Spending Comparisons #nlpoli

The Canadian Institute for Health Information (CIHI) released its annual summary of health care spending health care last week. This is a pretty basic collection of numbers that show how much money we spend on health care, whether it is from provincial, federal, or private sources.

The report made the news, as it always does.  The Globe and Mail reported that spending on health care was growing at its lowest rate in 17 years.  fair enough.  They also did a story on how much seniors are costing the health care system.

In that second one, the Globe asked why it is that some provinces pay more per person for health care than others.  Some provinces – like Newfoundland and Alberta – have more money because of oil, said the Globe’s expert.

And if you really didn’t know what was going on, you’d think that made perfect sense.

A failed petrostate? Look closer #nlpoli #cdnpoli

Andrew Leach at macleans.ca took issue on Monday with the idea Canada’s economy is overly dependent on oil production.

Leach notes that both the oil industry and oil industry critics tend to over-estimate the share oil represents of the value of all goods and services produced in the country during the year. These people will estimate that oil makes up about 30 to 40 percent of GDP, in other words.

The reality is more like 10% today, down from 12% in 1997.

Leach goes through a raft of other measurements that support his position.

Fair enough.

But what about particular parts of the country?

House of Cards (Part B) #nlpoli

Continued from Part A

Terry Lynn Karl is the author of The paradox of plenty: oil booms and petro-states., one of the best known books on the resource curse or rentierism.  Karl described the essence of rentierism in an article she originally wrote in 2007 and revised in 2009:

Oil wealth produces greater spending on patronage that, in turn, weakens existing pressures for representation and accountability. In effect, popular acquiescence is achieved through the political distribution of rents. Oil states can buy political consensus, and their access to rents facilitates the cooptation of potential opponents or dissident voices. With basic needs met by an often generous welfare state, with the absence of taxation, and with little more than demands for quiescence and loyalty in return, populations tend to be politically inactive, relatively obedient and loyal and levels of protest remain low -- at least as long as the oil state can deliver.

In the extreme, oil wealth can disconnect a state from its population.  By the same token, oil can disconnect politicians from the population, transforming them from representatives who must satisfy voters in order to get re-elected to bosses controlling subordinates.

House of Cards (Part A) #nlpoli

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This is the third in a four part series on the current financial crisis the provincial government is facing.  The first instalment – “The origins of rentierism in Newfoundland and Labrador” – appeared on Tuesday and the second – “Other People’s Money”  - appeared on Wednesday.  The third instalment – “Rentierism at the national and sub-national level” -  appeared on Thursday.

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Finance minister Jerome Kennedy told the Telegram’s James McLeod on Wednesday that the provincial government had a structural deficit problem.

His proof was that government spent 60% or so of its total outlay each year on the social sector.  That includes health, social services, justice, and education.  If that’s what Jerome is worried about then he and his cabinet colleagues should know that in 2005, they spent 67% of their budget on the social sector.  In 2003,  the last year the Liberals ran the place, they spent about 64% of the budget on the social sector.

Before he goes all Grim Reaper, Jerome should know spending that kind of percentage on the social sector isn’t unusual for governments across Canada.  That’s been pretty much the norm since the late 1960s when governments introduce publicly-funded health care. In Ontario in 2012, for example, all but about $30 billion of the government’s $126 billion budget went to social program spending.

That doesn’t mean the provincial government doesn’t have a huge financial problem. They do. It just means that Jerome is looking in the wrong place to find a sign of it.

Rentierism at the national and sub-national level #nlpoli

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This is the third in a four part series on the current financial crisis the provincial government is facing.  The first instalment – “The origins of rentierism in Newfoundland and Labrador” – appeared on Tuesday and the second – “Other People’s Money”  - appeared on Wednesday.

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A rentier is a person who lives off the income from property and investments.  That distinguishes a rentier from a person who earns income through labour.

For the past 40 years or so some political scientists and economists have studied something called a rentier state.  In simplest terms, a rentier state is one that derives a significant portion of its national government income from the money they get from oil and other high-value, but volatile commodities.  [FN 1]

For our purposes, we’ll rely on a definition of “significant portion” as being 40% or more of  government income.  [FN 2] We’ll also focus the discussion on states that derive most of their income from oil.

What we are talking about here goes by several names including  the Dutch Disease or even the resource curse.   Jeffrey Frankel of the Kennedy School of Government put it this way:

It has been observed for some decades that the possession of oil, natural gas, or other valuable mineral deposits or natural resources does not necessarily confer economic success. Many African countries such as Angola, Nigeria, Sudan, and the Congo are rich in oil, diamonds, or other minerals, and yet their peoples continue to experience low per capita income and low quality of life. Meanwhile, the East Asian economies Japan, Korea, Taiwan, Singapore and Hong Kong have achieved western-level standards of living despite being rocky islands (or peninsulas) with virtually no exportable natural resources. Auty (1993, 2001) is apparently the one who coined the phrase “natural resource curse” to describe this puzzling phenomenon. …

Other People’s Money #nlpoli

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This is the second in a four part series that offers an interpretation of the current financial crisis the provincial government is facing.  The first instalment – “The origins of rentierism in Newfoundland and Labrador” – appeared on Tuesday.

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As much as people imagine a great difference between the Confederate and anti-Confederate forces during the National Convention, the two agreed on one thing:  someone else would have to pay for Newfoundland’s return to responsible government.

The London delegation asked the British government to provide the erstwhile country with money. The British balked, pleading their own financial hardship after a long and costly war.  That refusal is largely what prompted Peter Cashin to claim that the British were trying to sell the country the Canadians.  As many words that have been spilled and as many books sold trying to prove the conspiracy existed,  there’s never been a shred of proof that such a plot ever existed outside Cashin’s frustration.

The Ottawa delegation found wealthy Canada more receptive to the Newfoundlanders expectations and after a first referendum and a run-off vote, Newfoundlanders and Labradorians voted to become part of Canada.  For Labradorians the moment was especially sweet.  The National Convention and the referenda were the first time any residents of the mainland part of the country had ever been allowed to vote.

The Origins of Rentierism in Newfoundland and Labrador #nlpoli

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Over the next four days, SRBP will offer an interpretation of the political underpinnings of the current financial crisis.  This series goes beyond the immediate to place recent events in both historical and comparative, international perspective. 

The first two instalments briefly describe some characteristics of the political system and Newfoundland political history before 1934 and from 1949 to about 1990.  The third post will look at the concept of the rentier state and the relationship between dependence on primary resource extraction and politics at the subnational level (states and provinces).  The fourth post will place recent developments in Newfoundland and Labrador in the larger context. 

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Before 1949, the Newfoundland government’s main source of income was taxation of imports and exports.  The Amulree Commission reported, for example, that the government brought in around $8.0 million dollars in the fiscal year ending in 1933.  Of that, 71%  - $5.7 million  - came from customs and excise duties.  The next largest amount was $700,000 (about 9% of total) that came from income tax while the third largest source of income was postal and telegraph charges totalling slightly more than $587,000.

Newfoundland also had almost no experience of local government before the Commission Government in 1934.  St. John’s was the only incorporated municipality and the city council was quasi-independent of the national government. 

Beyond the capital city, the national government “managed a highly centralized system through the stipendiary magistrates stationed in each electoral district, “in the words of historian James Hiller in his recent note on the Trinity Bay controverted election trial in 1895(FN 1).  The central government also appointed the members of some local  boards to manage education and roads.  The money for all of it came from accounts controlled by St. John’s.

The members of the House of Assembly had enormous control over government and that public money.

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.