29 November 2007

The alchemy of P3s

Governments seem forever seduced by the allure of public-private partnerships (P3s).

With traditional procurement, a government hires a private company to build a facility such as a bridge or a hospital. The government finances the project, and after the facility is built, operates it. In a typical P3, the government contracts with a private cmpany to both finance and build the facility, and then leases it back. The idea is that, by some mysterious process, the government saves money.

Lately, federal Finance Minister Jim Flaherty has been preaching the P3 sermon and plans to set up an office to promote the concept. "Governments ... can no longer afford to finance, build and maintain every single infrastructure project in this country," says the minister."

They can't? Let's parse Mr. Flaherty's remarks.

In the first place, there is more money floating around this country than there has ever been before in our history. Much more. And the federal government is awash, almost to the point of embarrassment, in surpluses. Of course we can afford to finance, build and maintain the infrastructure we need.

In the second place, how will P3s save us money? Private companies aren't going to finance and build our infrastructure out of the kindness of their capitalist hearts.
Regardless of what legerdemain is applied to the financing, they will insist on recovering every penny they spend plus a handsome profit. Considering that governments can borrow at better rates than the private sector, projects will hardly cost less.

Big investors quite naturally love the idea. Jim Leech, incoming president of the Ontario Teachers' Pension Plan, says they are encouraging Mr. Flaherty, "to have assets that have in Canada traditionally been held in government hands turned over to the private sector." And why, I wonder, does he want to get his hands on our assets? Out of concern for the public good? I doubt it. More, I suspect, to make money for his investors, and that would mean at least equalling Teachers' recent rate of return of 13.2 per cent. That would be 13.2 per cent out of our pockets.

So please, Mr. Flaherty, stop wallowing in neo-con ideology and just give the cities the money they need to build the damn infrastructure.

26 November 2007

Iraq: If it was all about oil, it worked

In return for "guaranteed long-term security," the Iraqi government is about to grant the United States the right to station 50,000 troops in the country and provide American investors, no doubt Halliburton first among them, with preferential treatment. The Americans could hardly have hoped for a better outcome: favoured access to Iraqi oil and troops on the ground to protect its privileged status.

The deal is hardly a surprise. The Americans have all along been building massive military bases in Iraq as well as their largest embassy. This was obviously a colonial enterprise from the beginning. And now it's about to pay off.

The American empire is so much neater than the old European model. The British, French, et al., had to set up entire administrations to run their colonies while the Americans leave all that tedium to the natives. Not that it's cost-free: they will still have to station 50,000 troops in Iraq, but that's a small price to pay for preferential and protected access to the world's second largest reserves of conventional oil.

One wonders if the British will feel a little miffed if they don't get preferential treatment for their investors as well after all the help they've been -- a bone for the poodle so to speak.

21 November 2007

Canada's foreign policy: guns over butter?

In a recent address at York University entitled "Restoring a Broadly-based Canadian Foreign Policy," Joe Clark (that's the decent, modest man who was dumped for Brian Mulroney) nicely summarized a sensible approach for Canada to take with its foreign affairs.

Included in his remarks were some numbers that bear repeating. He pointed out that National Defence now accounts for 8.7 per cent of federal program spending, the Canadian International Development Agency (CIDA) for 1.64 per cent and Foreign Affairs and International Trade for 1.62 per cent. In other words we are spending over 2 1/2 times as much on the military as we are on foreign aid and diplomacy combined. And it's getting worse. In the next budget year, defence spending will increase substantially while CIDA's and Foreign Affairs' will both drop.

What a shabby set of priorities: the military over aid and diplomacy, guns over butter. As Joe Clark observed, "For 60 years, under Liberal and Progressive Conservative governments, we Canadians played above our weight in international affairs ... From the invention of peace-keeping, through the fight against apartheid, to the land mines treaty, we have a long, proud, bipartisan history of international initiative." And now that long, proud history is threatened, in so small part because Prime Ministers Martin and Harper have both allowed their Chief of Defence, Rick Hillier, excessive influence in setting military policy. Hillier is, after all, a soldier, and soldiers are in the business of killing people, not talking to them.

This shift in priorities seems to have taken place without public debate. Do Canadians really believe we can do more good in the world with muscle than with diplomacy or aid? Joe Clark insists, "We are quiet in the multilateral forums that we once animated ... We have become invisible on an international stage where Canada had been a consistent and constructive presence for more than half a century." Are Canadians content with subordinating our
"consistent and constructive presence" to military adventurism? Or would we rather leave that approach, with its Vietnams and Iraqs, to the Americans?

I suspect so. In any case,
the issue deserves a thorough public airing. And that it hasn't had.

14 November 2007

Growth hammers Calgarians' quality of life

With Alberta's booming economy front and centre in the financial news, observers might expect Calgary's quality of life to be booming proportionately. Calgarians would beg to differ. According to the city's annual Citizen Satisfaction Survey, 61 per cent of Calgarians said their quality of life had deteriorated over the past three years, a significant increase over last year's 51 per cent.

Calgarians still appreciate their city with 67 per cent saying life in Calgary was good or very good. Nonetheless, this has dropped from 77 per cent in 2006 and 85 per cent in 2005, a precipitous decline.

Asked about the causes of the decline, residents blamed the rate of growth and issues related to growth such as transportation problems, cost of housing, homelessness and crime. Apparently, not only for hosting the greatest outdoor show on earth is Calgary known as the Stampede City.

07 November 2007

Misogynist mates

How fitting Pope Benedict XVI and King Abdullah Bin-Abd-al-Aziz Al Saud of Arabia should sit down for a heart-to-heart. They have so much in common: they are both supreme rulers, they are both guardians of a religion and religious places, and they are both confirmed misogynists. In the Pope's domain, women are not allowed to rise to high office; they are relegated to roles as servants and supplicants. In the King's domain, they aren't even allowed to drive a bloody car!

The two old boys are said to have discussed many weighty matters: dialogue between religions and civilizations, confronting violence and terrorism, harmony between nations, and such like, agreeing naturally that the solutions to the world's problems lay through religion. They did not, apparently, discuss women's rights.

What a pair -- truly a match made in Heaven.

03 November 2007

U.S. neither morally nor logically armed to negotiate with Iran

U.S. Secretary of State Condoleezza Rice continues to insist the American administration is "fully committed to a diplomatic solution with Iran" and is prepared to negotiate the differences between the two countries. There are conditions of course. She doesn't want to sit down with them one-on-one, as they prefer, and Iran must first “fully and verifiably suspend its enrichment and reprocessing activities” and “persuasively demonstrate that it has permanently abandoned its quest for nuclear weapons.” She knows full well, of course, these conditions are unacceptable to the Iranians. So why the reluctance to talk it out?

Part of the reason may be the weakness of the American position. Consider first the demand that Iran abandon "
its quest for nuclear weapons.” Iran insists it isn't engaged in any such quest. If it was, the objection would be that this was in violation of the Nuclear Non-proliferation Treaty, to which Iran is a signatory, and the treaty says non-nuclear nations must not develop such weapons. But the United States is also a signatory and the treaty also says nuclear nations must rid themselves of their weapons. That the United States is not doing. It is rather awkward, therefore, for the Americans to demand Iran adhere to the treaty when they are violating it themselves.

Or consider the accusation the Iranians are providing arms to their Shia colleagues in Iraq. American actions have caused upwards of 600,000 deaths in Iraq, created over 4 million refugees, and broken and scattered that country's heritage, and they expect to be taken seriously when they complain about the Iranians sending some weapons across the border to assist their coreligionists? Iran cannot be expected to hold the same respect for American chutzpah that we do.

And then there's the American quibble with Iran assisting Hamas and Hezbollah. This, when the Americans provide the Israelis with billions of dollars in arms, helping them build the most formidable military in the Middle East. American bias in the Israeli/Palestinian quarrel is the major source of Arab and Muslim hostility toward the United States and a major source of Muslim extremism. How can the Americans look the Iranians in the eye and accuse them of being trouble-makers when their own behaviour sits at the root of Middle Eastern tension?

In summary, on the key issues the U.S. simply isn't in a moral or logical position to negotiate with Iran. It appears, therefore, to opt for sanctions, constant hectoring and calls to its allies to gang up on the perceived villain. Iran claims not to be interested in developing nuclear weapons, but it surely recognizes that if it wants to negotiate as an equal with the United States, there may be no other way.

02 November 2007

Flaherty is right on corporate taxes

Much of Finance Minister Jim Flaherty's tax package has been criticized, and rightly so, particularly the cut in the GST, but he is on the right track with corporate taxes. He intends to continue reducing them until they are "the lowest among the major industrialized economies."

Jack Layton refers to the cuts as "a $14.5 -billion gift to Corporate Canada." "Big banks and oil companies don't need more help right now," he adds. But Jack has it wrong. It's a gift to the Canadian economy and that will help all of us.

An important point to keep in mind about corporate taxes is that, like every other expense companies incur, they ultimately pass them along to us. We are not, therefore, shifting the revenue burden from us to them; we are simply increasing their costs and making them less efficient. And in the arena of global competition, we do not benefit from less efficient companies. The lower corporate taxes are, the more competitive Canadian companies are, and the better we do in the world economy.

The Scandinavian countries serve as a good example. They combine the world's most vibrant economies with the world's highest standards of social justice. In order to pay for the latter they maintain high tax regimes. Their overall tax rates are among the highest on the globe, yet their effective corporate tax rates are among the lowest. For example, Sweden's tax revenue, as a percentage of its GDP, is 51%, the highest in the world, yet its marginal effective tax rate on capital is a measly 12%, one of the lowest in the world. (The marginal effective tax rate measures the extent to which taxes affect investment decisions.) The figures for Norway and Denmark are 44/25 and 49/20 respectively. For Canada, they are 34% and 39%, representing a much lower overall tax regime but a much higher effective tax rate on capital.

If we lower the taxes on companies, then in order to maintain the same level of social services we must of course raise them elsewhere, as the Scandinavians have done. However, keep in mind that we pay them one way or the other in any case.

That's how I see it anyway, but hey, I'm no economist.

01 November 2007

Britain's son of a bitch

The British have been making a lot of noise recently about a lack of human rights in Burma and Zimbabwe and have supported the U.S. sanctions against Iran. One might conclude they really don't like dictators. One might be wrong. The UK is currently entertaining Saudi King Abdullah Bin-Abd-al-Aziz Al Saud, and he is getting the red carpet treatment. He was greeted by Prime Minister Gordon Brown, the Queen and an honour guard. Not bad for one of the world's more repressive despots, and almost certainly the most misogynistic.

During the Cold War, when the West supported various anti-communist dictators, the justifying phrase was "he might be a son of a bitch, but he's our son of a bitch," a phrase often attributed to Franklin Delano Roosevelt commenting on the Nicaraguan dictator Anastasio Somoza Garcia.

The phrase obviously still applies. The Sauds may be autocratic sons of bitches, but they are useful sons of bitches to the Brits. They may brutally abuse human rights, they may have even have sponsored a little terrorism in their time, but they are reliable suppliers of oil and they buy large quantities of arms from the UK. Last year, British exports to Riyadh exceeded £3.5-billion; about 20,000 Britons work in Saudi Arabia; and the Sauds have just put in a massive order for Typhoon fighter jets. For that, you get the PM, the Queen and an honour guard. All sins are forgiven.

Hell, if the Sauds wanted nuclear weapons, the Brits would probably sell them a baker's dozen.