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.

Why Government Needs to be Rationed - Government Over Spending

In business, a company’s actions are constantly rationalised to the dynamics of the market in the pursuit of profit. The expansion of administrative costs in a company sees an almost immediate effect on profit and ownership seeks to rectify the situation. The time span of realization of error is crisp, the line of accountability clear this generates a circumstance where the organisation responds quickly and effectively to frivolous and extraneous costs - the larger the organisation the more muted this response becomes.

The nature of our political system generates a circumstance where the three contributing factors in favour of private enterprise, work against government. In a company when an error in spending is made, the reporting structure sends information immediately to a concentrated entity - management and ownership, which responds. In government when an error in spending occurs, the time it takes for the people affected (the taxpayer) to realize it, events have extended beyond effective response. Worse, there is every incentive for the people who made the decision to conceal the event, as the individuals executing the error are financially unharmed by the event and can only be negatively affected by the public knowing. Further exacerbating the situation is that the reporting structure of government is arcane which mutes resolution of the event in the context of accounting. It is in this atmosphere that poor practices and waste continue in government, increasing the cost of services and exacting a greater and greater toll on the taxpayer. This phenomenon is attributable to the size of an organisation and in equal measure to the nature of government having an inherent challenge in this regard.

All matters of human exchange involve a transaction. Contemplate your daily life and count the number of transactions you make through the course of your day. If for every $10 purchase a $10 bank charge was levied on the transaction, you would have half as much money to pursue life. This is the exact circumstance most of us living in Canada, where for every $1 we make the government takes $1. As government burgeons there is an exponential increase in cost to the taxpayer. As government grows, so too does its involvement in all exchange. Transaction costs that emanate from government mandated requirements to utilise other services, the $1000 conveyance fee to transfer a house, the airport fee, the list is frighteningly immense. These represent transaction costs that serve as a drag on the actions of the population – retarding citizen’s ability to provide for themselves and retarding the ability for people to utilise resources for enterprise, leaving the government with a smaller, heavier taxed tax base. This is the vicious downward spiral that causes government to cave in on itself.

As government grows and extends greater control over human exchange policy requiring licensing comes in to play. A driver’s licence is a document that indicates competency around the operation of a motor vehicle, and is relatively benign as its access is determined by the ability to pay and competency alone. There are other cases however, where government licensing has other motivation and unintended consequences. In the case of licensing of frequency for broadcasting, licensing was originally required for the management of frequency – to avoid one broadcaster interfering with another. As time progressed licensing progressed under other motivations. Naturally an incumbent broadcaster wants less, rather than more competition and would lobby government to preclude new entrants. Government itself openly admits in it’s literature that it uses licensing to restrict supply of broadcasting services. When government takes actions which distort the natural ebb and flow of business, the consequences are almost always negative. In the case of broadcasting, lower numbers of people restricted the supply of advertising raising the cost of businesses to promote themselves – ultimately increasing the cost of goods and services as the media spectrum of offering was limited. People have been forced to consume media content of inferior quality and interest. While it is appropriate for government to seek to offer strategic direction- meddling with distorting micro policy is most inhibiting. The government in this case should seek harmonious utilisation of the airways and allow the market to work.                   

Tax policy in Canada is very complex so there is extreme cost to the citizenry, firstly in negotiating the maze of tax policy to minimise payment and secondly in the actual paying of the tax. Complex taxation policy, in and of itself, increases transaction costs, and worse, is the waste of human capital taken in administering taxes. The complexity of the system takes some of our best minds away from productive contribution to society to attend to the analysis of complex policy to determine the most beneficial “interpretation” of tax legislation, while some more of our other best minds at Revenue Canada are taken away from productive pursuits to devise ways to respond to the interpretations of the first group. All this intellectual capacity is wasted; it is hard to imagine a more destructive way for government to conduct itself. By simplifying the tax system, this waste is reduced, government requirement for enforcement is reduced and a retraction in government operating costs effects a positive situation by reducing tax requirements – a positive cycle is initiated. Opportunities abound to reduce the complexity of government and hence the cost of government. This is just the tax system; contemplate the legal system and any of the other multitude of government services. Government is too important to allow actions that serve to damage its own long term standing.

Canada is a resource rich country, unimaginable wealth is ours to use to build the most advantaged society on earth. An occurrence of grave concern is the liquidation of assets to fund government operations. This is the equivalent of a farmer selling his/her land to buy fertilizer, soon the farmer will run out of land to fertilize. The federal and provincial governments are presiding over the liquidation of non renewable resources as fast as the market will purchase them. This is fine as long as the revenues this generates go to the establishment of other capital assets, but it is presently going to fund the operations of government. Sell a million barrels of oil, build a hospital – ok, sell a million barrels of oil and pick up the garbage – not ok. Inherent in this reality are massive structural deficits. Take government revenues from taxation ONLY and if operating expenses exceed that, you've got a structural deficit – presently most governments in Canada see royalties from the sale of raw resources as a legitimate source of funds for funding operations. The funds from royalties should be going toward long term infrastructure and the development and enhancement of human capital.

There needs to be an apolitical rationing mechanism that limits the growth of government, so that government and economy are optimally matched. The challenge we face now is that governments are strongly incentivised to spend more, more as a percentage of GDP, in the quest for public approval. We elect government on how best to administer public resources and choices related to this task need to reside with elected officials. There are objective means to assess the optimal size of government, within reasonable variance. Size of government is determined by the size of the budget at any given point in time. In the same way that the central bank has a narrow set of parameters to set interbank rates at arm’s length from government, so to could a “Budgetary Review” official have a narrow set of parameters and function at arm’s length from government to set the size of the budget.

As stated before, there is a point where government is an organ supported by the people as an entity unto itself – rather than being the facilitator of human exchange, it becomes the focus of national endeavour. It is then like the proverbial snake eating its tail – a circumstance that is clearly unsustainable. Canada has a productivity deficit; perhaps we need look no further than the overall transaction cost that is government to find the key contributing factor.