Wednesday Night #1512

Written by  //  February 23, 2011  //  Herb Bercovitz, Peter Trent, Reports, Wednesday Nights  //  No comments

The presence of Peter Trent ensured a lively discussion of municipal issues, and afforded Wednesday Nighters a glimpse of some of the subject matter of his forthcoming book, while Marcus Hope lent an unexpected personal view of events in Libya.

(Québec) Governments and governance
Public policy behind Quebec government assistance/subsidies to business remains a mystery tightly wrapped in the enigma of red tape. Numerous examples indicate that those most likely to take advantage of government largesse are the companies least in need of it, but possessed of  individuals (sometimes armies) dedicated to the fine art of completing all the necessary forms. The development of the Cité Multimédia is a classic example. Now that the original prime tenant, giant CGI – which benefited from rental rates way below market and subsidization of salaries – has moved out because of increased rent, the smaller companies who were the original target beneficiaries of the synergy of the concept cannot afford to move in.
Public sector unions owe their existence to a benevolent theory in the early 60’s that public service workers should not be subject to dismissal when governments changed. Originally, in return for job security, public servants were paid less than their private sector counterparts. Today, 85-90% of the public sector jobs are unionized versus some 35% in the private sector and public sector employee remuneration is some 30-40% higher than in the private sector. (The current case of Quebec prosecutors, and the remuneration of nurses and teachers are exceptions.)
Municipal employees in Quebec are in an even better position. Today, they are paid some 30% more (based on hours worked, vacation time and defined benefit pensions) than their colleagues in the rest of the public sector; hours worked are diminishing, salaries are increasing, the pension fund obligations are out of control, and, in the view of one expert, “nobody wants to do anything about it”. Municipalities simply cannot afford their municipal workers. The solution? Hire people on contract, with no benefits – not just, but the only option.
Meanwhile, the managerial and professional classes in the Quebec public sector have insufficient mobility between public and private sector with the result that public sector managers are trapped in a gilded cage. New government agencies are not offering the same job security.
If business is so much more efficient than government, why not contract government services to non-government providers?
In the 1800’s most public services were provided privately. Over time, individual private providers of services to the electorate, including electricity, were replaced by government agencies, presumably because the latter were perceived to be more efficient and possibly more reliable than private contractors.  However, the replacement today of such government-run monopolies such as utilities by private monopolies would, in fact, prove retrograde.
Considering the constraints and the need for business skills and sacrifices required, competent community-oriented men and women are rare among political candidates, especially at the municipal level, and are found primarily in smaller urban communities where, in the absence of political parties, hence party loyalty, political policy is not sacrificed to individual opinion or the attempt at political gain. In these happy enclaves (including Ancient Greece, Nunavut – just under twelve years old as an independent Canadian territory – and some smaller urban and suburban communities), the elected acknowledge their obligation of loyalty to the electorate.
Unfortunately, the ability to attract votes is determined by a set of criteria totally different from those required to manage a large complex enterprise in which value of services to the client is considered the prime measure of success. While some place partial blame on the virtual absence of mentoring in training new government employees, others are not aware of or do not see Maslow’s hierarchy of needs as essential in creating an efficient civil service, responding to the needs of the public. In the absence of  a perception of public employees as intelligent human beings, they play the role that is assigned to them. As people retire healthier and younger, mentors might very well be helpful in training new employees, but with governments running their own monopolies and elected officials untrained in the world of business whose management style is usually top-down, there is little expectation of improvement.

New School of Athens – the Montreal Dialogues

The discussion led inevitably to the mission of the New School of Athens (NSoA), to apply lessons from the past to the development of strategies for the future governance of globalization and the forthcoming Montreal Dialogues. This working meeting of representatives of government, business and civil society, which will examine the Canadian model – what can the post-crisis world learn from Canada and what can Canada learn from itself? It is the second in a series of eight national and regional meetings, four to be held in the western/developed world, followed by four in the non-western world. When queried about where the meeting on the Middle East model might be held, the President of NSoA, Kimon Valaskakis, replied instantly: the Bibliotheca Alexandrina.

Libya
Marcus Hope added a welcome historical dimension to current events, recounting that he was at the British Embassy in Tripoli on September 1, 1969 and witnessed the bloodless coup that brought the young (27) Colonel Muammar Gaddafi to power. Unlike today, the then-ruler, King Idris, was an enabler of the coup, essentially telling the army that he would depart for Greece and they should pick a date to carry out the coup in his absence. Would that the transfer of power were so civilized in 2011.
Relations between Britain, Canada and the U.S., and Libya have been subject to several drastic revisions. Now that it appears proven that Gaddafi in fact ordered the bombing of PanAm Flight#103, there has been much condemnation of   the West’s embrace of the Libyan leader following his renunciation of WMDs (ex: Tony Blair and Paul Martin trips to Libya to secure trade deals), but as is often the case, trade trumped any morality issues. [Update In any event, not everyone agrees — Peter Mandelson writes in the FT Britain was right to do business with Libya: When you reach out to repenters, you do not then turn on your heels and start treating them like pariahs.

The release of the terrorist Abdel Baset al-Megrahi, the convicted mastermind of the Lockerbie on compassionate grounds (he was supposed to be dying) has left a very sour taste in Britain as well as in the U.S. Although the decision to release him was made by Scotland, it is assumed that pressure was exercised by the British government.

Oil
Although Libya’s oil production equals only some 2% of the world’s consumption, some 85% is exported to Europe. This raises the very ugly spectre of the consequences should ‘someone’ set fire to the Libyan oil fields.
There can be no doubt that as with the price of gold, the finite quantity of a commodity ensures constantly increasing prices, but it would appear that, as demonstrated around the beginning of the Libyan uprising, the price of gas often rises in advance of an increase in the market price of oil. The apparent collusion in the movement of oil prices leads one to believe that the petroleum industry benefits at the very least from self-fulfilling prophecies of higher prices following from events, whether or not the supply is affected. Inevitably, the consumer suffers. As an exporter of petroleum, the relatively high price of gasoline in Canada gives one cause to reflect. It is paradoxical that Canada is an exporter of oil, finds itself in a position in which we must pay for imported oil, with consequences for the price of transportation and commodities, and eventually, a rise in interest rates.
We are reminded of the evolution of the petroleum industry, from the days when the Seven Sisters controlled a large percentage of the petroleum production to the rise of OPEC and the emergence of state-owned oil companies (a trend that started with Mexico’s nationalization of oil in 1938), dubbed the New Seven Sisters

The market
On a broader note, recent events in the Middle East have confirmed that forecasting both markets and the economy must take into account geopolitical developments. One economist suggests that stagflation is a very real danger with the rise in energy prices creating cost-push inflation in a stagnant economy.
March 9 will mark the second anniversary of the day that the stock market bottomed out. The recovery that followed has been strong and steady, so a correction , if it occurs, will be in the order of five percent at the end of February/early March. However, this is not predicted to be the end of the bull market, but a time at which to be selective (buying sectors/stocks rather than the market) which, if we succeed in doing, will lead to a full bull market for an additional nine months. Any risk that might exist would occur if fear were to turn to greed.

The U.S. economy
According to some Wednesday Night experts, far from being bankrupt, the United States remains wealthy and the world economy booming. In the event of a world war or other world tragedy, the citizens would accept a raise in taxes, under present circumstances technically possible but currently politically impossible. It may be that the electorate resists paying visible taxes but accepts hidden taxes without complaint. This is evident in North America where taxes on restaurant meals are visible and an irritant, but are accepted without complaint in France where they are included in the price of the meal.

Prologue

When we were growing up in the U.S., February 22nd was Washington’s Birthday. Now it is Presidents’ Day (in fairness Lincoln’s birthday on February 12 always took a junior role). This year, in Chicago, it may become Rahm Emanuel Day, although he must secure 50% of the vote in a competitive field in order to avoid a run-off. [Update: Emanuel Triumphs in Chicago Mayoral Race]
This Wednesday we have two special guests from highly different worlds: Marcus Hope, former British Consul General in Montreal, whom many of you will remember fondly as a loyal Wednesday Nighter and experienced diplomat.  Tony Deutsch will introduce Ed Figlarz, a lawyer with an MBA from INSEAD. Ed specializes in the law related to distribution of products or services and international transactions.  Also noteworthy is that Ed’s daughter is the founder of Dyslexiability, a non-profit providing specialized training to people with dyslexia – she would be a fascinating addition to a future Wednesday Night.
In such impressive company, there will no doubt be new topics of great interest; however we will put forward a few suggestions.
Obviously, the continuing spread of revolutionary fire across the Middle East is the number one topic. Libya, after years of rule by the shall-we-say quixotic Gaddafi (or Gadhafi, or Quaddafi) is a more volatile threat to the world order than most because of its vast oil reserves and the likelihood of a very long period of transition to any semblance of true governance. The small, highly tribalized population, the nebulous (other than the fact that power is concentrated in Quaddafi’s hands) government structure in place, an economy that has been mismanaged … the list goes on. Only one commentator, the Globe & Mail’s Geoffrey York,  the impact of the possible (probable?) disappearance of Brother Leader of the Great Socialist People’s Libyan Arab Jamahiriya on the vision of African Unity. Worth reading. Also very worth reading is John Ivison’s condemnation of western [trade] policy, particularly Canada’s, in the post-Lockerbie era.
Meanwhile, protests continue in Bahrain and Yemen, while there are increasing demands for reform of the Hashemite monarchy of Jordan (Al Jazeera). While we are all fascinated by these developments which we watch from afar and which are almost entirely filtered through Western media eyes (read Frank Rich and weep) , we have little appreciation for the long-term effects on the region – and almost none of the effects on western governments who are playing foreign policy catch-up on a daily basis. Presumably the emerging markets mavens are also going to have exciting times predicting the outcomes for world markets and western economies.
On the home front is the proroguing of the National Assembly< - not such a menacing action as federal parliament's two prorogations, as the new session starts up on Wednesday. According to former French Premier, Jean-Pierre Raffarin (Don't you love how Québécois get their news?), Charest will announce his determination to balance Quebec's budget, outline plans for his ambitious Plan du Nord, announce more money for health care and brag about the economic record of his government. With the announcement of the formation of François Legault's Coalition for the future of Quebec CAQ) we may be in for some interesting times ahead, but then, from the way in which the launch was received, maybe not. We do find Legault and Charles Sirois an Odd Couple. Of far greater potential impact on government and the community is the acrimonious confrontation between the Quebec government and the Prosecutors.
In Ottawa, meanwhile ‘Superstar’ status in global economic poll strengthens Harper’s hand, but we suggest that Mr. Harper, all political parties and pundits check out last week’s At Issue panel.  In the wake of three recent polls, all showing the Conservatives with a comfortable two-digit lead, CBC’s At Issue panel, especially polling expert Allan Gregg, explain why polling numbers no longer should be given much credence.  Bev Oda seems to have somewhat disappeared from the headlines, but according to Lawrence Martin, she will be replaced by Christian Ouimet, the former Integrity Chief (sounds like something from Animal Farm). Stay tuned.
For a total change in topic, Wednesday Night’s OWN Margo Somerville tackles the question of ethical restrictions on surrogate motherhood in a thought-provoking piece in the Globe & Mail  When granny gives birth to her grandson, there’s something wrong Like Margo, we have a gut reaction to this story and are grateful to her for putting forth the arguments so clearly.
On a more cheerful note, reverting to one of last Wednesday’s hot topics, Stanley Fish (NYT) asks What did Watson the Computer Do? We find the content of this column vastly reassuring in that it offers hope that we, in the context of Wednesday Night (read the article!) are not about to be replaced and nor are you!

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