State of the Province

State of the Province

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In British Columbia, the pendulum swings with such velocity it destroys things, the only thing that destroys more is the rhetoric that moves it and resulting distortion of public perception.  The recent events in our provinces politics are no exception and they are a product of failing to build consensus on a foundation of reason. Once again, short-termism, election cycles, frivolous posturing and spin are taking us away from health and prosperity to waste and destruction. What is even more ridiculous, is that the only thing there is consensus on, is the use of a Carbon Tax as a deterrent to fossil fuel use; a proposition I can readily disprove and is just plain stupid. One watches in disbelief as contention fueled folly leads us like a pack of squabbling lemmings into the realm of ineffective policy.

CLICK THIS LINK - MEDIA DISTORTIONS & PARTY POLITICS

I search every day for purity of thought in government policy – highest and best use, social goals, regional advantage, innovated education policy, disruptive economic policy, rural revitalization, rational medical policy – there is a void. There is a void because everybody is appeasing special interests and snuggling sacred cows; somehow we need to have the courage to question the status quo and design a future that holds prosperous people, social transcendence and a healthy environment.

To the socialists that clutch to mediocrity in the form of monolithic government institutions for security and salvation; I say that a truly generalised state of prosperity will never be found there and worse, institutions steal families and individuals. To the “top 1%” I say, pursue an exclusionary policy at your peril, Marx and Engels were created by exclusionary policy and their thinking has set motion several human disasters – disasters that can only be measured against the neglect of the working masses in the industrial revolution.  To the preservationists I say, we are the stewards of the earth now – the face of the earth is going to change, it is how you view that change that matters – Chernobyl, indisputably one of the largest disasters in history and it has created a wildlife refuge for short-lived mammals – that is everyone but us – it is a paradox that the thing you feared most generated what you love most – so have courage there is always a way forward. We live in the most beautiful and abundant place in the world, we can afford to be generous and we can afford to pursue a disruptive policy in the pursuit of a generalised state of prosperity and a healthy environment.

CLICK THIS LINK - TRANSCENDENCE & WHY IT MATTERS

There are a lot of “inconvenient truth(s)” that people want to ignore – here’s one – if every resident of British Columbia ceased to exist today, every environmental concern presently at play on the global stage would continue unabated – the only thing lost would be BC’s bank of human capital that wants to protect the environment. So it makes no sense to “sacrifice” our children’s futures at the altar of example – but rather make sensible use of our natural abundance, to generate wealth, to lead the change we are seeking. If you believe for one moment that stopping the production of fossil fuels in Canada will somehow drive better behaviour in other actors – you are a naïve. The vast majority of other actors in the world will respond to one thing, less expensive energy - whether it helps the environment or not – so that is where the focus should be – viable alternatives.  A policy that works is made by people accepting reality, rather than people peddling altruism. Focus altruism on measured outcomes.

CLICK THIS LINK - WHY CURTAIL CANADA'S OIL INDUSTRY - 

BAD ACTORS WILL FILL SUPPLY

Here’s another “inconvenient truth”, there has never been a school in history that has taught a child, people teach children. There was a time that knowledge travelled painlessly from one generation to the next through the course of life - no institution in sight. We have created a collection of institutions that place a higher value on credentials and process, than on knowledge and that has translated into a society that places a higher value on the status of credentials than value added outcome.  Most education is really a supply management system, we have a situation where most people are underemployed or waiting to be employed. Clearly, one needs to guard against nihilism or destructive change and take care of people who now depend on various established systems for prosperity – the trend away from this reality is essential if we are to ever to transcend the constraints our institutions are putting on the human enterprise.  We can accomplish this if we provide more relevant, rapid and less costly knowledge transfer – and credentials that are measured by improved outcome rather than ink on a page.

CLICK THIS LINK - HOW FREE & FREER EDUCATION WORKS

Here’s another “inconvenient truth”, there are a collection of people who want to control human discourse – they want to centralise power and impose their view of the world. Their view is often outmoded or corrupted by various interests that are antithetical to progress. As a result, we have legislation with many very damaging externalities – public policy should have one goal – that the human enterprise is exercised in pursuit of the expansion of the human condition – happy, healthier and prosperous people; that is to say, the facilitation of the populous. Seed the economy in the way homestead policy built 1/3 of the United States net worth, by giving people opportunity to prosper.  We have many opportunities in British Columbia for such effort – forest renewal, the transition to “tree farming” from “tree extraction”, tourism, agriculture and high tech offer many opportunities for aggressive support by the government in the form of independent capitalization. Much of what we have is wasted on policy that lacks an extended vision –  and without a consensus, we shuffle from the pillar back to the post.  Here we need cast aside old modalities to let a thousand flowers bloom, to emerge as they will – we need only feed them.

CLICK THIS LINK - Quantitative Easing for the Middle Class

Here’s another “inconvenient truth”, institutional inertia is taking us to the wrong place, nowhere is this truer than our medical system. Everyone has worked under failed strategy, one tactical change after another and the system is screaming for more, staff are overworked, resources are short - service is low, people are left wanting.  The concern here is the care and wellbeing of the population, as opposed to, preserving the medical system as it now exists. There is an irrationality that has gripped the Canadian populous on this issue and it is true here in British Columbia. We have to draw on all models – models beyond medical service delivery and design a system the provisions cutting edge care in abundance – it can be done because it is done in other areas of service.   

CLICK THIS LINK - MEDICAL SYSTEM REFORM 

Old ideas, old divisions and old thinking will take us to old places. We need to have the courage to forge a way forward that takes the long view, that can be counted on, that recognizes reality rather than pandering to existing in the box thinkers, we need to fragment group think at its source – the education system, we need to first educate and then finance our young people, we need to realize that prosperity for the poor is prosperity for everyone, we need infrastructure, we need rational environment policy – what we’re getting is political squabbling and lost opportunity.

Agriculture Supply Management - Addicted Folly

Supply Management & the Trans-Pacific Partnership (TPP)

Supply Management is showing as an inhibiting factor in Canada’s participation in the TPP, it has been an inhibiting factor in the DOHA trade talks and it played in our trade talks with the EU and it has been a bane at the WTO. Tallying the overall cost to our economy due to lost trade opportunity is outside the scope of this discourse; however, it is substantive, because the reduction in trade due the presence of Supply Management (SM) in the agriculture sector reaches beyond just agriculture. It is reported, for example, the SM is threatening Canadian participation in the TPP, which represents access to a market of 800 million people. At other international forums, SM has been an inhibiting factor – third world countries want access to our the “rich” West's food market and the West is being stubbornly obstructive; paradoxically, now, the expanding middle class in the “third world” countries is one of Canada’s biggest opportunities.

It is worth noting as well, that if you're unwilling to support the end SM for access to trade internationally, then do it for domestic reasons.  Each Canadian household subsidises the dairy industry in the amount of $260 / year, for most households, this is an imposition, for low-income people it is a burden.  Please also, support the end of SM so that we can have a healthy, vibrant primary food sector that is rationalised to the market and that is accessible to everyone.  The present SM regime in Canada is very obstructive to new entrants, and as such, retards the innovation for the respective sectors.  In the case of the BC Dairy Milk Marketing Board, for example, access to the industry for innovative production, process or new markets is grossly retarded – worse, however, is that the market share for primary dairy products has stagnated and is losing ground against products that are unaffected by SM.  All are better off if the industry operates in response to the market.

There is no question that SM regimes must go, they simply are burdensome to manage, please examine any of the SM regimes. I have examined the Milk SM regime, my conclusion is that, domestically alone, the SM regime is detrimental – TO THE INDUSTRY – as well as the rest of Canadians; it is clear that on the world trade front they are an inhibiting factor and very costly to our economy. The question if SM should go, but, how.

The Government of Canada & the provincial governments have developed, in most cases, a quota system – quota is, in essence, a permit to produce a given amount of product for a predetermined sale price. Quota when originally allotted to producers was allotted for free and was never met to accrue value – of course, the right to access a market garnered value and of course quota began to be traded. Eventually, many boards set up quota exchanges to manage the trade of quota, this was done under a government legislated regime.  There is no argument that quota has value, there is no argument that government has recognised that value and there is no argument that government legislated and by extension, forced participation in the system. Farmers have invested heavily in the system, for many, quota represents more than 50% of their net worth – government has an obligation to ensure that farmers have a transition strategy the recognises this reality.

We have quantified the cost to each household of $260 per household per year to support SM now. We can quantify the degree of benefit we will garner from free trade; we can quantify the net benefit to the taxpayer that flows from fee trade agreements. In that mix is a means to fairly remunerate farmers for relinquishing an asset and facilitating an orderly transition to a free market operation. THIS IS RIGHT AND FAIR, a byproduct of a clearly published policy on the transition that has Quota market value at the heart of it is, farmers will offer less resistance.  Conversely, there needs to be a clearly communicated benefit to the public, that shows how they benefit from the arrangement.

The time for hesitation is through, we need to act, we need the change – let’s get on with it.    

More thoughts on the subject  

Supply Management - Transition

Supply Management - Minister of International Trade

Experiences & Overview of the BC Milk Marketing System

Inverine Consultancy

Supply Management Reform – Dairy Industry - Conference Board of Canada

Supply Management Reform – Dairy Industry - Conference Board of Canada

It is clear that in Canada the supply management system needs to be reformed, specific to dairy, the interests embedded in the present regulatory modality of conduct are retarding the industry's growth. As an individual who wants to enter the industry at a scale and at a pace that is practical, as an individual who attempted to seek the support of the present industry complex to engage in business and was in effect rebuked for my efforts, there is no one more enthusiastic to see reform here. I believe there is a viable place on the WORLD stage for the Canadian Dairy industry; the question is “how to shed the baggage of the present supply management system”. This posting is in response to the Conference Board of Canada’s Report – REFORMING DAIRY SUPPLY MANAGEMENT, THE CASE FOR GROWTH. This is an outstanding work and warrants study by anyone who wants to see the Canadian Dairy industry removed from the constraints of the past.

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 The report does an excellent job of quantifying the industry and the cost of supply management. It understates or, to some degree, neglects to stress the mass of capital that is sitting latent at a market value of 23 billion dollars; the cost of quota ownership zaps the industry of vital resources. The report shows the 600 million dollars or so each year that it costs farmers to finance quota, it fails to project where farmers would be if they had those resources deployed toward production rather than licensing.
 Also absent was a quantification of the regulatory overhead the industry now carries, other industries are absent Boards to manage them, and the market manages itself. The incremental increase in the product of $260 per family per year would be more tolerable if farmers were getting it, but much of it flows to the administrative aspects of the regulatory process.

 The new industry vision is a welcome expression of a brave and viable way forward with a strong argument to support it. There is no doubt that the present state of the industry and the regulatory regime is affected and stunted, both domestically and internationally. I personally attempted to start a dairy-related business that in no way diminished incumbents in the industry, was innovative and at scale and would eventually integrate with the present system – it was met with near-violent opposition.
 The present industry quota value of $23 billion is massive, yet the report suggested that we buy the industry out at approximately $5 billion. One understands the rationale presented in the report, the vintage of the quota affects the cost or benefit of ownership; the fact remains, however, that any dairy farmer now in possession of the quota can sell it for fair market value – to institute a transition strategy that deviates from fair market value is going to meet resistance from the industry regardless of whether one can pencil out a justification. The challenge is that Quota is viewed as an asset with a market value, and producers, if not reimbursed at FMV, will be in a position of loss relative to the status quo. One can make the argument and demonstrate a relative advantage to one producer over the other; however, you are saying to the industry with a quota valued at 23 billion that the buyout is 5 billion - it is a hard sell.

 The quota system was developed by the government, and it generated a quota that had value at issuance as much as later. The presence of value is substantiated both by the rationale for creating quota and by the subsequent valuation that evolved via government-sanctioned and created exchanges. The report states, “And the policy can be justified because, as a matter of law, new entrants were required to buy quota as a condition of entry into the business whereas the initial quota allocation was issued at no cost." This approach takes the position that farmers should not need to realize a capital gain on their quota asset funded by taxpayers or consumers.” This is analogous to the government asserting that because a family has had land since it was homesteaded or granted by the government, then it should be valued less upon expropriation than a family's land that was purchased shortly after. The key consideration here is that the government defined and permitted the quota system to evolve, and the value of the quota was a product of government intervention in the marketplace. The government chose to effect a subsidy, and the license to garner that subsidy had and has value. The transition needs to be equitable Yes, the math does count, but it must be just as well. It is unfair that consumers have subsidized approximately $260 / household/year – the government intervention in the market generated this unfairness. It would be unfair also to take from farmers an asset that has been held and sustained at the cost of opportunities foregone. 

The transition needs to be as rapid as possible, and the government will have to pay. The farmers should receive the FMV for the quota over ten years, said rights transferable by sale.  The government can finance this transition from debt, and the increase in production and expansion of industrial activities via the export markets will likely go a long way to paying the bill over the buyout period – it surely will over time.