Tweaking the System

The other day I was talking to a friend about the ways that capitalism might evolve to become something that benefits more people. It's one of those topics that doesn't get near enough public discussion.

I have never done sufficient research on the topic, but I know that some thinkers have defined our current system as shareholder capitalism and have argued that we should move to a system of stakeholder capitalism that involves collective ownership, profit-sharing, a cooperative labor process, and guaranteed incomes. Some people propose that we move to a system of economic democracy with socialized markets and employee-managed work.

My mind tends to run to less grandiose, more bandaid-type solutions: We need more regulations, better enforcement, and tax reform. (For two of my earlier posts about this, see In Praise of Regulation and Employee Protection.)

When playing around with ways that capitalism could change, it's interesting to think of the outcomes we would like to achieve. Economic growth and prosperity, for sure. High productivity. Less poverty. Environmental improvements. But what about the ways our system shapes us: the sorts of people who are rewarded, and the sorts of people who are marginalized. For example, in our current system, arrogant, ambitious men tend to be the most successful, regardless of their relative qualifications or benefit to the organization. It's a pipe dream I guess, but it would be nice to think that one day the system wouldn't tip in their favor.

Anyway, on to ways we could change the system...

Income redistribution
Tax reform is an important part of improving our system. Currently, the highest tax bracket in Canada is $120,888 to infinity, and the marginal tax rate is 46.4%. The next lower tax bracket is $74,358 to $120,887, and it is nearly the same rate (43%), so you could say that everyone over $74K is in about the same tax bracket. People who make $15,099 pay 22%. These tax rates hardly meet the goals of progressive taxation. We need lower rates for low income, and we need tax brackets over $120K that get progressively higher. (Remember that rich people pay tax on only 50% of their income from capital gains and that they have other loopholes like trust funds.)

Labor
One part of moving to a more enlightened form of capitalism is to move to more enlightened corporate environments: places that have more respect for their workforce and operate less to make the top six executives richer than Croesus. The odd company may become more enlightened (probably due to employee ownership) but it won't be the norm without regulation and public education to support the movement.

Markets
We need much more heavily regulated markets to protect citizens from pollution, the exhaustion of resources, fraud, inflated prices, and so on. Think of it this way: one of the most highly regulated markets in the world is the financial market. The people who are most involved in the financial market tend to be pro-free market, anti-regulation... except when it comes to protecting their money. In the same way, we need to protect the health and prosperity of all citizens.

How to get it done
I know, I know, usually at this point is a posting I invoke the name Bob Rae and do a little hand-wringing about what-might-have-been. But really, none of this will ever happen unless the electorate demands it. I wish I understood how the French did it.

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Chilling News on the Economic Front

I reprint this article in today's Globe & Mail, since Globe articles quickly disappear behind the subscription wall.

For my thoughts on all this, see the links below.

Help with U.S. dollar sag, Flaherty tells China
HEATHER SCOFFIELD

October 20, 2007 at 1:12 AM EDT

WASHINGTON — Canada has shouldered more than its fair share of currency appreciation, says Finance Minister Jim Flaherty, and it's up to China to do something about it.

As the Canadian dollar closed well above $1.03, Mr. Flaherty said the currency “has borne the brunt of the U.S. dollar adjustment.”

Officials explained that about one-third of the depreciation of the U.S. currency against a basket of currencies has been absorbed by the Canadian dollar, every year since 2002 – although the figure is likely higher this year.

“A third of the burden has been borne by Canada, and we're only 33 million people in Canada. About a third by Europe,” Mr. Flaherty said after meeting with his counterparts at the bi-annual Group of Seven meeting.

In the past, the Bank of Canada has studiously avoided talk of burden-sharing of currency movements, since it has argued that much of the Canadian dollar's appreciation since 2002 has been warranted by higher commodity prices and strong economic fundamentals.

But Friday, Canada appeared to join Europe in claiming that the appreciation of their currencies was unfair. The euro also traded at an all-time high against the U.S. dollar Friday.

The G7 resisted calls from Europe to bolster the U.S. dollar, and instead wagged their fingers harder than ever at China's exchange-rate regime. They used their toughest language to date in their campaign to persuade China to allow its currency to appreciate.

But the G7 communiqué did not mention the U.S. dollar, the euro or the yuan at all. Markets sent the U.S. dollar lower, interpreting the G7 statement to mean that the only currency solution the seven countries could agree on was that China needs to be more flexible. China was not included in the meeting.

“We welcome China's decision to increase the flexibility of its currency, in view of its rising current-account surplus and domestic inflation, we stress its need to allow an accelerated appreciation of its effective exchange rate,” the G7 officials said in their final communiqué, meant to set the tone of meetings among international finance officials all weekend in Washington.

China has allowed its currency to appreciate incrementally against the U.S. dollar, but has resisted repeated demands for larger moves, with an eye to fallout within its own economy.

Bank of Canada Governor David Dodge acknowledged that China would not react immediately to the G7 plea, but he held out hope for the future.

“We know that this has to be part of the global adjustment,” he said.

The G7 finance ministers and bank governors also warned that the global economy will slow somewhat, after five years of robust growth.

And they congratulated themselves for handling the global credit crunch well, and said focus on central bankers must now turn to controlling inflation.

Market players involved in the financial turmoil, however, now need to shape up and figure out how not to let such problems boil over again, the ministers said.

“We expect markets to learn lessons and address many of the shortcomings that have been exposed by recent events,” Mr. Flaherty said.

“Our securities regulators should also be engaged on financial markets issues.”

Developing countries, however, blamed lax practices in rich countries. In a communiqué of their own, they noted that so far, the credit crunch has not caused much harm in developing countries.

But they warned that unless rich countries improve their oversight of risky market practices, the market turbulence could destabilize their economies as well.

“Ministers underlined that active policy co-ordination is critical to prevent the emergence of a larger crisis,” the Group of 24 developing countries said in a statement Friday.

See also:
* The Unsustainable World Economy
* A Big Mess is Brewing
* Sub-Prime

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Don't Let Harper Americanize our Justice System

Much has been made of Stephane Dion's reaction, or predicted non-reaction, to this week's Speech from the Throne. There are times when politicians' hands are tied: they oppose something in principle but can't oppose it in fact without losing their ability to oppose at all.

Meanwhile the Canadian public appears to be taking a thoroughly passive role - leaning back like the crowd at Wimbledon, waiting to see whether the Government or the Official Opposition is victorious. But politics shouldn't be a spectator sport.

At issue is Harper's plan to Americanize the Canadian justice system. In the Throne Speech, Harper proposed a bill "to protect Canadians and their communities from violent criminals and predators" that will put more people in prison for longer periods and will tie judges' hands with mandatory prison sentences.

The homicide rate per 100,000 people in the US is 5.59. In Canada, it is 1.85... and declining. It makes no sense to follow the model of a country that locks up inordinate amounts of its citizens - especially minorities - and only manages to keep crime rampant.

Canada has had huge success with a kinder, gentler approach to crime. Jail diversion programs reduce recidivism, but that should not be the only metric used to judge their effectiveness. This is a human rights issue. Going to prison wrecks a person's life: it is traumatizing; it makes it difficult for a person to ever work at a good job or fit in to regular society; it is a training ground for future criminal behavior. People should only be subjected to prison when there is risk to society or a strong need for deterrence.

We need to stand up and tell Harper that we don't support his "Tackling Violent Crime" bill, aka C-2. You can email him at pm@pm.gc.ca.

See also:

* Canadian Department of Justice report
* Police Line Do Not Cross

Some More Arguments Against Private Medicine

Staph Fatalities May Exceed AIDS Deaths in US

U.S. maternal death rate higher than Europe's

Comparative Gas Taxes

A recent study measured, among other things, the taxation of gas at the pump in industrialized countries. Here is the gas tax per liter (in US currency) for various countries in 2007:

Holland - $1.13
Norway - $1.12
UK - $1.12
Germany - $1.04
Belgium - $1.04
Finland - 1.03
Sweden $0.99
France - $0.99
Switzerland - $0.68
Spain - $0.67
Greece - $0.53
Japan - $0.52
New Zealand - $0.42
Australia - $0.38
Canada - $0.28
USA - $0.11

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Facts Counter Conventional Wisdom

The Center for Global Development has released its Commitment to Development Index ranking "21 rich countries on how much they help poor countries build prosperity, good government, and security." Canada's scorecard is somewhat surprising - you might even say it goes against conventional wisdom. To wit:

* Among the G8, Canada ranks 1st overall. Among all 21 industrialized countries, it is tied for 5th.
* Among the G8, Canada ranks 1st in aid.
* Overall, Canada ranks 1st in positive trade policies with developing countries.

Things that run against the grain are not limited to the positive:

* Canada's immigration record is not so hot (it's ranked 9th of 21).
* Canada is ranked 18th of 21 on the environment.
* Canada is ranked 12th of 21 on global security (which includes peacekeeping).

There is nothing surprising about the highest-ranked countries (Holland, Denmark, Sweden and Norway) - they always top indexes of enlightened governance. But I was surprised by the last-place country (and it was not even close to the next-to-last): Japan.

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Ontario Liberals Should Mend Fences with the NDP

Dalton McGuinty won back-to-back majority governments but... remember this is the first time that a Liberal has done that in something like 80 years. Plus, John Tory's weird and inept policy proposals may have been the deciding factor.

We can't yet say that the Ontario political landscape has changed: the Tories are probably still the Natural Governing Party of Ontario, just as the Liberals are federally. Fingers crossed that will change (in Ontario - not federally), but a few years of Liberal rule isn't enough to do it.

So complacency is not the appropriate order of action for Ontario Liberals. (Although a new holiday is a very nice way to celebrate, so thank you, Dalton!)

What I propose is that McGuinty reach out to the NDP. I'm tired of vicious bickering between the NDP and Liberals, two parties who have very similar values and goals.

Many NDPers are strategic voters, voting Liberal when necessary to defeat a Conservative. So the Liberal party should give some support to the NDP in return. Help Howard Hampton bring some reforms to the North. Ask for his advice. Enlist Hampton's help in dealing with the crumbling manufacturing sector. All these things would help Ontario. Maybe McGuinty could go further... Give the NDP official party status. Put an NDP MPP in cabinet, or give them a big policy appointment. Forge allies. Make a coalition.

The NDP, at its best, is the conscience of the province. And the left in Canada is split, now, between three parties: the Liberals, NDP and Green (although the Green party is just posing). That leaves the Conservatives in a very powerful position. I'm not suggesting that the Liberals and NDP should merge, but some cooperation is appropriate.

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Faith-Based Schools

What bothers me most about John Tory's proposal to provide public funding for faith-based schools is that someone so close to being Premier of our province could be so wrong-headed as to think religious orientation should be the basis on which educational facilities get funding.

What of the province's large network of Montessori schools, or bilingual schools? How in the world can he justify discrimination against schools that are not faith-based?

During his short stint as Premier, Ernie Eves enacted policy to provide a $2,000 tax credit for each child attending private school. I didn't agree with the policy and was glad that Dalton McGuinty cancelled the program before it started, but that policy was at least reasonable public policy. Tory's proposal is so scandalously bad that it should be unconstitutional.

Another issue with Tory's proposal is the extra cost of busing tens of thousands of students to the school of their choice. That cost would be enormous, and would be on top of the estimated $500 million that his proposal would drain from public education.

This isn't an off-the-cuff idea of Tory's. It isn't the fault of his policy committee. This is Tory's baby and he has been proposing it for years. He stuck to this policy even in the face of an outraged public during an election campaign, softening only so far as to say that as Premier he'd allow a free vote on it.

Some see Tory's proposal as a way to right the wrong of the Catholic school system. I also oppose the Catholic school system, but shattering the system will not fix it, or make it more equitable - it will just create a lot of new inequities, and a province full of ill-educated kids to boot. It was Conservative Premier Bill Davis who brought in the fully-funded all-grade Catholic school system, and it's not going to be easy (or possible?) to remove. Nearly half the province is Catholic, and there are 650,000 students enrolled in Catholic schools (out of a total of 2 million students). Catholics argue that their schools provide a better education than public schools. At the least, dismantling the dual school system is going to require compromises. If one compromise is to provide a half day for religious training in every school, then I could see opening up the program to other faiths.

But is Tory's proposal really about Catholic schools? Remember that his other unpopular policy proposal during this election was to introduce two-tier health care by allowing private medicine in the province. Allowing a multitude of faith-based school boards is a form of privatization of the school system, just as he wants to privatize the health system. Both proposals would enormously weaken the public institutions' funding and their ability to provide essential services. It seems that privatization at all costs is Tory's goal. What he wants to do is dismantle our government.

It is mind-boggling that Tory never thought through the implications of his proposal to fund faith-based schools - that he doesn't have the intellect to see the implications, and doesn't have the right people around him to set him straight, and doesn't listen to people with differing viewpoints. We are very, very lucky that McGuinty is forecast to win a majority in tomorrow's election. The Conservative Party of Ontario should seriously consider finding a new leader who has more common sense and at least a basic understanding of good public policy.

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MMP: Five Reasons I Vote No

1. I don't want larger ridings.

2. I don't want 39 of our MPPs to be unrepresentative of any riding, without constinuency office, constituency duties, constituency president, constituency board, or... constituency.

3. I don't think the 3% limit for list votes is high enough. It will lead to too many single-issue parties getting seats.

4. I don't believe that MMP will lead to more women and minorities in parliament. The parties have ways to elect more women or minorities now, and aren't using them.

5. I don't believe the current system is working badly.

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Ahoy Kitchener-Waterloo: Witmer is Vulnerable!

It has been a long run for Conservative Elizabeth Witmer. She has been Kitchener-Waterloo's MPP for 17 years, but it seems in next week's election she is vulnerable to defeat.

The Laurier Institute for the Study of Public Opinion and Policy Seat Calculator still shows Witmer as the predicted winner, but LISPOP also quotes local news reports as saying that "the race could go down to the wire." That's about as encouraging as it gets when you oppose such an entrenched incumbent.

The K-W NDP has an extremely capable candidate in Catherine Fife - the best NDP candidate I've ever seen in our riding. Her web site claims that she is only slightly behind the Liberal candidate, Louise Ervin.

Still, it's probable that K-W Liberal Louise Ervin is the only candidate who could unseat Witmer. Ervin, a longtime member of the School Board and former teacher and social worker, has a solid understanding of local issues, a great resume and a solid track record.

People criticize strategic voting but the fact is that Witmer will only win if the NDP and Liberals split the vote. My mother, impressed by Fife, found a compromise: she's voting for Ervin but sent Fife a campaign contribution. Me, I'm just voting for Ervin.

I would dearly like to have new representation in the next government. Witmer was such a big part of the horrible Mike Harris years... let's get her out and elect someone new.

Water

The effect of global warming is to reduce levels of inland fresh water lakes (due to evaporation) and to raise sea levels (due to melting ice caps). At some point we are going to have to adapt to this by diverting increasing amounts of fresh water that would otherwise flow into the sea. It isn't possible not to. There will be all kinds of justifiable NIMBY reactions but they will never be able to do more than slow the process.

Canadians are up in arms about the possibility of the US siphoning off Canadian water. We rail about "bulk water exports", but in reality the US doesn't have to buy the water: they have their own coast lines on the Great Lakes, St Lawrence River, Red River, and so on. All they have to do is divert water in their own territory. In fact, the current low level of Lake Huron may be partly due to dredging in the St Clair River (which has caused erosion that further deepens the river) that is estimated to be causing an extra outflow of 10 billion liters/day.

How we take the water will make all the difference. Obviously, diverting it closer to the sea causes less havoc on communities than taking it in the middle of the continent. But it seems likely that the Great Lakes, with 20% of the world's fresh water, are going to be hit.

The problem with the Great Lakes is that they are not replenished as a river is. About 99% of water in the Great Lakes is a leftover from the last ice age and is non-renewable. Also, the water level goes through periodic up and down cycles, and it isn't known whether the current low levels are temporary or part of a global warming trend.

I live right in the center of the Great Lakes, and for decades we have been exceedingly careful about water usage. It has been ages since you could buy anything but a low-flow toilet in Ontario. In my region residents are only allowed to water their yards or wash their cars one evening a week, after 7 PM. By-law officers enforce the law and hand out fines. By mid-summer most lawns are dormant (brown and dry).

It is therefore not unexpected that southern Ontarians are pretty unhappy about the prospect of the US siphoning off water to US communities - some of them in southern deserts - that do not do much to conserve water. But restricting siphoning is a double-edged sword, and will hurt us too.

Waterloo has plans to build a pipeline from Lake Huron to supply our community with water. Recent concerns about lake levels are raising questions about whether any new pipelines should be allowed. We are already operating with minimal amounts of water. If the new reality means that our pipeline might not happen, we had better adjust our growth rates soon so that we don't get into a godawful mess.

Update: Drought-Stricken South Facing Tough Choices

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