Ridiculous is all the rage #nlpoli #cdnpoli

Fresh from her triumphant speech about co-operation and consultation as the way to develop the north, the potential for developing uranium in Labrador and  - of course – the glories to come from Muskrat Falls, Premier Kathy Dunderdale is off to Atlanta as part of an Atlantic provinces’ trade mission.

Regular readers will recall then-business minister Paul Oram’s insightful interview on Newfoundland and Labrador history during one of his trips to Georgia.

Yes, friends, this is not the first time people from this province have gone off to the southern United States to see if we could increase trade with the Americans.  It has been a popular destination.  Danny Williams took one of his last over-seas trips to Mississippi as part of one of the trade junkets.

As you can see from that post on Williams’ trip, the Americans are looking for people to come to their states, invest money and start creating jobs for their people. There could be no better time to talk to them about investing in our province and creating jobs here.

Obviously.

And if you wanted to find some place to sell stuff we make then surely there can be no better time to do that than when our largest trading partner  - the United States – is struggling to come out of a recession. 

Again, a bit obvious, but apparently not quite so obvious to some people.

In a province where even the finance minister said the economy was fragile,  the provincial government can’t quite seem to get the concept that looking for new markets might be a good idea.

Other people certainly get the point.  Prime Minister Stephen Harper has been talking about expanding trade with Asia and Europe.  In British Columbia, they’ve got a new natural gas strategy  - h/t to David Campbell in New Brunswick – that talks about developing natural gas as an export to places like Asia.

Meanwhile, in Newfoundland and Labrador, there’s no serious interest in finding new markets for stuff. A couple of years ago, the current provincial government refused to take part in trade talks with the Europeans.  The locals were more interested in the seal hunt than in creating jobs. Just last year, one local politician said it would be like doing a “back-room deal with a group of serial rapists”.

You can see the level they are working at.

As for natural gas, developing it for any practical use at all is about as popular an idea in government circles as a one cheek sneak sliding across the pews on Sunday morning.

Any talk of it as a means of generating electricity gets them raising the completely absurd idea of buying liquefied gas from somewhere else and importing. 

Too expensive, the government’s favourite economist clucked, to be a viable alternative to the favourite economist’s preferred project. He didn’t really even need to hold a match to his straw-man to watch it burst into flames.

And the local natural gas? 

Well, it’s just not possible.

Because, well, it just isn’t.

Never mind that you wouldn’t have to liquefy the stuff to bring it ashore.

Never mind that there is enough of it out there to power a 500 megawatt plant all day long, every day, all year long for a century.

Never mind that they could get it from one field today where it is getting costly to re-inject the gas they get during oil production. 

Never mind that the provincial government need take only as much gas as they needed to run a gas-to-electricity plant. 

Never mind they could put a price on it and take the gas as a partial credit for offshore royalties.

Never mind there’s likely tons of it onshore Newfoundland.  The same people pushing the very expensive electricity scheme actually found gas in 2011 in not one but two wells drilled at Parsons Pond. Nalcor shut down drilling on a proposed third well because they found gas, not the oil the company hoped for.  And, as CBC reported:

Vice-president Jim Keating said there is no need for a third well as it would likely produce the same result.

Same result being gas.

Gas?

What could they possibly do with gas?

Sheesh!  <insert eye rolling>

The government crowd want to go with their Labrador project and that is really the end of it as far as they are concern.

It is a green project, you see.

Just don’t bother to notice that their “green” scheme includes building – wait for it – more oil-fired generation than the current plant they want to replace with the hydro one.

Not gas.

Oil.

Yes, their argument is ridiculous, but then again, it’s no more ridiculous than giving up a market worth billions for new products in order to posture about a product almost no one wants any more.

Or heading off to the sort-of recessionary United States for the umpteenth year in a row to talk trade with people we already trade enough with.

Ridiculous, you see, is all the rage.

- srbp -

Hebron, the Lower Churchill and Local Benefits #nlpoli #cdnpoli

Apparently, this whole Hebron work thing is much ado about nothing.

Premier Kathy Dunderdale spent some time Monday afternoon chatting with On the Go’s Ted Blades about a recent decision by Kiewit to take a pass bidding on a second topsides module for the Hebron project.

Labour was tight. The company was having trouble delivering on time and on budget.
 
At one point, the Premier said there would be more work.  The size of the topsides has apparently gone from the original estimate of 11,000 tons to 18,000 tons.

So, sez the Premier, there’ll be 18,000 tons of work.

You know, that’s something that always puzzled humble e-scribblers.  When people say there’s tons of work, now you know what they mean.  Don’t look for the number of people on the job.  Forget the number of hours of labour.

Work now is measured in tons.

You cannot make this stuff up.

You wouldn’t.

You’d be afraid to make something like that up because people would never believe that the Premier of the province could say such a thing.

But she did.

Dunderdale also tried to claim that the crowd what has been running the place since 2003 were the first ones to copper-fasten the amount of work to be done locally on an offshore project.  Others, she said, had settled for “best efforts.” 

Kathy didn’t say copper-fasten but that’s one of her favourite little bits of meaningless jargon.  Like referring to something as a piece.  Like the Hebron piece.  Or the Kiewit piece.

But anyway, first time for nailing stuff down right to the gram or work that had to be done in the province.

All that would be wonderful, of course.

Splendiferous even, except that it isn’t true.

Construction of the gravity base for the project was always going to be done in Newfoundland.  That’s the cheapest way to do things.  The provincial government didn’t get anything there they didn’t already have going into the meeting.

And then there is a bunch of small time stuff like a tube called the flare boom. Low tech metal bashing, for sure, and again, nothing of any difficulty to get done in someone’s back yard welding shop.

But the topsides modules, utilities and process module and other big stuff covered in Sections 5.5 B, C,and D of the benefits agreement, well those are all subject to conditions. The conditions are secret. They are considered to be commercially sensitive.

They are not copper-fastened at all.

As for the rest of the project, the Hebron final agreement has more than a few give-aways in it. 
The companies got a huge break on financing research and development.  Kathy and her former boss let the companies skate with a pittance of a cash commitment compared to what the offshore regulatory board rules required.

On royalties, Kathy and her old boss gave the companies a break up front as well.  Instead of an escalating percentage of revenue, Kathy and Danny gifted the companies with a flat one percent for as long as it takes to pay off the project development costs.

When Roger Grimes talked about such an idea, back when oil prices were forecast to stay low forever, Danny tore great strips off Grimes’ hide.  As it turned out Danny gave the oil companies a gigantic break when prices were high.  And Kathy Dunderdale totted out in front of the cameras to tell news media it was a way of giving the oil companies some protection against changes in oil prices.

Just think about that, in hindsight.  Back then  - in 2008  - Kathy was running to protect oil companies against the chance oil prices might drop. 

The poor old multinational multi-trillionaire oil companies. 

Too fragile to take the risk.

A couple of years later – in 2010 – oil prices were going to be high forever.  That is the justification for Muskrat Falls. And what about protecting taxpayers from the possibility oil prices might fall?  Out trots Kathy and then Shawn and now Jerome to say there’s no chance of that happening.

And so the taxpayers of Newfoundland and Labrador, the people who own the oil and gas and the water, having given the oil companies a break must now dig ever deeper into their own pockets to ensure their electricity prices are high. Nova Scotians, meanwhile, will get their power for free, except for three months of the year when Muskrat apparently can’t deliver the juice.

Not much of a local benefit in that. Sure,  Tory supporters will tell you all about what Danny got in exchange.  Like equity stakes.

Hang on a second.

Equity.

No small irony that the two big issues in the province are the Lower Churchill on the one hand and Hebron on the other.  Those equity stakes, including the one in Hebron, were always about one thing:  financing the Lower Churchill. Local benefits were entirely secondary. 

Don’t believe it?

Williams broke off Hebron talks in 2006 because he couldn’t get an equity stake.  Nothing else.  After 18 months of public pissing matches and private suck jobs, Williams  got a deal on Hebron. 

But he didn’t pick up any local benefits that weren’t already on the table in 2006.  The so-called super-
royalty won’t add much beyond what the province would have received under the same royalty regime that is delivering in spades on projects like Hibernia and Terra Nova and White Rose.

Equity was the thing.

The first thing.

The most important thing.

So important that Danny even told Arnold about it:

The Premier also discussed the province's Energy Plan objective of using non-renewable resource revenues to fuel a future based on renewable sources of energy.

At times like this, it is always interesting to go back and see what was running around at the time.  This time look at August 2007 and the rather convenient election announcement of a Hebron deal:

6. Shortage of workers means shortage of work.   

In the last round of negotiations, the provincial  government insisted that any work that could be done in Newfoundland and Labrador had to be done there or the companies would pay a penalty. Reportedly, the companies noted that Long Harbour plus the Lower Churchill would outstrip the local labour and engineering pool making it almost impossible to complete Hebron using only local resources.

Cancellation of Hebron last year meant that workers who would have started work on Hebron have already headed west to the higher wages of Alberta. That made the predicted situation worse, not better and therefore will make it harder for the province to stick with that bargaining point. 

Expect that provincial demand to drop off the table or for Hebron to get preference over the Lower Churchill. Otherwise, the cost of the project will be forced up.

Your humble e-scribbler had plenty of people from the local oil and gas community point that out.  The companies talked about labour force shortages and costs, they said. The final Hebron agreement reflected the limited capacity in the local market to do some of the bigger components for Hebron.  The only things the companies had to do here was what they absolutely had no choice but do here.

Not surprisingly, that old demand for guaranteed local benefits or suffer a penalty disappeared.

And equally unsurprisingly, the provincial government’s news release talked up the GBS and the small stuff – “outstanding local benefits” – but only after they played up the equity.

Makes you wonder why Kathy Dunderdale is talking about Kiewit and Marystown like it was some kind of surprise to her.  She’s known about the whole thing from the beginning:  Hebron, the Lower Churchill, jobs, local benefits and the equity.

The equity.

It’s always been about the equity. That’s what ties it all together.

- srbp -

Unsound financial management – the Dunderdale acknowledgement #nlpoli

It’s not hard to find the toad of truth in the swamp otherwise known as the ruling Conservatives’ record on public spending since they took office in 2003.

You can find it because since 2009 they like to admit every now and then that their spending habits are “unsustainable."

As nottawa reminds everyone, Premier Kathy Dunderdale has now acknowledged that:

“[o]ur spending at the rate that we've been doing over the last eight years — and it has been very necessary for a number of very good reasons to do that — is not sustainable in the long run.” [CBC online story]

But when Mark claims that “[u]p to now, Tories (and others) have disagreed with that assessment” he is not exactly right.

In 2009, Paul Oram was the first Tory cabinet minister to acknowledge publicly that “unsustainable” thing.

As your humble e-scribbler noted at the time, those words must have received the blessing of the Premier’s Office since cabinet ministers under Danny Williams couldn’t break wind without permission from Hisself’s posse.

Fnance minister Tom Marshall.chimed in with an unsustainability admission.*

And then they just kept up the same old habits.

It’s not surprising therefore that the public sector unions just won’t react to Kathy Dunderdale’s comments that the unions must not expect big wage increases in the upcoming round of negotiations.  Local CBC has been pounding away for a couple of days trying to make a story out of this but so far they’ve come up with zip.

The unions know the sad Tory record of saying one thing and doing another.  They also know that the Tories are still in a pre-leadership phase.  Danny’s gone.  Kathy’s a fill-in. 

If they thought about it for a moment, they’d also know that the local economic boom the Tories like to praise themselves for is actually a function of public sector spending.

That’s right.

It isn’t oil.

It’s a massive increase in the number of public servants since 2003,  fantastic wage increases, and unprecedented increases in  public spending. Roads and buildings are just part of it.

That unsustainable public spending is what has been sustaining the provincial economy. Under the Tories, the provincial economy is considerably more fragile than it’s ever been before. 

Any effort by the Tories to get their spending under control – to get it to sustainable levels - will put a chill through the place.  That will inevitably lead to a chill in the local economy.  The chill won’t just hit St. John’s where most of the public servants and the construction industry lives.  The chill will be felt everywhere and that will put a chill on the Tories’ political standing.

All that is the answer to Doug Letto’s questions in his essay on the “massive obstacles” Kathy Dunderdale is facing:

Can she and the government say no? Consistently?

No.

And no.

And everyone knows it, including Kathy.

Muskrat Falls, incidentally, is nothing more than the best example of a party addicted to unsustainable public spending.  The project will increase the public debt to new record levels but that is irrelevant to the province’s Tories.  They want all those jobs to keep the economy humming.

You can easily find the toad of fiscal truth in the swamp of Tory financial mismanagement since 2003. The truth is – as Kathy admitted herself – their spending is unsustainable.

The part Kathy didn’t say is that she won’t be able to do anything but keep it up.

- srbp -

* Changed wording to clear up sentence meaning in the context of the post.  Original post had wording left over from earlier draft.

A step in the right democratic direction #nlpoli

One New Democrat is fighting the re-count in Burin-Placentia West on grounds that the special ballot provisions of the provincial Elections Act are unconstitutional.

Let this be the first measure to turn back the anti-democratic current of the past eight years.

Now fighting against the anti-democratic tide is familiar stuff to SRBP readers. 

September 11, 2007.

Note the date.

That’s when your humble e-scribbler first raised questions about the changes the House of Assembly made to the Elections Act the previous spring.  The amendments sailed through the legislature in of its typical speedy sessions with no debate beyond the bare minimum needed to make the amendment bill into law.

Others  - notably Mark Watton – saw the same thing around the same time, bit into the issue with their considerable knowledge and gusto.As Mark wrote in 2008:

In the lead-up to a by-election, when there are no candidates in the running, these provisions are just plain silly. But in the weeks preceding a general election, they afford a tremendous advantage to incumbents. It is hard to imagine a greater democratic injustice than rules permitting incumbent candidates to campaign (and do so free from electoral-spending scrutiny) and collect votes while their potential opponents cannot even register. It's no wonder the amendments passed through the House of Assembly with no opposition.

…

Over a decade ago, a unanimous Supreme Court of Canada stated: "Elections are fair and equitable only if all citizens are reasonably informed of all the possible choices and if parties and candidates are given a reasonable opportunity to present their positions. ... "

More recently, this court ruled the provisions of Canada's Elections Act, which effectively ensured "that voters are better informed of the political platform of some candidates than they are of others," violated Section 3 of the Charter of Rights and Freedoms and struck them down.

In the words of the Supreme Court of Canada, our rights under the charter go beyond the "bare right to place a ballot in a box"; they "grant every citizen a meaningful role in the selection of elected candidates."

In the three years since Mark published those words, nothing has changed.  The special ballot provisions still smell to the high heavens and generally the people who ought to be raising concerns about this have been silent.  One call-in radio host today left the impression he’d never heard of this issue before. Let’s hope he misspoke in the rush of the moment.

Well, nothing until one candidate and her lawyer decided to take a simple judicial re-count and strike a blow to restore fair elections to the province. The New Democrats did include changes to the House of Assembly as one section of their election platform last month but special balloting and the other changes the NDP supported in 2007 got not so much as a whispered mention.

Fair elections are a basic democratic right.

It is such a basic right in our society that we often take for granted what it means.  But we need look no farther back than 2007 to see just exactly how fragile our most basic democratic principles are. 

They are so fragile that the very group  - the members of the House of Assembly  - we expect to protect our democratic rights are the ones who happily and blindly violated them.

Of course, no one is surprised by this given the sustained assault on our fundamental democratic principles the past eight years have brought.

Just to give you a sense of what we are talking about here, let’s look at those democratic principles as laid out in the Bill of Rights (1689) and the examples of the attack on those principles.

And make note of that date:  1689.

• “That election of members of Parliament ought to be free;”   - the special ballot provisions as well as the other changes made to the Elections Act since 2003.
• “That the freedom of speech and debates or proceedings in Parliament ought not to be impeached or questioned in any court or place out of Parliament;: – Danny Williams’ public statements in 2007 that he favoured ending free speech in the provincial legislature and his efforts to chill free speech through personal, verbal attacks and threats of law suits.
• “… that for redress of all grievances, and for the amending, strengthening and preserving of the laws, Parliaments ought to be held frequently.”  The House of Assembly last sat in the spring and will not sit again until next spring.  Under the Conservatives since 2003, the House of Assembly sits the least number of days of any legislature in the country.

To be sure, the fundamental contempt displayed by the government for the legislature continues unabated with the the change in Premier.

What is encouraging, what is different is that for the first time in eight years, more people are starting to argue against the Conservatives’ contempt for democracy.

This court case over a simple re-count could prove to be one of the most important legal decisions in the province’s history.

- srbp -

Truth in small things #nlpoli

If the truth may be found in the smallest of things, then the shifts and changes in Kathy Dunderdale’s second cabinet reveal a great deal.

“It is very important to me that our government operates as efficiently as possible, while providing quality programs and services that meet the needs of the people of our province,” said Premier Dunderdale. “Re-aligning departments and adjusting ministries to ensure they are best positioned to take on the challenges and opportunities before us is very important.”

Here’s how the official news release laid out the re-aligning and adjusting:

• Combine the old Human Resources, Labour and Employment department with the post-secondary education section of the Education department to create the  Department of Advanced Education and Skills.  The new department will “focus on supplying highly educated graduates and skilled workers for a fast-growing economy.”
• Merge the aboriginal affairs department with the Intergovernmental Affairs department to create the Department of Intergovernmental and Aboriginal Affairs.
• Put the Business department with Innovation, Trade and Rural Development to create Innovation, Business and Rural Development.

This release puts the big information at the back end.  Eliminating the business department ends an eight year fiasco. In effect, the Conservatives created the “business” department in 2003 by breaking off some sections of the industry, trade and rural development department.  Now they’ve just put it all back the way it was, complete with the Beaton Tulk-era Rural Secretariat

After eight years of accomplishing nothing, the Conservatives have just put the economic development resources of government back to where they were in 2003. Danny Williams created the department to give a vehicle for his personal business acumen to create thousands of jobs and single-handedly produce a economic miracle in the province.  Williams did nothing while he was minister of his own department, often going weeks without meeting his deputy minister. He handed it off to a succession of second and third tier ministers like Fairity O’Brien or Paul Oram.  Even someone like Ross Wiseman couldn’t do anything except make speeches and hand out gobs of free cash to private companies.

The result of those eight years is a very fragile economy is is more heavily dependent than ever on government spending. The new minister – Keith Hutchings – has exactly zilch in the experience department when it comes to economic development:

Mr. Hutchings graduated from Memorial University with a Bachelor of Arts, Majoring in Political Science and obtained a Certificate in Public Administration from Memorial, as well as an Occupational Health and Safety Program from Ryerson University in Toronto.

Mr. Hutchings’ professional career has included 11 years with the Workplace Health, Safety and Compensation Commission. He also served as Chief of Staff and Executive Assistant to then Leader of the Official Opposition in the Provincial House of Assembly (1996 -1998) and successfully ran his own consulting business.

The Intergovernmental and Aboriginal Affairs department basically recreates what used to exist 20 years and more ago as the Intergovernmental Affairs secretariat, and adds Labrador Affairs and the non-profit and voluntary secretariat for good measure. The first two are relatively small, functionally oriented sections that could easily be rolled inside the Executive Council where they once lived.  The latter two sections are meaningless political sops that serve only to increase bureaucracy without enhancing service delivery. Dunderdale could have eliminated them entirely while likely improving the overall efficiency of government.

The ministry went to newbie Keith McGrath in order to make sure there was a cabinet minister from Labrador. This reorganization is a minor administrative change.

The new Advanced Education department actually combines the pre-2003 post-secondary education ministry with the department that handled job training programs.  That’s it. 

The organization makes sense if it was aimed solely at ensuring that the provincial job-training resources lined up to meet – belatedly – the labour crunch in the province. 

Adding Memorial University to the mix could severely hinder the university’s development by burying it inside a department aimed at something other than what it does.  Memorial doesn’t exist in order to be a glorified trade school.

This is Joan Burke’s big reward for backing Dunderdale, nothing more, nothing less.

What’s more interesting about the labour market focus of the department is that it won’t include any of the labour relations elements.  They are all part of the provincial government’s traditional function of regulating industry and ensuring a healthy and productive labour relations climate.

But under the most recent re-organization, the Workplace Health, Safety and Compensation Commission reports to the government services department and the labour relations agency reports to the environment department. Such a re-alignment ensures that the “silos” the new minister claims the re-organization would cure remain in place.

In  every other respect and distinct from these three adjustments, the departmental organization stays the same. 

When it comes to who got a new job and who didn’t, those seemingly small points also tell a larger story.

Besides Joan Burke, Susan Sullivan got a big reward for her political loyalty to the Premier. She takes over the health portfolio.  Sullivan may not feel quite so lucky in a few weeks or months – health is a difficult portfolio – but it is the largest department and the one that typically goes to those the Premier holds in high regard. If she does well, Sullivan could become a contender to replace Dunderdale when the Premier leaves before 2015.

Jerome Kennedy’s new gig at natural resources gives him a well-deserved respite from the health minister’s job. Kennedy took over that job at a hard time and navigated the department though some tough times.  he got out of it with both his health and his reputation intact.  That’s a rare achievement.

At natural resources, Kennedy faces the challenge of mounting problems with the Muskrat Falls project.  Kennedy can be a forceful proponent for an argument like Muskrat Falls.  He can also be a diligent house-cleaner when problems occur. if Dunderdale had to kill off Muskrat, Kennedy could handle that effectively too.

In the next four years, Kennedy will also have to deal with the border issue in the Gulf of St. Lawrence and the future of a string of law suits related to the Lower Churchill. 

Danny Williams appointed Kathy Dunderdale to natural resources safe in the knowledge that he was really looking after things.  He didn’t need a minister who understood much and Dunderdale fit the bill.  With Kennedy, Dunderdale has a minister who will – in all likelihood – lead this crucial department in more than name only and take the heightened public profile along with it.  Kennedy could be well set when Dunderdale leaves.

Kennedy’s appointment as Government House Leader is a clear sign the Conservatives are going to approach the legislature with a strong arm and an iron fist.

Darin King took the poisoned chalice of fisheries in the recent cabinet shuffle.  The provincial Conservatives haven’t been able to find a policy they can all agree on.  As a result, the fishery remains a festering political pustule that breaks from time to time, splattering the minister of the moment. King can kiss his leadership aspirations good-bye.

Derrick Dalley got the Conservatives’ community pork portfolio as minister of  tourism, culture and recreation.  He succeeds Terry French who got a quiet and relatively easy portfolio in what is usually the home of ministers on the way into cabinet or those on the way out.

- srbp -

Public sector job growth outpaces private in NL

From labradore:

In the five years since the recent-historic low, in early 2006, of about 55,600 public-sector employees, the public-sector labour force has increased by about 11,500 or over 20%. As a share of total employment, the public sector has grown from 26% to 30%.

The twelve-month average ending in June 2011 was 67,100 — an increase of 4100, or 6.5%, from the same period twelve months earlier. This represented an increase of over half a percentage point in the public sector's overall share of the employed labour force.

Then there are the pretty charts showing the public sector employment, federal, provincial and municipal, in thousands of people:

and the private sector:

 

So when you have digested the full impact of that little bit of information, consider what the Muskrat Falls project is really all about: the megadebt will be worth it because it will “bring significant employment and income to the residents and businesses of Newfoundland and Labrador.”

 

- srbp -

Related:

• The Fragile Economy;  … and two steps back
• The Fragile Economy:  hard numbers

15 ideas (and more) – Setting the Table

Our economic vision for Newfoundland and Labrador is that of an enterprising, educated, distinctive and prosperous people working together to create a competitive economy based on innovation, creativity, productivity and quality.

Strategic Economic Plan, 1992

Our social vision for Newfoundland and Labrador is of a sharing society which balances its economic and social interests, cares for its disadvantaged, nurtures its human and physical environment, celebrates its quality of life and traditional values of individual respect and community responsibility and provides opportunities for personal and collective achievement.

Strategic Social Plan Consultation Paper, 1995

 

Within a mere two decades, Newfoundland and Labrador transformed almost two centuries of economic backwardness into unprecedented growth.

And yet, as we enter the second decade of the 21st century, a number of factors, some identified in the early 1990s, threaten to rob Newfoundlanders and Labradorians of the bright future they worked to achieve through careful planning, steady work, and a steely determination to endure.

Public sector debt remains at record levels.  Rather than reduce debt, the current Conservative administration plans to increase the debt burden still further by building an economically unsound megaproject.  What’s more, the most recent economic forecast predicts that the current administration’s policies could triple the debt within a decade.  That is on top of the burden from the  Muskrat Falls megaproject.

Changes in the province’s population, forecast in the early 1990s, have started to create pressure for new government spending and more government spending.  Just paying the interest on the growing debt will rob money that could be helping to pay for those new services.

The highly competitive global economy that has emerged in the past 20 years, coupled with fall-out from the recent recession, will demand even greater inventiveness if businesses in Newfoundland and Labrador will meet the challenges these changes present. 

Yet, over the past decade government policy has fostered greater social and business dependence on government hand-outs.  The result is a fragile economy that will grow less robust and more susceptible to set-backs.

The answer to these challenges can be found in the principles that lay at the heart of the 1992 Strategic Economic Plan: 

• We must foster a change in people.  We must renew genuine pride, self-reliance and entrepreneurship. We must once more become outward-looking, enterprising, educated and innovative. 
• We must change government.   Our people do not need saviours or demigods.  They can run their own affairs.  We must introduce fundamental democratic reforms.  Decisions about education, health and economic development must be made closer to the people directly affected by them. The role of government is to create an environment in which the private sector can develop economically and environmentally sustainable  businesses.
• We must change relationships. We must replace the chaotic, secretive and highly centralised government of the past decade, with mature, professional and open government based on sound long-term planning and a genuine understanding of the province’s long-term interests.  Beyond that, we must forge new relationships among governments, business, labour, academia and community groups of the sort envisioned two decades ago. We must build a strong relationship between the federal and provincial governments in order to deliver government services as efficiently and effectively as possible while ensuring that the people who pay for those services can hold the right government to account for what they do.

The ideas that will follow in posts over the coming days and weeks are nothing more than the starting point for discussion.

Only through vigorous, free-wheeling public debate can we build a mutual understanding among all the people of the province on both the necessity of change and of the specific changes themselves.

Change is not a luxury.

Change is not merely possible.

Change is essential.

- srbp -

Next:  Building the Fishery of the Future

The unsustainable lightness of Tom Marshall

Tom Marshall keeps a tight grip on the provincial government’s purse strings.

He has to do that.

The damn things won’t stay that wide open on their own.

In presenting the provincial government’s budget to the House of Assembly on Tuesday, Marshall announced that the Conservative administration of Kathy Dunderdale would continue the practice of unsustainable public spending set under Dunderdale’s predecessor, Danny Williams.

Overall government spending will grow by 4.9%;  that’s about twice the rate of inflation. 

A windfall in oil prices directly attributable to turmoil in the Middle East helped to erase a forecast cash deficit of $959 million and turn it into a modest cash surplus of $133 million. (Estimates 2011 p. iv)

For the past two years, Marshall claimed the government’s profligate spending came from the need to spend cash to fuel an economic recovery. 

Now he’s got a different excuse:  we can afford it.  Marshall told reporters that the provincial economy was “sizzling”. That’s nonsense, of course.  The economy is actually becoming increasingly fragile and public spending is sustained by cash coming from a volatile source, namely oil. Marshall seems to know that just like he knows the public debt is something he should be reducing.

Oddly, Marshall never seems to do anything about it. 

Marshall forecast that the province’s net debt will increase in 2011, largely the result of continued growth in unfunded pension and benefits liabilities in the public service.

And that’s despite repeated warnings from the province’s auditor general among others.  In 2009 a provincial cabinet minister resigned unexpectedly citing concerns about unsustainable public spending.  Earlier this year, Auditor General John Noseworthy repeated the same concerns;  interestingly enough he did it in a report on Fiscal Year 2009, the same year Paul Oram left cabinet.

Two years later, the provincial government is still on the same path.

- srbp -

Related:

• Fragile Economy:  Staying the course
• Fragile Economy:  reductio ad argentum
• Fragile Economy:  …and two steps back
• Fragile Economy:  now three steps back and loving it
• Fragile Economy:  hard numbers
• Fragile Economy: The Public Sector

Provincial government wakes up on EU trade

Almost two years after your humble e-scribbler pointed out the blatant stupidity of the provincial government’s decision to boycott free trade talks, the provincial government is now sorting itself out.

The provincial government trade gang will switch from observers to participants at the upcoming trade talks between Canada and the European Union in April.

The old policy  - supported unquestioningly by the same people who have now turned 180 degrees – was stupid because it jeopardized the existing and future economic interests of the province and left local industry to being left out of a new lucrative market.

What’s worse, the old, stupid policy threatened to increase the dependence of the local economy on  on the American market. As a result, the provincial economy would become even more fragile than it had already grown as a result of seven years of backward economic policy by the provincial government.

It may have taken two years but the current crowd have finally figured it out.

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Pushback in New England on hydro lines

Environmental concerns are causing problems for a proposed electricity transmission line that could help carry Labrador electricity into the United States.

The Northern Pass project will carry electricity from Quebec into New Hampshire and on to the rest of New England.

Some local residents in New Hampshire are concerned that the proposed route will damage the state’s tourism industry. 

John Harrington is a retired newspaper publisher.  He told North Country Public Radio:

“What’s being threatened is the only thing we really have left, which is tourism. All for the convenience of people far to the south. And we’re going to wind up with this huge scar right down through the narrowest and most fragile part of New Hampshire.”

Then there’s the question of whether or not big hydro is actually green. Only Vermont currently accepts hydroelectricity from large dams as renewable and green and therefore eligible to count in state-mandated energy calculations.  Most New England states require that a percentage of electricity in the state come from renewable, green energy sources.  Both the American federal and some state governments also give cash incentives to renewable energy projects.

In some states, debate is already raging about the implications of renewable energy policies.  In last fall’s gubernatorial campaign, incumbent Deval Patrick’s Republican challenger included support for big hydro as part of his campaign platform. 

In Connecticut, Northeast utilities senior vice-president James Robb told a conference last November that without big hydro, “ it will be very challenging to meet those goals” of increasing the use of renewable energy sources to 25% of generation by 2025.  Robb said that there are projects but many are uneconomical.

Still, the big hydro projects don’t meet existing guidelines.

The main concern regarding hydro is that the flooding resulting from dams causes leaves and other foliage to decompose, emitting methane, one of the worst greenhouse gases. The Canadian officials [at the November conference]  argued that the water in their provinces is so cold that the leaves don’t decompose.

“I’m struggling here in New England with how New England is going to meet its renewable requirements. Without Quebec and Newfoundland & Labrador, you will struggle to hit that,” said Ed Martin, president and CEO of Nalcor Energy, which is based in the hydro- and wind-rich Newfoundland & Labrador. “Hydro is part of the mix that has to happen if you are going to meet the goals in New England.”

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Fin minister Tom Marshall talks debt reduction - audience pees in pants with stifled giggles

According to voice of the cabinet minister, provincial finance minister Tom Marshall is interested  - again – in talking about the provincial debt.

Here’s a excerpt from the VOCM online story, quoted here since it may have been disappeared by the time this gets posted:

Marshall proposes several measures in doing so. First, the government needs to balance sustainable and prudent spending with the implementation of steps to lower taxes and net debt. He says the province has to maximize the benefits from its non-renewable resources now so that it is prepared for when they are depleted. Finally, he argues that it is important to diversify the economy, such as focusing on the Lower Churchill Project.

Marshall’s talked about sustainable spending before but only to the extent of making clear he wasn’t the teensiest bit interested in actually doing it. In fact, Marshall’s record is of a profligate spender who never met a deficit he didn’t like.

And just to get the point across, note that current provincial gross debt is about $12 billion.  That’s roughly where it’s been for the past four years and it higher than it was in 2003 when Marshall and his crowd took office. 

Tom mentioned lowering the net debt.  Well in order to do that he’d have to stop overspending as he’s done the past two years.  According to the most recent financial statements, the province’s net debt went up in 2009 and it is set to go up again in 2010 (the current fiscal year) if current trends hold.

So while that whole “sustainable and prudent spending” thing is a great objective, Tom and his friends haven’t done it yet.  After seven years, Tom’s got to have cajones the size of watermelons to talk about debt reduction and fiscal responsibility with a straight face, expecting the people in the province to take him seriously.

Ditto the part where he talks about maximising benefits from oil and minerals.  Tom and his former boss specifically rejected any suggestions to set aside sovereign wealth funds, real debt reduction and any other ways to accomplish the goal of putting the money from oil and minerals to work for the future.

And double ditto for the bit about diversifying the economy.  The current fragile state of the provincial economy is a direct result of provincial government policy since 2003. 

That leaves the Lower Churchill.

Reducing net debt, right?

Okay, Tom Marshall’s current plan is to force taxpayers to borrow at least $3.0 billion and put a total of about $6.0 on the provincial government’s gross debt load.

Tom also wants ratepayers in the province to accept electricity rates roughly double what they are currently to pay for electricity.  Can you say “uncompetitive” boys and girls? 

And he’d like to ship power free to Nova Scotia for 35 years.

Surplus power would enter the market at uncompetitive rates so the chances of export are pretty much slim and none as it now appears.

Given all that’s going on in the province and what Tom Marshall and his pals have actually done since 2003, the finance minister’s audience on Thursday must have peed in their pants with stifled laughter as he rambled on.

Surely no one would take Tom seriously, not with all the evidence against him.

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Traffic for 5K and 50 “members”

1. Connie Leadership rigged?
2. Undisclosed risk:  financing the Lower Churchill
3. Connie Leadership 2011:  democratic deficit
4. Connie Leadership 2011:  editorial kick-back
5. Leadership by fiat
6. Connie Leadership 2011:  Persistent Rumour Department
7. Fragile Economy:  finance minister complains about his own policies
8. Pater knows best
9. Is Gerry Byrne completely nuts or what?
10. Connie Leadership 2011:  for the sake of five large and a gang of kids

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Just imagine…

For some reason, the Conservative government of Danny Williams wanted to smash Fishery Products International and sell off the bits and pieces.

FPI used to be a large and successful fish processing company based in Newfoundland and Labrador.
Now it doesn’t exist any more and the most lucrative bits and pieces wound up in the hands of people who don’t do much business in Newfoundland and Labrador.

Just imagine if certain powerful interests in the province hadn’t destroyed the company.  FPI might be doing what one of its former competitors is now doing:  trying to buy into the Iceland fish business.

High Liner announced late Tuesday that it made an unsolicited offer worth ¤340-million ($445.4-million) to acquire Icelandic, one of the three biggest value-added seafood processors to the U.S. food service market. It wants the company simply to bulk up its own business.

That wouldn’t normally be front-page news. But in this case, it was the main story in at least two major media outlets. Why? Because Icelandic is owned by a public pension consortium run by the Framtakssjódur Íslands fund. And the owners have excluded the Canadians so far from the takeover process. High Liner piping up publicly was akin to a foreign company telling Iceland’s politicians to smarten up and open up the sales process to more bidders.

There’s a fascinating story in the Financial Post on the whole thing.

The world is only as small as people imagine themselves to be and, for the past seven years, this province has been dominated by people whose vision is incredibly myopic.

The consequences of such limited thinking are all around us, from the fragile economy that worries the cabinet minister who helped create it to this sort of lost opportunity in the fishery.

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The Fragile Economy: finance minister complains about his own policies

Finance minister Tom Marshall thinks its time for the private sector to step in and boost the economy around Corner Brook.

“Other than construction, I would like to see more economic investment; I would like to see more businesses coming in and investing here,” he said. “It is jobs ... What we have seen is government spending, in a massive way, in this area.”

That’s from a story in last Friday’s Western Star.

Two observations come readily to mind.

First of all, that’s a great big “D’uh” there, Tom.  Your humble e-scribbler has been banging out post after post after post over the past six years on this very subject.  The number of posts on it has gone up in the past two years because the fundamental situation is getting fundamentally worse. 

It is getting fundamentally worse – to hit the second point – as a direct result of government policy.  In everything from its energy policy to its disastrous seizure of private sector assets in 2008, the current administration has shown itself to be relentlessly opposed to creating an economic climate that attracts investment, promotes innovation and rewards entrepreneurship. 

The current fragile state of the provincial economy  - “fragile” is a word Tom Marshall used not so long ago, by the way - is a direct consequence of government policies.  Only a fundamental shift in those policies can move the province off the course it is currently on.

As it stands in early 2011, the current administration is firmly committed to continuing the policies that have contributed to putting the economy in its current parlous state.

We have seen the enemy, says finance minister Tom Marshall, and he is us.

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2010: The year in review

For the year-end post, you’ll have to wait until Friday to find out what the readers picked as their favourite stories of 2010.

For today, here’s another view.  Your humble e-scribbler has picked one Bond Papers post or topic from each month as a reminder of the year’s events.  I f you take the time to wander back through the archives, you’ll find all sorts of things from the UFO story that ran among last winter to a couple of posts on education.  There are also posts on the fishery that got some public attention – h/t to CBC’s Fisheries Broadcast.

So much more happened in the province than people seem to remember and the stuff they do remember is often not the most important things.

In any event, here’s the Year in Review:

January:  Spending scandal:  when “facts” aren’t true

February:  Three on one topic:  Deep Throat, Deep T’roat and Deep Throats

March:  The Fragile Economy:  staying the course

April:  Jon Lien:  mensch

May: The search for meaning challenge – yet more unfounded news media claims. 

June:  Roger Fitzgerald’s bias – the House of Assembly is at the point where partisan bias openly displayed by the Speaker is now commonplace.

July:  Calamity Kathy’s story doesn’t add up.  The local media are already praising her political genius.  Here’s another example of how short their memories are or how low are their standards.

August:  Good to the last fish

September:  The politicisation of public emergencies

October:  Breasts:  they’re not just for gawking at

November:  Reversing the entrepreneurial drive

December:  How to win without news media – Part 2

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The Fragile Economy: reversing the entrepreneurial drive

In a province that is so heavily dependent on public sector spending, it’s hard to imagine anyone would think that having the government play such a huge role in  the provincial government in the economy would be a great idea.

Step forward the head of the St. John’s Board of Trade:

Chairman of the Board of Trade, Derek Sullivan said government contracts give a competitive advantage for local businesses and “can be a very powerful and reliable revenue stream.”

Talk about throwing the engine of economic development into complete reverse. 

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The Dismal Science: Debunking the “federal presence” fairy tale

Far from being hard done-by when it comes to federal jobs in the province, Newfoundland and Labrador is pretty much on par, according to a recent study conducted by the Frontier Centre for Public Policy, and reported by the National Post.

You can find a news release summarising the report here, while the full report is available in pdf format.

Some provinces  - Prince Edward Island, New Brunswick, Nova Scotia and Manitoba – have significantly more than the national average number of federal jobs per 100,000 population.  Quebec, Saskatchewan, British Columbia and Alberta have less.

Newfoundland and Labrador and Ontario are only slightly higher than the national average.

The study effectively refutes claims that this province is receiving something less than its “entitlement’ to federal pork spending.  The comparative figures also demolish two reports released by Memorial University’s Harris Centre in 2005 and 2006.  The provincial government has used those studies repeatedly to bolster its claims for increased federal transfers to the province to offset what turn out to be imaginary grievances.

The Frontier Centre study refers to these federal jobs as a form of “stealth” Equalization.  That is, they contend that the federal jobs serve as a type of federal transfer to the local economy in each of the provinces. More importantly, though, the Frontier Centre contends that the transfer comes in addition to the formal Equalization program and is particularly heavy in the provinces it refers to as “major” have-provinces.

The study also notes that the have-not provinces with the highest ratio of federal government jobs also tend to have higher than average reliance on provincial public sector jobs generally. They compare provinces based on the number of public sector employers as a share of the total population.  Newfoundland and Labrador is third highest on that scale, with Prince Edward Island and Manitoba coming, respectively, first and second.

Looking at the same information but as a share of the provincial labour force, Newfoundland and Labrador is by far the province with the largest dependence on the public sector.  Almost 30% of the provincial labour force is employed by the federal, provincial or municipal government.

The Frontier Centre study puts the findings into a particular context, namely transfer payment reform:

The stealth equalization of unbalanced federal employment described in this paper is part of a much bigger problem —an approach to public policy in Canada that transfers money out of high-productivity regions into low-productivity regions.

Not only is this policy approach harmful to our productivity growth, it is also, quite simply, unsustainable. Historically, the taxpayers in three provinces—British Columbia, Alberta and Ontario, have paid most of the bill for high levels of public sector employment in the have-not provinces.

At the same time, the study does point to issues that are especially relevant to Newfoundland and Labrador, even if the report’s authors simply missed the poster child for their argument of unsustainable public spending and the dangers of reliance on what the author’s call “the state driven approach to economic development”.

Most residents of the recipient provinces are unaware of the extent to which their economies are state-driven and reliant on transfers. Beyond the official equalization money, massive amounts of revenue from elsewhere flow into these provinces from a number of different sources. Stealth equalization through federal employment is one important example—but there are others. Higher dependence on federal
government transfers to individuals and discrimination in ordinary  operating programs in favour of the have-nots are two more examples of ways Canadian public policy transfers wealth into the have-nots.

Most residents of Newfoundland and Labrador are unaware of the extent to which the provincial economy is state-driven and reliant on federal transfers in addition to overall public sector spending.

They aren’t alone, of course.  The current provincial administration operates as if going off Equalization was a tragedy of biblical proportions.

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Related: 

• Fragile Economy:  staying the course
• Fragile Economy:  reductio ad argentum
• Fragile Economy:  The public sector
• Fragile Economy: …and two steps back
• Fragile Economy: …now three steps back and loving it

“Get fiscal house in order” first: analyst

An analyst with the Atlantic Provinces Economic Council told a conference in St. John’s that the provincial government  “has to get its fiscal house in order” before it makes an investment in any version of the Lower Churchill energy megaproject.

Fred Bergman said the province’s net debt to gross domestic product ratio remains among the highest in Canada at 41%.

Bergman is quoted by the Telegram [page four story, Wednesday November 3, not on line] as saying:

“Get your fiscal house in order, get your debt-to-GDP ratio down, get your budget balanced and then you can afford to tackle something like that.”

The Williams administration ran a half billion cash deficit in 2009 and budgeted for a $900 million cash shortfall in 2010.  Budget projections released in spring 2010 do not include any forecast for balanced budgets.

Finance minister Tom Marshall has previously consistently rejected balanced budget legislation.

In its various configurations, the Lower Churchill project could cost anywhere from $6.0 billion to $14 billion.

The following charts show the provincial government’s liabilities and net debt.  The vertical axis is in millions of Canadian dollars.

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Related:  “The Fragile Economy: staying the course”

Traffic Drivers, July 19-23

1. There is a green hill (not so far away)
2. Telly web design sucks, kills RSS feed to popular content
3. Drill baby drill:  Dunderdale rebuffs Quebec concerns about border, offshore oil spills
4. Government website still POS
5. Scientists find new sea creatures near deep water oil exploration sites
6. New 500 MW intertie for NS and NB
7. The Irish Miracle
8. Forever blowing bubbles
9. Fragile economy – the Public Sector
10. Semrau guilty on one count, not guilty on others

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Fragile Economy – The Public Sector

Last week, labradore comments on the size of the provincial labour force occupied by the provincial government public sector.  He capped it off with a chart (below) showing a comparison for all 10 provinces over the past decade.

All this brings home one of the points made here earlier this year in a series of posts on the increasingly fragile state of the provincial economy. More the provincial economy is dependent on trade with a single market, namely the United States.  There are fewer private sector industries driving the economy and, at the same time, provincial government spending has assumed an increasingly large role in the economy as a whole.

If you extend the picture back over the three decades for which data is available, you can see both the persistent over-reliance in Newfoundland and Labrador on public sector labour compared to the situation in other provinces as well as the increase in the public sector labour force over the past three years.

These charts go a long way to demonstrating the extent to which popular perceptions of local prosperity  are entirely wrong.  Whatever is going on locally is most certainly not the result of private sector economic development.

Rather there are more public servants making more money, 20% more, in fact over the most recent four year contract.  Couple this with the dramatic increase in overall provincial government spending – upwards of 60% in four years – and the picture is unmistakeable.

Those who want to talk about prosperity in the province or those who want to celebrate the province’s “have” status would do well to look at the three provinces with the smallest proportion of their labour forces working for the provincial government.  It is no coincidence that those provinces with the strongest economies are also ones in which the public sector labour force is a relatively small proportion of the overall working population.

That doesn’t mean that public servants and public services are unimportant.  Rather, the situation in Newfoundland and Labrador demonstrates the extent to which successive provincial governments in Newfoundland and Labrador – but most particularly the current one – have failed to create the climate in the province for sustainable economic development let alone diversification of the local economy.

What makes the current administration stand out, though, is that increasing the role of the public sector in the economy, whether through NALCOR or through admittedly unsustainable growth in public spending, is openly stated as the goal.

The fact that observers outside the provincial government have repeatedly failed to notice that this is occurring is another matter.  No surprise, though, that if they cannot even correctly identify the trend to growing fragility, they may not pay any attention at all to the very serious implications from policies that promote the hollowing out of the province’s economic underpinnings.

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