Frontier Centre: Your blog talked recently about “nation branding,” and said that Canada is the third most popular brand in the world. We are a multicultural melting pot. What values make us distinctive?
Andrew Coyne: I have to give a disclaimer about “nation branding.” I was on vacation, and that wasn’t me. But I don’t think our goal should be to try to be distinctive as such. There is nothing wrong with that, but it shouldn’t be an objective of national policy. It seems to me our goal should be to make ourselves the highest exemplar of universal values. If we think that freedom is a good thing for the people of the world, let’s try to be the freest country. If we think that fairness is a universal human value, let’s try to be the fairest country. Let’s try to be the most democratic country. That won’t necessarily make us different from other countries in terms of the values that we pursue, but I hope that maybe we’ll do a better job at it. It means we share in a common heritage to which most of democratic countries subscribe. The goal of trying to be the best rather than trying to be unique is a better and more appropriate objective of national policy.
FC: You want a country with smaller governments, freer markets and greater personal liberties. What chance do we have of accomplishing those goals with the new government?
AC: It will obviously depend on how they are able to negotiate through very muddy political waters in their minority situation. In this mandate they are not going to be able to do a great deal, and haven’t promised to do a great deal. I think the mandate was about rehabilitating themselves as a legitimate government-in-waiting and now a government, as a party the people could actually look at and measure. They’re going to spend a lot of time in the next while just trying to look competent and professional, and dealing with some of the democratic and ethical reforms that obviously precipitated the election, and that they ran on. If they can establish themselves as permanent contenders for power, then at least an opening exists for those goals. Even then, it will really depend on what their intentions are. Steven Harper certainly has a track record as somebody who has an interest in smaller government and greater personal liberty, but he is operating under constraints. It will be a test to see how ambitious he is and how willing he is to endure public opposition to that. At this point, that is unknowable.
FC: One of the essential elements of smaller government and freer markets is property rights. The most glaring lapse in the Charter of Rights and Freedoms enacted in 1982 was that property rights were left to the common law. At some point in time, the courts are going to say which one trumps, common law or the Charter. Should Harper do anything about that lapse?
AC: I am certainly in favour of the constitutional entrenchment of property rights. I agree that it was an unconscionable omission from the original charter. When you consider that it’s in the UN Charter and in the constitutions of any number of democratic countries, it is not the right-wing bogeyman that some make it out to be. It’s in our common law, and in some cases, it’s in provincial statutes. Why we would not go to the further extent of constitutionally entrenching it for the same reason that we entrench other rights is beyond me. It’s not a matter of property rights’ being absolute anymore than any other right. Were we to entrench it, that clause would be subject to the “reasonable limits” clause as other rights are, so it is not as if it be an absolute, iron-clad thing. But it would force governments to justify incursions on property rights in ways they are not required to do now. I can’t see how anybody could object to that.
FC: Depending on whom you ask, recommendations for an ideal size of government range quite widely, even within Canada’s conservative community. What do you think is the optimal size of government?
AC: I have to say I don’t believe in that whole field of literature. The right size is the size at which people are bearing the cost of their actions. Government should only do what only government can do. If governments are performing essential public-good types of services and only those services, and they are not straying into areas where we don’t need government to do things, that is the right size for me. Whether that is 20% or 30% or 40% of GDP, I don’t know. Subjecting that role to some kind of numerical value depends on restricting government to the performance of essential public services, understanding what a true public good is, and not being tempted into fields that aren’t actually public goods. Government is fundamentally about taking people’s money and bossing them about. That is sometimes necessary for certain limited purposes, but it is very cumbersome and certainly not something that you want to do any more of than we absolutely have to, unless we enjoy taking people’s money and bossing them about as an end in itself.
FC: If you had total power for five minutes in Canada, what would you do to ensure freer markets? What laws or regulations most offend that principle?
AC: Certainly I think freedom of trade is a pre-condition of other economic freedoms. It’s not a slippery slope where it inevitably leads to other policy changes, but it reveals the costs of bad policies more quickly and more clearly.
FC: Probably the main reason why Ottawa got debt under control was pressure from international markets.
AC: Absolutely. One of the first prerequisites of the Klein revolution in Alberta was a committee that recast the books on proper accounting principles. That made the true nature of their finances clear to the people of Alberta, and that made possible a consensus on a lot of other changes. Free trade is similar in that respect. It makes it far harder to fudge and hide things and in the broader vector beyond that to boil a lot of things down and de-subsidize the economy. There are so many explicit and even worse implicit subsidies with which we cross-subsidize one form of economic activity over another. That does enormous damage both economically and in terms of regional aggravations and arguments.
FC: One of the objections you have about the Conservatives is their Johnny-come-lately attitude towards supply management, which is in effect a destructive subsidy.
AC: A particularly perverse one, in that it is paid by consumers. Maybe this is just an end-game in terms of the WTO, because it is very clear that supply management is going to be on the table whatever protestations Canadian trade ministers may make. They may just be posturing for the inevitable climb-down. Who knows? But it would be nice to see somebody somewhere in federal politics come out and say it is bad policy from an efficiency standpoint or from a social-equity standpoint to be charging welfare moms three times the world price of milk. It is insane from any standpoint. Why is there is this absolute taboo on getting rid of it? It is sad that nobody can actually come out and make the argument for the principle of saying it’s a good thing to get rid of it, not that we have to because the WTO is going to make us.
FC: You have tended to be in favour of a stronger federal government. Do you think there is a fiscal imbalance and how would you deal with it?
AC: I don’t agree there is such a thing as a fiscal imbalance. That is just another long series of games the provinces play where they try to come up with arguments for more money that sound like something else. They try and dress it up with some kind of appeal to principle. The notion that there is a fiscal imbalance just because the feds have a surplus and many of the provinces are running deficits may sound reasonable. But ultimately the provinces have recourse to every source of revenue that the feds do, plus some that the feds don’t, resource royalties, for example. There is no sort of structural imbalance. Whatever they tell you, the provinces are not short of funds. If you look at real per-capita revenues, they are at historically high levels. They just don’t have as much as they would like to spend. Join the club.
When you look at Ontario, for example, invoking this $23-billion dollar gap—meaning the excess of what is collected from that province’s citizens in revenues versus how much is returned in government spending—that may or may not be an argument for returning revenues to the provinces citizen’s. But I don’t see why it is an argument for giving more money to the government of Ontario, except for the obvious reason that they want it. When people talk about a fiscal imbalance, they mean a lot of different things. They mean either the one between the federal government and the provinces as a whole, or the one between the federal government and Ontario. But how is Ontario’s fiscal imbalance to be resolved? Well they can either get the money from other provinces, most of whom are less well off than they are—good luck selling that one—or it means they get the money from Ontarians.
FC: If they claimed there were a fiscal imbalance, perhaps the best way to right it would be federal tax cuts.
AC: If people want to talk about disentanglement, I am prepared to listen to that argument. We’re transferring all this revenue to the provinces through federal-provincial transfers, which essentially amounts to two levels of government spending the same money twice. I would support and have no problem at all with attaching federal conditions to those transfers, and that’s one reason to have them, but I recognize that there seems to be very little appetite these days for enforcing those conditions.
If that is the case—if the Canada Health Act is a dead letter, if the feds are not prepared to enforce it by withholding transfers to provinces that violate its provisions—then let’s get out of that game altogether, because at that point you’ve got all the power and all the money and no responsibility. At that point you have all the problems that people have enumerated with federal-provincial transfers, the blurring of accountability where the taxpayer doesn’t know who they should blame if things go wrong. I accept all those arguments. Yet on the other side of the ledger, if attaching conditions to them is no longer operable, then I would say we should get the feds out of the game, cut the transfers off, and cut federal taxes to match. If the provinces want to raise their own taxes to fill in the gap, let them do so on their own. I don’t see why there should be any kind of negotiation of a transfer of tax points, which again would amount to blaming the feds for provincial tax increases, except with this one proviso, that the feds got something in return.
FC: Several groups are arguing that the transfers be swapped, that either Ottawa takes on provincial debt or hands over some tax points, or even the GST, in an even exchange. Do you think that makes sense?
AC: Those kinds of swaps are certainly interesting. But I don’t see why we can’t talk about uploading some responsibilities to the federal government. I think universities should be a federal responsibility; the market for universities is national and international, not provincial. It makes no sense to have the funding stopping at provincial boundaries, as it does now, when a student goes from one province to another.
I also think the feds should say, “We are going to get serious about the economic union. We have allowed the provinces to negotiate for years on end and never get anywhere. Enforcing the economic union is part of the basic responsibility of any federal government. We recognize that we have a legitimacy problem. We are frightened of doing that because the provinces will scream blue murder, so the price of our acquiescence in some kind of tax transfer or whatever is that we want explicit provincial recognition of the federal powers to enforce the economic union, and no if ands or buts about it. We’re going to get serious about knocking down these interprovincial trade barriers, about doing what trade commissions do in Europe, dismantling local monopolies that interfere with the single market.” It is time for the feds to bring some demands of their own to the table and not always to be making concessions to the provinces.
FC: Regional subsidies are harmful to the regions, and some of us in Manitoba think that they keep us poor. We have ridiculous things like low electricity prices; if we priced it at market level we wouldn’t need federal transfers. What is your take on regional subsidies? What should we do about them?
AC: They’re economically harmful because they conceal the real cost of activities from people. One of the first prerequisites of any sound economic regime is that the people actually bear the full cost of their choices. The subsidies encourage terrible inter-regional jealousies, and whatever economic activity they may engender disappears as soon as the subsidies do. They simply transfer wealth not from one region to another so much as from one industry to another within the same region; the companies and industries that get the subsidies profit and benefit at the expense of the ones who don’t. The track record of them is so abysmal. One of your sister organizations, the Atlantic Institute, did that famous calculation where, if you took all the money that the feds have transferred to Atlantic Canada over the years and instead had invested it in bonds in the names of the citizens of those provinces, they would all be millionaires today. It shows you the degree of leakage and waste and distortion that has come from that. If ever there were a failed social policy experiment, it would be regional development subsidies.
FC: You have been more astute than a lot of pundits in observing that the problem with Adscam was weak rules to separate politicians from departmental decision-making and in calling for a New Zealand-style solution. Can you describe that concept?
AC: Justice Gomery has gone in this direction. He clearly recognized that one of the problems of Adscam was too much discretion for ministers to go in and interfere with the day-to-day management of their departments. We saw it with things like the Judy Sgro affair, or with the Lawrence McCauley business in Prince Edward Island. One wonders, when one hears these accounts, “How do they have the time?” You are a minister of the Crown, you’re part of the cabinet, you’re making policy for the country as a whole. How do you have the time to lobby the commissioner of the RCMP to get a grant for your brother’s community college as in the McCauley case?
What New Zealand did—and I am going to gloss over the details—was essentially make each government department into a Crown corporation. They transformed the relationship between the minister and the deputy minister from a pseudo-hierarchical one, where it is not quite clear who’s the master and who’s the servant, into a contractual one, where it is all out in the open, where they negotiate a set of desired policy outcomes, some benchmarks for measuring how well the department has done in pursuit of those objectives, and where the minister essentially becomes a purchaser of government services on the public’s behalf. It is the purchaser/provider split writ large.
One benefit is that, if something goes wrong in the department, the minister is not the shifty-eyed provider of a service that has gone awry, he is an outraged consumer. He can step out of the conflict of interest he is in now as the repudiated manager of that department. Too many of them see themselves as managers of departments rather than as members of cabinet. If you structurally separate the political minister from the department in that way, he becomes responsible for broad policy objectives. The department and the chief executive officer—the former deputy minister—become responsible for how you do it.
I think that is a very effective split. The way it was explained to me that first caught my fancy was when a minister from New Zealand visited. His example was that the Minister of Transport sets the broad outlines of transport policy and transport objectives. He has no say whatever in which riding the road runs through. I think that is only appropriate.
FC: Could the corporate analogy, in the sense of a board of directors and somebody else implementing policy, take hold in Canada after so many generations of diddling?
AC: The sponsorship scandal certainly presents an opportunity. Our inherent caution probably means we won’t go as far as that. Some of Judge Gomery’s recommendations certainly go some way towards that. But now what he sees is that there would still be a relationship on an ongoing basis between the minister and his deputy minister in a similar way to what we have now. But it would be regulated and supervised a lot. There would be rules and tests and ways in which deputy ministers could object to undue influence. That is certainly better than nothing, but it seems to me it may be better to separate them structurally rather than rely on a lot of supervisors and rules that may or may not prevent undue influence.
FC: When some from New Zealand observed Adscam, they said it could never happen there.
AC: Ultimately it boils down to what your vision of the role of a minister is. We’ve unfortunately done something to the role of the MP. In my view the role of the MP is not just to sit in Parliament and represent his riding, but also to make policy for the country as a whole. We have gone way down this route. We not only have Members of Parliament spending a lot of time in their ridings doing constituency work that could be done by an employee, partly because they have so little to do in the legislatures as the role of an MP has declined, but also the previous Liberal government started involving them in decisions about how government money should be spent. They were running local grants policies past the local MP. That is complete perversion of the MP’s role. The MP’s role is to be a watchdog on the government, on the way it spends money, not to be participating in decisions of how the money is spent.
FC: You have been highly critical of Canada’s electoral laws. What sort of reforms would you like to see?
AC: We still have a way to go, top to bottom, on campaign finance laws, to get the remaining vestiges of corporate money out but also to get out the government money Liberals brought in. I was sad to see that Conservatives, who in the 2004 election promised to get rid of public subsidies to political parties, are now no longer saying anything about it. I am an advocate of electoral reform along the lines of some kind of mixed proportional representation. I liked the British Columbia model, for example, that came within an ace of passing a referendum there. I think certainly that at the federal level it’s a particularly pressing objective, because the electoral laws exaggerate and distort regional majorities; they create distended regional majorities à la the Bloc in Québec or the Reform in the West that are way out of proportion to their actual numbers, so the current view creates a picture that is more divided than it actually is. We have enough real regional tensions without the political system’s making them seem much worse than they are.
There is a whole list of campaign laws that I would change. I certainly would change the way that we do debates. We went part of the way in this last election to making the debates more useful democratic instruments, but we could go a lot further. The problem is we keep treating debates as kind of innovations, as ad hoc. They have been around for thirty years; it’s time that we treated them as being part of the basic furniture of an election, like lawn signs, and I think they should be part of the electoral law. I think we should set the rules for them in advance, and in a veil of ignorance so that people wouldn’t know whether they’ll be leading in the polls or behind in the polls at the time the debates happen. We could set rules that were fair to everybody and make debates much more educative instruments for telling people who these people are and what they stand for, rather than prize fights, which is what they have been up until now.
FC: What do you think will happen to our auto industry when the Chinese start selling cars here at $7,000 a pop?
AC: I hope it will be very tough on the auto industry. I weep no tears for the auto industry, which has been one of the most effective and ruthless exploiters of government’s endless willingness to subsidize. If good quality automobiles can be purchased from overseas at $7,000 a pop, and cars made available to people who could never afford them before, that is a wonderful boon to this society—not only in terms of the mobility that automobiles bring to people but also in terms of the real income left over that can be used to buy other things. It forces our society to specialize in things that we do better than the Chinese. The left-over, disposable income means that they are able to purchase a whole range of other products from across the economy and those sectors benefit from that.
FC: What are the chances that the Harper government will introduce internal markets into Medicare? Is Medicare the third rail of Canadian politics? How bad is the problem and how do you think Harper should start to fix it?
AC: Medicare has been the third rail of Canadian politics. I think that is changing. The center of gravity of public opinion now would be receptive to private provision within a publicly funded envelope. That used to be very hard to put on the political table. You can now argue for that in political terms and not be shouted down. People are aware that the system has real problems, the waiting lists being the most visible sign of that, and that is what has really brought it home to people. Medicare has until now often been described as a black box. Nobody knows what anything costs in the system. The best distillation of that was the Kirby committee. It is interesting to watch how the Kirby report has now become the blueprint off which people are working rather than the Romanow Commission. When the two reports first came out, because one had government sponsorship and the other one didn’t, everyone was paying attention to the Romanow Commission which was a big disappointment and of very little use. As Senator Kirby himself acidly remarked, in the entire Romanow Commission Report they never once mentioned hospitals. I think the Kirby committee performed a very useful service in making the idea of internal markets respectable. I don’t think the driver behind that is going to be the federal government, whatever its stripe. I think that is going to be the provinces that drive that, if they are willing to go down that road.
FC: And maybe court-imposed consumer rights?
AC: Obviously the Chaouilli decision has had an enormous impact on that as well. My fear however is that it will, in terms of interest-group dynamics, be hard to go down the road to internal markets. They are facing enormous opposition from provider groups because markets will impose stricter disciplines than they have known until now. The great mistake of the Medicare model as we structured it was not public financing, it was the idea that the “one big payer”—the macro constraint—would drive costs down. In the real world, in fact what happened was, when there’s only one purchaser, it becomes a political target for everyone. If something goes wrong in the Medicare system, that’s who gets blamed. Their answer over the years was just to spend more. In my view what is common to all the serious Medicare reform models is that they would localize budget constraints. They would take it down from the macro level to the level of the individual doctor as in the capitation model or the individual consumer as in the medical savings accounts model. They are very similar; it is just where you locate the budget constraint. But the point in both cases is getting it down below the political radar. You get it down to the level of individual choices based on real costs and benefits, rather than politicized choices and benefits that may have nothing at all to do with costs and benefits.
FC: With the administrative benefit they claimed for the system because of that macro organization, they lost the information that they need to measure costs and benefits.
AC: Absolutely. Kirby was struck by going around and interviewing hospital administrators. People with two and three degrees who had spent twenty years in the business literally did not know what anything cost. Kirby didn’t stress this as much at the time, although he started to later. You’ve got to establish what things cost to provide if you want to create a market. But once you do that, then a competitor can come in and say, “Oh, I can do that cheaper with a different mix of inputs.” What we’ve traditionally done in Canada is fund very select line items for inputs that fix the mix in stone. There might be much better mixes, much more efficient ways that provide these treatments at much less cost. Until very lately we have also had almost no information whatever on the benefits of these treatments. We are only now starting to get the data on what bang for the buck we were getting. Why? Because nobody had an incentive to collect it. Once you start creating internal markets, then people have very strong incentives to try and figure out if this is the best allocation of dollars.
FC: Ronald Reagan’s eleventh commandment—“Thou shalt never criticize a fellow Republican”—has seldom been observed by Canadian Conservatives. What chance does Harper’s government have if it is nitpicked to death by its own people?
AC: Obviously some criticism can be destructive and go over the line and isn’t helpful. In any political party, some things are better said behind closed doors than in public. I understand that. But the notion that the only duty of any good Conservative is to shut up and listen and take whatever the leadership dishes out is, I think, hugely mistaken. Political parties, like any other organization, benefit from criticism, internal or otherwise and they certainly look much stronger and surer of themselves if they are willing to take criticism. In our newspaper, every day we run a “Letters to the Editor” page which tells us publicly all the things we did wrong yesterday. Do we lose credibility because of that or do we gain it? We gain it, because we show that we are open to criticism that we can learn from it and correct our mistakes. Within limits, it is the duty of a loyal party member to speak up, internally or otherwise, when they think their party or leader has screwed up.
FC: Do you really think that Stephen Harper’s appointment of Michael Fortier to the cabinet is hypocritical? Why can’t he appoint a senator under the old rules before he changes them?
AC: I don’t think it is as much a matter of being hypocritical as being contradictory to what he promised during the campaign, which was that he was not going to appoint people to cabinet who are not elected and was not going to appoint people to the Senate who were not elected. People took him seriously, and took him at his word. It is not the worst thing that anybody has gone back on. But consider what this election was about, particularly since the Conservatives had stripped themselves of much of their ideological differences with the Liberals. Much of this election was about, “OK, but can you at least clean up government. Can you at least change the way politics is done?”
It hurt them more than perhaps they realized because people had really invested some degree of hope in this party and in this leader because of the way he had comported himself in the past. He seemed like a pretty straight arrow and that is an asset you squander at your peril. A reputation for honesty, whatever its virtues in other spheres, is a matter of political self-interest. That is an asset you should draw dividends from, not sell off in a hurry. If people trust you, they will go places with you; they will follow where you lead. I don’t say he squandered it, but he has certainly taken a hit that he didn’t need to take. I don’t see the great payoff politically or otherwise from appointing Fortier to the Senate or Emerson to the cabinet. I think it was tactically smart and strategically stupid.
FC: Did you once say that you wish the Conservatives did have a “hidden agenda”? What items should that agenda, if it exists, include?
AC: I am certainly not in favour in any serious way of hidden agendas. I think the model of politics that I subscribe to is one in which you tell people straight up what you are going to do and you try to persuade them to your course. You probably have to measure how much people can take at any one time, but I think a program of radical honesty about who you are and what you propose to do is one that, if you stick to it, can pay dividends. That being said, I would like to see an economic model that would reduce the role of subsidy in Canadian economic life. I would like to see the areas of government that are not appropriately connected to the purpose and role of the state or to the provision of public goods as technically defined through many decades of economic analysis, hived off of government and privatized wherever possible. I would like to see the government charging for things that can be charged for rather than providing them as benefits in kind. I would like to see an emphasis in the provision of social services, at least wherever possible, on putting cash in the hands of consumers, benefits in cash rather than benefits in kind. You then allow competition in consumer choice to flow into those areas, like education or indeed healthcare.
I would like to see them take a more co-operative role in the defence of the West, that we should be pulling our weight and paying our share of the common defence against external threats. Free riding only pays off if you play the game once. But if it is an integrated game, and the other players get wise to what you are doing, then you pay a cost. We have paid a cost. We have been marginalized. We are not influential in the councils of the world in the way that Australia now is and frankly it is demeaning that we should, in the memorable words of John Manley, “sit around at the NATO table and then when the bill comes we excuse ourselves and go to the bathroom.” I hope that they will change that.
FC: Can you handicap the forthcoming Liberal leadership campaign? Who are the front runners and what are their key positions? Who do you think has the best chance to emerge as leader?
AC: I am not sure that I can. I can divide the field into interesting and indeed admirable individuals that the party has been able to attract into at least considering a run, and some not-so-admirable individuals who are running for all the worst reasons. I am intrigued by Bob Rae, who I think is a fine fellow, and Michael Ignatieff, who I think has enormous potential. Ordinarily I would bristle at the idea of somebody stepping into politics and immediately running for the leadership, but given the straightened circumstances the party is in, this may be his moment. He is an immensely attractive candidate. I think Stéphane Dion is a remarkable individual who has shown you can preserve your dignity and your principles even in the political world. I don’t know whether he should be leader but certainly hope he runs. I think Ken Dryden is a very interesting and thoughtful fellow. I disagree with him on some policies but he would clearly bring a great deal of gravitas and dignity to the leadership. You can imagine an election between Stephen Harper and Michael Ignatieff or Stephen Harper and Bob Rae, and see them squaring off against each other in the House. It would be quite inspiring. That would really bring our politics to a level that has not been enjoyed for a long time, in terms of people behaving in a more civilized fashion and bringing more considered arguments to the field.
FC: It’s surprising to many that Bob Rae may run for the Liberal leadership. Is he going to be like Buzz Hargrove and get kicked out of the NDP?
AC: He left the NDP some time ago. If you read his book, The Three Questions, he’s done a lot of rethinking about these things. I still think he is only part way there. He had to go through an enormous rethink and that is a great credit to him. To admit the beliefs of a lifetime were in error takes enormous courage and strength and I think he should be applauded for that. So he’s an intriguing choice. It speaks to some of the weakness of the party that some of the leading contenders for the leadership are not actually Liberals. You’ve got Bob Rae, and then Scott Brison and Belinda Stronach, neither of whom I would be particularly excited about, and then you’ve got Denis Coderre and Joe Volpe, who are just running to try and improve their position in the party.
FC: Do you think the Harper government will get a majority next time around?
AC: There’s certainly every possibility. People are giving them a trial run here. You have to bracket the election we’ve just had with the previous election, and probably with the next election. There is an enormous tectonic shift going on in Canadian politics. Nothing is inevitable, but there are forces at work that are hard for the Liberal Party to overcome. The Liberals have been progressively losing each of their regional power bases over the years, in a process that goes back fifty years. Up until the fifties, the Liberals used to win majorities with large numbers of seats from the West. The Diefenbaker sweep extinguished that, and they never recovered in the West. That didn’t matter because they could always win almost all the seats in Québec. The Liberals owned Québec going back 100 years, but the Mulroney sweep in 1984 and then the Bloc killed that. They took a terrible beating in Québec this time. They could still have won majorities by taking all the seats in Ontario. That’s not a sure thing any more, either. The Conservatives have a chance, if they prove themselves.
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