Book Review: "Hard Choices, Soft Law" by Kirton & Trebilcock

Hard Choices, Soft Law: Voluntary Standards in Global Trade, Environment and Social Governance
John J. Kirton and Michael Trebilcock, eds.
Global Environmental Governance Series
Aldergate: Ashgate Publishing Limited, 2004, pp. xviii, 372

{Note: this book review originally appeared in the Canadian Journal of Political Science vol. 39 no.1 (March 2006), pp.223-25. It will be of particular interest to students of Corporate Social Responsiblity, forestry, and labour standards.}



This book sheds considerable light on the new forms of “soft law” governance (voluntary standards and informal institutions) that are emerging out of the confluence of rationally calculated interests, inter-subjectively shared norms, and entrenched structures of power in the global economy. It benefits greatly from the analytical framework and meticulous exposition provided by the editors, John Kirton and Michael Trebilcock, whose introductory chapter repays close reading. The remaining chapters of the book are grouped in four sections.

Part I, “Setting Standards for Sustainable Forestry”, suggests that soft law options may be serving as a viable alternative to the failed International Forestry Convention. Steven Bernstein and Benjamin Cashore’s chapter on legitimacy of transnational forest certification schemes points out that the requirements for international legitimacy must extend beyond simply the support of major states, since new forms of transnational governance such as the Forest Stewardship Council (FSC) arise precisely in response to the lack of legitimacy and effectiveness of intergovernmental, multilateral processes (40). At the same time, non-state certification requires a second level of legitimacy anchored in the domestic arena, where domestic legitimacy achievement strategies must meet the challenge of competitor certification schemes without unduly compromising the goal of sustainable forest management. Tasso Rezende de Azevedo’s chapter on the impact of the FSC on forest management in Brazil, and Chris Tollefson’s chapter on indigenous rights and forest certification in British Columbia, are both cautiously optimistic that soft law can serve as a useful complement and stimulus to improved hard law regimes.

Part II on “Setting Standards for Labour” raises thorny issues of domestic sovereignty and disguised protectionism. Case studies include Adelele Blackett’s critique of ‘ratcheting labour standards’ (RLS) as an overly-optimistic form of corporate self-regulation that will only serve to supplant, rather than reinforce, more democratic state-based standards; Leah Vosko’s skeptical treatment of consensus-based decision-making in the ILO; and C.S. Venkata Ratnam and Anil Verma’s argument that in the developing world soft law strategies are to be preferred to hard law trade sanctions, which are usually responding to domestic interests in developed countries. Michael Trebilcock ‘s more general analysis rejects “unfair competition” and “race to the bottom” rationales for a link between labour standards and trade policy. He argues persuasively that it is no more ‘unfair’ for developing countries to use low labour costs as a source of comparative advantage, than it is for developed countries to use high labour productivity and better public infrastructure; only violations of universal human rights justify the use of trade sanctions in a labour standards context.

The essays on “Creating Corporate Responsibility” in Part III bring balance to what has been a controversial subject. Wesley Cragg, Hevina Dashwood and John Foster appreciate what CSR has accomplished in setting standards, but mix this acknowledgement with varying degrees of reluctance to leave corporate social responsibility solely to the corporations. Explorations of the link between hard and soft law in Part IV include the perspectives of a number of former high-ranking Canadian officials (Thomas Hocking, Roy MacLaren and Sylvia Ostry), Christopher Wilkie’s chapter on the nexus between CSR and the international trade and investment framework, Robert Matthews’ critical analysis of Canadian corporate responsibility in the Sudanese oil industry, and Lisa Mills’s study of the Codex Alimentarius Commission. Mills shows that high voluntary standards are sometimes too great a competitive disadvantage for corporations, who generally keep genetically modified foods out of only those markets where high consumer pressure to do so exists. She therefore finds international hard law to be indispensable. Nicholas Bayne ends the book with a similar observation, based on his comparison of the WTO and EU with the voluntary and soft law frameworks of the OECD and G7/G8, that hard law and soft law serve different purposes and are generally not alternatives, but rather complements.

Students of the public/private distinction in Critical Legal Studies, or admirers of A. Claire Cutler’s excellent recent book Private Power and Global Authority, may be disappointed by the relatively low profile that critical theory has in this collection. Nevertheless, the editors are careful to recognize that who benefits most from soft law regulation is a question of utmost importance (13). They conclude that “the great debate over the proper role and relationship of soft law and hard law in sustainable global governance will continue…with as much passion as ever, but at a deeper and more refined analytical level” (28). By presenting a number of insightful analyses of the relationship between soft and hard law, particularly in the contentious areas of forestry, labour, and CSR, the authors of this volume have already set a high standard for future debaters to follow.

An Arrow in the Heart of Capitalism

Is Capitalism Characterized By Growing Externalities?

Back in 1979, when I was an eager student in my first year at the University of British Columbia, I obtained a small book called The Viability and Equity of Capitalism. It was a copy of the Woodward Memorial Lecture given at UBC 3 years earlier by the Nobel Prize-winning economist Kenneth J. Arrow. In it, Professor Arrow explained why he was not confident about the long-run stability of capitalism, even though it had proven to be enormously productive and resilient in the twentieth century. A key feature of his argument was that capitalism was characterized by growing externalities--the technical term that economists use to describe the side-effects that an economic activity can have for people not engaged in it and that are not reflected fully in prices. Since these costs and benefits do not form part of the calculations of people, they can constitute a market failure--i.e. markets under-supplying beneficial activities (public goods) and over-supplying harmful activities (pollution and social ills).

Since that time, I have often wondered: was Professor Arrow simply reflecting the prevailing doom and gloom that was fashionable in the mid-seventies, with its economic instability and stagflation, and fears expressed by outfits like the Trilateral Commission about the crisis of governability afflicting advanced capitalist democracies? I have not had the opportunity to verify whether Arrow's pessimism has been modified in light of the fall of communism, the achievement of relative price stability, or the reduction of international trade barriers. Yet something tells me that he has probably not fundamentally altered his view, regardless of intellectual fashion or political developments, because it was based on deep reflection about the underlying nature of the economic system, and not on current events.

Professor Arrow is regarded by many of his peers as being, along with Paul Samuelson, (and with all due respect to Milton Friedman) the greatest of all living economic theorists. His doctoral dissertation, published in 1951 as Social Choice and Individual Values, is rivalled only by Samuelson's Foundations of Economic Analysis for its precocious rigour. Its conclusion--referred to ever since as the "Arrow Impossibility Theorem"--was that there was no democratic voting system that could be relied upon to aggregate individual preferences in such a way as to arrive at an unambiguous social preference. While such an analysis might appear to frown on government intervention, Arrow's subsequent work in general equilibrium theory and welfare economics took aim at that Achilles heal of "free market" economics, uncertainty and asymmetry of information. His classic 1963 article "Uncertainty and the Welfare Economics of Medical Care" launched modern health economics. He concluded that failures of information ("uncertainty") render health care and health insurance largely unmarketable, and that professional self-regulation and direct government regulation may therefore be necessary . Arrow's analysis is the starting point for all sensible discussions of market-based health care reform to this day.

When an economist as famously rigorous and scrupulously non-ideological (or at least even-handed) as Kenneth Arrow worries about the long-term viability of capitalism, we should take heed. Evidence of growing externalities is easy to find in the early twenty-first century: genetic diversity is being extinguished at a rapid rate, with one vertebrate (back-boned) species going extinct approximately every nine months instead of the natural rate of one such extinction every 1,ooo years; deforestation and over-fishing are examples of environmental externality problems wich arise largely because the costs of internalization exceed the benefits; and of course global warming is probably the ultimate example of a cost that tends not to be "counted' by users of fossil fuels. Environmentalists are surely right to question the narrow definition of "cost" as a foregone economic benefit, when that fails to fully include the damage incurred by people and nature in the process of production. Social critics are surely right to worry about the growing power of transnational corporations, given their built-in tendency to generate externalities for the sake of maximizing profit. As surely as the transition from industrial economies of "extensive" growth to post-industrial economies of technologically driven "intensive" growth proved to be pivotal in the demise of communism, so too will the experience of pervasive natural and social constraint likely force us to revise some of the fundamental assumptions of liberal capitalist societies.

In particular, a deep understanding of the effciency advantages of a market-price system must not be allowed to be the light that blinds us to the public interest. Professor Arrow's message is as relevant today as it was three decades ago.

20/20 Perspective: The Decision to Invade Iraq

Ironically, the best 20/20 analysis of the Iraq war that I have read was actually a work of foresight. It was simply titled "An Unnecessary War", and it was published in the January/February 2003 edition of the journal Foreign Policy. Even more ironic was the identity of the authors: John J. Mearsheimer of the University of Chicago and Stephen J. Walt of Harvard University are two of America's foremost academic proponents of "international realism", the theoretical approach that stresses the paramountcy of national interest and balance of power in international affairs--the very same fount of wisdom that many conservatives claim as their own. I used the article in my International Relations class in the spring of 2003 as the debate over whether to invade Iraq heated up and America began to prepare for an invasion. As a straightforward, textbook application of realist logic to a contemporary event, it is hard to beat.

Anyone interested in understanding the Iraq War should read the article in its entirety. I believe that it was reprinted in the New York Times, and is also available at http://www.mtholyoke.edu/acad/intrel/bush/walt.htm and on several other websites.

Here are a few choice excerpts:

"Even many opponents of preventive war seem to agree deterrence will not work in Iraq. Instead of invading Iraq and overthrowing the regime, however, these moderates favor using the threat of war to compel Saddam to permit new weapons inspections. Their hope is that inspections will eliminate any hidden WMD stockpiles and production facilities and ensure Saddam cannot acquire any of these deadly weapons. Thus, both the hard-line preventive-war advocates and the more moderate supporters of inspections accept the same basic premise: Saddam Hussein is not deterrable, and he cannot be allowed to obtain a nuclear arsenal.

One problem with this argument: It is almost certainly wrong. The belief that Saddam's past behavior shows he cannot be contained rests on distorted history and faulty logic. In fact, the historical record shows that the United States can contain Iraq effectively - even if Saddam has nuclear weapons - just as it contained the Soviet Union during the Cold War. Regardless of whether Iraq complies with U.N. inspections or what the inspectors find, the campaign to wage war against Iraq rests on a flimsy foundation. "

..............................................................

"Those who call for preventive war begin by portraying Saddam as a serial aggressor bent on dominating the Persian Gulf. The war party also contends that Saddam is either irrational or prone to serious miscalculation, which means he may not be deterred by even credible threats of retaliation. Kenneth Pollack, former director for gulf affairs at the National Security Council and a proponent of war with Iraq, goes so far as to argue that Saddam is "unintentionally suicidal."

The facts, however, tell a different story. Saddam has dominated Iraqi politics for more than 30 years. During that period, he started two wars against his neighbors - Iran in 1980 and Kuwait in 1990. Saddam's record in this regard is no worse than that of neighboring states such as Egypt or Israel, each of which played a role in starting several wars since 1948. Furthermore, a careful look at Saddam's two wars shows his behavior was far from reckless. Both times, he attacked because Iraq was vulnerable and because he believed his targets were weak and isolated. In each case, his goal was to rectify Iraq's strategic dilemma with a limited military victory. Such reasoning does not excuse Saddam's aggression, but his willingness to use force on these occasions hardly demonstrates that he cannot be deterred. "

{ Anyone who has followed Saddam's career since he was found hiding in a hole near Tikrit cannot help but be impressed by the unswerving nature of his lifelong instinct for self-preservation. That he is, in the language of international realism "eminently deterrable". Furthermore, Osama Bin Laden's recent video likening George Bush to Saddam Hussein just shows how fantastic was the suggestion that Saddam and Osama were close enough to actually share nuclear weapons--MC }

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"If Saddam's use of chemical weapons so clearly indicates he is a madman and cannot be contained, why did the United States fail to see that in the 1980s? Why were Rumsfeld and former President Bush then so unconcerned about his chemical and biological weapons? The most likely answer is that U.S. policymakers correctly understood Saddam was unlikely to use those weapons against the United States and its allies unless Washington threatened
him directly. The real puzzle is why they think it would be impossible to deter him today. "

.........................................................

"Ironically, some of the officials now advocating war used to recognize that Saddam could not employ nuclear weapons for offensive purposes. In the January/February 2000 issue of Foreign Affairs, for example, National Security Advisor [Condoleeza] Rice described how the United States should react if Iraq acquired WMD. "The first line of defense," she wrote, "should be a clear and classical statement of deterrence - if they do acquire WMD, their weapons will be unusable because any attempt to use them will bring national obliteration." If she believed Iraq's weapons would be unusable in 2000, why does she now think Saddam must be toppled before he gets them? For that matter, why does she now think a nuclear arsenal would enable Saddam to blackmail the entire international community, when she did not even mention this possibility in 2000? "

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"The lack of evidence of any genuine connection between Saddam and al Qaeda is not surprising because relations between Saddam and al Qaeda have been
quite poor in the past. Osama bin Laden is a radical fundamentalist (like Khomeini), and he detests secular leaders like Saddam. Similarly, Saddam has consistently repressed fundamentalist movements within Iraq. Given this history of enmity, the Iraqi dictator is unlikely to give al Qaeda nuclear weapons, which it might use in ways he could not control. "

.................................................................................

"In sum, Saddam cannot afford to guess wrong on whether he would be detected providing al Qaeda with nuclear weapons, nor can he afford to guess wrong that Iraq would be spared if al Qaeda launched a nuclear strike against the United States or its allies. And the threat of U.S. retaliation is not as far-fetched as one might think. The United States has enhanced its flexible nuclear options in recent years, and no one knows just how vengeful Americans might feel if WMD were ever used against the U.S. homeland. Indeed, nuclear terrorism is as dangerous for Saddam as it is for Americans, and he has no more incentive to give al Qaeda nuclear weapons than the United States does - unless, of course, the country makes clear it is trying to overthrow him. Instead of attacking Iraq and giving Saddam nothing to lose, the Bush administration should be signaling it would hold him responsible if some terrorist group used WMD against the United States, even if it cannot prove he is to blame. "
...........................................................

"If the United States is, or soon will be, at war with Iraq, Americans should understand that a compelling strategic rationale is absent. This war would be one the Bush administration chose to fight but did not have to fight. Even if such a war goes well and has positive long-range consequences, it will still have been unnecessary. And if it goes badly - whether in the form of high U.S. casualties, significant civilian deaths, a heightened risk of terrorism, or increased hatred of the United States in the Arab and Islamic world - then its architects will have even more to answer for.

Regardless of whether Iraq complies with U.N. inspections or what the inspectors find, the campaign to wage war against Iraq rests on a flimsy foundation.

Nuclear terrorism is as dangerous for Saddam as it is for Americans, and he has no more incentive to give al Qaeda nuclear weapons than the United States does. "

---

{ Mearsheimer's and Walt's analysis is as useful today as it was at the beginning of 2003. It reminds us that whether or not the war is "justified" either in terms of humanitarian values or the threat of WMDs---the double-barrelled argument of the National Post, the Economist, Stephen Harper, Tony Blair, or Christopher Hitchens, to name some of the more estimable advocates of the war ---needs to be seen as just part of a larger calculus. Iraq was one of maybe half a dozen countries headed by violent dictators opposed to the United States, and one of perhaps two dozen countries that consistently violated human rights on a massive scale. If political capital (which was plentiful both domestically and internationally after 9/11) and financial and military resources are now extremely scarce, can we say that they have been wisely spent? The greatest tragedy of all would be if the United States proved unable to execute a necessary intervention in Korea, Pakistan, or Iran, or that such an intervention was made vastly more difficult, or that such an intervention was actually made necessary, because of an earlier, unnecessary war in Iraq. But then, hindsight is 20/20! ---MC }

Federalism and Public Policy II: Is Fiscal Imbalance Something to be "Fixed"?

Like finding unintended humour in an unlikely place? Take a look at "The Existence, Extent and Elimination of Canada's Fiscal Imbalance," a report released in June 2005 by a special Finance Subcommittee of the House of Commons, a.k.a. "the Loubier Report".

What was funny was how, in order to reach its bizarre conclusion that provinces should simply be given federal tax room to match their expenditure needs, the then-Conservative & Bloc Quebecois opposition majority on the Committee looked right past what an impressive array of experts from all corners of the political spectrum had to say about the subject. Consider the following comments:

• "The provincial case that there is a fiscal imbalance between the responsibilities of the provinces and the revenue available to the federal government rests upon some very questionable assumptions." ---Janice MacKinnon, former Minister of Finance of Saskatchewan and author of Minding the Public Purse: The Fiscal Crisis, Political Trade-Offs and Canada's Future
• "The very premise of the committee's work is faulty"---Brian Lee Crowley, founder of the Atlantic Institute of Market Studies
• "[Having each level of government raise just as much tax revenue as it spends on its own responsibilities is] "both conceptually wrong and practically impossible"---Richard Bird, Rotman School of Management, University of Toronto
• "Those are two items [i.e. the health care guarantee and fiscal re-balancing guarantee] that are not in what I was presented to analyze... I don't think, frankly, that those are in the platform, they're just under discussion. ...Those items were not costed, which leads me to believe that they're something that they're having under consideration that they're not committed to." ---Paul Darby, deputy chief economist of the Conference Board of Canada, explaining what elements of the Conservative election platform were left out of what he was presented for financial assessment
• [The assumption of the Loubier Committee] "that there is an imbalance that needs fixing violates the first rule of policy analysis, which is to get the question right" ---Rod Dobell, Institute of Public Administration, University of Victoria

Clearly, "getting the question right" means understanding that the common everyday notion of an 'imbalance' as something that is by definition 'bad', needing to be "balanced", has virtually no place in this discussion. Most theorists of economic federalism instead attempt to estimate what the best level of imbalance is for efficient federal governance: how much federal fiscal leverage is needed to foster tax harmonization; prevent wasteful competition between provinces or a "race to the bottom" in terms of taxation and services; ensure that national standards are adhered to in health care and social policy; and cover the emergencies of the federal government's international jurisdiction in an increasingly global future.

What is really at issue in the current debate is whether there is a VFI (expenditure/revenue mismatch) once federal transfers (equalization and other direct spending obligations) are fully taken into account. Also at issue is whether, after a couple of decades in which the trade-off was the Feds cutting back on their share of shared cost programs in exchange for a loosening of conditions for federal funding, there should be a return to greater conditionality as the federal share of funding for social programs is increased. A little bit of history is in order here: the current strength of the federal position relative to the provinces follows a period in which their positions were reversed on two occasions. Fiscal relations have always been in flux, there has never been a perfect balance, nor has it ever been particularly important that they be balanced. Provinces have on occasion overstated the VFI by ignoring the significance of the 1977 tax transfer and referring to the old 50/50 shared cost formula as a valid benchmark. (Not without mentioning old levels of conditionality, you don't!)

It is noteworthy that in the early 1970s, before the federal fiscal position began to rapidly deteriorate, federal revenues in excess of own expenditures were around 30 percent; coincidentally, federal revenue balances since 1995 have once again been in the 30 percent range. Indeed, this has enabled the federal government to commit $65 billion in new health funding over the past six years. Of course, that does not completely close the differential between 7% annual rises in health spending and government revenues (including federal transfers) of only 5%. Paul Boothe and Mary Carson have shown in a recent study that this will leave a funding gap of $10 billion after five years, $12.9 billion after six years, and $15.9 billion after seven years. But I would be happier to see the federal government continue to pay down its debts and limit any future escalator clauses in federal transfers to the rate of growth in revenue, while provinces implement new revenue measures and economies of their own. As Paul Wells in McLeans Magazine bluntly put it last June, "Shut up and raise your own taxes"!

A federal budget balance of up to 30% "excess" revenue is both historically normal and potentially valuable to the pursuit of economic efficiency and equity within the federation. This fact should be recognized by provincial politicians even if --as in Quebec--they can't always say so. Such a recognition should be the basis for any intergovernmental agreement about what a "fair" federal cash contribution to provincial health care is. In the spirit of compromise, the federal government could commit to unconditional transfers of cash and tax room above the 30% level. As for conditionality, I would like to see a return to more dedicated funding for postsecondary education and income security. It is tempting under present circumstances for provincial governments to under-invest in these areas, especially given the high mobility of students, labourers and welfare recipients. It is an appropriate role for the federal government to ensure that non-health priorities such as municipal government and postsecondary education do not get crowded out by the undoubtedly greater pressures every province feels to put more money into healthcare, although the spirit of s. 106A of the Meech Lake Accord---i.e. providing for provincial opting out that is "compatible with national objectives"---is also appropriate.

As an academic, I am used to being ignored. I admit, it is amusing to see the careful testimony of an all-star team of experts swept under the political carpet by a parliamentary sub-committee. But there may be a serious downside to all of this. Prime Minister Harper will never stand in the House of Commons and say, as he did when he was a policy wonk at the National Citizens Coalition, that "two-tier health care is a great idea". What he will say, and has already said in his capacity as Conservative Party leader, is that he intends to let the provinces do what they wish with their own jurisdiction provided that is technically consistent with the provisions of the Canada Health Act. But this betrays either a naivete on the part of the Prime Minister about the law--since the Canada Health Act is far from self-applying and the precise scope of its provisions far from self-evident--or an assumption that we are naive: what provinces will actually wish to do depends in turn upon their fiscal capacity, along with the extent of Ottawa's willingness to use its own fiscal leverage to enforce and promote national standards.

Still think that federal tax room should simply be handed over to provinces in order to match any growth in their spending responsibilities? You've got to be kidding!

Federalism and Public Policy I: Respecting Federal Jurisdiction

The newly-elected 39th Parliament is brimming with new potential political and policy dynamics that could have far-reaching consequences for Canadians and their place in the world. For example, an interesting aspect of Stephen Harper's approach to federal-provincial relations is the idea that by showing more respect for provincial jurisdiction--i.e. by reining in the federal government's penchant for using its spending power in areas of provincial responsibility, and "disentangling" from the provinces--the feds will be able to govern more effectively within their own jurisdiction.

Mr. Harper makes a good point.

Corrections, gun control, defence (i.e. in suitable "niche" areas as arctic sovereignty, patrolling borders and coastlines, military intelligence, disaster relief, and peacekeeping), national sport and culture, research, parks, museums and heritage sites, foreign aid, transboundary (air and water) environmental issues and aboriginal policy, are all areas of federal jurisdiction that have historically been among the most neglected and ill-governed policy fields. Surely this is not what we should expect in a federation where the national level of government enjoys a perennial fiscal surplus. Whatever the political importance of healthcare and education--and they are the most important policies to Canadians--it nonetheless remains a fundamental truth that they are primarily provincial responsibilities and, as such, it is always possible for provincial governments to raise their own taxes to pay for them. No such option exists for the aforementioned items of exclusively federal jurisdiction.

In addition, a federal government that is less preoccupied with provincial social programs and their funding ought to be more capable of realizing an internationalist vision and a policy of connectedness to the world. Yet, in the election campaign, not one of the three main party leaders gave a major address on international affairs. If anything, the Conservatives were even more guilty than the Liberals and NDP of neglecting the rest of the world in their platform.

The problem: other aspects of conservative ideology and the Conservative platform, which could frustrate the potential of any new 'politics of federal jurisdiction'.

The new Conservative government should have little trouble delivering on its GST cut, its accountability agenda, and its crime bill. Opposition parties would be foolish to try to block these initiatives. It is also possible that the Bloc Quebecois could be counted upon to support the government's childcare program, but for an ironic reason: Quebec already has a full-fledged public daycare program of its own, and therefore has nothing to lose if such a program is not adopted in the rest of the country. A $1200 parental tax break could complement Quebec's policy without "interfering" in program standards or design. In other words, the Conservatives' childcare policy is consistent with their "disentanglement" agenda, and could help to consolidate Tory gains in Quebec. After that, however, things could get shaky.

For example, doing something to redress the "fiscal imbalance" between provincial spending responsibilities and federal fiscal capacities would appear to imply giving more tax room, or transfers, or jurisdiction over resources, to provincial governments. With a federal budget already strained by Liberal health care commitments and Tory election promises, this could prove unaffordable.

Try talking to Stephen Harper about how the government plans to reduce greenhouse gas emissions and close the gap between our Kyoto promises and our Kyoto performance, and he will likely try to change the subject to his "anti-smog strategy". That's because he apparently intends to renege on Canada's commitment to implement the Kyoto Treaty. One can question whether recognizing Quebec's cultural autonomy at UNESCO is the best way for Canada to fulfill its international role. And it is also highly doubtful that the Tories would improve upon the Liberals' performance in foreign aid, which is expected to remain well below half of our stated goal of 0.7% of GNP through 2010. Is this what will count as assertiveness from the new, unshackled federal government of the Tory future?

The Conservatives supply us with a valid premise--that disentanglement from provincial jurisdiction can "free" the federal government to do its own job better--but they appear either unable or not inclined to follow through on what such a realignment should mean for Canada's role in improving the global environment, ending global poverty, and safeguarding universal human rights. Such an epiphany may have to wait until the 40th Parliament of Canada.

Conservative Majority? Second Thoughts

{The following post, though written on Janaury 20, appeared as a special article to the Williams Lake Tribune on January 24, 2006. Given the importance of aboriginal issues in the Cariboo-Chilcotin region of British Columbia, I felt it was an apposite commentary. However, I probably should have known better than to hazard a guess as to what the party standings would be after the election. Another blow to the prestige of political "science"! --MC}


Stephen Harper has finally made a mistake. While he has for the most part avoided getting drawn into detailed discussions of who will be in his Cabinet ( a blunder that former British Labour Party leaderNeil Kinnock made in 1992, stealing defeat from the jaws of victory in that year's British general election), his remarks about how his power would be constrained by Liberal-appointed bureaucrats, judges, and Senators have had the opposite of their intended effect.

First, the feeble nature of Harper's reassurance served to underscore the near-absolute power that a Prime Minister enjoys in a majority government. Second, Harper appeared to imply that our professional civil service and independent judiciary are as politicised by patronage appointments as the Senate is. Third, the soon-to-be Prime Minister's attitude suggested that a Conservative government might need to appoint conservative judges, conservative deputy ministers, and conservative senators in order to rectify the problem. Finally, we were led to wonder just what there was in Harper's conservative agenda that would come into conflict with the Charter of Rights or strain the usual obeisance of unelected officials toward their political masters.

Journalists and political opponents pounced upon Harper's remarks, and rightly so.

I am betting that the election of a Harper Government will trigger a run on library and bookstore copies of Thomas Flanagan's First Nations? Second Thoughts, especially on the part of citizens in the aboriginal policy community. Flanagan, a close advisor to Harper who is certain to be playing a leading role in a Harper PMO, is famous (or infamous) for puncturing the image of Louis Riel and attacking any form of special status for First Nations people. Essentially, he is a throwback to the classical liberalism on Indian policy that was abandoned by Pierre Trudeau in the wake of the aboriginal backlash against his 1969 White Paper and the pathbreaking Supreme Court decision in the 1973 Calder case. First Nations? Second Thoughts makes a refreshing read (i.e. classical liberalism is not dead), but its prescription, taken as a whole, is not tenable either legally or politically, in today's Canada.

The Conservative attitude, typified by Flanagan--is that native Canadians, who suffer from ghettoization and a culture of defeatism and dependency, are best helped by changing the structure of economic incentives and opportunities that face them as individuals, rather than the kind of collective enablement that comes from aboriginal rights, treaties, or "throwing money" at their problems. How will this stance be manifested once the Kelowna Accord is scrapped? I am willing to believe that that the mooted policy changes could result in marginal improvements to the lives of some First Nations peoples, but most of that cautious optimism is based upon the force of Section 35 of the Constitution Act, the impressive body of law recognizing indigenous difference in the constitution and the common law, and the determination of today's First Nations leadership, all of which would prevent any Government from undoing what has been accomplished in the past 30 years.

{People wishing to look at a detailed profile of Flanagan, the Calgary School, and their influence upon Stephen Harper, should look at "The Man Behind Stephen Harper" by Marci MacDonald in The Walrus, dated Friday October 08, 2004: http://www.walrusmagazine.com/article.pl?sid=05/05/09/2119243 . According to MacDonald, First Nations? Second Thoughts unleashed outrage in aboriginal and academic circles. "These aren't second thoughts," says Joyce Green, an associate professor at the University of Regina and a Metis herself. "They're the same old first thoughts that the colonizers came with from Europe. It's a celebration of the original arguments that supported the subordination of indigenous peoples." }

It is not surprising that the Globe and Mail and the Vancouver Sun have both endorsed the Conservative Party in this election. The Conservatives are the Official Opposition and the best bet to form a new government. But what both newspapers should have also stressed is that the objective of house-cleaning and the promise of new accountability standards can be realized in a minority parliament. Many voters wince at the prospect of another minority government, and the conventional wisdom is that a Conservative minority would be as unstable as the previous Liberal one. I disagree. Mr. Harper can work with the NDP on accountability, the Bloc Quebecois on decentralization, and even the Liberals on a wide range of economic and social issues. He will likely only need the support of any one opposition party for any given piece of legislation--a distinct improvement over the situation facing Prime Minister Martin. The result should also be sufficiently well-drawn to remove some of the incentives for vote-buying and floor-crossing on the part of individual Members that marred the 38th Parliament.

A minority government would also force the Conservatives to do what they clearly have not yet done----actually sell their programme to Canadians.

P.S. My Predictions, as of 7 p.m. Friday Jan.20:

Conservatives-- 138
Liberals -- 73
Bloc Quebecois-- 62
NDP -- 35

The Two Most Important Things You Need to Know About "Public Versus Private" Health Care

Public discourse over the state of our health system has repeatedly stumbled over the issue of "privatization" and how it relates to the "unsustainable" situation of escalating costs and growing waiting lists. Some point out that Canada already has "private" clinics, that Paul Martin and Jack Layton have both used them, and that most doctors and even most (not-for-profit) hospitals are already "private" actors, so why get worked up about greater privatization of delivery of health services? Now that the Supreme Court has ruled that in certain situations banning private health insurance for medically necessary services is unconstitutional, and large parts of the non-medicare health system are already being purchased privately, what could be wrong with allowing people to purchase better health care? Is the whole "public versus private" debate much ado about nothing? To understand why it is not, voters (and governments, and judges) need to grasp the implications of two fundamental distinctions: first, between financing and delivery; and second, between medicare and non-medicare components of health care expenditures.

Financing versus Delivery. This distinction is recognized as fundamental by everyone who studies health policy, but its implications weigh perhaps most heavily in the analysis of the Kirby Senate Committee Report on health care reform. Kirby states that a public monopoly (single-tier) health insurance for medically necessary services is essential to the achievement of both efficiency and equity because of the gains from larger scale; simpler administration; restrictions on the impact of inevitable market failures; and better cost control. These gains are so significant that Harvard Professor David Himmelstein has estimated that adopting a single-payer system in the US would free up sufficient funds to allow universal coverage in a country that now has over 30 million uninsured people. Kirby, however, does not see any similar advantages for public delivery: indeed, he sees competition in delivery (either within the public sector or in the private sector) as crucial to the sustainability of the system. This is another version of the "governments should steer, not row" philosophy that underlies much contemporary policy that goes by the name of New Public Management, Smart Regulation, et cetera.

The Kirby view strikes me as being quintessentially liberal--and Liberal. It is certainly true that more private and competitive health care delivery will not necessarily destroy our cherished medicare system. The heart of medicare is single tier financing of medically necessary physician and hospital services, not the idea that healthcare providers should be public employees. But the professed open-mindededness of the Kirby approach --"we are completely neutral as to whether delivery is done by private actors, interested only that competititon be allowed and efficiency be attained" runs into at least a couple of objections. The notion (endorsed by the B.C. Medical Association) that private, for-profit clinics would necessarily spend public monies more efficiently is highly questionable. Researchers at McMaster University released a detailed study in 2004 of for-profit hospitals in the US indicating that services cost 19% more in for-profit hospitals than in non-profit ones and that health outcomes were worse on average in for-profit facilities. Furthermore, trade policy analysts generally agree that the greater the degree of privatization and marketization, the greater the likelihood that health care measures will fall outside of trade treaty exclusion clauses for public services and therefore be subject to NAFTA and GATS/WTO obligations. These obligations could make reversing privatization prohibitively expensive--either in terms of financial compensation to private actors under NAFTA, trade sanctions under the GATS, or both. In short, there is a danger that privatization could get "locked in", whether it is in the public interest or not.

These considerations do not mean that competitive or for-profit delivery is always wrong. But in my mind they should create a presumption in favour of healthcare that is public or not-for-profit in how it is delivered, and not just in how it is financed. If that presumption is to be rebutted, it should be on a case-by-case basis in terms of demonstrated cost savings and efficiencies for the health system as a whole, without harm to quality of service or equality of access.

Medicare versus Non-Medicare. It is remarkable how seldom combatants in health care debates take the trouble to distinguish between different categories of health care expenditure, or to even specify what they mean by "medicare". It turns out to matter very, very much. Indeed, to use the term "medicare" as a synonym for health expenditures or even for public health expenditures is extremely misleading. Between 1993 and 2003 total annual health expenditures in Canada grew by about $50 billion--by 69.8 percent, as compared to 66.8 percent growth in GDP. But if we break these aggregate figures down we see a surprising result. If we reserve the term "medicare" for the two major founding programs which came into being in the 1960s, that is, hospital services and physician services, we find that their combined cost as a share of GDP actually declined over the decade--from 5.11 percent to 4.29 percent! The big increases occur in such categories as "other professionals", "other institutions", "prescription drugs", "capital", and "public health and administration", according to the Canadian Institute for Health Information. As Hugh Scott, the former executive director of the McGill University Health Centre, puts it, "it is difficult to see what is unsustainable about medicare funding as viewed from this perspective".

Indeed, when we look more closely at the categories of healthcare expenditure that are growing fastest, we find that they are to a large degree private. Compared to other countries, Canada is distinguished by the degree to which classic medicare (hospitals and physicians) is public, while the fastest growing items of expenditure, e.g. "other professionals", and to a large degree "drugs", are private. That makes it prima facie very difficult see how further privatization--whether of funding or delivery, and whether of medicare or non-medicare items--can be the panacea for reining in "unsustainable" cost increases.

Indeed, medicare has adapted quite well to technological and demographic change, although it has been temporarily compromised by under-funding and under-supply of health care professionals. A decade ago, the concerns about "waste" and "over-servicing" in the context of budget-cutting at the federal level led to major cutbacks in hospitals and decreases in health professional enrolment opportunities. The resultant personnel shortages are the root source of long current waiting lists. Fortunately, current efforts to increase the supply of health professionals, coupled with an effective waiting list management strategy, should mean than by the time the first baby boomers turn 65, most waiting lists will have been greatly reduced or eliminated.

The real question for the future is not whether we can continue to afford the publicly funded medicare component of our healthcare system, but whether we can afford the privately funded, non-medicare components of that system.