05 November 2012

Kathy Dunderdale, give-aways, and the resource curse #nlpoli

Ontario has been interested in Gull Island since at least the 1990s.  We didn’t need Kathy Dunderdale to say that again as part of the advertising show she is mounting before finally admitting Muskrat Falls is a done deal.

As recently as 2005, Dunderdale and her friends turned up their noses at Ontario’s offer to help develop the Lower Churchill at no cost to local taxpayers.  The result: No development.

Instead of building the Lower Churchill for export  - profit for taxpayers -Dunderdale and her friends are forcing taxpayers to empty out their public bank accounts of billions in oil savings and then borrowing billions more in order to give cheap electricity to multi-billion dollar mining companies. Then those same taxpayers will pay themselves back through their electricity rates over the course of 50 years.

Whoever could imagine such a ridiculous idea?  Especially in a province where the overwhelming majority of the population pays very little, if any, tax.  

That's what Kathy Dunderdale told her fellow Tories at their convention in Gander. us a couple of weeks ago in Gander:  “Nineteen per cent of the people in this province pay 70 per cent of the taxes. Think about that now. Nineteen per cent of the population pay 70 per cent of the taxes.“

Think about that, indeed.

The 80% paying little or nothing don’t do so because they live in some kind of oil-soaked, progressive paradise where only the most ultra-rich pay for everything.  This is not a place where, as Kathy Dunderdale imagines, “we’ve relieved that burden on people…”.

Far from it. 

Kathy Dunderdale may like to imagine she and her friends have been some gaggle of messiahs and saviours, but that would be purely her delusion. What Kathy Dunderdale described in Gander is an historic situation in Newfoundland and Labrador.  When the Tories came to power in 2003, for example, the average fish plant worker in this province made less than $16,000 a year from their labour. If you took out the federal employment insurance payments from their income, you’d have people making less than $10,000 a year from their own work. 

Newfoundland and Labrador is now a “have” province where the vast majority of people are “have not”.  The vast majority of people in Newfoundland and Labrador don’t pay taxes because they don’t make enough to qualify for the lowest tax on the lowest income levels. Or they make so little that they barely make it onto the tax rolls at all. 

And now this same Kathy Dunderdale who recognises the fundamental economic problem in the province wants those people who don’t make enough money to pay taxes to pay a special tax on electricity. 

A new tax

Kathy Dunderdale wants those same people who can’t afford to tax taxes to do more than pay a new tax.  She wants them to take the billions of dollars that a mere fluke of nature bestowed on them and piss it away. Then Dunderdale wants those same people, already bearing one of the largest debt loads per person of any people in Canada, to borrow billions more.  She has already decided to give all those billions to build a dam to make electricity.

Dunderdale’s dam project will not give those hundreds of thousands who cannot afford to pay taxes a break on their electricity prices.  Dunderdale will give them no relief on that count.  Rather she wants those same people whose money she has decided to spend and then drive further into debt to pay themselves back in full, over time through higher electricity prices than they would normally pay.

Dunderdale will relieve someone of the burden of paying for electricity alright.  She will relieve the owners of mining companies from electricity prices. The Telegram’s Russell Wangersky figured this out:
One of the things you’ll notice is that it sure looks like we’re going to have a special set of power rates for miners.  
“Government is developing an industrial rate policy for Labrador,” a report on electricity and mining says.
As part of Dunderdale's campaign to sell her dam project, her old friend Wade Locke gave us a wonderful look at the blindingly obvious last week:  economic development is good.  People get jobs.  The government gets taxes.

Then Wade added a twist. He told us how you can translate those benefits into dollars per kilowatt hour. You know, to help people understand how important “development” really is. 

No one measures economic development in the cost per kilowatt hour.  No one.  No one that is except someone who wants to try and sell you on a new tax.  Wade did a wonderful of greasing the skids for his current and former and future clients and their argument that we must give multi-billion dollar mining companies cheap electricity.

What Locke doesn't say - of course – is that we would get most, if not all, of those benefits without giving up a penny.

Wangersky has also sussed out what is wrong with this scheme:  “It’s a new electrical tax to be split between already-wealthy mining firms and the provincial government.   If mining companies need power, let them pay for it.  We’re already giving them premier access to a non-renewable resource. Do they really expect us to ice that cake for them, too?”

Maybe the mining companies expect the hand-outs.  Maybe they don’t.   All we can say for sure is that the provincial government and its supporters want to relieve mining companies of the burden of paying for electricity.  A bunch of them have formed a group to sell people on the idea. It’s quite the list of people behind it. 

The St. John’s Board of Trade  - Newfoundland and Labrador’s business leaders – want to relieve mining companies of the burden of electricity prices, too. Kathy Dunderdale told the board all about her plan when she spoke to them last month.  The businessmen and women stood and cheered the dam project.

Historically, the St. John’s Board of Trade has always cheered provincial governments that believe firmly that the role of government is to give public money to private business.  2012:  they cheer.  Eighty years ago as the then-country of Newfoundland slid toward bankruptcy?  Cheering.

There’s another historical connection in all this that might not be so readily apparent.  Back in Gander, Kathy Dunderdale said that when “people don’t pay a whole lot of income tax and so on, then sometimes you can get a little benign about your advice to government.”  They don’t care about over-spending and things like that.

Not exactly. 

When so many people don’t pay for government, they tend to act like government isn’t theirs to control.  They act like subjects of government, not citizens. Non-renewable resource wealth only makes that situation worse in places where politics is more about distribution (patronage) than it is about citizen participation. 

Political scientists started looking hard at this connection about 40 years ago. They have looked at the way the resource curse  - as they call it - works in countries in the Middle East.  Lately, they have started to look at the way the resource curse plays out in federal states like the United States and Argentina.  The pattern holds.

The political aspect of the resource curse in these countries is not just that the average person doesn’t get involved in politics or looks at politics as a source of patronage.  The political problem is also that politicians act less like agents of the people who voted them in and more like rulers dealing with their subjects.

Politics in these sorts of places tends to be parochial, that is, it is focused on local concerns and patronage.  And it can be paternalistic:  father or lately mother knows best. 

You can see that paternalism in the way supporters of the government of the moment insist that the only thing that matters is who has the most seats in the House and who got the most support at the last election.  If they got the most seats in the House, then they have the unquestioned right to make whatever decisions they want.

You can see it as well in the attitude that politicians in power take to voters and the legislature. The legislature is a nuisance so they don’t open it very often, if they can control its sittings.  Access to government information is a privilege, not a right.  They’ll restrict it if they can.   Voters are usually ungrateful for all the benefits they get  - remember Danny after the Straits by-election? - or, as Dunderdale put it, they get a little “benign” in their “advice” to government.

You can see it as well in the way Kathy Dunderdale and her colleagues are treating external review of their dam project.  In an interview with CBC, natural resources minister Jerome Kennedy condemns the public utilities board – everyone one of them appointed by the current administration – because they refused to play along with Kennedy and his party:
The way they dealt with it, in my mind, was an abdication of responsibility," said Kennedy. "The premier has clearly indicated that they had their chance, they offered no assistance, they chose not to."
And the House of Assembly is irrelevant to government’s dam plan.  They will do it anyway, regardless of what happens in the House.  As Kathy Dunderdale noted in an interview with NTV, the public endorsed her party’s energy policy in the last two elections.  Therefore, she is good to go with the dam plan.

Dunderdale apparently forgot that in that in elections going back to 2003, the voters also endorsed her party’s platform of “no more give-aways.”