Archive for February, 2016

Funding higher education

February 28, 2016

Water bed economics or how entitlements can have perverse effects

What is good news for Ontario students from low income families may not be good news for the education which they hope to receive. One reporter wrote that university administrations, faculty associations and student groups all hailed the changes.

What they wish for is greater affordability for low income students. But what will they get?  Ontario universities will have one source of revenue reduced. How may they respond? The alternatives are to raise fees for students with family incomes above $50,000 a year, to ask the Ontario government to make up the difference, or to cut costs. The first will not be welcomed by the affected families; the second will be resisted by a government already running a deficit; and the third can result in lower quality education and the migration of students to universities outside Ontario leading to a further loss of fee revenue.

This is not to argue against aiding low income families sending their children to post secondary institutions, but alternatives need to be considered. Australia provides one example. Students are able to borrow in order to attend university. Repayment is not required until the student has graduated and is employed, and the terms vary with the earning power of the student. The details are more complex but the aim is to make education available to all qualified persons regardless of income.

Granting an entitlement without explaining the likely consequences may be a good way to buy votes, but can result in unfortunate costs. This is a case of water bed economics. Exert pressure in one place and it will cause a bulge elsewhere.


Milking the voters

February 27, 2016

“Canada is like an old cow. The West feeds it. Ontario and Quebec milk it. And you can well imagine what it’s doing to the Maritimes.” Attributed to Tommy Douglas.

That is more or less the case today. Ontario has its hand out for federal support for the automotive industry. Quebec is asking for further federal money to prop up Bombardier’s aerospace division.  And now Alberta wants the Feds to fund its resource industries.

While not unexpected, a little history will remind Canadians of the past.

Nortel Networks Corporation, formerly known as Northern Telecom Limited, Northern Electric and sometimes known simply as Nortel, was a multinational telecommunications and data networking equipment manufacturer headquartered in Mississauga, Ontario, Canada. It was founded in Montreal, Quebec in 1895. At its height, Nortel accounted for more than a third of the total valuation of all the companies listed on the Toronto Stock Exchange (TSX), employing 94,500 people worldwide. (Wkipedia).

Over the years Nortel received all kinds of government support. It filed for bankruptcy in 2009.

Bombardier operates in several industries and provinces. In aerospace, over the years it has received federal funding and is now asking for more. Its rail division is doing much better, but in the past it received funding for a high speed train which was mothballed and never brought into service. With a former federal auditor general on its board, hopefully someone will pay attention to the interest of taxpayers.

Government funding creates entitlements which once established for corporations or individuals are seldom removed. With three levels of government in Canada funded by one set of taxpayers,  the growth of entitlements presents a grim prospect for the future of democracy.

Sorry, you will have to wait for the fire brigade.

February 20, 2016

Do you want to be told that the fire brigade cannot respond to your emergency because it is waiting for equipment to be delivered?

Domestic security is provided to Canadians by municipal fire brigades and police forces. Equipment is up to date and personnel vacancies are filled on a regular basis. Contrast this with national security provided by Canada’s armed forces. While personnel are well trained, they are forced to operate either with outdated equipment, or equipment which may be available only some years hence. This is especially the case for ships and aircraft. Successive governments of all political stripes are responsible for this situation.

There is no way voters would stand for fire and police protection to be treated in this way. Yet it happens with the military, largely because politicians allow it to happen, but blame can be spread around.

The deplorable state of military equipment reinforces the continued dependency which Canada has for protection from the US, a situation which has grown yearly since 1945. For example, Canadian forces don’t have the capability to protect its lengthy coastal borders especially in the Arctic, where Russia is making moves to establish its presence. Elsewhere, it’s clear what the China is doing in the South China Sea where the counterforce is the US 5th Fleet and the US Airforce. The Arctic could be the next move by Russia.

The only positive shaft of light is the reporting provided by Canadian writers, journalists and others. The writings of Jack Granatstein, Colin Robertson and journalists like David Pugliese, Matthew Fisher and Andrew Coyne are among those documenting the parlous state of Canada’s military. Their writings can be found using a web search. One example is Robertson’s piece in the Globe and Mail for Feb. 16, 2015, where he points out that Canadian defense spending is one percent of GDP, and lower than that of its allies. The Canadian Global Affairs Institute is another source for relevant information.

The next time you dial 911 for police services, the call will be answered. The same may not be the case when Canada is called on to defend itself militarily.

Voting in the next Canadian Federal Election

February 16, 2016

The current Liberal government proposes to change the federal voting system from first past the post (FPP) to some other system that has different flaws to the present one. There is no system that is flawless. There are just different consequences and biases.

A main objection to FPP is that it allows a candidate to be elected with less than 50% of the constituency votes, sometimes in the low thirties depending on how many candidates compete in a riding. Let’s say 65% vote for other than the winning candidate, then the losers object, because the majority winner receives only 35%. The losers want their vote recognized at the polls and to be awarded seats. Seldom mentioned is the possibility of disenchanted voters joining a major party and attempting to influence policy from the inside.

One alternative to FPP is preferential voting (PV) where voters choose their first, second and subsequent choices on the ballot, either on one voting day or more than one. The latter raises the costs of the electoral process and leads to electioneering between ballots. PV can ensure that the winner gets 50% plus of the votes. Its other advantage is that the elected candidate comes from the constituency as with FPP.

PV favours the party straddling the middle of the political spectrum. If in Canada this is the NDP on the left, the Liberals in the centre and the Tories on the right, then the Liberals might try to campaign towards the NDP and Tories to get the needed majority. The NDP and Tories might structure their platforms to appeal to Liberal voters. With more than three parties the politicking gets more involved. One attribute of PV is that the elected person still comes from the constituency.

Neither of these alternatives satisfies those with specialized interests, the Bloc and the Green Party being two Canadian examples. But there are more parties and more would appear with a voting system of proportional representation (PR). With PR, the electorate votes for a party, with seats awarded according to the percentage of votes received. This system favours special interest groups but has other implications. It is often assumed that only existing parties will register for votes, but other interest groups are encouraged to form parties. Persons are elected because they represent certain interests, and not based on representing both a constituency and those interests. Each party decides who will be candidates for election and the link with a riding is lost. (In the 2015 federal election there were as many as ten candidates on the ballot).

For each of these three options there are variations to compare and examples of how voting is performed in different countries can be assessed. According to Wikipedia, there are around 20 different voting systems used for head of state, upper and lower houses of parliament in various countries.

Another information source is in the excellent Danish television program Borgen, where legislating in an environment of many small parties with narrow interests is portrayed. It makes for good viewing if you enjoy watching sausages being made.

The First One Hundred Days of Liberal Rule

February 8, 2016

Canada, 100 days after the October 2015 federal election won by the Liberals

  1. The Liberal majority win provides an opportunity to change direction for a number of policies and to change the tone of governing. For the Conservatives the opportunity is to reorganize with a new leader and a new platform which will need to appeal to the centre of the political spectrum where the majority of voters reside. The British Labour party and the Tea Party conservatives in the US appeal to the two tails of the spectrum and will find it hard to get a governing majority in their next elections.
  2. There are around 200 new MPs, many of them Liberals, a party which increased their elected MPs by about 150. Some newly elected Liberals are cabinet ministers with important portfolios such as Finance, Defense and the Environment. With a steep learning curve, these ministers are likely to be dependent on departmental bureaucrats who will be in a position to exercise influence at the outset.
  3. The bureaucrats appear pleased with the results. Their dislike of Harper’s style of government led civil servants to become politically involved in the election, at least around Ottawa. If the result makes the bureaucracy become more politicized, then the idea of a career civil service is weakened.
  4. The global and national economies have received a major shock with the decline in the price of oil. It results in a decline in Canadian federal and provincial tax revenues, as well as lower energy costs for firms and consumers. Loss of revenues to western provinces puts pressure on the government to facilitate the sale of energy to foreign markets.
  5. Debate over the building of energy pipelines is splitting the country with some eastern Canada politicians opposing the energy east pipelines, and some in BC opposing the twinning of the Kinder Morgan pipeline with its terminal in Port Coquitlam BC. Quebec is likely to ask for further financial support for Bombardier which is now a corporate cripple. If the province then opposes policies which will harm the west, it will cause divisiveness.
  6. The Liberals have acted on their elections promise to amend Canada’s military contribution to fighting ISIL, to accept displaced persons from the Middle East, and to raise income tax rates for high income people. Out of fear of offending protected interests (like those benefiting from supply management policies) they have not fully endorsed the TPP agreement despite the importance to Canada of trade in the Pacific region.