Policy

I recently caught wind of Hydro Quebec’s latest effort to control electrical utilities outside of its borders at the expense of the owners of those assets. [READ] The Premier of Newfoundland and Labrador is being overly polite in my opinion. Hydro Quebec fucked his province around the Churchill Falls hydroelectric project – a project that might have softened the blow of a dying fisheries industry was it not for Quebec.

If you’re not familiar with the Churchill Falls issue, here’s the Coles Notes version:

• The Churchill Falls project was started in Newfoundland in 1967 and had potential to be the biggest hydroelectric project in North America.
• Completed in 1971, the dam has the second largest capacity of hydroelectric dam in North American and has the potential to be the biggest with upgrades.
• Newfoundland geographically isolated from the rest of Canada and the US by Quebec.
• Normally, Provinces allow each other to transport electricity across each others borders for sale in other markets in what’s called a “wheeling agreement”
• Wheeling agreements typically allow the Province that is letting the power be transferred along its lines first rights to the power at a fair market price only so far as domestic supply doesn’t meet demand.
• The financial model for Churchill Falls depended on being able to sell power to the US market where better prices could be negotiated.
• After the project was completed, Hydro Quebec began to play games with the wheeling agreements by selling vast amounts of their domestic power to the US market at a healthy markup and then in turn claiming that they had a domestic shortage, giving them the rights to nearly all of Churchill Falls’ output at a much lower price.

This, in effect, is what ruined the potential of Churchill Falls for Newfoundlanders. The project ran into financial trouble early on because it couldn’t sell power to the US (because of Quebec’s maneuvering) and guess who swooped in to bail out the project for majority ownership? Hydro Quebec. The 50 year agreement gave Hydro Quebec exclusive access to all the power Churchill Falls produced at a price even lower than what they would have paid through the wheeling agreement.

That’s what the Premier of Newfoundland is referring to when he says that Hydro Quebec took out $22 billion and left $1 billion for Newfoundland. The $22 billion is likely the amount of profit that Hydro Quebec has generated since 1971 by selling Newfoundland power on the open market while claiming a domestic shortage. This is money that by all rights, should have gone into Newfoundland’s economy.

This is why New Brunswick Power should be wary – Hydro Quebec (and by extension the Quebec government) are like sleazy loan sharks. They give the appearance of helping out their impoverished neighbours when in fact, they are setting these “friends” up for failure. Those who do not learn from history are doomed to repeat it.

The results of the 2009 BC Election are in – Gordon Campbell’s Liberals are in for a third straight term (albeit with a smaller majority – something that does not shock me). What did shock me was how badly the BC STV electoral reform proposal got beaten in the referendum. Last time this issue was up for discussion, it garnered 57.7% of voters’ support. It needed 60% to pass. Because the vote was so close last time and many voters had expressed confusion about the option at a technical level, it was decided to run the referendum again.

The initial results on STV this year is 39% in favour of the change. Because of this substantial drop, the issue is effectively dead in BC and is unlikely to go to referendum again in the next few elections. Some pundits are claiming that this result has killed STV for a generation in BC and probably in the rest of Canada as well.

My theory as to why STV died at the polls is that voters never really understood how the process works and when they did, they had some fears about how it would affect the political balance in this province. I imagine that a good number of Liberal supporters voted “no” on the issue because they felt it would lead to NDP majority governments. I also heard some folks with concerns about coalition governments that “wouldn’t be able to get anything done”.

Other pundits have suggested that the way the question was framed this time impacted the results. Last time, voters were told that a group of citizens had recommended STV and they were asked to vote for or against it. This time, voters were simply asked to vote for the existing system (first past the post) or for STV. This could have scared some voters off because it put things in terms of “abandon the current system”.

In any case, it was an interesting election. Voter turnout was down to 47.6% this year (compared to 62% in the 2005 BC election). The NDP gained three seats and still no special interest parties represented.

I want to start by saying that I neither advocate for or against BC-STV but I do believe that people should educate themselves before going to the polls. Tomorrow, in conjunction with the British Columbia General Election, voters in BC will have another chance to vote for or against and new election system called Single Transferrable Vote (STV). There are groups campaigning for and against this issue and there are some relatively neutral groups that are trying to provide unbiased information. I wanted to share some of the better resources that I’ve found while trying to educate myself:

1. Understanding STV
   

   This site has an excellent lay-persons description of how the system would work at a technical level and shows an example of how election outcomes would change from previous elections if this system was in place. There’s also some great information in there about how this proposal came before BC voters and a reminder that the last time this issue went to the referendum, more than half of the voters were in favour of it but the threshold was set at 60%. Check out the very detailed section where this person outlines how the 2005 election might have played out under this system with various scenarios [READ].

2. Ireland’s STV System
   

   In terms of use cases, one only needs to look to Ireland to see what an STV system in action looks like. They’ve been using it since 1922. As you can see from the above link, Ireland has debated doing away with the STV system on a number of occasions but when put to a referendum, people voted to keep the system. Obviously, the system works well enough for Ireland. How readily this would translate to BC is another matter and I leave that interpretation to you.

   Malta also uses the STV system as does Australia for its senate. There are many countries that use proportional representation as their voting system but these systems are slightly different that what is on the referendum. You can read up on Proportional Representation on Wikipedia with a full list of countries that use this system. [READ]

3. Advantages of Proportional Representation Systems
   

   The Electoral Knowledge Network has a good summary of the advantages of a proportional representation system (STV is a PR system). The main arguments for it seem to be that it translates the popular vote more accurately into seats won, provides more seats to minority parties and reduces wasted votes. There’s a strong campaign for BC STV that you can read up on if you’re interested. [LINK]

4. Disadvantages of Proportional Representation Systems
   

   Thanks again to the Electoral Knowledge Network, here’s a good summary of the downsides of PR systems like STV. The main arguments against it seem to be that it can lead to coalition governments (which have a bad reputation for lacking the power to push legislation through), it can lead to party fragmentation and it can give a platform to extremist parties. There’s an equally strong campaign against BC STV that you can read up on as well. [LINK]

Again, I see valid arguments on both sides of this argument and I do not advocate either side. I do advocate that everyone read some of these resources before going to the poll tomorrow so that you can make a more informed decision.

By 2015-2018, Canada (and most other major economies) will have reached a point where there are more jobs available than people to fill them. That’s not very far off and, to the best of my knowledge, no one has a good plan on how to solve this problem. Much sooner than this, we will be facing a management labour shortage. Why? Because managers, mostly due to seniority, tend to be older than the average entry-level employees. I don’t think we, as an economy, have thought about how to fill this management labour shortage which is already starting to impact the trades.

The Journal of Commerce – Western Canada’s construction newspaper – identified this problem in mid-2007. [READ] Another article from 2006 predicted that management labour shortages would correct themselves as companies increased management pay to attract people into those roles. [READ] Russia and EU countries are having similar problems. [READ] Even China is not immune to the management labour shortage. [READ]

A few solutions have been bandied about that I want to identify and address here as evidence that we really don’t have a handle on this problem:

1. Immigrant recruits
   

   Many a pundit cite “immigration” as the great saviour of our economy as labour shortages rise. While I know many very capable immigrants, I also recognize that there are huge cultural differences between Canada and other countries that mean managers from these countries cannot just be parachuted into management roles here. Leadership and communication styles can vary wildly.

   Just as Canadian managers often have a hard time motivating employees in say, India – Indian managers have a difficult time motivating Canadian employees. This is not to say that we shouldn’t recruit immigrants to help fill the labour shortage. We should. We just shouldn’t expect them to be able to jump straight into management roles here.

2. Increased post-secondary education
   

   Labour market analysts occasionally assume that if we increase university participation rates, we can increase the supply of skilled labour. I think this is a dangerous assumption because as the shortage grows, employers will have to be less picky about their candidates. I actually believe that university enrolment will go down as the labour shortage increases.

   Why would you go and get an MBA to land an amazing job when you can land a good one without the degree? That might actually be a strategy to address the shortage – lower your standards. It’s important that managers also understand the industry they’re working in. A university degree doesn’t give you industry knowledge – that’s something you gain with experience.

3. Accelerated management training programs
   

   Some employers, like BC Hydro and the Federal Government, have management fast-track programs where new recruits go on rotation for two years through a number of departments, receive in-depth management training and mentoring. I have a colleague at BC Hydro who is going through this program right now. I actually think these programs are pretty effective but they’re not very scalable. For a company like BC Hydro who has hundreds of managers and only runs a handful of people per year through its accelerated management program, this program alone cannot solve their management shortage.

   These programs are not very scalable because it requires current managers to take time out of their normal duties to groom, train and mentor the program participants. This puts a hard limit on the number of participants. Without a low ratio of participants to managers, these programs are not that effective. Hence, there is a ceiling on the scalability of these programs.

Some of you might be thinking “so what? Does the world really need more managers?” Maybe we can do without as many managers – I suspect that management is self-replicating and in some instances, overbuilt. Can we do without 50%+ of all managers? Not a chance. We need to solve this problem ASAP. I’m open to suggestions.

I am facing a big challenge while working with one of my current clients – the Asia Pacific Gateway Skills Table. Their mandate (and one that I believe in strongly) is to ensure that British Columbia has enough people to fill hundreds of thousands of trades jobs that will become vacant in 2015 as the Boomers leave the labour force en masse and BC grows in its role as a major port between North America and Asia. What this organization is trying to do now is help companies and the government prepare for a time of massive labour shortages by looking for ways to bring new hires to the region, to increase productivity and to ensure that we’re doing the most we can with the people that are already here. The concept of labour shortages is difficult to stomach in early 2009 when the headlines read things like “Recession could cut 42,000 B.C. jobs this year” [READ].

The issue is not going away despite our short-term economic woes and if a recent Conference Board of Canada presentation on the BC Economy is anything to go by, the slump will be followed by a major growth spike – a situation that might accelerate the looming labour shortage. Most of the projections that I have seen (including those of a recently released AIMS report on Canadian Labour Shortages [READ - PDF]) show that labour demand in Canada will outstrip supply sometime in mid-2015. However, all of these models assume little or no economic growth. If above-average economic growth does occur after our current recession, that dotted line in the graph below will move up into a steeper angle, bringing the labour shortage crisis closer to today.

Even with modest economic growth in the next decade, we’re still hurtling towards a crisis. By conservative estimates, we have six to seven years to solve the labour problem. Jurisdictions like Australia are already addressing these issues by loosening immigration policies, offering incentives to new skilled immigrants and recognizing more foreign credentials than most Western countries. Canada’s overly restrictive immigration policies and culture of credential-worshipping is not helping the situation. Canada is a great country but in the coming decade, we will need more than our charming personalities to maintain this nation.

Now is the time to start thinking outside the box. I’m going to write more on this topic in the coming year but I firmly believe that our salvation lies in productivity gains and a warmer immigration environment. These views, as I mentioned earlier, are not popular right now because people are having trouble seeing past our current woes. We must look to the future and start planning now. It’s vital to our survival as a country.

I don’t know if they’re serious or not but the US pornography industry is the lastest industry group to appeal to the government for a bailout. [READ] I don’t normally write about porn on my blog but it was hard to resist in this case. Joe Francis (of “Girls Gone Wild” fame) and Larry Flynn (of Hustler fame) are saying that they’re going to ask the US Congress for a $5 Billion bailout. In 2006, the porn industry represented a $13 billion industry (surprizingly, South Korea and China’s industries are both nearly double the size of the US industry) [READ]. Claiming that smutty DVD sales are down 22% in the last year, US pornographers want the kind of help the US auto industry is receiving.

Safe For Work: Look! They have to mend their own pants now!

Taking a step back, this smacks of opportunistic pan-handling to me. Clearly, the porn industry is a significant player in the US (no surprize there) but are their current economic woes all due to an economic downturn? The porn industry has more in common with the movie and music industries than it does with US automakers. In other words, they’ve been having problems for years and it’s nothing to do with the economy.

The porn industry, like more mainstream media, suffers from piracy problems (made easy by the Internet). [READ] While going into your local HMV to buy a DVD or a CD has never been socially unacceptable, going into your local adult video store has huge psychological barriers. Any system that makes it easier for porn connoisseurs to get their fix without spending time in a sleazy, sticky adult video shack is going to have huge appeal – legal or not. While initially, the porn industry embraced the Internet with open arms, traditional porn publishers whose empires were founded on video and magazine sales, have been increasingly less competitive in the Internet era.

Back to the question of the bailout – should the US Government tuck some cash into the g-string of this ailing industry? In my opinion – no. Not unless they are also willing to bail out Hollywood and the US music industry. There has been some talk (mostly unofficial talk) that movie studios and record labels are expecting a slump in sales despite previous recessions in which they were relatively stable. Personally, I don’t think the auto industry should get a bailout. Call me insensitive but when an industry dies – let it die. People can get new jobs and towns will re-invent themselves. The auto industry is a basket of problems that I don’t want to rant about right now but I am going to suggest that it might not be worth saving in its current form.

A friend of mine sent me a comical article today that was penned by a local leadership coaching firm (yawn) summarizing the results of a poll that asked Canadian business leaders to rate the performance of Canada’s Federal leaders. Laughably, Canadian business leaders think Canadian politicians are doing a poor job. Why is that? Is it because the economy is in the toilet? That’s 100% the government’s responsibility, right? When things are going well, most of Canada’s business leaders wait for government handouts (in the form of grants, special tax credits and infrastructure funding) and bitch like crazy that government needs to stay out of their way so that they can be competitive. I’ve been around the table while these kinds of discussions fly back and forth between the Feds and business interests.

Along comes the big, bad recession and business leaders start screaming “why didn’t the government do something about this? What are they doing to save us?” Part of the economic meltdown can be blamed on a very poorly regulated financial sector. Whose interest is it in to have a loosely regulated industry? It’s in industry’s interest, of course. Who would have had to convince the government to not regulate an industry? Lobbyists from private industry. Is business saying that government shoudn’t have catered to their demands back when they were busy digging themselves into this trench? No. They would have screamed “nanny state”.

So which is it? A command and control economy where business takes its marching orders from the government or a free market economy where government stays out of the way of business and the “invisible hand” guides the economy? I’m not naive enough to think that it has to be one extreme or the other. There’s an equilibrium in there somewhere to be sure. I’m just trying to make a point.

Shame on “business leaders” for playing both sides and trying to stick taxpayers with the bill. I take umbrage with your attitude “business leaders” because you’re coming to the biggest lender in Canada (the government) with your hat out while complaining about what a shitty job the government is doing. We taxpayers are the investors and the leaders of this country are our portfolio managers.

If your business is in the toilet right and you’re looking for someone to blame, I think it’s time for some reflection. Ask not what your government isn’t doing. Ask what you aren’t doing for yourself.

I was at a conference today where I saw a presentation by TransLink (Vancouver, Canada’s quasi-public transit company) CEO Tom Prendergast about the state of transit infrastructure in Greater Vancouver. It was a great presentation and one that was very similar to one he gave at the BC Chamber of Commerce in October. (See a copy of that presentation below). In both of these presentations, Prendergast outlines what is, in my opinion, public transit policy 101 and makes the case for increased revenue from a variety of sources to help grow our public transit infrastructure. I agree with him that we need to spend more money on our public transit infrastructure. What caught my eye was one of the sources that he was looking at – a levy (tax) on cell phones. This, more than any of the proposed measures on his list of potential revenue sources caught my attention and my initial reaction was “that’s a terrible idea”.

There is some precedence for a cell phone levy. In India, for example, there is a per minute levy on every cell phone call placed in the country. Funds collected through the levy are used to improve India’s physical transportation infrastructure – a big stumbling block on the path to fully modernizing India. This is not unlike what TransLink would use similar funds for. TransLink, in case you’re not aware, is not just responsible for busses and the SkyTrain – it’s also responsible for major transportation infrastructure like bridges and roads. TransLink is going to run out of cash to keep Vancouver running by 2011 if it doesn’t find new revenue sources.

“Now wait a minute Aaron,” you say. “I pay fare when I go on the bus. Doesn’t that cover TransLink’s expenses?” Not by a long-shot. I had a great conversation with someone in the operations department at TransLink earlier this year and we had an invigorating discussion about what it takes to get people out of their cars and onto public transit. While we stopped short of deciding it would take a miracle, we did acknowledge that public transit infrastructure is rarely fully utilized and not appreciated when it is.

The population of Greater Vancouver continues to grow and clogged roads mean that public transit is more important now than ever. Never mind the environmental benefits. When I was doing my Public Policy degree at SFU, we talked at length about the economics of public transit. One of my professors there was a real big proponent of green transportation. The truth of the matter is that when you look at a public transit project from a pure economics perspective, they’re always money-losing operations. That’s not my opinion – it’s a fact. Why would anyone build public transit then, you ask? There are lots of reasons:

Assuming that public transit is a worthwhile investment for a community like Greater Vancouver, the money has to come from somewhere. In the presentation (above), Prendergast cites Annual Vehicle Fees, Tolls, Distance-based insurance, Parking Taxes, Carbon Offsets, Commuter Taxes and Higher Fares (amongst other options). All of these, in my opinion, are reasonable policy options to consider. Where this proposal, in my opinion, goes off the rails is when TransLink starts talking about Utility Fees and Cell Phone Levies. Where is the connection between these realms of our lives and the need to subsidize public infrastructure?

Utilities are, in BC, almost entirely publicly owned. We’ve already paid for our utility infrastructure twice – once through tax dollars when the infrastructure was built by Crown Corporations like BC Hydro and again when we pay our utility bills. Another levy on a public good is, in my opinion, unfair. Furthermore, for a policy to be effective, the affected population needs to see a connection between action and consequence. Just taxing things willy-nilly will not endear the public to TransLink’s cause.

Which brings me back to this ill-conceived (in my opinion) cell phone levy: Where is the connection between public transit and cell phones? Yes, sometimes people talk too loud on cell phones on the bus but telecommunications is practically an essential service in the developed world. It seems opportunistic and unjustified to target cell phone owners (the majority of Greater Vancouver residents). Furthermore – wouldn’t collecting all that revenue from multiple cell phone vendors on a regular basis dilute the efficiency of those dollars before they go to work for TransLink? Even India has been systematically reducing its cell phone levies to ensure that its telecommunications infrastructure is competitive internationally. [READ]

I want to see TransLink get the money that they need to make the much-needed upgrades to Vancouver’s public transit but I think going after cell phones is the wrong way to go. Focus on areas where there is a connection between transit and the levy – such as car insurance, tolls and commuter taxes.

I nearly fell off my chair today when I read a piece in the Victoria Times Colonist today that detailed Ray Howard’s suggestion that some of the mothballed BC Ferries vessels be re-used as floating homeless shelters [READ]. My shock was based on the fact that this is a great idea and one that I had suggested – in 2006!

For a short time, I worked in the Stakeholder Engagement department at BC Hydro. What this group does is liaise with communities that could be negatively impacted by a major infrastructure project (like a new dam). During my short tenure, I was responsible for an IT procurement project that saw us trying out different Stakeholder Engagement Management software. Once we selected the winning platform, it was my job to populate the program with a fake infrastructure project and enter fake community engagement notes into it so we could test it out. My boss made it clear that I couldn’t do a test run with anything that looked like an actual BC Hydro project in case someone outside the company got ahold of it and thought that we were planning an unauthorized project. So, I decided to come up with an project that was similar in scope and scale to some of the smaller projects Hydro does – a floating homeless shelter/addiction centre.

Now I’m not suggesting that Ray Howard stole my idea – a good idea is a good idea and will come up more than once. I am suggesting that this idea merits serious consideration. In my opinion, one of the biggest contributors to long-term homelessness is substance abuse and addiction. The streets don’t give up lives easily. When someone is trying to get clean – they need to be away from drug dealers and people not ready to be clean. That’s nearly impossible to do when you’re living on the streets.

A floating homeless shelter would be an interesting experiment to try because it would severely limit access to the people staying there. Drug dealers would have a difficult time getting on board (especially if there was a resident drug sniffing dog greeting patrons) and like the Vancouver’s InSite for Community Safety (the controversial supervised injection facility), it would afford health professionals an opportunity to meet with and treat individuals with drug addiction problems and other health complications.

What I’m not suggesting is that we cordon these people off from society and keep them from messing up our streets. Far from it – it’s their community just as much as it is ours. What I am suggesting is that people who are trying to recover from addiction need space from drug dealers and other addicts in order to get well. A floating shelter in the harbour might be just the thing this community needs.

In Canada, we have a fairly comprehensive Charter of Rights and Freedoms. In 2005, we added to this slate of protections the Civil Marriage Act which expands the definition of marriage to mean a “lawful union of two persons to the exclusion of all others”. Many provinces in Canada had already legalized same-sex marriage by 2003. This decision was made by the elected government – not by referrendum. In a similar way, the Charter of Rights and Freedoms itself was crafted through a legislative process in the House of Commons. While I think it’s tragic that it took Canada until 2005 to officially recognize same-sex marriage, I find it dispicable that the issue was on a referendum in California earlier this month.

In case you haven’t heard, California voters chose to take away same-sex couple’s right to legally marry – a right that they’ve had given to them and taken away several times. [READ] While Governor Swarzenegger says that he’s hoping the courts will overturn this referendum decision, I think it was ridiculous that this went to a vote in the first place.

Human rights get awarded to persecuted groups precisely because rights enjoyed by the majority of a population in a given jurisdiction are not voluntarily extended to them. In cases like this, literal democracy doesn’t work. Think about the other human rights fights we’ve seen in the last century – equal rights for African Americans? Equal rights for women? Equal rights for minorities? Those were all great steps forward. There were opponents to this progress but looking back, few people would argue that we didn’t do the right thing.

The right thing to do in California (and the rest of the US, for that matter) is to immediately draft legislation legalizing same-sex marriage. You can’t count on the majority of people to do the right thing in an anonymous vote. In that situation, it’s too easy to let bigotry drive our decisions. That’s a decision that shouldn’t be in the hands of the masses.