Saturday Morning Links

Assorted content for your weekend reading.

- Paul Dechene interviews Maude Barlow about the downside of privatizing public infrastructure:

Somebody asked me to point blank explain the difference between private and public and I said, profit. That’s the difference. In a public system, it’s the same amount of money; you’re raising it from taxes or you’re raising it from water rates, water services. And so the same amount of money has to cover for a private company not only the supposed delivery of whatever services they’re delivering but profit for their investors. Something has to give. And that’s the fundamental difference. It doesn’t take long for most municipalities to figure that out. Often, the company comes back — this is just standard — the company comes back to the local municipality and says, Gee it’s more expensive than we thought and we’re in cost overruns and we have to charge more, we can’t keep going. So, they either back out of it, or the city backs out of it or renegotiates and gives them more money. This is just classic.
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There’s obviously no reason to think that a private company is any more efficient than the public company. If in fact they were to set rates and the municipality were not to budge, then you’d start to see declining services because the company simply has to make money, they have to make profit and something would go.

On average what goes is 30 to 50 per cent of the workforce. When you have a broken sewer line down the way it doesn’t get fixed that day. The water coming out of your tap, you’re not very happy with. It may be a week before someone comes to fix it. This is the story around the world of privatized systems. The only way they can keep up with the public system is to keep raising water rates. So they either cut their workforce in half or 25 to 35 per cent. Or they cut services. You simply cannot as a for-profit entity do the same job and find a 15-20 per cent overhead profit to send to your investors and not have something giving. It’s just a fallacy that the private sector can do it better than the public sector. If the job is done properly, it’s done properly.

I’m not saying the private sector can’t do it properly. But even if they do it properly they have to find that overhead for the profit and that’s the essential difference here.

- And Toby Sanger looks at the risks and rewards involved in Regina's wastewater treatment plant:

The only real risk private operators assume in a P3 is limited by the net amount of unsecured money or equity they have in the project: usually no more than 10-15% of their total capital, as I pointed out in a previous post.   Since P3s are set up as “special purpose vehicles”, the big companies behind them can simply walk away if they aren’t making enough profit or if problems develop, or use the threat of doing so to get more money out of the government.   The maximum they lose is their unsecured equity and cash.  And a number of P3 companies have abandoned their projects—from small P3 arenas in Ottawa to the multi-billion dollar Metronet failure in London—leaving government with the responsibility for delivering the service and paying off the creditors.

Any calculations of risk transfer exceeding the private equity in a project should have no credibility.   The amount of private equity involved in the Regina wastewater plant has not been revealed, but with total private financing at just over $118 million, it is highly unlikely the private equity share (usually a maximum of 15%, so $18 million) exceeds the estimated value of risk they claim will be transferred, which amounts to $40 million according to some of their calculations.

So even if the city administration continues to hide the financial details, it appears these claims of risk transfer are simply not credible.

 - Jim Stanford notes that public-sector austerity figures to undermine the lone force that's allowed Canada to recover from the 2008 recession. And Gayle MacDonald discusses how the Toronto Centre by-election will offer a choice between a candidate who understands both the origins of inequality and the possible solutions, and one who plans to brand herself as a voice on inequality while leaving any detailed thought about where it comes from and what to do about it some unspecified point in the future.

- Caroline Fairchild reports on the obvious link between unionization and reasonable middle-class wages.

- Finally, Lana Payne discusses the dangers of allowing any level of government to silence both dissenting opinions and the people who hold them.

Musical interlude

Massive Attack - Protection

On questions of trust

I'll give Deputy City Manager Brent Sjoberg credit for at least partially answering one of my long-standing questions about a privatized water treatment plant: namely, who's going to be left with the job of making sure a private operator lives up to its promises?

Q8. What are the contractual terms that are going to ensure that risk transfer on paper is risk transfer in practice?

SJOBERG: "There's quite a number of things in place in terms of that. It's where the private sector financing portion is really important as part of this project because they will be borrowing from banks and so on, and the banks will provide oversight that the contractor is delivering on their requirements in the contract, because they want to be repaid the borrowing, so they have oversight mechanisms.

So never mind ensuring that the City itself is knowledgeable enough to monitor how a water treatment plan is being run. Instead, we're supposed to trust our friendly neighbourhood banksters to put the public interest first in deciding how to handle loans to a private operator.

Because anybody who might caution that the interests of our financial overlords might involve cutting to the front of the line in the event of crisis or misreading risks out of self-interest is plainly unfit to be heard by the Very Serious People who have decided that a P3 is necessary.

Friday Morning Links

Assorted content to end your week.

- Armine Yalnizyan points out that Canada has followed the global pattern in which income growth has disproportionately been directed toward the few people with the most to begin with:

Canada’s story pales in comparison – and so does our access to comprehensive and timely public data about the top 1 per cent. But the data we do have reveal the same troubling trends. In each phase of economic expansion since the 1980s, the top 1 per cent of Canadian tax-filers took a bigger share of income growth, and less of the hit in bad times. (The top 1 per cent always sees a big decline in incomes during a recession, but in the 2008-2009 recession more of the pain was shared with the rest of the top 10 per cent.)

The bottom 50 per cent has seen a dwindling share of income growth over time, accounting for only 3 per cent of all income gains since 2009, after having lost much more during the recession. Most Canadians have seen almost no improvement in their real incomes since the crisis began.

But incomes have indeed grown since 2009, and thus far the top 10 per cent enjoyed more than half of all that growth – and the top 1 per cent alone accounts for more than half of that. Welcome to the recovery. The higher up the income ladder you are, the more you benefit from economic growth.

As one wag put it: Trickle-down would work if it weren’t for the sponges at the top.

- And Edward McClelland mourns the demise of the U.S. middle class - while recognizing that corporatist zealotry will only ensure that no such thing develops again.

- Justin Brake discusses the minimum wage in Newfoundland and Labrador, concluding that at least workers should be able to expect annual adjustments to match the cost of living. And the Star concludes that it's long past time for an immediate increase in Ontario:

It may sound counterintuitive but in today’s increasingly marginalized workforce, many people who work full time still live below the poverty line. That’s both socially unacceptable and just plain bad for an economy that needs consumer spending to thrive.

Some 534,000 Ontarians work 35 hours or more each week in fast-growing retail and service industries, earning the provincial minimum wage of $10.25 an hour. Indeed, with annual earnings under $20,000, these workers will never even crack the paltry official low-income measurement of $23,000 a year. That means a lot of people are working very hard just to remain in poverty.

The emergence of such a huge underclass does not bode well for Ontario. There are many complex reasons for it – including long-term challenges facing the province’s old industrial economy and the lingering effects of the Great Recession. But the Liberal government didn’t helped matters by freezing the minimum wage for the past three years.

It needs to stop stalling. To both alleviate poverty and increase consumer spending, the government should move as quickly as possible on minimum wage reform. It should speed up the work of the advisory panel it set up on the issue this summer and get ready to make a substantial increase in Ontario’s minimum wage.

 - Finally, the Canadian Press reports on the Cons' continued refusal to take any action to combat - or even track - violence against aboriginal women:

“There have been a number of inquiries and resulting proposals for improvements over the years,” says the reply.

“In addition, race-based statistics are not recorded in a systematic manner across Canada’s criminal justice system due to operational, methodological, legal and privacy concerns.”

Thursday Afternoon 'Rider Blogging

It would be nice to be able to blame the 'Riders' latest loss on injuries hitting a few more of the team's key players. But that excuse would ring rather hollow against an opponent missing the CFL's defending Most Outstanding Player and its top starting quarterback - particularly at the point in the season where every team needs to be prepared to deal with a few missing starters.

Unfortunately, as I'd worried at the start of 2013, the 'Riders seem rather unprepared to deal with the foreseeable. The offensive line has indeed proven fairly thin, resulting in Darian Durant facing unmanageable pressure for the most of the past five games; the dropoff from Weston Dressler and Rey Williams to their replacements had an obvious impact on the 'Riders' performance on Saturday; and a decision to operate with only one true running back proved deadly when Kory Sheets got hurt in the first quarter against Toronto.

Yet even that spate of injuries might not have been enough to lose an otherwise close game if not for some other avoidable problems. After starting off the season as the CFL's most disciplined team in avoiding both penalties and turnovers, the 'Riders have racked up both at an alarming rate in recent weeks - with the most painful sequence Saturday coming early in the first, when an interception, a pass interference penalty, an unnecessary roughness call and a botched snap helped turn zero offensive production by the Argos into ten free points.

From that point on the 'Riders had little choice but to go to the air - initially to try to catch up, and then to account for Sheets' loss. And the results were about what we should expect when a CFL team has to show its hand too soon: Durant and company managed to make a few opportunistic plays (especially in the second quarter), but couldn't keep up consistent production against a defence which could load up a blitz with no risk of punishment. And the 'Riders' defence which started off strong gave up just one more score than the team could afford.

What's worse, the Toronto game likely ended the easiest five-game stretch the 'Riders can expect all season. Now, the schedule features plenty of tough divisional games which will only raise the degree of difficulty - and it's an open question whether Saskatchewan will be back to health in time to fix what's been ailing it over the past month.

Thursday Morning Links

This and that for your Thursday reading.

- Carol Goar points out why Canada's EI system is running surpluses (contrary to all parties' intentions) - and notes that the result has nothing to do with the best interests of the workers who pay into the system:

Flaherty’s explanation was true as far as it went. Employment has edged up this year. EI claims have declined. But the real story lies in what he left out.

A large proportion of jobs that have come on-stream in 2013 have been part-time, temporary, short-term, casual or intermittent. Last month, for instance, 41,800 of the 59,200 new jobs Statistics Canada reported were part-time. People who don’t work full-time seldom qualify for EI. (They can’t accumulate enough hours of paid employment to meet the eligibility criteria). But they have to pay into the fund.

More contributors and fewer beneficiaries add up to a rising EI surplus.

But that’s only half the story. The federal government has systematically restricted access to jobless benefits this year. It imposed a requirement that repeat EI claimants accept any job within 100 kilometres of their residence that pays as little as 70 per cent of their previous wage. It launched a crackdown on “false and inappropriate claims,” visiting EI recipients at their homes, unannounced, to check whether they were out looking for work — and grill those who were not. And it raised the threshold to get full EI benefits in all but a handful of regions.

These measures had exactly the effect the government intended: Payouts declined.

- Paul Krugman discusses the gap between a recovery for the rich following the 2008 financial meltdown and a continued slump for everybody else.

- CBC reports that an apparent tax dodge by Cameco is finally being challenged by the CRA.

- The Huffington Post reports on the damage the Cons have done to our knowledge of poverty in Canada. pogge reminds us that eliminating evidence to support evidence-based policy was the Cons' goal all along. And Mary Agnes Welch examines exactly how the destruction of the long-form census makes it more difficult to answer even basic questions about a community.

- Finally, Adam Chapnick's proposal for an annual federal leaders' debate would figure to go a long way toward encouraging greater citizen engagement and critical thought about political messages. But that's exactly why we shouldn't expect the Cons to sign on anytime soon.

New column day

Here, on how the real question in Regina's P3 referendum vote is that of how to operate the City's vital infrastructure - and why we should vote "yes" to maintain some control.

For further reading...
- CBC reports on last night debate between Jim Holmes and Michael Fougere.
- Brent Sjoberg's interview with Paul Dechene referenced in the column is here.
- Ryan Deschamps' commentary on rent-seeking in the context of the wastewater referendum is well worth a read (particularly given that the entire operational phase of the P3 model has been set up as a giant, 30-year pool of rent money to be paid to a contractor) - even if I don't agree with his disapproval of direct democracy.
- And finally, Deron Staffen has compiled a list of referendum resources here.

Wednesday Morning Links

Miscellaneous material for your mid-week reading.

- It shouldn't be a surprise that more people are pointing out the importance of effective regulation in preventing disasters like the Lac-Mégantic explosion. But it may be somewhat unexpected to see that message from a CEO in the industry which stands to be regulated:

Canadian Pacific Railway Ltd. CEO Hunter Harrison warned that a catastrophic derailment like the one that levelled the centre of Lac-Mégantic could happen again if regulators don’t impose tougher safety rules for transporting hazardous materials.

Mr. Harrison, an outspoken industry executive who has been running railroads in Canada and the United States for more than five decades, said he is frustrated with the “turmoil” and “bureaucracy” of multiple cross-border investigations, legal volleys and political finger-pointing after a fiery crash of crude tankers that killed 47 residents in the small Quebec town.

The chief executive officer said the large teams and agencies investigating the accident are taking so long that regulators are not adopting precautions needed to avoid further accidents with hazardous crude, gases and chemicals. “God forbid that something else should happen again while they investigate,” he said in in an interview with The Globe and Mail on Tuesday.

The deadly accident has given new urgency to a long-standing debate about the need for safer tanker cars, a reform that Mr. Hunter said has been stonewalled for decades by petroleum and chemical producers and other commodity shippers who own the vast majority of North America’s tankers. 

“The root of all this is the dollar sign,” he said. “We can fix all this stuff, it is fixable.”

- Meanwhile, Mike Hudema points out that Alberta has seen another oil-spill-filled summer. And Damian Carrington notes that the only forms of energy with any realistic chance of reaching the "too cheap to meter" standard promised of non-renewable power developments are in fact...wind and solar, thanks to their zero-cost inputs.

- Bill Tieleman writes about the Canadian Taxpayers Federation's selective interest in transparency - which of course doesn't apply to its own shadowy funding and administration.

- Bradley Brooks and Frank Bajak report that Brazil may be leading the way in developing alternatives to the Internet in its current form as a response to the revelation that the current infrastructure has been set up to facilitate surveillance by the U.S. and other governments.

- And finally, Kapil Khatter debunks a few myths about the (negligible) difference between brand-name and generic drugs.

Tuesday Night Cat Blogging

Inquisitive cats.

Tuesday Morning Links

This and that for your Tuesday reading.

- Christopher Ragan writes about the lessons we should be drawing from the 2008 financial meltdown - as well as so many similar bubbles before it:

Contrary to what many people seem to believe, financial crises like the one that began five years ago are neither rare nor inexplicable. They have been occurring for centuries, and while each one has its own fascinating details, they also have much in common.
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First, there always appears to be some new kind of investment or financial instrument to get investors excited. In Amsterdam in the 1630s, it was the arrival of tulip bulbs from foreign lands. A century later, publicly traded “joint stock” companies were the new thing, and the promise of far-away profits added an exotic twist. In the 2000s, the process of “securitization” and the creation of mortgage-backed securities seemed to offer both high returns and the safety of diversification.

The complexity of many financial instruments gets us to the second common element: The belief that money and intelligence travel together. It is probably natural to think that only really smart people can make it in the complex world of financial markets. When we see these people doing so well, we naturally conclude that they know a lot more than we do and, since they’re so smart, maybe we should do whatever they’re doing. And so the bandwagon starts rolling.

The third element is something very old: By borrowing a lot to purchase investments, investors become highly “leveraged.” The wonderful thing about leverage is that for good investments, the return on equity gets highly magnified because the investor starts with so little equity in the first place. The terrible thing is that for bad investments, the same magnification happens in reverse – and many investors then find themselves with few assets but mountains of debt. In 1630s Amsterdam, individuals borrowed massively to finance their tulip investments. A century later, investors did the same to purchase shares in the Mississippi and South Sea Companies. In the 2000s, individuals purchased houses with enormous mortgages and investors then borrowed money to purchase the associated mortgage-backed securities. The tulips and company shares and houses were all purchased with the expectation of ever-rising prices. But prices didn’t keep rising – they never do.

The fourth element is the assignment of blame after the fact. Maybe it falls on the founder of the company whose share prices collapsed, or the land developer whose real estate values evaporated, or the “predatory” mortgage lenders or the agencies that rated the riskiness of the mortgage-backed securities. There’s rarely a shortage of people to blame. But Mr. Galbraith noted that we never blame “the system,” because to do so would be to question the basis of a market economy – and who wants to do that?

Yet market systems have been prone to financial crises for hundreds of years. We can regulate the extent of leverage, the nature of bank lending, mortgage conditions, corporate governance, and much else. And we are right to do so, because financial markets do not work efficiently in the absence of such regulations. But let’s not delude ourselves into thinking that we can prevent the intrinsic behaviour that fuels financial euphoria and leads to financial booms, collapses and occasional crises. These are an unfortunate but unavoidable part of a market economy.

Mr. Galbraith’s final common element is our painfully short memory preventing us from learning from previous errors. So, maybe the most important lesson to be drawn from the past five years is that we should be less ignorant of our history. Our tendency to neglect the past, and to repeat crucial mistakes, will hasten the arrival of the next financial crisis.

- Anne Kingston writes about the developing Toronto Centre by-election campaign. And while some observers have raised questions about her fawning portrayal of the Libs as a party, the developing themes look to be ones which operate in Linda McQuaig's favour: a candidate with the "home-turf advantage" and a focus on income security versus a "habitué of the Davos think-tank circuit" whose message lacks much appeal beyond a business-school crowd.

- Stephen Maher and Glen McGregor's report on the participation of the Cons' primary counsel in interviews with Michael Sona and other Robocon figures has received plenty of attention. But I'll highlight the fact that Arthur Hamilton's intervention was purely in his capacity as the Cons' counsel - meaning that to the extent he managed to interfere with an investigation into election fraud, he did so in the name of (and the legal interests of) Stephen Harper and company.

- Finally, Nick Taylor-Vaisey and Aaron Wherry both discuss the NDP's use of Twitter to ask the questions the Cons are avoiding by shutting down Parliament. And it may be worth noting the effect that plan will have in getting responses - not from the Cons (who don't figure to be any more responsive than in the real Question Period), but from the public in determining which #QPQ questions receive the widest distribution.

[Edit: fixed typo as per comments.]

Monday Morning Links

Miscellaneous material to start your week.

- Dean Baker discusses the strong relationship between union organization and the elimination of poverty:

A simple regression shows that a 10 percentage point increase in the percentage of workers covered by a union contract is associated with a 0.7 percentage point drop in the poverty rate. (This result is significant at a 1.0 percent level.) This means that countries like Sweden, Belgium, and France, where the coverage rate is close to 90 percent, can be expected to have poverty rates that are more than 5.0 percentages points lower than in the United States, where the coverage rate is less than 15 percent. In the case of the United States this would imply a reduction in the poverty rate of almost a third from current levels.
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There are many other important differences that could be important in reducing poverty in these countries. However in almost every case, unions were a major force in advancing the various policies that are associated with lower poverty. It would have been difficult to envision a scenario in which these policies would have been enacted (without) pressure from unions.

The same holds true with measures that have reduced poverty in the United States. The creation and expansion of Social Security, which has lowered the poverty rate among seniors to the same level as the adult population as a whole, would have been impossible without pressure from unions. Similarly programs that help young children, such as Head Start or promote education such as Pell Grants and subsidized student loans, passed with strong support from organized labor. Medicare, Medicaid, and SCHIP have always been strongly supported by unions and the Affordable Care Act would not have passed without a big push from the labor movement.

- Ann Cavoukian, Ron Diebert, Andrew Clement and Nathalie Des Rosiers point out that Canadians need to be able to count on genuine oversight of the federal government security apparatus in order to have any confidence that our privacy isn't being violated.

- CBC reports that Newfoundland's PCs seem to have thoroughly absorbed the exclusionary strategy of their federal cousins - having threatened to slash funding from schools and other local projects if people identified with other parties weren't prevented from participating in public events.

- Finally, Paul Adams reminds us that most of what's being (rightly) criticized about the PQ's Charter of Values would have fit comfortably into major parties' platforms over the past few years. And in recognizing that the path toward social inclusion has been far less smooth than it seems in retrospect, it's well worth remembering who's led the way - and who's had to be dragged kicking and screaming.

Sunday Afternoon Links

Assorted content for your Sunday reading.

- Alex Pareene muses that Lawrence Summers would be an entirely worthy nominee to oversee U.S. monetary policy - for a very specific set of criteria:

Laws and policies he championed directly led to the financial crisis, and the same laws and policies caused that crisis to kick off a global recession that we still have not crawled out of. He is more responsible than almost anyone else alive — it’s him, Robert Rubin, Phil Gramm and Alan Greenspan, basically — for the severity of the crisis. I can’t think of a better time to inexplicably reward Summers for his disastrous record than today, as news outlets everywhere revisit those miserable days of five years ago and sort through the aftermath. The ascension should happen as soon as possible. Think of it as a sort of birthday president for the crisis.
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The timing has never been better to reaffirm that in America, a lucky few are able to be wrong — disastrously wrong, in ways that cause a great deal of harm and suffering — about everything and be forever rewarded for it. Larry Summers is basically the mascot of the last few terrible decades, and today is the day that should be officially recognized.

- And Peter Beinart sees Bill de Blasio's primary victory as evidence that voters are very much willing to throw their support behind genuinely progressive options, rather than looking for somebody who caters primarily to the Very Serious People.

- Speaking of unabashed progressive heroes, Peter O'Neil excerpts Graeme Truelove's take on Svend Robinson's legacy. And the would-be MPs currently pursuing nominations in the upcoming set of by-elections would do well to follow his example.

- Finally, Armine Yalnizyan offers her take on how the Cons have permanently damaged our ability to assess the state of Canada's housing market - and how the limited data available through the National Household Survey offers plenty of reason for concern.