who own the land through which energy is transported, constitute an important part of the market; and the federal government, as the representative of all Canadians, has an obligation to consider obligations to First Nations and the Environment that the rest of the market ignores.  The idea that waiting a few years to approve the most direct pipeline to China could be profitable (because of long-term increases in energy prices) is admittedly, a speculative gamble; but no more so than the idea that shipping as much as possible out quickly will generate the most long-term economic benefits.  If we insist upon an effective carbon capture and storage system in the tar sands, the negotiation of treaties along the Gateway corridor, and the banning of anything less than double-hulled tankers as necessary conditions for the approval of the pipeline, then we create powerful economic incentives for each of these things to happen. But if we  ram through a pipeline approval without securing those three conditions first, then we create powerful economic incentives for not putting in place effective carbon capture, for not  concluding treaties, and for not banning all but the safest oil tankers.

Of course, viewing Gateway as a long-term project need not mean placing a moratorium on all pipelines. Consider the following:
"The only way to get that world price is to give Alberta oilsands products easy access to overseas markets, says Frank McKenna, former ambassador to the U.S. and former premier of New Brunswick.  Even if the western Gateway pipeline, the fastest route to the Coast and on to China, gets approved, Canada also needs new pipeline capacity to Eastern Canada to truly diversify its markets and get the best price, he says.  He points out that Canada's largest refinery, the Irving refinery in Saint John, N.B., already handles heavy oil and could be modified to upgrade bitumen from the oilsands."
Read it on Global News: Eastern Canada could be gateway for Alberta oil if Keystone pipeline gets nixed 

Canada's policy on pipeline construction should be: (1) If the industry wants to build a pipeline in the short run, consider a pipeline to eastern Canada to improve our self-sufficiency and reduce imports and east cost tanker traffic and related pollution.  (2) The Keystone pipeline should be considered a medium-term project proposal that awaits American regulatory approval--and which, if possible, should also seize the opportunity to process the bitumen here instead of in 30 year old refineries in Texas.  (3) There are several alternative routes that could also transport oil and gas--such as a port in Churchill, Manitoba, which could take advantage of the opening up of the Northwest Passage  as well as having the virtue of switching between eastern and western destinations; twinning the McKenzie Pipeline route; or changing the route to Prince Rupert. Another possibility would be to process the bitumen in Alberta, thereby increasing jobs in Canada and possibly lessening First Nations opposition to a (gas or oil) pipeline. (4) The Gateway proposal should be considered a long-term project that should wait for the implementation of an actual functioning system of carbon capture in Alberta and the the actual completion of treaties with First Nations along the pipeline route--to say nothing of an iron-clad legal obligation of double-hulled  ( and not just double-bottomed) tankers on the West Coast. Besides, some very serious analysts have questioned the  economic wisdom of  the Enbridge  proposal, based on its effects on Canadian oil prices. Robyn Allan's report to the National Energy Board concludes that   "[a]s a consequence, the project will raise the price of oil with no commensurate change in production or efficiency; it will enrich a few global oil companies such as Sinopec and it will increase inflationary pressures in Canada for decades."

"Unfortunately, there are environmental and other radical groups that would seek to block this opportunity to diversify our trade."---- Joe Oliver

PM Stephen Harper and Resources Minister  Joe Oliver have both blasted environmentalist protestors for being "radical" (Oliver) and  "Publicly Funded"(Harper).  By framing this issue as environmental radicals versus Canada's future prosperity, the government has once again illustrated its general communications strategy of both dividing and conquering through false dichotomies.  That is disingenuous and incredible and it is not good public policy.

I can't recall a government  being this hypocritical and biased at the outset of an (ostensibly neutral, open-minded?)  regulatory hearing. All the government has to do is set time limits on public submissions if it is worried about finishing the hearings--instead of villifying environmentalists and "people like George Soros".  Joe Oliver and Stephen Harper should re-read Mill's discussion of the marketplace of ideas in On Liberty ---assuming they  ever read it in the first place.

Can you believe it?

While it is true that  many environmentalists are bent on delaying the project for as long as possible, that is not a reflection of some ""foreign" or especially "radical" interest.  And while it is hard to say no to  $270 billion worth of economic activity, why not delay the pipeline until  (1) carbon capture technology has been successfully implemented; and  (2) First nations rights and interests have been clarified; and (3) the whole issue of the tanker moratorium can also be revisited?  Delaying  the McKenzie Valley Pipeline until First nations and environmental concerns could be more fully addressed was one of the wisest decisions the federal government made in the 1970s.  Former Alberta premier Peter Lougheed has spoken of a planned growth strategy that puts Canada first; why shouldn't we? It is very likely that waiting until the environmental costs are lower would also mean waiting until a time when energy prices are very much higher. That could be a win-win for the economy , the environment , and for future generations.  Unfortunately, it seems that nowadays even Peter Lougheed  and Frank McKenna are  too "radical" for this government.

Sunday, January 15, 2012

A Canadian Perspective on Mitt Romney's Brand of Capitalism

Back in September 2010 , I was  asked by the editor of the Mark News to contribute to a series on Canada's most influential people.  I chose to write a short profile of Gerry Schwartz, the founder of Onex Corporation, Canada's leading private equity (buyout) firm.  Since the  2012 U.S. presidential campaign is starting to turn in part on Romney's record as a co-founder and executive at Bain Capital, it may interest readers to look at my article:

What I found was that even though Gerry Schwartz is a relatively 'good' leveraged buy-out (LBO) specialist, in the sense that he prefers to grow firms rather than simply flip them for a quick profit,  I couldn't entirely shake my ambivalence about his business in the context of the current economic crisis.  To be sure, Schwartz, like Romney,  has not made  his fortune from re-packaged mortgage debt on sub-prime mortgages, or by betting against his own clients(!).  But they have both exemplified the big shift in financial capitalism that started in the 1980s: away from industrial start-ups to the more lucrative areas of  "take-overs" and "re-structuring". Associated with this phenomenon was the invention of the Leveraged Buy Out itself, which just threw out of the window age-old strictures about how much money one should be able to borrow on a given amount of equity.  This helped to provide the context, if not the specific content, of the 2008 Financial Crisis.
Now that we are in a Great Recession--"great" because practically everyone both public and private is having to de-leverage  debt before they can start buying, investing or hiring again---it would be ironic indeed if America were to turn to a LBO king for its economic salvation.

Interested readers should also follow up on these two quotes:
"Romney soon switched Bain Capital's focus from startups to the relatively new business of leveraged buyouts: buying existing firms with money mostly borrowed against their assets....   Less an entrepreneur than an executive running an investment operation, Romney excelled at presenting and selling the deals the company made."  ------  "Mitt Romney", Wikipedia

 ‘I don’t like what private equity firms do in terms of taking out every dime they can and leveraging [companies] up so that they really aren’t equipped, in some cases, for the future.’”
                                                                    ----Warren Buffett, quoted in the Wall Street Journal.

Wednesday, January 04, 2012

It's not just Liberal attack ads that remind me of Glen Clark and the 1990s-- it's Adrian Dix that does

I have just seen the new "Risky Dix" negative TV ad, and although I agree with Dix's tweet that "BC deserves better" ,  I also think that BC deserves better than him.

Although it is silly to attribute the problems of the 1990s economy with Adrian's role as principal secretary,  I can think of half a dozen examples of where his unseemly and inappropriate ruthlessness contributed to either bad policy; or bad personnel decisions;or demoralizing, less-than inspiring leadership--including the sneaky, snake-in -the grass approach to seizing the leadership with last-minute invisible busloads of instant members. That happened only 9-10 months ago.

 That episode showed that although  middle-aged Dix is more careful and more knowledgeable than he was as Glen Clark's political operative, his basic character and modus operandi remains unchanged.  It  reminded me of his backdated memo (which was NOT out of character, but part of a general pattern of clandestine accountability evasion); his practice of delaying FOI requests; his honourable mention on page 31 of the Auditor General's Fast Ferry Report, in the context--tellingly--of his role in impressing upon a reluctant BC Ferries Board that the fast ferry project was more in the character of a ministerial priority or directive than business as usual, and in helping to create a fast ferry fait accompli before anyone could organize themselves to oppose it.

I take nothing away from Dix: he looked like a professional surrounded by amateurs in the Opposition caucus 2005-2009. But the reason for that amateurism was that the caucus had been nearly wiped out in 2001--and although any NDP leader would have lost that election, the reason for that extreme wipeout was casinogate, ferrygate and budgetgate, i.e. popular reaction to the way Clark and Dix made decisions in the premier's office.  We are supposed to support Dix because he fills a leadership vacuum that he helped Glen Clark to create? I don't buy it.

Similarly, Bob Plecas and Joy McPhail were probably right to say that Dix did a terrific job on the tragedy in Children and Families. BUT it bears repeating that his skill came from his long experience backdating memos, pushing fast ferry fait accomplis, delaying FOI requests, and just generally playing games of information control and accountability avoidance. To use several apt metaphors, it was a clear case of a thief catching a thief, it takes one to know one,  the pot was calling the kettle black, etc.  Great if you are hiring a political operative or choosing an opposition critic, but lousy if what you want is truly more open and accountable government.

It also bears repeating that his greater skill at getting on the TV news came from his years in the premier's office implementing the subordination of  public policy to communications strategy --to the detriment of both public policy and caucus and cabinet morale. In addition to my own experience as a Ministerial Assistant in 1996-97, I have had private conversations with a t least two former senior cabinet ministers that support this point, and who agree with me that the Harcourt government was better than the Clark government, largely for that very reason.

Yes, Dix's singular focus his entire adult life on getting and exercising power in Victoria has made him a knowledgeable political actor and has sharpened his political acumen.  He is not the same ignorant brute that Glen Clark installed in the premier's office in 1996.  He is more careful, more knoweldgeable and more mature.  BUT HE IS STILL ADRIAN DIX.

If I were as partisan as David Schreck or Billl Tieleman, or if I had a financial interest in an NDP victory, I might swallow all of these reservations. But I think I can speak for a broader category of citizens and taxpayers. As a progressive, I would feel like a hypocrite if I bemoaned Stephen Harper's ability to gain a majority with 39% of the vote while relishing the thought of a Clark or a Dix preying on Liberal/Conservative divisions and getting another 36% artificial majority provincially. We should be consistent and support someone who can build a broader progressive centrist coalition that actually represents a majority of the people. And given Dix's proven character and track record, I am willing to wait another four years to do that.

Progressives should support the independent MLAs in Delta South and Cariboo North; and the Green Party candidates in all marginal constitutencies where the Liberals are vulnerable.