Author Archives: Paul

Rescuing Vancouver’s middle class from financial ruin

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For the past week, The Province has been publishing a series of articles on Vancouverites who’ve left the region to seek a better life elsewhere. It seems as though the financial pressures on the middle class are finally prompting locals to leave the ‘Best Place on Earth’. This is not just about the housing crisis; it’s about the rising cost of living, from transportation, to medical services, to local taxes. The source of this burden is simple: our region runs off a false economy that has failed to provide the income increases necessary to support the majority of its residents.Vancouver is a gateway city built on foreign investment. This stark historical reality provides the basis for an economy that runs on real estate, tourism, and goods movement. All three of these industries serve primarily in the interests of the wealthy who have the capital to run these systems. For the workers, wages in goods movement and tourism are low, and while real estate can be a financial boon to an individual’s bank account, employment in this sector perpetuates the false economy, not to mention the fact that not everyone can flip properties for a living.

What we’re left with is a region where the majority of citizens subsist on low wage private employment, either in small businesses or multi-national chains, or middle wage public employment, increasingly strained by a reduction in public budgets. It’s not sustainable, and as the cost of living continues to skyrocket above acceptable levels, the middle class is beginning to feel the strains that the poor have felt in Vancouver for decades.

For those who care about the region, there’s only one option. We must end the false economy and bring forward a real one based on sustainable, inclusive growth in a post-industrial society. To meet this goal, I have four specific suggestions.

First, we must stop neglecting the economy. Metro Vancouver is renown for its efforts to protect agricultural lands and green space, and has produced plans to do so for the past fifty years. Never once has there been a comprehensive regional economic strategy. There should be a concerted effort at the regional level to discuss these issues, to come up with specific plans to help grow key industries, and to create a revolving economic strategy for the entire region.

Secondly, in concert with the above, we must recognize that local economies do not end at municipal borders. As a region with 22 municipalities, the level of bureaucratic barriers to doing business is no doubt stifling. Our cities should work together to harmonize their by-laws, their building codes, and their business licencing standards to cut unnecessary red tape. Think of it as a free-trade agreement for Metro Vancouver.

Thirdly, we need to invest in and re-imagine education. Too much human capital is wasted in our current system, either with the 20% of high school students who drop out or the nearly 50% of adults who are functionally illiterate. Too many people fall through the cracks and become a burden on society instead of adding wealth to the economy. We need to build a post-secondary education system of constant enrolment, with more varied levels of certification and time commitment, to ensure that people have access to the re-training and upgrading of their skills. Lowering or removing the cost barrier to this system will be key to eliminating wasted human capital.

Finally, we must instill a culture of entrepreneurship in our region. Americans value the free enterprise system because they recognize that it enables anybody with an idea to take it to the market. We need to embrace capitalism instead of turning our backs on it. When more people access the system and compete in the market, better products, services, and wages are created. Matched with our existing local values of environmental stewardship and social inclusion, I have no doubt that we could create a new form of ethical capitalism that can be a model for the world.

The challenge is no doubt great. What we must do is nothing short of re-inventing the fabric of this region since colonialism. But perhaps, by traveling just beyond that time, to the era of pre-contact, we can find hope. It was in those days when local First Nations, all of whom remain today, had a responsible, sustainable, and inclusive economy. Let us find inspiration in their resilience and strength and restore that once great economy back to the lands of the mighty Fraser.

UN calls for new paradigm on progress

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Following up on the fascinating dialogues at Davos, where some of the world’s richest individuals discussed reforming capitalism for the 21st century, the UN is calling on the world to establish a new precedent for progress: sustainable development.

Preceding the Rio +20 Summit this year, held on the 20th anniversary of the first Earth Summit in Brazil, the UN High Level Panel on Global Sustainability has outlined the need for a “new paradigm for economic growth, social equality and environmental sustainability.” The panel says that traditional economics have notable market failures, neglecting to factor in the costs of carbon emissions or “quantify the economic cost of sustained social exclusion.”

That sustainable development is right is self-evident. Our challenge is to demonstrate that it is also rational – and that the cost of inaction far outweighs the cost of action.

Some of the panel’s specific suggestions:

  • Measure growth beyond GDP and develop a new sustainable development index
  • Global sustainable development goals to replace the Millennium Development Goals
  • Incorporating social and environmental costs into the pricing of goods and services
  • A global fund for education to provide universal access to post-primary education by 2030
  • Employers, unions, and governments should establish non-discrimination policies and publicly report on progress
  • Develop labeling schemes for goods that reflect their full impact of production and consumption to enable consumers to make informed choices
  • Applying price incentives and disincentives on goods based on universal sustainable product standards
  • Establish regional and global ocean management frameworks for major marine ecosystems
  • Begin an “ever-green revolution” to double agricultural productivity while drastically reducing resource use
  • Universal access to affordable, sustainable energy by 2030; double the rate of energy efficient and the global share of renewable energy by 2030
  • Transparent disclosure of, and planned removal of all subsidies which cause the greatest detriment to natural, environmental and social resources
  • Phase out fossil-fuel subsidies by 2020
  • Sustainable development criteria for all government procurement
  • Business and governments should develop a framework for sustainable development reporting and should consider mandatory reporting by corporations with market capitalizations larger than $100 million
  • Establish a Global Sustainable Development Council to improve integration of the three dimensions of sustainable development, address emerging issues and review progress
  • Establish a peer review mechanism to encourage States to share experiences and fulfill their commitments

The panel was chaired by Jacob Zuma, President of South Africa, and Tarja Halonen, President of Finland.

I personally found the document inspiring and incredibly enlightened. Combined with the talks on Davos, it seems as though dialogue is moving towards a new model of ethical capitalism – that is, a market which quantifies and values those three dimensions of development equally: social, economic, and environmental. In a sense, it replaces capitalism’s drive for profit at any cost to one which pursues progress in a holistic sense. Under such a paradigm, expansion of the oil sands, which may provide short-term economic value, but have long term detrimental environmental impacts, is ultimately an unethical pursuit and would not be pursued when fully quantified.

As noted in many of the suggestions, moving towards this model requires a new form of economics, one that quantifies the opportunity costs within all three dimensions of sustainable development. The most obvious intervention in our current system is applying financial disincentives to that which we don’t want – carbon, for example – and applying financial incentives to that which we do want – green energy products perhaps. Pricing signals, rather than traditional regulation, would let the market naturally direct capital towards that which we want more of. Similar market reforms have been successful in reducing tobacco usage, and could be replicated on unhealthy foods which contribute to obesity.

But how do we start to quantify other attributes, such as biodiversity, or ocean health, into economics? What about the costs of “sustained social exclusion”? Neglecting large segments of the global population and relegating them to poverty actually costs society the returns investment would produce. How specifically capitalism could integrate these measure into the market without global governance regulations is unclear. Indeed, it seems as though an entire new breed of economists would need to develop such a system. However, if it were achieved, the potential results of such a paradigm shift could truly change the world.

Old Age Security is a waste of tax dollars

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The Prime Minster was in Davos last week for the World Economic Forum. During his speech, he laid out a bold vision based on structural reforms to many Canadian governmental programs, including Old Age Security. As a young person with no immediate focus on retirement or pensions, I went about learning more on this program and why seniors and opposition parties were immediately against any changes.

First, we must not confuse Old Age Security with the Canada Pension Plan. Under the CPP, all Canadian workers must pay into a government managed long term investment fund, from which retirees will eventually receive their pension payouts based on their contributions. Meanwhile, OAS provides all seniors – Canadians over 65 – with a cheque from the government of about $500 a month. For low income seniors, they also receive the Guaranteed Income Supplement of up to $700 a month. Both the OAS and GIS payments come out of the federal budget and require no contributions on the part of the recipients.

While Harper’s proposed changes are not yet public, many believe it will entail moving back the eligibility age from 65 to 67, due primarily to shifting demographics. When OAS was introduced, life expectancy for men was 66 and for women, 71. Today, men live to 78, women to 82, and those numbers will continue to rise. This effectively means that payouts to seniors are increasing as people live longer.

There’s also the concern of the baby boomers threatening the sustainability of OAS. Whereas today only 12% of the population accesses the program, in 20 years that figure will boost to 1 in every 4 Canadian. OAS currently costs the federal government $36 billion, projected to rise to $108 billion by 2030! Ottawa had a federal budget of $237 billion in 2011, meaning OAS is currently 15% of revenues, but would come to consume nearly 40% of the budget in 2011 terms.

Raising the eligibility age from 65 to 67 is an obvious and acceptable change. There’s no reason a senior who expects to live to 80 should start receiving cheques from the governments at 65, on top of their pension. The only arguments I’ve heard defending the status quo is moralistic: seniors have paid their fair share over the years and deserve comfort and dignity in retirement.

But, in a world of smaller government and tighter finances, I’d argue that OAS itself should be abolished. $36 billion is not chump change by any means and using that money for OAS is an absolute waste. Instead of an investment, like health, education, or infrastructure, OAS is an expenditure with no return. It is simply money down the drain.

Furthermore, is it a handout to those who should least need it. Seniors have had the entire lives to plan for their retirement. Not only do they receive CPP payments, they also have plenty of opportunity to save money in RRSPs or investment portfolios. Additionally, seniors who are homeowners would have long ago paid off their mortgages, providing them with a large piece of financial equity for retirement. Also, seniors can, or should be able to, rely on support from productive members of their family. There should simply be no excuse for a government cheque of up to $1200 a month for the last 15 years of their lives on top of everything else they’ve accumulated during their working years.

The irony is that young people struggling to start a family receive no such government support. Nor do low income Canadians, many of whom are stuck in a cycle of poverty. Putting that $36 billion into direct government support for this segment of the population would be a far smarter investment, as it would reduce poverty and its associated government costs (policing, courts, health, housing), while increasing national incomes, boosting the economy and tax revenues. For some perspective, note that paying the full tuition of all 1.2 million Canadians in post-secondary education would cost just over $5 billion. The Kelowna Accord of 2005, which promised to make significant progress on reducing opportunity gaps for Aboriginal Canadians through education, health, and infrastructure investments, cost just $5 billion over five years.

So tell me, what’s the better use of money? Putting those tax dollars back into the system to help produce greater dividends for the country, or using them to support the last fifteen years of a senior who should already have access to income from a myriad of sources.

One is a investment and the other is a expense. I know where I’d put the money.

Why education will always be a human-intensive activity

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There’s a growing consensus out there that not only does education needs to be disrupted, but that the logical conclusion of such change is to digitize learning. While I agree that schools need a major overhaul, the diagnosis that education ought to be automated is completely absurd.

Two articles speak to this ideology. The first was published on TechCrunch and claimed that teachers would be replaced by technology – essentially, software can do as effective a job as a human. The second was published on the Huffington Post, stating that higher education was necessarily being disrupted by new self-service online instructional platforms that would break down the cost barriers to university.

Both articles are based on an ideology that defines learning as the accumulation of knowledge – I would contest such a notion. To be truly educated means one must be able to think critically, to synthesize different facets of knowledge, to effectively express one’s self to others, and to learn how to learn. Education of this depth can never be adequately facilitated by an online platform powered by multiple-choice exams.

There’s no doubt that the way schools currently operate needs disruption. The traditional model features a teacher transmitting “knowledge” into the empty brains of students. This is the way most schooling occurs, from grade school to grad school. This model lends itself greatly to replication online. Indeed, why should any student go to a physical building or pay thousands to attend university if the quality of the education can be obtained cheaper or more conveniently from an internet connection.

In this sense, the disruptive forces of these so-called innovations are good. They are prompting brick-and-mortar education to up their game and change their modus operandi. To survive in such an environment, face-to-face learning will need to become more valuable that a simple one-to-many transmission of static knowledge.

In its replacement will emerge collaborative, multi-disciplinary, engaged, and personalized learning that delves into the deep questions. Teachers will no longer be “teachers” but rather facilitators of the learning process.

Technology will play a part in enabling this shifting of roles and learning environments, but it will never outright replace the vast majority of face-to-face education. In depth education is simply too multi-faceted, complex, and ever-changing for algorithms to ever produce.

Let’s cut the tax rhetoric

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“The sky is falling!”

That line, famously tied to Chicken Little, could just as easily be linked to politicians and business leaders when talking taxes.

We’re living, still, in an era dominated by neo-liberal economics, an ideology that calls for limited government, privatization of services, de-regulation, and low taxes. In fact, it’s so ingrained in our society that any politician that would dare proclaim they supported raising taxes would simply be laughed off the stage by citizens and the media alike. Of course, business groups and economists, with their primal focus on wealth and jobs, reinforce this notion that all taxes are a drain on private capital and productivity.

The rhetoric is extreme with their claims that any tax increases would destroy the economy and put untold numbers of workers out of employment. Ironically, in recent times, the political leaders of this campaign in BC have eaten crow twice for reversing course.

When Christy Clark became Premier, she pledged to raise the minimum wage from $8 an hour, one of the lowest in the country and not raised in over a decade, to $10.25, more in line with other major provinces. For years, the Liberals claimed that raising the minimum wage would destroy jobs in low margin industries like restaurants. Their claims were backed up by economists and local business groups that said the economy would grind to a halt if the government dared raise the floor on wages.

Yet, Clark moved forward, and increased the minimum wage, through three escalating steps over the course of two years. The economy has not crashed and burned, McDonald’s and White Spot are still employing people, and the world went on.

Situation number two. The HST was able to head to a provincial referendum and the Clark government decided to sweeten the deal if British Columbians decided to keep the tax – if a majority supported it, the HST would be lowered to 10%. How would the government make up the lost revenues? Well, it would just increase the corporate tax rate.

Yet, this completely contradicts the rhetoric from the Liberals for a decade that corporate taxes were driving away investment from the province. Corporate taxes were demonized as inefficient; nothing more than a hidden cost passed onto the consumer. Of course, the HST was voted down, and thus the corporate tax rate was never increased, but for a government that vehemently decried the tax for years to suddenly flip flop shows the real holes in its ideological economics.

What these two examples prove to me is that, despite all the cries that the sky would fall if we raised taxes, in reality the effects are minimal. While a huge spike or drop in taxation no doubt would either hinder or help investment, changes around the margins don’t make a significant difference to business. They adapt and life goes on.