Category Archives: Social contract

Why the Public Does Not Believe That Corporations Are Accountable

westonAddressing members of the media on Thursday, Galen G. Weston, executive chairman of Loblaw, told reporters that, “I’m very troubled. I’m troubled by the deafening silence from other apparel retailers on this.” Mr. Weston was referring to the tragedy at a Bangladesh textile factory last week in which factory collapsed, killing almost 400 workers.

Mr. Weston said Loblaw has always ensured that factories in its supply chain adhered to rigorous standards in areas including local labour laws and work conditions. Mr. Weston said he was “troubled” by practices that saw it fit to send workers back into the factory after it was declared dangerous.

“Nothing in those reports suggested a problem, but the scope of the audits does not cover structural integrity,” Weston said.

But it is exceedingly difficult to believe that Loblaw executives would have been unaware of the risks associated with shoddy building practices in Bangladesh. Site selection methodologies have become very sophisticated and comprehensive over the last 10 years, covering everything from the cost and availability of labour to elements associated with real estate. The number of fire escapes and other safety factors would have been integral considerations in any evaluation. Site selection may not have been the responsibility of Loblaw employees themselves, but specialists contracted to perform evaluations would have provided a detailed breakdown of risk factors. Since this has been standard procedure for some time, it is disingenuous in the extreme that Mr. Galen would project that this was all new to him and his executive team.

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Filed under Corporate Ethics, Labor force management, Risk Management, Social contract

In Health Care Cost Cutting Will Not Be Enough

Published in the Telegraph-Journal 30th October 2012

Healthcare spending in Canada, which annually consumes in excess of $200 billion, has emerged as this country’s biggest source of anxiety over public spending.

Canadians generally are committed to continuing our current system of government-funded healthcare that is free to all Canadians. The cost of healthcare has risen but the simple solution of adding more money without first making fundamental changes has not been successful. The $41-billion increase in federal transfer payments to the provinces initiated in 2004 by then-Prime Minister Paul Martin was intended to end healthcare funding problems for a generation. Instead, it has become one in a series of healthcare public policy miscalculations.

In December 2011, Finance Minister Jim Flaherty outlined Ottawa’s newest healthcare funding plan. Federal transfers for healthcare would continue at six per cent until 2016-17. After that, the federal government plan will have transfers move to a system that ties increases to the growth in real GDP plus inflation. Mr. Flaherty called the plan, which was not open to negotiation, an effort to move toward responsible spending.

“Our public health care system is a source of pride to all Canadians,” Mr. Flaherty said. “We all want to see a strong, sustainable system that is there when we need it for today and for our children and our grandchildren tomorrow.”

In New Brunswick, where the cost of healthcare is $2.8 billion a year or approximately 40 per cent of the total provincial budget, Health Minister Ted Flemming is promising to put a full-court press on healthcare spending.

“We are going to create a target to bring our healthcare spending in line with at least the national average, if not better than,” said Mr. Flemming.

Premier David Alward recently referred to measures government is undertaking to achieve reductions in healthcare costs. The New Brunswick government plans to eliminate the duplication of services in addition to reviewing administrative, supervisory and management functions for savings. He added that alternative service delivery – potentially leading to the integration of FacilicorpNB operations with the Department of Government Services – could also achieve cost reductions.

“Are there areas for shared services where the system can work more efficiently and ultimately more effectively?” Mr. Alward asked. “We have seen some of the success that has taken place with the renewal within general government”.

The initial priorities identified through the government healthcare reform process are focused on achieving management efficiencies within the healthcare system. The New Brunswick government also plans to implement health innovations and best practices, although it has not yet selected an innovation strategy.

New Brunswick “has started to put a curb on (healthcare) spending, but we cannot get there alone,” Mr. Alward said. For this reason, government has indicated that system-wide changes will be fueled through collaboration with established boards, agencies, organizations and health-service providers.

But will cost cutting measures be enough?

There is no doubt that healthcare costs need to be comprehensively understood and more effectively managed. For example, a sustainable public health system information infrastructure is urgently needed. Despite the recent eHealth Ontario debacle, the deployment of an effective e-health, mobile health and tele-health infrastructure may become essential to provide services while managing cost in remote areas.

But simply reducing costs will not fix healthcare. The real issues lay below the surface, which include the challenges associated with end-of-life decisions, the increasing demands for seniors care, the pressures of emerging technologies and dramatic demographic changes. These issues will provide the foundation of sources of contention among Canadians. And in the background, the principles of our healthcare model will come under close scrutiny as Canadians review the limits of their entitlement and even entertain a two-tier service provision model. In New Brunswick, two official languages add complexity.

Healthcare reform will not stem from reviewing and implementing those initiatives that have proven successful in other jurisdictions. Healthcare reform in Canada will not be a simple matter of cost management. Instead, the philosophy, concept and practice of healthcare goes to the heart of what it is to be Canadian.

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Filed under Fiscal Policy, Healthcare, New Brunswick, Social contract

Winning Countries Will Be Stable Ones

By Peter Lindfield, published in the Telegraph-Journal 10th August 2012

We read again and again that the world economy faces considerable uncertainty in the short term. Will the United States be able not only to forge a path to renewed growth but also create prosperity for a majority of its citizens? Can the eurozone not merely avert disaster but emerge to be attractive to business in this generation and the next? Can emerging economies maintain fiscal stability through the economic slowdown without imploding?

Answers to questions such as these will determine how national economies will evolve over the coming decade, but longer-term, more ominous challenges are also beginning to emerge. Increasingly there are concerns that the world may experience a slowdown in economic growth greater than any period since the end of the Second World War.

Regardless of how advanced economies handle their current difficulties, many will continue to be plagued with high debt, low growth rates and fractious internal politics. Europe will need enormous energy, focus and discipline to rebuild its tattered union. In the U.S., increasingly strident political battles between Democrats and Republicans will continue to paralyze economic policy until well beyond the outcome of the November elections.

In advanced economies, increasing levels of inequality and aging demographics will fuel political discontent in the form of unemployment raising regional inequality. As aging nations increasingly focus on domestic challenges, they will become less involved internationally. They will also be less willing to support multilateral arrangements that they perceive as damaging to their interests. This will make it more difficult to reach multilateral agreements on environmental, security, intellectual property and human rights issues.

This global arena will be corrosive to consistent growth. It also increases the likelihood that there will emerge deep disparities in economic performance among nations because some will be much more adversely affected than others. Picking winners and losers will continue to be difficult, but nations that will be more successful will share three characteristics.

First, they will not be encumbered by high levels of public debt. Not only is high government debt a serious drag on government’s role in underwriting economic growth, but it also paralyzes fiscal policy and inevitably leads to severe distortions in the financial system. Governments distracted by debt-reduction measures are disinclined to make the critical investments required for long-term structural adjustment. Some emerging economies have begun to manage their public debt, but their private sectors have borrowed heavily. Since large-enough private debts tend to become public liabilities, prudent government fiscal management may not provide a sufficient buffer.

Second, successful nations will not be over-reliant on the global economy. Their engines of economic growth instead will rely on a balance of domestic and export-led demand. Countries that rely excessively on export markets and global finance to fuel their economic growth will be at a disadvantage. That means countries that are able to combine a reliable domestic market and a prosperous and stable middle class with powerful export-led industries will have an important advantage.

Third, successful nations will be democracies with healthy political institutions and robust social contracts. Democracies with historically strong social contracts will outperform authoritarian regimes because they possess established and legitimate systems of conflict management. These systems provide platforms for consultation and co-operation among opposing social groups that are essential in times of turmoil and uncertainty.

Tomorrow’s winners will be those countries that today are in a position to make public and private investments to fund infrastructure and social assets. These countries will emerge from the current slow-growth period with strengthened international trade advantages that can underpin strong domestic growth. Placing these investments on tomorrow’s opportunities are shrewd decisions today.

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Filed under Fiscal Policy, Globalization, Social contract

Employment Insurance Reforms Are Inevitable But the Methods Are Not

By Peter Lindfield, published in the Telegraph-Journal 15th June 2012

The federal government recently announced sweeping changes to Employment Insurance (EI) that will have dislocating effects for many workers across Canada. In the Maritime Provinces, workers in industries that have seasonal characteristics will be particularly hard hit as the government’s new rules attempt to reduce their reliance on EI during what can be months of unemployment. The new rules place more stringent conditions on workers with three or more EI claims in the past five years, or who have collected EI for more than 60 weeks in the past five years.

Seasonal workers in industries such as fisheries, forestry or tourism would be considered frequent claimants and would be required to accept work for which they are qualified after collecting EI for seven weeks. If required, training would be provided to allow workers to learn new skills. Long-tenured workers and occasional claimants who collect EI less frequently would be given more latitude to find employment.

These new EI rules have been met with derision by opposition political parties, but some business groups welcome the changes. “These new rules should help push people off of a pogey lifestyle and into steadier jobs,” said Gregory Thomas, national director at the Canadian Taxpayers Federation.

Some critics of the government’s changes to EI have complained that a significant number of seasonal workers will be required to travel substantial distances to find year-around work. Other criticisms stem from observations that many workers will be forced to accept employment far removed from their chosen vocations.

Federal government officials deny both charges. “These changes are not about forcing people to accept work outside their own area, or taking jobs for which they are not suited,” said Human Resources Minister Diane Finley at news conference.

There is no denying that Canada’s social programs require an overhaul. The responsibility of government is to find that balance between fiscal stability and social conscience. With the global economy and the harbingers of fiscal and demographic constraints becoming more apparent, there is no guarantee that this twin trajectory can be maintained. At the same time, the gap between haves and have-nots is increasing. It is not a recipe for political, economic or social success: increasingly, this gap is a source of real social discontent.

There may be a better way to address the intersection of social and economic issues. The graduated way in which government introduced recent reforms to the Old Age Security (OAS) is a stellar example. Rather than instituting massive changes in one sweeping move, government has chosen to grandfather today’s recipients into the current plan for an extended period. A similar approach to EI reform could be made to pay large dividends. An orderly and measured transition from flagging industries and moribund locations to more productive ones could be made over the period of years rather than months. A precedent embalms a principle, observed Benjamin Disraeli.

More troubling is the overtly moral tone that has emerged when discussing the recipients of Canada’s social programs. One of the hallmarks of this moralism is the exasperation with what some consider the piousness of the soft-hearted left who are also considered enemies of the work ethic. This reactionary perspective is neither founded in fact nor helpful.

In fact, the consequence of this animus of work ethic moralism represents a danger to the larger project of comprehensive human decency. The current capitalist paradigm vastly underrates the value of economic equality and social stability. For most of the more than two hundred years since the Industrial Revolution, this has been inconsequential, as relentless technological advancement has tended to compensate for short-sighted policies. But economic globalization has re-written the rules in a profound way.

As with the changes to the Old Age Security program, Canadians should view reform of Employment Insurance as part of the blueprint for the Canadian identity. We will achieve greater success if we consider political, social and economic reforms not as a political mandate checklist, but a long-term journey.

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Filed under Government transformation, Income Inequality, Social contract, Social policy

Changes to the Fisheries Act Will Have Far Reaching Implications

Published in the Telegraph-Journal 23rd March 2012

The federal government plans to rewrite a critical section of the Fisheries Act to remove references to protecting habitat.  The change in wording appears innocuous enough, from the current “no person shall carry on any work or undertaking that results in the harmful alteration, disruption or destruction of fish habitat” to the proposed “no person shall carry on any work, undertaking or activity, other than fishing, that results in an adverse effect on a fish of economic, cultural or ecological value.”

Even the federal government’s Department of Fisheries and Oceans makes it clear that the protection of habitat is critical to the survival of fish species, stating that “it is important that we protect the habitat that provides fish with clean water, spawning and rearing grounds, an adequate food supply and clear migration routes because habitat requirements typically change for each stage in a fish’s life cycle; from egg to adult. If the various life cycle requirements are not met due to loss of habitat, fish numbers drop, and over time the entire population may even die out.”

Currently, any commercial or industrial projects that would interfere with fish habitat must undergo an environmental assessment to obtain the government’s authorization and must also compensate for loss of habitat. Conservation advocates say that if only fish of economic, ecological or cultural importance will be considered for protection, the change in the Fisheries Act could lead to protracted legal challenges and increased uncertainty as definitions of economic, ecological or cultural importance are proved in the courts.

Such revisions would have dire consequences for the protection of wild Atlantic salmon habitat.  In Eastern Canada, the proposed changes could place at risk a natural resource that is valued at $150 million in annual revenue and has created 3,900 full-time equivalent jobs according to a recent Gardner Pinfold study.  The study estimates that in New Brunswick alone, recreational fisheries for wild Atlantic salmon and related spending contributed more than $50 million to provincial revenue in 2010. Further, wild Atlantic salmon are culturally critical to New Brunswick’s First Nations people, providing them with food and fish for ceremonial purposes.

Department of Fisheries and Oceans Minister Keith Ashfield has not denied that changes to the Fisheries Act were being proposed. He has instead defended the plans stating that “current fisheries policies go well beyond what is required to protect fish and fish habitat”.

Environment Minister Peter Kent goes further to outline the government’s position. Appearing recently as a conference keynote speaker in Vancouver, he repeatedly underscored the importance of efficiency in the government’s efforts to bring Canadian environmental assessment processes up to date.

“The government of Canada is determined to do what it can to create a greater degree of certainty for business, and to establish realistic timelines to help make conditions that encourage competitiveness and investment, and all the jobs that in turn are created by that investment. But all that can only come to pass if we create a modern, predictable and rigorous regulatory system. A system that’s streamlined and transparent, and a system that is effective and efficient,” said Kent.

This is playing out on a large canvas. On the face of it, increasing the efficiency of government regulations is a laudable goal. But questions are emerging over whether far-reaching changes to the federal government’s position on the vital relationship between the economy and the environment should be enacted in Parliament without first making Canadians aware of these proposals and giving them an opportunity to voice their concern. And if the federal government has decided that prescriptive regulations are unnecessary impediments to economic growth and prosperity, it must expect that there will be substantial resistance to diminishing such a critical policy tool. The health of our democracy demands that we court the views of all Canadians, not ignore those with differing points of view.

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Filed under Environment policy, New Brunswick, Social contract

Experts Cannot Settle Shale Gas Issues

Published in the Telegraph-Journal 19th March 2012

Shale gas drilling involves an exotic cocktail of water, sand and up to 600 chemicals used in the fracking fluids, lubricants and drilling muds. These chemicals include xylene, sodium hydroxide, benzene, carbon disulfide and naphthalene. Hydrofracking can have potentially devastating effects on the water table. Environmentalists claim that the drilling process poses substantial risks of gas leakage, explosions, contamination and discharge of radiation. The available methods for containing or mitigating these risks and the effectiveness of those methods may not be adequate to the task. With many gas wells, a substantial amount of contaminated water is at risk of escaping and there are uncertainties over where it will go and how it will be stored.

If any of these risks are accurate, it is not likely that public support for shale gas drilling will be found in New Brunswick.

But it may be that these risks have not been accurately portrayed, that the benefits far exceed the costs and that many of the facts simply are not yet known. Industry insists that hydrofracking is safe and that its risks have been wildly overblown. And government claims that the risks, once indentified, can be managed with the appropriate regulations, monitoring and enforcement mechanisms.

Whom should we believe?

For those who are resolutely committed to opposing fracking, the environment is at risk. But a substantial number of New Brunswickers say they want facts and figures from independent evidence and are seeking reasoned discussions presenting both sides. They are concerned about shale gas but undecided about whether to support its development. And in the absence of discussions focused squarely on the public interest, this undecided group is still attempting to determine who and what to believe.

The public relations problems that surround shale gas drilling in many ways stem from the inability of technical experts to satisfy the public’s need for reassurance and forthrightness. But some of the concerns that revolve around shale gas are not technical ones. Some ask whether the number of jobs created, or the revenues generated will adequately compensate for the additional risks in people’s lives. Those concerned about the practical implications of hydrofracking, even on adjacent properties, will want to know how close proximity to heavily traveled roadways may have a negative effect on the marketability and value of their land. People are concerned about a possible decline in the value of their property and whether the development of a mining physical infrastructure is consistent with traditional New Brunswick values. These are lifestyle issues and clearly outside the scope of the expertise of geologists, economists and mining experts.

There is no doubt that, while the technical aspects of hydrofracking inherently are data driven, there are issues that cannot be addressed by scientific findings. Yet we continue to insist that a superior discussion will inevitably be one that is underpinned by data, statistics and mathematical expertise as though this objectivity will intervene to solve our problems.

The reality poses a stark contrast to this view. In the West, the history of the social contract reinforces a key theme that, once we no longer subscribe to the assumption that we can only become knowledgeable by being exposed to expertise, we can recognize and value the knowledge, wisdom and skills that we have gained, often informally, on our own. This lesson of history is worth remembering; citizens do not need to be highly trained, narrowly specialized and technically qualified to take their place among others in a community of interest. The notion that debates should be driven by data rather than ideology diminishes the alternative to this polarization. Debates can be driven not only by a technocratic understanding of the facts but by informed judgement.

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Filed under Environment policy, Social contract

The World of the New Capitalism

Published in the Telegraph-Journal 16th March 2012

Anatole Kaletsky is the author of a superb and optimistic new book on the future of capitalism entitled “Capitalism 4.0”. Kaletsky possesses impressive credentials for a work of this magnitude. He is editor-at-large of The Times of London and governing board member of the New York-based Institute for New Economic Theory, a nonprofit created after the 2007-2009 crisis to promote and finance academic research in economics outside the orthodoxy of “efficient” markets.

Kaletsky puts the upheavals of 2007-2009 in historical and ideological perspective and describes the emerging features of the new capitalist model by explaining how it will differ from previous versions and suggests how the rise of Capitalism 4.0 could transform politics, finance, international relations and economic thinking in the coming decades. This transformation is taking place not a moment too soon.

The market supremacy model of capitalism which assumed that there could be no constraints on the growth of the economy has suffered setbacks from which it cannot recover. Its adherents took it that if any physical or environmental limits to growth appeared, the market would in short order send the correct price signals to ensure that these obstacles were automatically avoided. This reassuring belief, predicated on the oversimplified assumption that efficient markets would always discover and transmit long-term social preferences, no longer is credible.

“For the thirty years following the Thatcher-Reagan revolutions, business leaders took it as axiomatic that virtually all regulations and government intervention was damaging to their interests and that companies should devote substantial resources to campaigning for a minimalist state. Ruthless industrial restructuring and the single-minded pursuit of shareholder value were not only presented was inevitable but also seen as desirable and efficient,” Kaletsky says.

The economic concepts of rationality and efficiency have thoroughly been discredited and a profound re-evaluation of the relationships between corporate management, governments and the public has begun. Corporations will have to acknowledge wider definitions of their objectives than maximizing their share price, especially in the short term.

What is at stake in this transformation is the future of the social contract in the West. Pulitzer Prize-winning journalist Thomas Friedman recognizes as much in a recent New York Times column in which he discusses the key to the success of current American capitalism that will enable it to thrive in the 21st century. To Friedman, American capitalism has been for more than one hundred years “a healthy, balanced public-private partnership where government provided the institutions, rules, safety nets, education, research and infrastructure to empower the private sector to innovate, invest and take the risks that promote growth and jobs.” The lesson of history, Friedman adds, is that capitalism thrives best when you have this balance.

This balance – Friedman calls it a bargain, while Kaletsky calls it an equilibrium – is what underpins the social contract. This balance is also what is increasingly unstable in our society today. In Canada and the U.S., constructive thinking about how environmental pressures could provide incentives or motivate innovation to change industrial, financial and social patterns of activity has become more conspicuously absent. Businesses from the Capitalism 3.0 era are fighting ideological battles against the principle of environmental activism while environmentalists increasingly are fighting market fundamentalism. The result is that increasingly the public is mired in arguments such as whether shale gas can meet the litmus tests of public safety while industry has turned to arguments of economic necessity. Those arguments – that society needs the jobs, that government needs the revenue to fund social programs, that oil extraction is a national security issue – serve only to further harden views that corporations are demanding severe sacrifice from the public.

For the social contract to survive, environmentalists and last-generation capitalists need to become connected to the balanced policies that ultimately will drive sustainable increases in living standards and create jobs. We need a more robust version of capitalism to achieve this.

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Filed under Economics, Environment policy, Social contract