RM
Letters

May 23 2004

Dear Jeffrey Simpson,
In your column Rich, gifted and incompetent: the Ontario enigma (RM copy following this letter) of May 21/04 in the Globe and Mail, you ask, "...what is it about the governance of Ontario that keeps producing these mistakes, and this cycle of recurring deficits, regardless of which party governs?..."

Well, perhaps I can steer you to an epiphany of sorts, as the low-born are occasionally called upon to do for the highborn. I'll tell you what happened, and continues to happen, Mr. Simpson, if you really want to know, to lead to this puzzling situation - for it is indeed seemingly odd, that the wealthiest province in one of the wealthiest countries in the world, with hard-working, well-educated citizens, who pay significant taxes, should be so strapped for finances in its government. It is hard to believe you would not already be aware of what I am about to relate - but then, as one who has written from within the power structure for so long, embedded as it were in the corporate-government-media nexus that controls us all, it is also understandable that you could conceivably be in one of those "can't see the forest for the trees" situations. So I will take a few minutes and direct you to some ideas that just possibly have managed to elude you for the last few years - none of us, after all, can be expected to know everything - and, certainly, what I am about to tell you has never, to my knowledge, appeared in the mainstream media, so those dependant on this media for their information, or embedded therein, will have had to figure this out by themselves - which people are not by and large encouraged to do, these days - or been lucky enough or curious enough or perseverant enough to stumble across one of the alternative sources of information available to those who seek wisdom concerning some of the mysteries of modern life.

The problems in the economy, and budgets (not only of Ontario, obviously, but all across the country), I can tell you with some assurance, are not mistakes, or well-meaning people making poor decisions, or acts of god or otherwise inevitable, or "natural economic cycles", or swirls and flows in the currents of the universe in that backwater planet called Earth whose seemingly endless warlike proclivities have stalled indefinitely an invitation to the Greater Galactic (Peaceful!) Empire - no, the things happening in the economy are the direct result of intentional government policy, with highly predictable outcomes. The budgetary problems faced by all Canadian governments could be solved essentially overnight, were the political will there to do so. The political will, however, unfortunately for most of us (although to the great benefit of a few) is directed in somewhat different directions.

Hint: the case of Air Canada is a perfect exemplar - there is something in the news always that, if looked at in a holistic, historical sort of way, reveals to the aware mind what is happening. Robert Milton is signing gold-plated contracts and parachutes for he and his top aides - while demanding the employees take significant pay cuts. Or - the average family in the opening year of the 21st century here in Canada needs both adults working full time to maintain a standard of living that, 30+ years ago, could be maintained by one adult working. What happened to progress, Mr. Simpson? At least for ordinary Canadians? What happened to "new technology leading to better lives, less stress, more leisure" as we were all promised? Did such things disappear from natural causes - or were they intentionally taken from us?

Think of it now - the people running our economy - the high-level corporate execs and Boards of Directors and Bankers and others occupying the top levels of the Bay St towers, and the top level government politicians and bureaucrats, are not (all) stupid people - they all have decades of experience and access to the best advice available, and have been running successful business enterprises for decades. If they want to build a CN tower, or a railroad from coast to coast, or an Avro Arrow (most advanced jet fighter in the world in its time), or get paychecks out to a million people every month on time, projects and records and budgets that must be managed and carefully controlled within certain parameters for years and decades - they can organize the people and materials and space to do such things with a very high success rate. Organising the day-to-day financial dealings of the citizens of a country is, all things considered, a very manageable proposition - not easy, but doable. Like the CN railroad or Avro Arrow - complex in the extreme - but we can do it! Such things never run perfectly, or without hitches, but in a well-run business, or government, such hitches are dealt with through normal channels - competent, dedicated leadership should see our economy standing on solid financial ground, not on the edge of disaster, as it has been for the last 20+ years.

So why does the government regularly find itself strapped for funds the last couple of decades? - a wealthy country, with this wealth of modern, trained and experienced managerial talent available, with a more-than-adequate tax income from its citizens, should NEVER find itself short of funds, should it?

And indeed - an examination of the facts, and some deductive reasoning, leads to only one conclusion - our governments are in serious financial straits because that is the way the people running the place (note - this is NOT your collection of backbench MPs!) WANT it to be - which is, speaking bluntly, a society where the rich get richer and more powerful, and the poor and middle class get poorer and less powerful, and which we have been seeing for the last 30 or so years. Intentional policy choices were made that led us to this situation - policy choices which could equally have led other places, had those making the decisions wished to get to other places - such as a stable, thriving democratically-controlled economy that had the desire and wherewithal to look after all of its citizens well - and actually improve everyone's lives, rather than, as we have been seeing, taking us backwards to much less prosperous and secure times - taking us back, indeed, it would appear, to the days of a small wealthy leisure class and a large underclass of workers and peasants with few rights such as prevailed in Dickensian England, for example, or even prior to that time - no, of course, we are not there yet - but you can hardly deny that is the trend, backwards rather than forwards.

But what of these policies that have led us down this sinister path? Well, one in particular is the basis of everything else, the Sauron-Mordor from which all the littler evils flow unceasingly - the "National Debt Scam" - wherein, over a period of a few years in the late 70s and early 80s, the government faced some cash shortages due to a reduction in corporate taxes at the time, and a period of Draconian usurious interest rates, and, rather than turning to the Bank of Canada and directing it to credit the government accounts with legal tender, turned to private banks, and allowed THEM to create the “legal tender” which they then borrowed to maintain government programs, at of course prime interest rates, which rather magically over a short period of time morphed into a $600 billion national debt by the mid-1980s, where it has rather (again) strangely or magically remained, draining on average some $30-50 billion (give or take, depending on various factors) per year in “service charges” right off the top of the tax dollars collected from Canadians.

Are you aware that the federal government alone has paid out something over a Trillion dollars in "service charges" on the federal National Debt alone over the last 30 or so years? That’s a lot of money - do you suppose our governments would be crying the blues about "not having enough money" if this Trillion had NOT been handed over to wealthy banks and "investors" during those years? (It's hard to get a decent figure without a lot of research I don't have time for right now about how much the provincial governments have paid out over that time - but several hundred billion dollars at least - this very year, in the budget you refer to with such wonder, McGuinty and the Ontario Libs are crying about a deficit of 6-8 Billion forcing them to cut back various programs, charge new premiums for health care, etc - and the "service charge" on the provincial debt is around $10 billion (rather odd that no news story (that I've ever seen anyway) has ever mentioned that!). And that's only this year alone - imagine if the provincial government had of had that 10 billion last year, and the year before, and the year before.... and the feds an extra 30-40 billion or so, each year for the last 10 or 20 years!!!!!)

Just imagine.

I know you're immediately reacting with the standard knee-jerk, hands-in-the-air response that "governments printing money is inflationary and must be avoided at all costs" - but that is just nonsense, Jeffrey, just nonsense, like so much else we are taught to believe unquestioningly. Think about it. The assumption behind this "received wisdom" is that if governments use this prerogative, they will print money by the boatload to give all their friends, causing the ensuing terrible problems - but why would a responsible government behave in such a fashion? Why would it print such huge amounts of money rather than simply the amount demonstrably needed, a figure arrived at by responsible deliberation of responsible people, and justified by natural economic growth in the country? You would have to assume, in Canada, that all of the top level people in the PMO, the various financial departments, the top level bureaucrats, and various other high-level private sector influential advisors would all agree to such an irresponsible thing - highly, highly unlikely, I would think, in a "responsible" government, particularly with a “responsible” business press keeping a close watch on them, yes??

And have a quick thought about the other side of the coin - rather than instructing the Bank of Canada, over a few years, to issue something like $100 Billion for various program expenses back in the late 70s and early 80s, matching the growth in the money supply with the natural growth in the economy, the government did the "conventional" thing and borrowed that money instead - leading within a very few short years (quite predictably, one might add, given the known effect of compound interest rates) to a national debt of over half a Trillion dollars, upon which, as I noted above, we have paid in the order of a Trillion dollars in debt service over the last couple of decades, and still face budgetary difficulties because of the ongoing interest payments - and we still are looking that half Trillion dollar debt in the face!!! It escapes me entirely what was so "responsible" about that course of action - indeed, there is a very, very strong prima facie case to be made for, at the very least, a serious breach of fiduciary duty and financial mismanagement and incompetence of the very worst sort. At the least. I think personally that an equally strong case could be made for intentional fraud in VERY high places, but that is not the objective of this short missive and we'll leave that for another day. As a journalist, you might however dig around a bit yourself, as one concerned with governmental financial problems. (but be sure your life insurance is paid up first haha)

But why would such a thing be done? Why would such a massive debt be incurred intentionally and unnecessarily, when it would lead to such problems for the governments of We the People? Well, I would suggest two related reasons for this, one direct, one indirect, but both highly persuasive.

Directly, there has always been a struggle between progressive elements in society who believed that the government should provide a "security blanket" for all people, with everything from pensions to UI to health care, and those who believed in a more laissez-faire, "everyone looks out for themselves" form of government - and it's no secret that a strong majority of the wealthiest members of Canadian society (as voiced primarily in such organisations as the BCNI-CCCE and their ilk) who generally favor the second view have been very influential in Canadian government policies, particularly beginning with the Mulroney government (where, "coincidentally" enough also, this "debt problem" sort of sprang out of thin air overnight) - and a "huge" debt problem leads to a government having a good excuse to tell the people it **has** to make “tough choices" even if it might wish to do otherwise - such as moving towards a privatised health care system and reduced "social entitlements" in general, or even (this takes a bit of doing, but that's why they have a lot of expensive PR "consultants" and control of the media to reduce dissenting voices less inclined to pass on government-corporate BS without asking some sceptical questions) reducing taxes for those who have the most money to "spur the economy" and create a "trickle down" effect. Such "cutting back" policies also have a number of additional bonuses - people with less money are less concerned with democracy or government policy in general - taking care of the basic needs of themselves and their families comes first. Also, people with less security and higher bills are more likely to take lower paying jobs, which is good for all the corporate sector, and their desire to boost the bottom line by reducing their “salary expenses”.

And secondly in terms of "why?" - well - where did the government borrow all that money from over the years, and where are all the "service charges" going? $30-40+ billion a year ain't small change, even for these guys.

I don't know how much you are aware of where our money comes from (most people don't seem to have any idea), but for quite some time now (oddly enough, dating back to the mid-70s when all of this trouble began, culminating in essentially removing the reserve requirements for banks in the early 1990s as part of the bank bailout) the government has allowed the Canadian banks to create about 90% of the yearly increase of the money supply of Canada - a pure golden "service charge-interest" windfall for them, and reflected in their huge profits every year. But it is absolutely insane that when the government of Canada needs money, it allows private banks to create that money, and then borrows it from them, committing the Canadian public to paying interest to those banks for decades into the future. Absolutely insane - and again, I think one could make a very strong case for criminal fraud. (No, I can point to no signed confessions, high-class crooks aren’t THAT stupid - but then again, if signed confessions were the only basis for investigating people in white-collar crime, we could pretty much shut down the courts in this country. Denial does not equate with innocence in criminal matters, Jeffrey, as I'm sure you know. And equally, high level conspiracy does exist in high-level financial circles in the modern world - you do recall Enron and Anderson, I am sure - and various Canadian banks were implicated in that situation as well, although it got pretty short coverage in the Canadian media.

The natural growth of the money supply in a country such as Canada - more people, new businesses, natural growth - is 3-4% - if the government created this money rather than the banks, it would allow them to meet all of their spending needs without this crazy notion of allowing private banks to create the new money and borrowing it from them - which is, obviously, great for the banks and their "investors" - but surely the purpose of our economy should not be "First the banks! Then the rest of us!"???

There is one and only one problem we face in this country at this time Jeffrey - political will. At the moment, the political will is almost entirely devoted to enhancing the wealth and power of those who already have most of those attributes - and as long as this is the situation, things are not going to improve for the average people - indeed, things will continue to get worse, as more and more and more of what wealth we have continues to be shovelled up and up and up, as we have seen in a whole list of provincial budgets the last few months. As Ross Perot put it a few years ago in a slightly different context, there is a huge sucking sound all around us - and that sound is huge scads of our money going up and up and up, when it SHOULD be used for OUR purposes, not to enrich the banks and other wealthy “investors”. Things could improve a lot, and quickly, for most people were the political will ever there to do so.

(How? The political will to do what? Well, everyone comments, as do you, when talking about our “budgetary problems”, on the great drain of health care costs - so implement the Romanov report, for starters - which is NOT simply about "shovelling money" at a problem, although some money is needed to make up for the starvation of the last few years - but by reorganising health care so there are fewer doctors needed, fewer hospital ER visits and stays through 24-hour community clinics, cheaper drugs (and less drug use as well), and many related things - there is an excellent story again in your paper as I write about one aspect of this - N.S. islanders reap benefits of health-care alternative (By SHAWNA RICHER Saturday, May 22, 2004 - Page A9 ). Or use the Bank of Canada as suggested above to quickly pay off that national debt and get rid of those usurious, draining “service charges” year after year after year. What if your paper started a campaign saying something like the needs of Canadians MUST be placed ahead of the profits of private banks and wealthy investors? - it is time that INVESTORS reduced their demands for ever-higher ROIs rather than Canadians reducing their health care expectations!!! - again, Jeffrey, it is all about political will - we have some of the best minds on the planet in this country, and if they want to do something - if WE as Canadians want to do something - we can do it. If those minds in government and their Big Business advisors want to devise a system to maximize their personal wealth and influence - they can do so, and have. If, however, they wanted to create a country that worked well for EVERYone, and not just the privileged few, with an economy that was strong and stable for average Canadians, rather than a giant gambling casino for wealthy investors - well, such could easily be done too.

Political will.

(Should you wish some more info on this from people much more knowledgeable than am I, you have an excellent opportunity there in Toronto, and not far from the Globe office - you might consider spending a few hours at a conference that just happens to be coming up next weekend - FUNDING THE FUTURE: PAYING FOR THE PAST put on by the Committee on Monetary and Economic Reform, COMER - Saturday, May 29th, 2004, 9am - 6 pm, Steelworkers Union Hall, 25 Cecil Street, Toronto. You can find more info at the COMER website - http://www.comer.org/

It would be an excellent opportunity, should you truly be concerned about these things, to use your column to alert a lot of Canadians to one of the central problems in our country during this time in our history - the control of the Canadian money supply by private banks rather than by the Government of Canada, where such control rightly belongs, and the huge problems resulting from that mis-placed control.)

Oh well - all for now. I fear I once again waste my breath and my words, but it is what I do.


==================================

Rich, gifted and incompetent: the Ontario enigma

By JEFFREY SIMPSON Friday, May 21, 2004 - Page A19

Those who follow the doings at Queen's Park likely understand these matters, but the merely curious among us keep wondering what goes on down there. Specifically, why is Ontario so poorly governed?

Okay, maybe Ontario's governing is no better or worse than elsewhere. But it's a big, sprawling province with lots of human capital, a presumably talented civil service and a diversified economy that other provinces envy.

And yet, government after government leaves office with the books in shambles. Think back to the last Liberal government, the one led by David Peterson.

The Liberals governed in glorious economic times. The revenues just kept rolling in, but the best the Liberals could do was barely balance the books before they left office. They should have handed over a tidy surplus to the incoming NDP, with a declining debt to boot.

Instead, when a brutal recession hit Ontario and knocked the budget for a loop, the NDP had no surplus upon which to fall back. Then, as Ontarians well remember, the NDP ran up the deficit, got into fights with its public-union supporters, and were replaced by the Mike Harris Conservatives.

The Conservatives governed for two terms under Mr. Harris and Ernie Eves. They too bequeathed a large deficit, after denying in the campaign that one existed. The Common Sense Revolution was a revolution of sorts, cutting taxes and spending (for a while), but it lacked the common sense of proper budgeting.

The Dalton McGuinty Liberals arrived in office clutching an election platform stuffed with promises, far more of them than required for victory, many of them poorly conceived. You just had to read the Liberal campaign platform to understand its unreality. Even with a balanced budget, the Liberals could not have done what they promised.

A voter just had to throw up his or her hands in the last election. There were the Liberals with their unrealistic promises, the Tories with their political bribes for this or that group deemed important for their narrow coalition, and the NDP with its track record of governmental incompetence.

Meanwhile, the greatest public-policy fiasco in postwar Canadian history -- and that's saying a lot -- unfolded in the province's hydro sector under governments of every political stripe. From a proud, publicly owned hydro system, Adam Beck's great legacy, hydro degenerated into a massive sinkhole of debt for which consumers will be paying for the rest of their lives.

The only reason the McGuinty Liberals could show, as if by magic, a sharp decline in the province's deficit was by shifting $3.9-billion in hydro liabilities onto the backs of consumers, whose rates will now rise even faster.

The province continues to be among the worst in Canada in financing its universities, the engines of the future for economic growth, social mobility and new ideas. Ontario's per-student support for universities is near the bottom in Canada, and far below that provided by major U.S. states.

So what is it about the governance of Ontario that keeps producing these mistakes, and this cycle of recurring deficits, regardless of which party governs?

Is it the electorate's indifference to what happens provincially? Is it the proliferation of interest groups, and especially public-sector unions and advocacy groups, whose pressure seems irresistible? Is it a problem with the tax system? Is it, as some would argue, that the federation is out of whack, with Ottawa having too much money and provinces too little to discharge properly their constitutional responsibilities?

Maybe it's all (or none) of the above, but these factors exist elsewhere in Canada. What is it about Ontario, a big, rich province that a generation and more ago, back when Tory premiers followed each other in orderly succession, enjoyed tidy but surprisingly forward-looking governments?

Could it be that the behemoth of health-care spending so distends the budget that it makes sensible governing almost impossible, sort of like the U.S. military budget? The system has ostensibly been reformed and reformed again. Its needs are so great and growing that almost everything else gets squeezed, exhibit-A being the McGuinty budget that freezes spending in 15 departments.

It would be easy to blame health care for what ails Ontario's governance, because every province faces the same dilemmas over health care. Health care is the policy gift, adored ferociously by Canadians, that keeps on taking.

No, there have to be other answers. It beats a curious observer to know just what they are.

jsimpson@globeandmail.ca



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