Relentlessly Progressive Political Economy

Undoubtedly the title will already lead some to call me third way. The Canadian left struggles with the issue of user fees: are they regressive taxes on the poor or can they be constructive public policy tools? The environmental movement, where the focus is on a polluter-pay principle, has forced us to think harder about this issue.

Here’s my brief take on where to draw that line in the sand. First of all, almost all user fees have disproportionate impacts on the poor. On the other hand, user fees can be very efficient in preventing the over consumption/over-use of a particular goods. Garbage, congestion, and overfishing are all classic examples of where user fees may be helpful in achieving social goals. If a user fee can be shown to reduce the indirect negative impact of one’s choice on others, I argue that the user fee should be considered.

For example, take traffic congestion in the GTA. Commuters do not consider the effects of their driving on others resulting in incredible levels of costly congestion (see the 401 at 4pm). A toll would force some of those drivers to take public transit, carpool, etc. Along the same general principle, companies that pollute the air and water should be forced to pay for their emissions.

That said, user fees should not be applied to services that are basic rights. This includes for example health and education. Using these services do not represent choices (note that neoliberals see this differently, but they are clearly wrong) for there are no other options/alternatives. If you’re sick, you need to go to the hospital. If you want to get a decent paying job, you need to go to school.

This provides a basic framework for evaluating user fees. Going back to road congestion, is driving in the GTA a choice (i.e., not a basic right)? Likely — public transit provides hundreds of thousands of people a route to work everyday. Certainly a small proportion of commuters have no transportation options choices in terms of transportation. A user fee policy supported by the left would involve addressing these deficiencies.

That said, user fees are not the be all and end all of public policy. As has been mentioned elsewhere on this blog, regulation can complement or be better than user fee in achieving public policy objectives. Lastly, the importance of income redistribution should not overlooked. High levels of income redistribution reduce the inequalities inherent in user fees, and must play a key role in the left’s user fee policy.

The NDP has a chance to make inroads in urban and rural ridings across the country, steal votes away from Liberal and Conservative voters, all while staying true to the party core ideals: make “consumer rights” an election issue. There are concerns shared by Canadians from coast-to-coast: privatized health care, child poverty, degrading environment, and less funding for public education to name a few. But what about uncompetitive telephone, cable, and internet services? Most have a bad Rogers, Bell, or Telus story, and can identify directly with the issue. More importantly, it fits into the party’s legitimate criticism that big business is profiting at the hands of workers and citizen/consumers. From an election strategy perspective, I see this as a way to grab voters attention, earn their trust as a good advocate, and serve as a springboard to the party’s core issues. A simple “Getting Results for People” message.

The NDP has taken the first step with their clever gas prices campaign — but there is more gauging than just at the pumps.

The $35+ billion bid for BCE resulted in Teachers’ pension fund securing a majority stake in the company. Over the next year or so, Teachers’ and its minority US private equity partners will have to turn the company around to find stronger returns. This means two broad decisions: what areas of the business to make large investments in and how to boost margins.

There is no doubt that the latter decision could mean large job cuts, and BCE’s unions have already signaled their intention to put up a fight. The principles of private equity buyout are to reduce the company’s business to its core operations (landline, wireless and cable) and cut costs (jobs) as much as possible. This buyout likely won’t involve the third principle, having the company take on big debt, as Teachers’ has already indicated they’re interested in the investment for the long term.

In the last few years, Teachers’ big equity plays involved international assets. In many respects, it’s easier that way — they can reduce labour costs and widen profit margins without risking criticism from the workers that fund the pension. No doubt unions and their pension funds will be closely watching Teachers’ relationship with BCE’s unions as it looks towards job cuts. Will Teachers’ act like capital and adopt “slash and burn” tactics, or will act as “union capital” and limit the impact of small scale job reductions?

We all know that Europe and North America import billions of dollars of goods from China. In April alone, the US recorded a trade deficit with China of $16 billion dollars. China’s reliance on high emission energy and destructive environmental practices mean that the west is also a major exporter of pollution.

China has so far refused to set an emission reduction target and impose taxes or other measures on polluters. If the West is serious about meeting global emissions targets, they could force emission reductions by imposing duties on goods widely regarded as “dirty”. While this is an indirect environmental tax and does not offer incentives for Chinese firms to adopt environmentally efficient technology, it will force China’s hand. Of course, it will drive up the cost of your lead-tainted Thomas the Tank Engine by at least 10 cents, which in my neo-classically trained economist mind is a disaster for “consumer welfare”.