Wednesday Night #1287 with Yves Séguin

Written by  //  November 1, 2006  //  Business, Canada, Emerging markets/economies, Government & Governance, Herb Bercovitz, Politics, Reports, Taxation, Wednesday Nights  //  Comments Off on Wednesday Night #1287 with Yves Séguin

1 November 2006

We had hoped to introduce Martha Hall Findlay to you this Wednesday Night, however, we should have known better than to trust politicians, or their eager organizers. She writes: “I was so looking forward to joining the Salon this coming week, but I’m afraid we’re going to have to cancel (or at least postpone?). With now only a month until the Convention the demands here are piling up—particularly in the fundraising department, which as you can understand is key right now. I am really sorry, I hope that this doesn’t cause a problem. I understand that you meet regularly regardless, so this time you can all agree on how undependable politicians can be!” As we greatly admire her and her perseverance in the campaign, we do hope that she will join us on another occasion.

Hallowe’en will have passed by Wednesday Night, but that in no way limits the number of truly scary items on the agenda.
First off, at a local (Canadian) level is surely the to-ing and fro-ing of Mr. Ignatieff’s pronouncements and the wild enthusiasm with which his Québec Nation policy has been greeted by none other than Bernard Landry. It is rare these days that we agree with the Gazette, but we were happy to see Norman Webster’s column in Sunday’s paper and his conclusion fits nicely with our post-Hallowe’en theme: “Even Bernard Landry is running with Ignatieff’s ball, and if that doesn’t scare you, nothing will.”
We would certainly place Gerald Tremblay‘s attempt to re-name Park Avenue for Robert Bourassa in the category of scary, only because of its total disregard for common sense, let alone democratic choice. What was he thinking of? And the Executive Committee that slavishly followed along?
From Great Britain comes news of the findings of a government-commissioned report by economist Sir Nicholas Stern on Climate Change. The Stern Review warns unless the world moves to cut green house gases it is heading for a “catastrophic climate change” which would create the worst global recession ever seen and
forecasts that 1% of global gross domestic product (GDP) must be spent on tackling climate change immediately.
It warns that if no action is taken:
— Floods from rising sea levels could displace up to 100 million people
— Melting glaciers could cause water shortages for 1 in 6 of the world’s population
— Wildlife will be harmed; at worst up to 40% of species could become extinct
— Flood and droughts may create tens or even hundreds of millions of ‘climate refugees’
Now that is truly scary. But the UK Government has already signed up Al Gore to advise on the environment – we’ll leave it up to you whether you think that is scary.
There are the usual scary headlines from North Korea, Iran and Iraq, with Russia contributing its share; meanwhile our chairman is intrigued by the Norwegian economy although many Norwegians do not seem that happy.
From China, the economic news seems good, however there are naysayers in every crowd, especially at the International Herald Tribune (IHT) which opines: “As foreign investors contemplate the health of the Chinese economy and the ultimate sustainability of the unfolding Chinese miracle, one focus is the level of bad debts held by the biggest Chinese banks. Some of the gloomiest prognosticators warn that Chinese banks are rife with nonperforming loans far greater than those officially acknowledged by the government and that, sooner or later, a financial train wreck is inevitable. ”
Meanwhile, last Friday , first estimates of U.S. GDP indicated that in the third quarter the economy grew by only 1.6% at an annualised rate, much less than expected and a full percentage point less than in the previous three months.
The most eye-catching component of the data was a dramatic tumble in housebuilding However, according to the International Herald Tribune “the prospect of a slowdown in the U.S. – still Europe’s largest export market – is producing little more than a shrug.”
This is the last Wednesday before the November 7 U.S. mid-term elections. Depending on your view, either a Democratic gain or a Republican holding of the line could be scary. We know which of these choices we would write into a horror flick, but we also know that consensus is a rare thing on Wednesday Night. Curiously, we read that much of the world is not overly concerned, despite the fact that “Around the world, President Bush remains as intensely disliked as ever by millions of people, and a triumph for the Democrats on Nov. 7 would be greeted by many with jubilation and even a sense of vindication”.
On that happy note, we urge you to join us to contemplate our favorite bugaboos and see whether, despite the state of the world, we come up smiling like jack o’ lanterns.

The Report [see great photos in slideshow]

How very appropriate that the night after the Hallowe’en débacle aptly described by Rex Murphy as “A Conservative government bent on making ‘We kept our promises’ the theme song of its next wild dance with the voters executes a perfect back flip on income trusts and sets off a chain of cardiac arrests on Bay Street”, Hans Black should proudly introduce his new associate, Yves Séguin, former Québec Minister of Finance in the Charest cabinet and Premier Robert Bourassa’s Minister of Revenue. Today, he is a professor at UQAM and a columnist at Le Journal de Montréal

Income Trusts
It was a bold experiment, in retrospect, bound to fail as it had in Australia, but income trusts were a unique (currently existing only in Morocco and phased out here), popular instrument. For the government, it had been intended to be at least, revenue neutral as net revenue was not taxed at the corporate level, but more fully taxed at the presumably higher personal level. When implemented, plans frequently take on a life of their own and in this case the ever-increasing interest in Income Trusts by foreign investors (some $45 billion) yielded to the federal government, a mere fifteen percent in withholding tax and zero from pension funds holding income trust units. In addition to the real estate and mature exploration companies for whom the Income trusts were originally designed, large corporations adopted the model and exacerbated the problem. The inevitable tax changes have occurred or will be phased out over four years, undoubtedly with the hope on the part of the Conservative government that unit holders will have gotten over the pain by the next election.
[Editor’s note: for those who are somewhat confused by all the fuss, the CBC has an excellent summary of the issues]

Ethical dilemma
Has Man created God in his own image? Who inscribed the stones bearing the Ten Commandments? What are benchmarks by which ethical behaviour is judged? Are we sliding down the slippery slope of opportunistic, convenient ethical codes? Is morality judged by thought or deed? Does life begin at conception or birth? What is the next step to harvesting organs from moribund patients who are not yet brain dead?
A good case can be made for harvesting stem cells from unclaimed foetuses, but is it ethically justifiable to kill a living human entity (the foetus) to prolong the life of another? In the light of progress made in medical science, it appears to be, but one should ask what the next step in the progression might be. Some people are adopting frozen foetuses. Is this a more ethical approach than adopting an existing starving child from a poor African country whose prospect for living a reasonable lifestyle is minimal if not adopted?

Political dilemma
Why have politicians become so unpopular? At one time, politicians like Pierre Trudeau, Réné Lévesque, Franklin Roosevelt, John Kennedy, Winston Churchill were very well regarded, even by people who did not support them. Today politicians rank at the bottom of the respect ladder, along with heads of unions. However, there are those who cling to the hope that whenever someone with leadership and vision like Barack Obama appears, hope and trust are rekindled.
One hypothesis is that the motivation of individuals to pursue a political career is not always what it should be.
Too often, they are attracted by the large increase in salary [and generous pension plans] over their previous incomes [Note: in the last Québec election, some 75% of the candidates had never earned anywhere near the compensation of an MLA. This is quite typical throughout Canada and probably many other democracies].
On the other hand, how does one attract powerful, successful people to political life if the compensation is minimal? Other candidates may be attracted by the standing in their local community, and/or opportunity to meet and work with well-known personalities.
Finally, the rapid rate at which politicians are discredited in public opinion prompts them to want to please the public while avoiding the hard decisions that a vision often entails.
Television enables the public to grasp uneasiness in an elected official when he is perceived to be quoting the party line or withholding the total truth [or is simply not comfortable with the medium]. As the system hasn’t changed since pre-television days, compromises must be made and party solidarity maintained. However, the imposition of party (administration) solidarity is muzzling any dissident – or even independent – politicians; there is no dialogue. The inevitable outcome is that politicians often demonstrate uneasiness in presenting party policy close-up on national television, especially when national policy clashes with local values.
It is also true, when examining the popularity of local politicians, that those who have been able to escape the disdain of the population and have remained popular despite their often unpopular decisions have been those who have avoided promising local or regional goodies in their election campaigns. Unfortunately, often those who endure the longest are those who say nothing and never step out of line.
At the highest level, candidates are groomed relentlessly and when they arrive in power they then become the center of a machine that manufactures the message according to the latest polls. The chasm between the elected official and the electorate is growing wider and wider.

A new confederation?
Perhaps the time has come for a new confederation including a partnership between federal, provincial and municipal leaders. In 1867, it was reasonable for most legislative powers to go to a strong federal entity, but Canada has grown and changed in almost two and a half centuries, regional differences have become more evident and the ability to govern has matured. There are many examples of successful, albeit complex, federations such as those found in Australia and Germany.

Emerging markets
The growth of emerging countries is about twice that of industrialized nations and they still provide great opportunity for investment . “Emerging market economies are outpacing developed countries in the global economic recovery and may continue to do so for some time. Investors need to think globally.”
In 2000, China was one of only two logical areas, but this has changed. There has been a substantial shift in the credit rating of these countries. In 2004, emerging market yields were about 9.2% versus 8.6% for junk bonds in the States. Today the ratio is reversed with emerging market yields at 7.5% versus 8.2% for junk bonds in the U.S. More

The U.S. mid-term election
With the Liberal Party leadership race on our mind, we sometimes try to predict the outcome of the concurrent mid-term elections in our neighbour to the south, where despite the evidence of a great deal of disaffection with the current Republican Congress this may possibly dissipate when the votes are cast, or expressed by refraining from voting. Will the Republicans’ ability to raise campaign funds overcome the public’s disenchantment with the Party, whether over the war in Iraq, or over morality issues like the Foley case? The days/months ahead will certainly be of interest to all.

I was in the House of Commons today … I was not impressed [especially by] the antics of the former Minister of Finance … they are a bunch of children
Ethics is values and not morality leading to ethical behaviour. I think we have a greater moral obligation to save existing lives, in Africa, for instance, while letting embryos [stem cell research] save existing lives
It’s wrong to use life as a therapeutic entity
Le citoyen vote pour l’image
If you go into politics to do the right thing, it is a battle of principle. You have to compromise

We have too few teachers and too many bureaucrats
The government has a $12 billion surplus and they want to raise taxes!!!

Ninety to ninety-five percent of politicians believe that they have to massage the truth because of the amazing skill of the media to get at the truth … There is no trust when people say one thing before the election and change their mind six months later
Politicians who tell it like it is are generally more popular than those who promise goodies
On television, you can’t possibly lie. You have to believe in what you are doing. Until the advent of TV, the party line worked

The bureaucrats rule, set the agenda
We mistrust the bureaucracy
(but) they are (often) a lot smarter than the Minister
[becoming an MLA or MP] is like creating a small business – You are given $300,000 to organize the riding office, hire staff …

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