Sunday, September 27, 2009

Scorched-Earth Economics

As the week comes to an end, we witnessed what Globe and Mail columnist Jeffery Simpson referred to as tired rhetoric in that both the Liberals and Conservatives were spouting the importance of the return to economic growth as the means from which Canadians are going to collectively dig our way out of the huge financial hole that we have made for ourselves.

Nothing new here except, given the possibility of global climate change of catastrophic proportions, there is something that is pernicious. Indeed, vaunting economic growth in the face of the disconcerted efforts to limit global warming to only two degrees Celsius by the end of the century is tantamount to advocating a scorched-earth policy.

As a defence strategy, rendering a terrain inhospitable in order to limit the advance of hostile armies proved to be effective, most notably by the Russians in the face of Napoleon’s armies and then again when confronted by the Germans during the Second World War. Today, however, such tactics contravene the Geneva Convention:

It is prohibited to attack, destroy, remove or render useless objects indispensable to the survival of the civilian population, such as foodstuffs, agricultural areas for the production of foodstuffs, crops, livestock, drinking water installations and supplies and irrigation works, for the specific purpose of denying them for their sustenance value to the civilian population or to the adverse Party, whatever the motive.

Yet, from an intergenerational perspective, the effects of continued global economic growth is to render useless the indispensable components of human survival (air, water, topsoil, ambient temperature) for future generations. A quick glance of the global inventory of the basic natural necessities reveals rapid depletion of water tables and the depth of topsoil, while at the same time the level of green house gases and the acidity of the oceans rise at an alarming rate. The motive for implementing a scorched-earth policy is clear, the insatiable greed of those living in the present, and the means is the ever-increasing levels of production and material throughput that goes by a rather innocuous term, economic growth, most often measured by a nation’s gross domestic product.

Clearly, a drop in economic activity brings about some positive results for the biosphere. For example, during the global recession we have witnessed a significant drop in the production of green house gases. In a report due to be released this November, the International Energy Agency projects a drop in global carbon emissions by 2.6% this year. Closer examination reveals that in the United States carbon emissions dropped by 3.8% in 2008 as compared to 2007 and are projected to drop another 6.0% in 2009.

Faced with significant deficits and mountains of accumulated debt, politicians throughout the G-8 are reluctant to make tough choices such as reducing expenditures or raising taxes and are opting to finesse their way through current economic difficulties by monetizing the debt and planning for a return to economic growth, albeit with a greater risk of runaway inflation.

It should now be recognized that the risk of allowing the externalities of increased production to negate efforts to reduce green house gases renders this economic strategy worse than useless. It is as though present generations refuse to accept the folly of their ways and either refuse to recognize that continued growth models have the effect of scorching the earth for future generations or opt to delay the inevitable downshifting of material production as long as possible.

The substitution of the reduction of energy intensity in economic production (less units of energy used for each unit of GDP produced) instead of the absolute reduction of carbon emissions hides a malicious intent. Although greater energy efficiency is devoutly to be wished, in the absence of absolute caps placed on economic activity increased energy efficiency has the perverse effect of increasing energy consumption and consequently increasing carbon emissions. For example, the increased efficiency of steam engines during the Industrial Revolution brought about an increase in coal consumption, and the increased fuel efficiency of automobiles during the first oil crisis, led to an increase of the total number of kilometers driven, which caused an actual increase in overall gasoline consumption. The tendency for increased efficiency to lead to greater rates of consumption is know as the Jevons paradox.

A second counter-intuitive phenomenon known as the Easterlin paradox should also call into question the desirability of continued economic growth. In short, there is a large body of evidence that indicates that as a society develops rising material wealth stops making the population any happier. Looking at quality-of-life indicators for OECD countries, it appears that the importance of relative wealth, in other words, how the wealth is distributed, is more important than the absolute wealth of the nation. Moreover, the documented increase in unequal wealth distribution that has accompanied the last 25 years of economic growth has not brought about an increase in the well-being of the populations of developed nations where income disparities are large. On the contrary, there is evidence to show that this type of economic growth that has characterized the end of the 20th and beginning of the 21st century has actually led to a decrease of the quality-of-life indicators for the vast majority of the populations.

Faced with the urgency of curbing green house gas emissions and the dubious utility of continuing to use an increase in economic production as a means to increase the well-being of the population of a developed country, it is time that we abandon the economic growth at all costs paradigm in favor of steady state economy.

Keeping the economy at a steady state has the advantage of placing an absolute cap on economic activity so that increased efficiency in energy use actually brings about significant reduction in green house gases. Second, the acceptance of curtailing economic growth in the developed world would bring about a marked change in attitude from the developing world with regard to their growing economies.

Overall reductions in carbon emissions require that those who are largely responsible for the problem to assume a leadership role in bringing about the solution. It is folly to believe that the developing world will accept diminished growth of its material well-being while the developed world continues to deplete the world’s dwindling natural resources at an unsustainable rate.

To avoid the global tragedy of the commons situation, it is imperative that some of the nations of the developed world abandon their scorch-the-earth economic policies disguised in the pursuit of ever increasing production levels for an approach that can sustain life as we know it and carries the possibility of actually increasing the well-being of the majority of the population.

Monday, September 21, 2009

Quebec Pays Dearly for its Democratic Deficit

Last Friday was a sad day for democracy in Quebec. The National Assembly had resumed its work, and after only three days the Liberal Government invoked closure in order to adopt an amendment that would modify the Balanced Budget Act and allow for a return to budget deficits without any clear plan on how the Province would emerge from its sea of red ink.

What I find troubling in this measure is how political power has become so concentrated in the Premier’s Office at a time when we should be questioning Premier Jean Charest’s capacity to manage Quebec’s economy. Moreover, the false majority that our electoral system bestowed on the Quebec Liberals (PLQ) came about as a result of the systemic discrimination of the Action Democratic of Quebec (ADQ), the only political party that concerned itself with the long-term consequences of Quebec’s status as the Canadian province with the highest per capita debt in Canada.

Looking back at the 2008 General Election, despite the Province being mired in the worst recession since the Great Depression, Mr. Charest called the election in order to take advantage of the ADQ’s weakness in the polls. Having dropped from 31% to 16% of the popular vote, the ADQ would bear the full brunt of our voting system’s discriminatory practices and have their seat count reduced from 41 to 7 seats. In other words, a 50% drop in popular support brought about an 83% drop in seats in the National Assembly.

What is remarkable is the PLQ’s rise from minority to majority government status came about as a result of significant drop in the participation rate during the last election. In short, the Liberal victory did not come about by its ability to attract swing voters, but by the fact that approximately 600,000 voters who voted for the ADQ in the 2007 General Election did not bother to go to the polls.

It seems that a disturbing new trend has emerged in Canadian politics: berate your opponents while hanging on to core supporters so that the margin of victory results not from increasing voter support but from the increasing numbers of the opponent’s supporters deciding not to cast their votes.

In Quebec, from 1994 to 2008, the PLQ was the more successful of the two major political parties in keeping a greater percentage of their core support as the participation rate began to plummet: the participation rate in general elections fell from 81% to 57% of the electorate. During the same time period, support for the PLQ fell from 36% to 24% of registered voters, while the support for the Parti Quebecois (PQ) fell from 36% to 20% of registered voters. In absolute numbers, support for PLQ declined by 371,652 voters or 21%, and support for the PQ declined by 609,691 voters or 34%.

Taken together, the PLQ and the PQ had the support of 71% of registered voters in 1994. However, in 2008 the combined support fell to 44% of the registered electorate. Disturbingly, during the 14 year time period, the number of eligible registered voters increased by 845,346 or 17%, yet the number of electors voting for both parties decreased by 981,343 or 20%.

Clearly, the majority of Quebec voters has moved beyond the sterile nationalist/federalist debate but are held hostage by an electoral system that makes it extremely difficult for emerging parties to gain and hold support. For example, of the five general elections the ADQ has contested, four of them have resulted in severe reductions of the number of seats that the ADQ would have won if the representation in the National Assembly accurately reflected the popular vote.

Not surprisingly, neither the PLQ nor PQ has shown much interest in adopting a proportional voting system despite the fact the public has been consulted four times over the last thirty years. In each instance the organizing committee tabled a report recommending the adoption of a proportional voting system.

In short, rather than working to give better representation of the diversity of political views in Quebec and to increase the participation of the electorate in the electoral process, the PLQ and PQ have conspired to perpetuate the status quo by shrinking the electorate to those who remain willing to choose between what the majority of the electorate believe to be two unsatisfactory options.

Looking at the state of the Province’s finances, the alternation of the two governing parties has not produced much in the way of prudent fiscal management. Back in 1970, when the Liberals were in power, Quebec’s accumulated provincial debt was almost nonexistent, standing at $2.3 billion. Since then, it has grown at a rate on average of $2.7 billion annually, reaching a summit of $130 billion at the end of March, 2009. More so, if we use currently accepted accounting practices and include the debt incurred by other government bodies, which would establish the accumulated debt to be approximately $150 billion according to the Montreal Economic Institute. Add in Quebec’s portion of the federal debt, and we reach a level of debt that is more than 80% of the Province’s GDP.

If the highest level of indebtedness is not cause for concern, the recent performance of Quebec’s public pension plans should. In 2008, the public portfolio managed by the Caisse Dépôt et Placement lost 27% of its value ($40 billion), and in the first six months of 2009 did not generate anything in the way of returns.

Looking forward, the Quebec Government anticipates another $12 billion of deficits during the next four fiscal years. This figure does not include a reduction in equalization payments from the federal government, which will inevitably incur as the major provincial contributors, Alberta and British Columbia, are now experiencing record deficits of their own.

To make things worse, Quebec’s rapidly aging population will reduce the Province’s capacity to generate economic growth from productivity gains and will only add to spiraling costs of providing healthcare.

Undoubtedly, these huge challenges will require tough decisions and innovative approaches. Unfortunately, neither of the two governing options has much to say that is relevant to the nature of the problems. It is as though we are stuck in the 1970s: the Liberals are still talking about mega hydro-electricity projects and the PQ is still proposing the panacea of independence.

To repeat a common theme in my posts, it is the tyranny of dead ideas that is the major factor in bringing about what has been referred to as the historical period we are now living in Quebec—the quiet decline.

Wednesday, September 16, 2009

Canadian Politics Make for Strange Bedfellows

The latest round of political posturing has shown how the present situation in Parliament is a farce. Drumming up the ghosts of the Liberal-NDP-Bloc coalition, the Conservatives accuse the Liberal leader, Mr. Michael Ignatieff, of wanting to lead the second coming of the once dead coalition, of which Mr. Ignatieff has flatly denied.

It is as though Mr. Harper, having vilified the Bloc as separatists and the NDP as socialists, has accused Mr. Ignatieff of having chosen to shack up with two political parties of ill repute. Shortly thereafter, however, in order to get a Ways and Means Bill adopted in the House of Commons, the Conservatives had no choice but to seek reprieve from either one of the shady political formations in getting them to support the motion; otherwise, a general election would ensue.

The moral of the tale is that the lust for power can be satisfied with the occasional dalliance with those of besmirched reputation, but woe to anyone who even thinks of establishing an enduring relationship with such political harlots.

Give us a break.

In the context of a minority government, if a governing party governs and the opposition opposes, what option exists, other than a general election, than seeking the support of one or more of the other parties so that Parliament functions. Moreover, given the inability of either one of the traditional parties to attract enough support to form even a false majority, a general election will not return us to the days of majority government.

So, like it or not, this is the situation. Either we remain in the present state of affairs in which there is a succession of short-lived minority governments unable to pass any meaningful legislation that addresses the nation's challenges, or we move on to a more stable form of government, a majority coalition formed by two or more parties.

If we are to do the latter, we must abandon our desire to be ruled by a system that privileges domination and control. A working coalition necessitates collaboration that only arises from the desire to reach consensus, a process that recognizes the capacity of those with different beliefs to find commonality and to move forward on the basis of shared objectives. Consensus does not arise form constant adversarial bickering, a feature that has come to dominate our dysfunctional Parliament.

To create a political institution that is built on the notion of seeking consensus requires a fundamental institutional change. Political power can no longer be an all or nothing affair. It is something to be shared on the basis of an accurate representation of the electorate. However, faced with an electoral system that distorts representation in order to bring about the domination and control by a single political party, we must abandon our current system in favour of proportional electoral system that does not produce false majorities. That way our politicians can escape the institutional incentives that encourage excessive partisan behaviour, and we can get on with the business of running the nation.

Monday, September 14, 2009

Blame it on the Separatists

If Canada has become ungovernable, we need not look any further than Quebec to know why. Simply put, the refusal of the Quebec electorate to support either one of the traditional governing parties combined with the inordinate distortion of the popular vote in favour of the Bloc Quebecois make it next to impossible to form a single-party majority government.

Although both the Liberals and the Conservatives have seats in Quebec, the number is insufficient to contribute to the formation of even a false majority. In general, the first-past-the-post voting system provides a bonus for the party that wins the plurality of the votes. Most often, 40% of the popular vote translates into 60% of the seats and consequently a majority government. However, in looking at the results of the last general election, it is the size of the distortion that the Bloc receives that thwarts the ability of the Conservatives to form a majority government.

With regard to their performance of obtaining popular support across the electoral districts in which they present candidates, the Bloc and the Conservatives both receive approximately 38% of the votes cast. The Bloc does this in the 75 ridings within Quebec while the Conservatives accomplish the same feat in the 308 ridings across Canada, and there’s the rub.

Calculating the popular-vote-to seats ratio for both political parties, the Bloc receives one seat for every 28,163 votes cast for the party in Quebec, and the Conservatives receive one seat for every 36,427 votes cast for the party in Canada. Breaking this down into electoral districts where each party presents candidates, the same level of support in the popular vote garners 65% of the available seats in Quebec for the Bloc but only 46% of the available seats across Canada for the Conservatives. In other words, those electors that vote for the Bloc have a significantly higher voting power than those electors that vote for the Conservatives. In fact, the votes for the Bloc produce 30% more seats than the same number of votes for the Conservatives.

Ironically, the essential component of this majoritarian electoral system has been appropriated by a relatively small minority of voters as to prevent the system form operating in the manner in which it was intended, thereby rendering the entire electoral system dysfunctional—we maintain a majoritarian electoral system that is presently incapable of producing a majority government.

To escape from this cul-de-sac, we must abandon the present out-dated method of voting. Indeed, proportionality should be a required feature of a new electoral system so that we do away with the notion that a political party forms a majority government of the basis of the systemic distortion of the popular vote. This would pave the way for the formation of majority coalitions that would extend the life of our current governments substantially.

The challenge is to convince those who have benefited from the egregious fault of the present system to abandon it in favour of a system where the benefits accrue to the electorate at large, which will find itself with a much more accurate reflection of its political diversity in the composition of Parliament. What is required is that the traditional governing parties recognize the futility of hanging on to first-past-the-post method and move forward to implement a systemic change that puts the well-being of the nation before partisan self interest.

Thursday, September 10, 2009

The Tyranny of a Dead Idea

Canada’s inability to conceive and put into place a system of governance that corresponds to its particularities is largely responsible for its slow slide away from “being the best country in the world to live in” towards a mediocre player on the world’s stage.

We are stuck in our colonial past, unable to shed ourselves from an electoral system dating from the Middle Ages in which two principal factions wage a campaign in approximately 300 winner-take-all districts. The faction that wins the most districts wins the right to rule the kingdom.

Undoubtedly, the complexity of the world in which we live is exponentially greater than the world that gave birth to the first-past-the-post voting system. Yet, for many of its supporters, it is the simplicity of the method which is its greatest strength. All it requires is electors who can place an “x” beside the name of a single candidate.

If the rate of societal change had remained unchanged since the middle Ages, perhaps such a system of governance would suffice. Unfortunately, the challenges of facing up to climate change, the decline of conventional oil supplies for an economy built on the availability of cheap oil, and a global financial system that lurches from boom to bust in ever shortening intervals necessitates the capacity to generate new ideas and ways of doing things that will enable us to adapt to the churn of incessant change. However, if all we ask of the electorate is to choose between the blue and the red team, we are not going to get anything more from the winning side than a futile attempt to bring the downward slide of our collective quality of life to a halt.

There are times when remaining with status quo is unacceptable. We live in such a time, and it is to our great disadvantage that our electoral system seeks to preserve it. When political power is an all or nothing affair, there arise emerging properties of the system that render it unsuitable for adaptation to a quick-changing environment.

First, since a large centrist electorate must be courted in order to find the widespread appeal that enables a political party to form a government, the two contending parties fight for the center. As a result, valuable new ideas rest at the periphery, failing to gain traction, for the introduction of new ideas carries the risk of alienating those at the center thereby perpetuating the status quo.

Second, each contending party must portray itself as offering unique solutions to the electorate when in reality there is quite a deal of commonality between their respective political platforms. Instead of trying to build upon what is held in common, both parties are locked in an adversarial relationship in which each lauds its supposed virtues and demonizes the other.

Within this dynamic, consensus building gives way to the alternation of domination and control. As a result, timelines shorten to accommodate the electoral cycle and long-term planning is next to impossible. We are stuck reacting to the latest crisis. Fundamental problems that require sustained action for more than ten years are seldom addressed, giving the impression that we prefer to re-arrange the deck chairs while the ship is sinking.

Finally, the electoral system is blatantly unjust. Whether or not your vote counts is totally dependent on where you live, and the majority of us live in electoral districts where the expression of an authentic choice renders the vote useless with regard to garnering representation. In short, more and more of us are effectively forced to watch from the sidelines as the size of the electorate at the center continues to shrink. We look on as the cost of inaction continues to rise and the number of those who benefit from the status quo continues to fall.

Saturday, September 5, 2009

Canada's Political System Has Passed Its Expiry Date

It appears we are going to have a fourth federal election in five years. Looking at the latest polls, there does not seem to a majority government in the making and that is with the built in distortions that the electoral system carries. In other words, single party majority government is over.

Within the political class, there appears to a collective sense of denial with regard to our political system's institutional capacity to provide our constitutional right to good government. In particular, the two political parties that offer a government option still pretend that can win a majority of seats in Parliament.

Keep in mind that the first-past-the post (FPTP) voting system transfers a significant proportion of seats to the party that wins a plurality of the popular vote at the expense of the party in opposition and the smaller parties. This feature arises due to the failure of FPTP to have a mechanism that either aggregates votes or allows voters to mark their electoral choices preferentially. As a result the majority of votes cast are ineffective, meaning that they are not used in any way to bring about representation in Parliament.

Not surprisingly, the incentive to go out to the polls on election day diminishes with the realization that one's vote does not count. Looking at the plummeting participation rates in provincial and federal elections, voters have figured this out for themselves, and the parties in power refuse to fix the problem. Consequently, elections are now being won not on the ability to attract new voters but because a significant proportion of the other party’s supporters decide not to participate.

This is exactly what happened during the last federal election. For example, the Conservatives increased their plurality of seats in Parliament because their overall loss of votes from the 2006 to 2008 federal election was only 160k compared to the 800k votes lost by the Liberals.

Moreover, with a participation rate of 58.8%, the Conservatives garnered only 22% of the votes from the eligible voters while the Liberals received a paltry 15%. Together, the supposed government options could only attract the support of approximately 37% of the electorate. Taking the latest polling numbers which have the two parties in a statistical dead heat, each one has the support of 32.6% of the survey’s respondents, and a projected participation rate of 60%, neither party can muster the support of 20% of the electorate.

Democracy is the rule of the majority.

Since even the formation of a false majority brought on by the vagaries of the voting system is not on the horizon, it is time that we abandoned our antiquated electoral system. Given the urgent need for a stable government with a mandate to implement comprehensive policies to address our mounting social, economic, and environmental challenges, it must be recognized that only a majority coalition, formed by two or more political parties, can provide the nation with the governance it justly deserves. If a proportional voting system were to be adopted, we could elect a democratic government that would be both effective and legitimate.

However, what needs to happen is that our entire political class comes clean and admits that the present system does not have the wherewithal to provide good governance. This recognition has not been forthcoming since the two major parties cling steadfast to the outdated dream of forming a single party majority. We cannot continue to have a minority government that governs like a majority under the threat of continual collapse and a return to an electoral process that brings about the same result.

Let’s not live in perpetual "Ground Hog Day", as captured by the Bill Murray film. We need to wake up, smell the coffee, and get on with bringing our political institutions in line with the realities of the twenty-first century.

Tuesday, September 1, 2009

The Leap of Faith

At the heart of faith-based discourse is Kierkegaard’s famous leap of faith. Indeed, the adherence to a faith-based discourse requires more than a " willing suspension of disbelief " to make sense of the narrative; it requires a permanent suspension of critical thought with regard to the core incidents, values, and prescriptions predicated by the faith.

Essentially, the leap involves the movement away from rational discourse towards a modality of thought that clings to the irrational acceptance of the truthfulness of the faith’s claims and assertions. Often, contrary evidence will serve to test the faith of the individual. Depending on the nature of the evidence, the individual may simply choose to ignore it, modify the discourse in an attempt to explain it away, or, if the evidence is earth shattering, decide to leave the faith-based community. Most often, the fundamental precepts of the faith are impossible to verify or falsify and are held in place by an authoritarian organization that usually takes the form of a command and control hierarchy.

Historically, religious hierarchies have had the greatest impact on the development of human societies. Faced with the existential mystery of existence, coupled with a quality of life overwhelmingly nasty, brutish and short, faith-based communities coalesced and acquired the organizational capacity to bring order into a world fraught with the ravages of continual military conquest and repeated crop failures and epidemics.

Typically, the command and control religious hierarchy would emerge years after the truth had been revealed to the anointed one. Over time, power within the hierarchy would become concentrated, causing an unequal distribution of wealth and power in the faith-based community, favoring, of course those who administer the truth. Inevitably, the constant recourse to authoritative measures to control and dominate the masses created opportunities for those exercising control to use the means of domination to increase their power and wealth at the expense of the faithful.

Before the Age of the Enlightenment, coercion was the principle method employed to maintain order. In some sense, as long as disputes center on matters of faith, that is assertions not subject to verification or falsification, the use of force is perhaps the only way to resolve them. However, once questions concerning earthly existence became at odds with received doctrine, the use of force to maintain order could not endure. The most striking example is the Roman Catholic Church's attempt to maintain its dogma of a geocentric universe. Unfortunately, holding a heretic's feet to the fire does not change the fact that earth revolves around the sun and not the other way around.

Notwithstanding the often ferocious persecution of those who challenged the received dogma, the proponents of a more rational and empirical approach persevered and gained a sufficient number of adherents until a spiral of continued scientific discoveries created a secular sphere where the possibilities to acquire wealth and power far surpassed what could be has with the confines of the faith-based religious communities.

For the most part, faith-based and evidence-based discourse co-existed, each having its own sphere of influence. However, there would be elements of faith-based thinking that would transfer into the secular sphere with disastrous consequences.

Beginning in the 19th century and continuing throughout the 20th, the world saw the rise of faith-based political ideologies: capitalism, communism, and nationalism. In each instance, the fundamental ideological precepts demand a leap of faith. For capitalism, it is the belief that the unintended consequences of the rational pursuit of self-interest, guided by what Adam Smith refers to as the invisible hand, brings about the common good. For communism, it is the irrational belief in the myth of historicism in which the oppression of the masses inevitably gives way to the rise of the proletariat and the utopia which ensues. Finally, with regard to nationalism, it requires an irrational belief in the commonly held misconception of ethnic origins and a very selective reading of history to assert and justify claims for territorial control and exploitation. Considering the scale of the bloodshed and human suffering wrought by over a century of ideological warfare, each of the above-mentioned political ideologies merits its place in the dustbin of history.

In the secular faith-based hierarchies, there exist the same powerful institutional incentives to close the minds of the faithful to opposing views. In short, maintaining fundamental truths are the means to maintaining privilege. As a result, anomalies are ignored, claims and assertions are overstated, opposing ideologies are demonized, and the common good is sacrificed for the gains of a well-placed elite.