MMP will fail, but not for the right reasons

You would think if a referendum in which the outcome would massively restructure electoral democracy in a province, there would be continuous debate in the press, in communities, and by the political parties themselves. Not so in Ontario.

The October provincial election will have a referendum question, asking citizens if they support a proportional representation scheme (“mixed member proportional”, or MMP). Here, 90 members would be elected directly by communities/geograhical areas they represent. Political parties would choose the remaining 39 members, with seats distributed proportionally by votes received. To succeed, the referendum requires both a 60% majority and a majority in at least 64 ridings.

So why doesn’t it have a chance? Political parties are actually legally prevented from taking official public positions on MMP. This courtesy of the governing Liberal party, who made sure that debate would be limited to occasional pieces in the newspaper and television. Coincidentally the Liberals may have the most to lose in proportional representation. Strategic voting, one of the benefits of occupying the political “middle” and having relatively little policy, would be no more. The NDP, and even parties considered marginal now like the Greens, would take big bites out of that soft Liberal support.

If I was a bettor, I’d guess that MMP will get in the low 40 percent range. This outcome will have more to do with people not knowing what it means, rather than their disapproval of proportional representation.

A lesson for Minister Flaherty on perfect competition

Yesterday, Federal Finance Minister Jim Flaherty asked business leaders to pass on savings on imports from the higher Canadian dollar:

“I won’t name the companies, but have spoken to some business leaders about ensuring that they pass along savings … price reductions that should follow the higher Canadian dollar”

Minister Flaherty, permit me to give you a lesson (surely a review) in what you’re supposed to believe. If the price of imports is above cost, an individual importer will have the incentive to lower its prices and take all the market share. Competition theory predicts that each importer will undercut the other until price equals the marginal cost of the imported good. Perfect competition.

In other words Minister, in the theoretical world you live, you need not call on business leaders to reduce prices. They’ll figure that out.

A quick thought on Miller’s budget play

Here’s what I don’t understand about Toronto Mayor David Miller’s failed attempt to introduce new taxes, including those on land transfer and vehicle licensing. Immediately after the vote, Miller suggested that a wide range of services would have to be cut, ranging from snow clearing in North York to policing to the Sheppard subway. If the city has to cut existing services because it cannot raise additional revenue, doesn’t that imply that the city was spending money without the revenue sources to support the spending?

I agree that the city is in the midst of a structural fiscal crisis and that the service cut announcement is an attempt to push the provincial and federal governments into providing more funding. But the threats to current services border on outrageous to the point of being irresponsible.

Towards a user fee manifesto for the Canadian left

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’s populist platform?

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.

Union vs. Union Capital: Teachers’ Collision Course with Big Job Cuts

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?

Can the West force China to reduce emissions?

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”.

Toronto Sun Finds New Low

Usually when we talk about racism in the media, we refer to subtle undertones. Luckily, the Toronto Sun ensures that it’s readers don’t have to read in between the lines:

Natives growing restless

OTTAWA — Unbowed by federal government threats to cut funding, First Nations across the country continue to make plans for a one-day shut down of the railway system that could spread into weeks.

Relations with the federal government have soured since Finance Minister Jim Flaherty’s budget ignored demands to make First Nations poverty a priority.

Things weren’t helped this weekend after it surfaced that the Canadian military labelled the Mohawk Warrior Society and radical native groups as “insurgents” in a draft anti-guerrilla field manual obtained by Sun Media and another news organization.

Defence Minister Gordon O’Connor’s office issued a statement Saturday saying native groups would not be included in the final version of the manual.


Indian Affairs Minister Jim Prentice’s aggressive stance on First Nations demands have pushed relations to a new level of acrimony.

Read the entire article here. The actual contents of the article are, for the Toronto Sun, relatively critical. I’m guessing it was at the editing/print stage that the overtly racist headline was inserted. Then the word “agressive” was placed as a heading to the fourth paragraph. I would suggest that this was meant for those who quickly glance at the article to think, “those natives are aggressive – they should calm down”. But the article was actually referring to Jim Prentice’s “aggressiveness”, not those pesky aboriginals’.

One Helluva Bake Sale

The People for Education, an Ontario public schools advocacy group, released a report today that found that Ontario’s public schools raised over $500 million from private (non-government) sources. This includes philanthropy, charitable donations and profits from cafeterias and vending machines. Either kids are being taken to the cleaners at lunchtime or schools have stepped up their efforts to privately finance childrens’ education.

Funding schools is the responsibility of the province. According to the report, while the Liberals have lowered class sizes, art, libraries, special ed, and ESL continue to experience shortfalls. Some of this need is clearly being picked up through charitable donations. The problem with doing this is that it will lead to large inequalities in which some schools will have and more will not. As the People for Education point show, the evidence speaks for itself: the top 10% of fundraising schools “raised more than the bottom 80% put together”.

The province must take this as a sign and fund access to special ed resources and extra-curricular activities. Otherwise, all we’re teaching is a hands-on lesson in systematic inequality.

Manitoba Election: PC’s Kyoto-Like Green Policy

The Progressive Conservatives have set the bar high this election cycle with the announcement of a major environmental policy. I quote their press release:

“We’ve already rewarded Manitobans who choose fuel efficient cars with a 3% PST rebate,” said the PC Manitoba Leader. “Today, we’re taking our commitment to environmentally-friendly transportation one step further by getting rid of the PST on all bicycles, whether it’s for a serious cyclist or a child learning on a bike with training wheels.”

It seems like the PCs have found the magic environmental bullet. Combined with their announcement of more bike lanes, can you think of a farther reaching plan to reduce emissions AND make Manitoba a better place to live? Let me take a stab at the new average family’s after-dinner conversation:

Child: Mom, time to go to ballet class.
Mom: Thanks to Mr. McFadyen’s removal of the PST on bikes, we were able to afford a bike for each member of the family! Now we only have to use cars for 98% of our transportation.
Child: Wow! Thanks Hugh! I wish I could vote!

Hugh, your work has truly put the “progressive” in the Progressive Conservative Party of Manitoba.