The PPGR is also accepted submissions for its annual essay competition, the Sylvia Ostry Prize in Public Policy. The author of the top paper shall be awarded $1000 CAD and publication in the next issue of the PPGR. Please see the poster below for details of this year’s Ostry Prize competition.

Brent Barron

Policy professionals had better start getting used to playing games. Not because we’re dour individuals in need of some fun (although maybe we are a bit dour: federal layoff fears led to less Christmas spending spirit in Ottawa), but because games and friendly competition have the power to seriously change how people behave.

You’ve probably heard this argument many times. The U.S. needs energy resources. Canada has the human capital and physical infrastructure to deliver them cost-efficiently. Let the market do its job and Canada benefits from its trade surplus with its southern neighbour. What about the environment, you say? Well, according to the Federal government, Canadians want to focus on the Copenhagen and Cancun accords that are as hazy as the mechanisms currently available to curtail greenhouse gas emissions.

This has been essentially Canada’s approach to energy since the 1980s.

But increasingly Canadians are demanding a national energy strategy that looks beyond supplying America’s energy consumption. An energy strategy that is socially acceptable, environmentally sensible, and focused on maximizing inter-generational economic prosperity. Easier said than done? Not really, there are three factors (hardly independent from each other) that are pushing for a stronger articulation of a pan-Canadian energy plan.

First, the ideological foundation for a potential energy strategy is already defined. Although there is a lack of clear consensus on the guiding objectives, most debates focus on security, affordability (allowing prices to reflect the real social cost of energy without denting drastically Canadians’ lifestyle choices), environmental performance, and fostering a culture of innovation. The Canada West Foundation has noted that to achieve these outcomes, the typical trio of principles (economic, environmental and social) must be complemented with political principles. By respecting constitutional division of powers and allowing inter-governmental players (not just federal and provincial officials, but also First Nations, Northern territorial and municipal leaders) to defend their stakes at the roundtable of energy discussions, political principles will strengthen rather than obstruct a workable national energy strategy.

The second factor is tied to the political principle described above. Western provinces have begun to exert pressure on the federal government for a clearer sense of direction on energy. The New West Partnership – which includes BC, Alberta and Saskatchewan – acknowledges that thinking in policy silos is no longer realistic. The Partnership wants the federal government to adapt its immigration system to suit labour needs, invest in critical infrastructure projects, and understand the contribution that oilsands development make to the national economy.

A pan-Canadian energy strategy must take into account all of these demands. Temporary foreign workers are supplying permanent labour market needs. By increasing alternatives to retain the skilled workers the provinces need, through policies such as immigrant nominee programs and the Canadian experience class, new Canadians can integrate faster into our social fabric while boosting energy production. Infrastructure spending and regulatory approval is needed to diversify energy projects. Whether it is building a pipeline to access Pacific markets or transmission lines to supply electricity to central Canadian provinces, a national energy strategy is essential for domestic economic development. The oilsands are expected to generate over $750 billion in provincial and federal taxes and 126,000 jobs in the next 25 years. During the same period, producers plan to spend over $177 billion in Canadian supply and services from outside Alberta, including $63 billion here in Ontario. Without a doubt, the economic benefits of Alberta’s resources reverberate across the country beyond equalization payments.

The third factor that presses for an overarching domestic energy strategy involves the private sector. Not only business associations demand a more predictable regulatory environment, but also the non-profit industry looks forward to having a framework to work with. Organizations such as the Pembina Institute, the Centre for Energy, and the Suzuki Foundation, among others, urge political leaders to coalesce around a comprehensive long-term plan for Canada that upholds environmental commitments at the same level of market principles.

In the past twenty-four months, these three factors have gained considerable ground. Political leaders and business insiders have become more vocal. Public media has picked up on it and commentators have widely disseminated the merits of a pan-Canadian approach to energy policy. To get the ball rolling, federal Natural Resources Minister Joe Oliver held a conference on July 19, 2011, with his counterparts from the provinces and territories in which industry leaders, environmental think-tanks and other stakeholders took part as well. Although this speaks to the political willingness of building a collaborative strategy to energy with input from all actors, the federal government risks being robbed of the opportunity to lead on this critical policy front.

Prime Minister Stephen Harper has to take it from here. Natural resources and energy ministers cannot consolidate an overall framework that deals with a myriad of issues – from immigration to aboriginal affairs, from labour force development to occupational health and safety – in one-day summits.

And this might be the greatest challenge to-date to a pan-Canadian energy strategy. Mr. Harper has expressed concerns of expanding the role of government, especially in the energy sector. At a recent radio interview in Calgary, Mr. Harper noted that “we always get nervous when we hear ‘national energy’ in the same sentence.” This may play well with his electoral base, especially those resentful Albertans who still remember the National Energy Program. But the New West Partnership shows that even Canada’s staunchest defenders of energy resources are no longer afraid of ghosts of energy policy past.

Back in September, Caitlin Schulz, one of PPG Review bloggers, asked whether Canada was ready for an energy strategy. She argued that despite “all the trials and tribulations that come with forging a national consensus… a national energy strategy is both economically and environmentally important to Canada’s future prosperity.” Evidently, it is now up to the federal executive to demonstrate leadership to position Canada as an energy superpower. This can only be achieved with a comprehensive energy plan that looks after Canadians for generations to come with a strong commitment to the environment and our social values. Our unofficial energy plan of supplying America’s energy needs one project at a time may not necessarily change as a result. But at least Canadians will have a guided vision of their energy resources. That would be a step in the right direction.

Leonardo Tovar is a candidate for the 2013 Master of Public Policy at the School of Public Policy and Governance. He holds two degrees from the University of Calgary, a Bachelor of Arts in Economics (Energy Market Specialization) and a Bachelor of Arts in Political Science (Minor in Latin American Studies).

The Backdrop

Ontario just can’t get a break. Once the economic backbone of Canada, the province was paralyzed by the global economic crisis that ravished the globe three years ago. Fast forward to January 2012: the province is saddled with a $16-billion dollar deficit and a rate of growth that is slower than that of some other provinces. With scarce natural resources to draw upon and a deep reliance on the U.S. economy, Ontario’s fiscal outlook is more severe than that of other provinces.

It is in the context of this ominous milieu that an influential credit rating agency recently put Ontario on notice that it would put its rating in jeopardy if it fails to get its fiscal house in order. Moody’s Investors Service warned last month that it might lower Ontario’s rating if it does not take aggressive steps in Budget 2012 to wrestle its multi-billion dollar deficit to the ground.

To be clear, credit ratings ought not to be viewed in the abstract: in concrete terms, a credit rating downgrade would render Ontario government bonds less attractive to investors; moreover, it is likely a credit downgrade would make it more costly for the province to borrow money at the very time when its debt is escalating. Ontario’s fiscal woes must also not be viewed within a vacuum: Ontario’s fiscal squeeze is germane to the rest of Canada because its economy is larger than that of many countries and accounts for roughly 40 per cent of the country’s economy, with a gross domestic product of $612-billion in the fiscal year 2010.

And so it is against this perilous backdrop that the Ontario government has enlisted the esteemed Don Drummond – formerly chief economist at TD Bank – to advise on ways to accelerate the pay down of next year’s $16.3 billion deficit – a deficit that will boost Ontario’s net debt to a frightening $241.4 billion. Appointed to the position in March 2011, Mr. Drummond chairs the Commission on the Reform of Ontario’s Public Services and will report on his findings later this month.

The Players

The principal players include a nexus of senior-level public servants and a clique of influential policy advisors who surround the veteran premier. The unenviable mission: slash government expenditures without causing political pain. In laymen’s terms, government services must be cut or streamlined with minimal pushback from the Ontario people.

The seminal figures include Premier McGuinty and Finance Minister Dwight Duncan. Aside from Mr. McGuinty – long viewed as the quintessential pragmatist – Mr. Duncan is the most prominent ‘fiscal hawk’ in the premier’s cabinet. Behind the scenes, Peter Wallace will play a muscular role as the Ontario government’s top bureaucrat. Mr. Wallace, until recently the deputy minister of finance, will play a make-or-break role in transforming the way in which the province administers and consolidates services. Government insiders say Mr. Wallace will bring a more ‘economic and fiscal-related’ bent to the table; the senior bureaucrat is armed with three decades of experience in the public service and is said to be uniquely qualified to confront the province’s fiscal challenges head on.

Mr. Wallace will be joined by senior level aides from the premier’s office and the ministry of finance. Among them will include the premier’s youthful chief of staff, Chris Morley, principal secretary and policy guru Jamieson Steeve, and the premier’s erudite director of policy, Karim Bardeesy. Of course, joining them, will be the public face of the entire effort: Mr. Drummond, or ‘Premier Drummond’, as his detractors in cabinet refer to him. It is anticipated Mr. Drummond will be unflinching in his diagnosis of Ontario’s fiscal status, providing Messrs McGuinty and Duncan with an impetus to move forward in pursuit of their mission.

The Policy Menu

Armed with an ambitious mandate, Mr. Drummond has already signalled to his political masters that consolidation of government services will be the order of the day when his report is released later this month. By all accounts, Mr. Drummond’s political masters are also trumpeting the consolidation ethos. As of late, the McGuinty government has advanced the notion that by modernizing delivery mechanisms, the government would be able to find billions of dollars in savings without adversely affecting public services. That would mean slashing duplication in government. Translation: the government would endeavour to identify incidents where many public servants are doing the same job and streamline government agencies where responsibilities overlap.

Mr. Drummond is known mostly for his expertise in macroeconomics. And thus far, his assertions regarding the province’s finances – namely the call for overall spending increases to be capped at one per cent annually – have hardly probed what will need to take place at a micro-level. While that may change with the report’s release, in the mean time, it is valuable to examine what private sector organizations are saying about Ontario’s fiscal crisis. The Ontario Chamber of Commerce (OCC), a federation of 160 local chambers of commerce and boards of trade, is a case in point. The organization, headed by Len Crispino, recently released a policy statement to the Commission on the Reform of Ontario’s Public Services.

In its submission, the OCC proclaims that ‘Ontario should embark on a continuous process of short-term actions and long-term planning’ and then proceeds to delineate four ways in which the Ontario government can expeditiously achieve cost savings. The four strategies enumerated include:

1. Controlling rising health care costs by adopting a more efficient health delivery system.

2. Developing a long-term public sector compensation restraint strategy.

3.  Ensuring Municipalities spend provincial transfers prudently.

4. Identifying programs that could be effectively and efficiently delivered by private entities.

With regards to controlling rising health care costs, the OCC cites that health care costs currently comprise 46 per cent of Ontario government spending; moreover, that number will soar to 80 per cent if current growth rates persist. And while the government has signalled its intention to hold health care spending increases to three per cent annually, it has yet to outline a detailed plan that stipulates how this will be accomplished.

The OCC, among other things, recommends the Ontario government permit more specialized privately-run clinics to operate within the province, all within a publically-funded, universally accessible health care framework. A second recommendation within the health care sphere involves adjusting the cumbersome compensation model for nurse practitioners and all partners in Ontario’s health care system.

On the thorny issue of public sector compensation, the OCC cites all the relevant statistics: the Ontario government currently spends 50 cents of every taxpayer dollar on compensation for employees in the broader public service (this includes teachers, nurses etc.). As Mr. Drummond will inevitably recommend later this month, any genuine plan for public service reform will necessitate curtailing Ontario’s labour costs. In this vein, the OCC pointedly recommends that the government spearhead a ‘comprehensive long-term public sector compensation restraint strategy’ that engages municipalities and extends beyond the current government’s minority mandate.

As has already been suggested by PC leader Tim Hudak, any dialogue surrounding a public sector compensation restraint strategy must include public pensions, salaries, and employee benefits: a considerable bone of contention among workers who comprise the broader public service. In spite of the uncomfortable nature that surrounds a discussion of workers’ compensation, the government must fashion a constructive dialogue with public sector unions in order to discuss all available options.

Regarding municipalities’ judicious use of provincial transfer dollars, the OCC shrewdly suggests the Ontario government must do more to ensure provincial transfers are being wisely allocated among municipalities. According to the relevant statistics, the Ontario government exhausted $3 billion on transfers to municipalities in 2011: that figure is expected to rise to $4 billion by 2018. By that juncture, Ontario will have undergone increased support to municipalities by 270 per cent since 2003, all while having uploaded $1.5 billion in municipal costs.

A possible solution, as advocated by the OCC, would see the government freeze or limit provincial transfers to municipalities that do not ‘undertake comprehensive, meaningful actions to reduce or limit spending, obtain efficiencies or act on recommendations by an Auditor General.’

Finally, the OCC stresses the need to identify programs that could be delivered more effectively or efficiently by private entities. The OCC notes that a number of private sector organizations in Europe deliver business services in lieu of government line ministries. Most notably, the Scottish Chamber of Commerce equips businesses with pro-bono mentoring services. The analogue in Ontario would be the Ministry of Economic Development and Innovation which currently provides advisory services to Ontario businesses on the government’s dime. The thought here is the Ontario government could divest itself of the responsibility to administer such services, prompting private entities to fill the void. There are several other domains in which the government ought to consider alternative service delivery mechanisms, but we’ll leave it to Mr. Drummond to incorporate the remaining examples in his report.

The Politics

It’s now apparent Mr. Drummond’s commission has been subject to remarkably less media scrutiny than the City of Toronto’s recent Core Services Review, spearheaded by KPMG under the auspices of the Ford administration. Characteristic of their respective styles, Mr. Ford and Mr. McGuinty have struck decidedly different tones in tackling what is in essence, an identical policy challenge: to consolidate government services in an era of fiscal austerity. However, Mr. McGuinty has meticulously avoided the public-relations disaster that engulfed Mr. Ford’s core services spectacle this past summer.

And yet, Mr. Drummond’s commission has not fallen below the radar in the bustling corridors of Queen’s Park. On the contraire, Mr. Duncan has been paddling upstream, struggling to persuade the Liberal caucus the time is ripe for restraint and change. In spite of Mr. Duncan’s unwavering support from the premier’s office, he still faces an uphill battle to bring the Liberal caucus enthusiastically on board. For one, most Liberal MPPs did not enter public life endowed with a hunger to reduce the size of government. But more practically, in light of the government’s minority status, Liberal members are highly cognizant of potential austerity measures dampening their electoral prospects back home in their respective districts.

And so it is within an environment marked by anxiety that Mr. Duncan must gently nudge a nervous caucus – not to mention a reluctant public service – to swallow what could most aptly be described as ‘strong medicine’ for Ontario’s economy. Luckily, for Mr. Duncan, recent pronouncements from Moody’s Credit Service and the bewildering news from the Eurozone might help to illustrate his urgency.

Finally, it bears highlighting that Dalton McGuinty’s Liberals recently campaigned for a third consecutive mandate on the narrative that Ontario is successfully navigating its way through turbulent economic conditions. A third-term premier, Mr. McGuinty is now uniquely qualified to honour his pledge to his electors and the public at large; as astute political observers will recall, Mr. McGuinty ran for the leadership of his party in 1996 as the ‘conservative’ candidate, pitted against the more left-leaning Gerard Kennedy. At the time, Mr. McGuinty spoke eloquently about the virtues of a pragmatic liberalism: one that clearly endeared him to a majority of party members as he eventually emerged victorious as party leader.

The previous eight years have shone a light on Mr. McGuinty’s enduring quality: his political pragmatism. The cerebral premier has proven adept as a nimble politician with the foresight to tact to the centre-left by investing massively in health and education (among other programs) when Ontario’s economy was thriving. This ability, without a doubt, has been the catalyst for much of his success in public life. But the province’s circumstances have now shifted rather dramatically and Mr. McGuinty will again face a litmus test: if history is any indication, the premier will once again defy expectations and prove the critics wrong. Ontario’s fiscal health and future economic and social affluence will hinge upon his actions in these next few months.

Andrew Perez is a second-year student in the Master of Public Policy program at the School of Public Policy and Governance, University of Toronto. He holds an Honours Bachelor of Journalism from Carleton University and previously worked for several elected officials of varying political stripes on Parliament Hill, Capitol Hill in Washington D.C., and most recently at Queen’s Park in Toronto.

The Public Policy and Governance Review is pleased to announce the release of its Winter 2012 Issue.

Click here for the new issue.

The articles in this issue reflect the themes of the past year, as well as other longstanding policy challenges. We lead off Volume 3, Issue 1 of the Review with a call to action from Senator Roméo Dallaire to policy leaders present and future. Other articles in this issue highlight current policy discourse on the topics of income inequality, the intervention in Libya, and the European debt crisis. Additionally, this collection features articles on Canadian national security, aboriginal education, tax policy, and foreign policy.

This year has certainly been a surprising one for Burma/Myanmar watchers. Beginning with the release of opposition leader and Nobel Peace Laureate Aung San Suu Kyi from house arrest nearly a year ago, Myanmar’s nominally-civilian government has embarked on a gradual but sustained effort to implement political, social, and economic reforms. October saw the government unconditionally free more than 200 political prisoners as part of a larger amnesty announcement and pass new laws to give workers the right to form unions and strike. Internet restrictions have been lifted on a number of international media websites, while publication censorship has been relaxed. Political party laws have been amended to allow opposition parties to register – including Ms. Suu Kyi’s own political party, which will now run in the next by-election.

All this seemingly indicates a genuine desire in Naypyidaw to dispel its international pariah status for good and rejoin the international community. It has been rewarded with the 2014 Association of South East Asian Nations (ASEAN) chairmanship – an appointment the country gave up in 2005. Last month, Hillary Clinton made the first US Secretary of State visit to Myanmar in more than half a century. While critics argue that the reforms were merely window dressing to better Myanmar’s ASEAN chairmanship bid and economic development, the efforts can nonetheless be seen as the first signs of a gradual process toward reconciliation and political openness. The next few years will be critical for Naypyidaw as it addresses the plethora of challenges in rebuilding the nation.

Politically, the government is motivated to stay in power. To that end, the government has rejected its traditional military allegiance and institutionally placed itself accountable to the constitution. Generals are now in civilian positions, and politicians have been emboldened to shout down these former military men. The current pro-regime party hopes to win again in 2015, but this time without the insinuations of a sham election. This is a major sticking point. Electoral laws under the 2008 constitution mandate 25 percent of the seats in parliament to the military, and the junta-backed party won 80 percent of the seats it campaigned for in the election last year.

Moreover, Ms. Suu Kyi cannot – and should not – shoulder the opposition burden on her own. As its most highly-visible representative, she is now largely exempt from Naypyidaw’s future crackdowns, but grassroots leaders must also participate, and be allowed to do so by the state. Having Ms. Suu Kyi in the political discourse gives the government a significant boost in legitimacy, but a large number of her fellow political prisoners still languish in prison. How other opposition parties and movements operate, and how freely and effectively they can do so, is the broader lens needed to gauge political change.

Socially, Naypyidaw faces the daunting task of reconstructing a society devastated by decades of junta rule and domestic strife. Its neighbours host significant refugee camps, a consequence of ethnic persecution. The largest challenge remains longstanding ethnic-minority movements for autonomy or independence. These armed conflicts have simmered for decades, and the brutal military offensives that attempted to quell them have resulted in countless human rights abuses. As part of its reform campaign, the government has tried to diplomatically bring parties back to the negotiating table, and with some success. Ceasefires with some rebel groups have been signed, but their longevity depends on further reintegration into Myanmar’s society and the passing of economic and political benefits to these historically-marginalized enclaves.

Beyond ethnic minorities, Myanma society faces the daunting task of national reconciliation. The regime’s senior leaders will not allow reforms to continue if they believe it will lead to their prosecution. Amnesty in this regard will be difficult to reconcile with a population that has suffered under their rule for decades. To her credit, Ms. Suu Kyi has none of the vindictiveness one might expect from her years of detention. Her moral authority and grace will be instrumental in establishing greater internal social cohesion, a necessary prerequisite in ensuring the permanency of recent and future reforms.

Economically, Naypyidaw understands that it has fallen far behind its ASEAN colleagues. Myanmar’s financial system remains one of the most rudimentary in Asia. Infrastructure – particularly transportation and energy – are in dire need of modernization. Inflation is high and the tax collection system needs strengthening. Without greater revenue, the country cannot pay for civil service, education, and health reforms. In ethnic rural areas, the narcotics industry has overtaken agricultural production, a staple Myanma export.

More importantly, Myanmar must dramatically improve its economy in order to meet certain participation conditions in ASEAN’s stated goal of a free-trade area for 2015. It is hoped that untapped energy deposits  and a fairly robust gemstone industry will serve as initial levers to wider growth.  Its reform campaign has attracted increased foreign investment, but a lack of an educated workforce makes value-added growth difficult. Indeed, large numbers of Myanma have gone abroad as migrant workers in neighbouring Asian countries as well as the Middle East.

Naypyidaw will need assistance in its transformation. Already Myanmar has asked for an end to economic sanctions in recognition of recent reforms and to help the country develop further. As much as the military-turned-civilian regime may loathe the notion, it is in Myanmar’s best interest – and thus its governing body’s interest – to continue reforms. Thein Sein has hung his administration’s international and domestic legitimacy largely on the success of these reforms. It thus has great motivation to comply with reasonable demands coupled to tangible incentives.

The international community therefore has a significant role in Myanmar’s future. Naypyidaw craves international approval. It has even indicated a new willingness to engage other international partners and their brand of conditional, ‘strings-attached’ support by rejecting the past regime’s unquestioning acceptance of Chinese financial assistance and political influence – best exemplified by the suspension of a controversial hydroelectric dam deal with Beijing. Indeed, Myanmar’s geopolitical and economic importance in the Sino-Indian rivalry, trans-Asia transportation hubs, and the Sino-American play for regional dominance give plenty of additional reasons why the international community should be involved in the country’s transition.

The key, however, is measured international support for Naypyidaw’s progress. A complete lack of recognition would signal to the population the international community’s insincerity in helping their plight and give the government a reason to reverse gains. Similarly, too much pressure will likely project the image of Naypyidaw kowtowing wholesale to Western value imperialism, fanning resentment in Myanmar’s hardliners and discouraging them from further reforms. No pressure and comprehensive support now, on the other hand, would allow Myanmar a relatively free ride to the chairmanship and remove further motivation and incentive to continue reforms. To that end, Hillary Clinton’s offering of small rewards and encouragement of further reforms was a carefully calibrated give-and-take process designed to maintain pressure but simultaneously acknowledge Naypyidaw’s efforts thus far.

Ultimately, change will be gradual. Given Myanmar’s decades of military rule, some level of failure in implementing new policies is also to be expected. Forcing reforms too rapidly will be as counter-productive as no change at all. Drastic action will destabilize a nation still attuned to a half-century of repressive authoritarian rule. Indeed, Asian nations have a cultural deference to authority (witness, for example, the rigid democracies of Singapore and Malaysia), and such a mindset is hard to give up. Even Ms. Suu Kyi is against a dramatic regime change akin to the Arab Spring uprisings, explicitly stating that it would not solve the country’s problems. Such instability would give hardliners an excuse to bring back the repressive status quo. Worse, the aftermath of such an uprising would not be in Myanmar’s long-term interest, as Tunisia, Egypt, and Libya can now attest.

Indeed, Naypyidaw is likely to continue dispensing change on its terms precisely because they fear such a grassroots conflagration. It has realized that future socio-economically-derived unrest not unlike the Arab Spring remains a distinct possibility without genuine, long-term reforms. If change is inevitable, then at least the regime can control it from the top down rather than bend to unpredictable pressure from the bottom up. Continued repression will not lead to social stability or future economic viability.

Ernest Chong graduated from the Master of Public Policy program at the School of Public Policy and Governance in 2011. He also holds a Master of Arts in War Studies from King’s College London. He is currently assistant publisher at Global Brief magazine and is an affiliated analyst for Polaris Strategies, a Washington D.C.-based geo-political consultancy start-up. His areas of interest focus on defence and security issues in Canada, the United States, and the Asia-Pacific. 

The Reckoning – Part 1

Years ago, when I was getting my first taste of comparative public policy as an undergrad, a wise and engaging professor of mine lectured about how states, from time to time, face a “reckoning.” While I could well have missed his point, what I took it to mean was the moment at which a society realizes that the state’s political economy – it’s social, political and economic framework – is no longer working. I found this to be a very profound and powerful idea.

It’s not a stretch to suggest that Western civilization is in the midst its own moment of reckoning. Over the last three years, we’ve seen the post-war liberal-democratic economic model – the source of much triumphalism and hubris in recent times – seemingly come apart at the seams.

The cause of this rupture is generally attributed to the ‘financial crisis.’ The common narrative is that the crash, and the hardship that has followed, were the result of a perfect storm: once-in-a generation housing bubbles in the US and Europe, driven by low interest rates and loose policy; reckless innovation and leveraging in the financial sector; toothless regulators and clueless or complicit ratings agencies; and consumers aided and abetted by feckless mortgage lenders.

The reality is, the financial crisis simply accelerated the economic and fiscal decline that had long been underway. All the warning signs were readily apparent before the crisis: economies increasingly reliant on housing construction, financial services and the public sector (or commodities in some cases) for growth and job creation; governments eroding their balance sheets to pay for entitlements and unaffordable tax cuts; labour markets increasingly creating inequalities by privileging the highly skilled, the unionized and the aged; and, as this recent McKinsey report lucidly shows, a staggering growth in indebtedness – among households, financial and non-financial businesses, and governments alike.

But in the immediate aftermath of the crisis, there was no ‘reckoning’. Even as governments were forced to make truly unprecedented market interventions just to stave off calamity, there was little public debate about how it had come to be that the financial sector was generating over 30% of US corporate profits with only 3% of the workforce; or of what the future held for Europe with youth unemployment shooting above 20%; or of what was prompting consumers to pile on debt to buy houses and groceries. Instead, there was actually some optimism that a speedy recovery was coming.

Only recently has that optimism begun to fade, and the true severity of the problems Western societies face become apparent. In September, the IMF reported that the “global economy is in a dangerous new phase,” as the economic recovery slows, confidence has fallen sharply, and downside risks are growing. This surely proved an understatement. The outlook has worsened since then, as the spiraling European debt crisis increasingly imperils the future of the Eurozone and risks sovereign defaults that would ripple disastrously through the global economy. This uncertainty is heightened by the weakness and fiscal paralysis in the US, crystallized in recent months by the historic downgrading of the credit rating.

Indeed, it is not hyperbole to suggest that we’re on the brink of an economic disaster, the outcomes of which we do not have the analytic capacity to foresee.

And yet, the gravity of the situation has not been fully grasped by Western policymakers and publics. Politicians in Europe have bickered and dithered for two years as the debt crisis has worsened. Flailing European governments, under intense pressure from the bond markets, have only reluctantly laid out austerity plans, generally out of desperation and in return for EU and IMF bailouts. In North America, meanwhile, policymakers have been similarly loath to take action. The US political system has been gridlocked by political polarization, dysfunction and venal brinksmanship. New brands of populist politics have produced electoral success – whether the Tea Party’s small-government credo, or the federal NDP’s campaigning on middle class angst – but have not sought to offer reasonable proposals for reform.

Public attitudes are also conflicted. Polling suggests that Brits and Americans, for example, are extremely pessimistic about the state of the economy (though Canucks are more positive). Incumbent governments have been swept aside in the UK, Ireland, Portugal, and more recently Greece, Italy and Spain (though, again, not in Canada), with Presidential elections looming next year in the US and France. The streets of Europe have also witnessed troubling eruptions of social unrest, violent protest and looting, sparked by longstanding class resentment, intergenerational inequity and government austerity and bailouts. But publics, while aggrieved and eager to punish governments for their profligacy and complacency, don’t seem eager to change their own behaviour or suffer the consequences of government debt reduction.

The Occupy movement, while now ebbing, really captured the zeitgeist of our current moment. The camp cities were born out of latent frustration and resentment about the status quo, loosely tied to the motifs of rising inequality, middle class anxiety, and the culpability and greed of the financier class. The movement garnered significant public support and recognition, and unlikely kudos from elite opinion-shapers. It has also inspired an ethos of communitarianism, social justice and democracy. Tellingly though, the Occupy Movement’s chief failing was its inability to convey a coherent message, outline objectives for reform, or harness the public support to spur political action.

This seems emblematic of the public mood: uneasy, angry and ever more aware that something is going terribly wrong; but uncertain of the hard choices their societies face, and reluctant to tolerate a political discussion of the sacrifices they’ll require. The ‘reckoning’ is beginning, acceptance will follow.

The Reckoning – Part 2

It’s hard to learn uncomfortable truths about yourself. But as many who’ve recovered from addiction and dependency can attest to, the first step on the road to recovery is acceptance.

If Western society is indeed ready to admit that it is facing a moment of ‘reckoning’, requiring a fundamental rethink of the 20^th century political economy, then policymakers and publics need to come to terms with three difficult truths.

The first difficult truth: the global economy is sick and the healing process will be long and painful.

What the 2008 crisis and its aftermath has revealed is how dysfunctional the global economic model has become. Many of the symptoms are plainly obvious, such as dramatic global trade and current account imbalances, increasingly volatile and speculative financial markets, and asset bubbles driven by low interest rate policies and lax regulation.  Author Michael Lewis has made a great living traveling the Western world, from Dublin to Sacramento, chronicling the folly of these unhealthy financial practices. The core, systemic problem, however, has essentially been this: the global economy has in large measure been sustained by the growth of export-driven emerging markets through the financing of Western consumption. This, clearly, wasn’t sustainable.

There are a couple of important conclusions to draw. The first is that a significant and wrenching restructuring must occur as developed countries acclimatize to a world in which they can no longer live beyond their means. This process will slow growth in the years ahead, as developed world consumptive capacity declines, currencies depreciate, and trade imbalances gradually narrow. This will consequently be challenging for emerging economies as their capacity to grow as low-cost manufacturers will be diminished by deteriorating terms of trade and declining demand for their products. China has been signaling that the growth of domestic consumer markets is critical to replacing Western demand and sustaining growth.

The second conclusion is that a variety of other factors will likely only make this realignment more difficult in the years ahead. Recent IMF research suggests that sustained fiscal consolidation, or deficit cutting, will reduce growth and increase unemployment, particularly long-term unemployment. Access to capital for investment will likely remain difficult for firms, as sovereign debt uncertainty persists and banking reforms take effect. Aging populations will shrink labour forces and shift resources from investment in productive things to the consumption of services like healthcare. If all this weren’t enough, questions persist about whether China, a driver of global growth, could face destabilizing asset and credit crises of its own.

Suffice it to say, the restructuring will be a long process and growth will remain slow.

The second difficult truth: governments will no longer be able to fund the level of services citizens are used to.

While it needn’t be belabored, Western public finances are utterly shambolic (here’s an interactive way to learn about it). While severely aggravated by the economic crisis, this should again be understood as a longer term phenomenon – driven by slowing economic growth, increasingly unsustainable health, pension and social service expenditures, and an anti-tax orthodoxy that has eroded the revenue base.

The consequences of this are clear: reducing public deficits and debt will require dramatic reductions in public service levels, or large tax increases, or both. The challenge will again be heightened by an increasingly grim set of forward-looking circumstances. Weak economies will restrain revenue growth and increase social assistance and unemployment costs. Rising interest on debt payments will eat up larger shares of expenditures, even with persistently low interest rates. Growth in health spending will also likely continue to crowd out other public priorities.

What type of pain will the era of fiscal austerity inflict? The UK’s 2010 emergency Budget provided an early example, coupling welfare reductions and draconian departmental budget cuts of 25% with increases to the value-added and capital gains taxes, and the imposition of a bank levy.  Most other major economies in Europe have since announced plans that include some combination of spending cuts, asset sales, public sector pay cuts, benefit and pension reductions, and tax or levy hikes. Particularly severe measures, imposed in likely defaulter nations such as Greece, Ireland and Spain, will perversely further constraining their future growth potential.

While the US hasn’t yet taken these difficult steps, the degree to which largely non-discretionary spending on health, pensions, interest on debt and the military dominate Budget allocations demonstrates how daunting fiscal reform will be. This fiscal architecture is similar across the Western world.

The third difficult truth: the middle class ‘social compact’ needs a rethink.

In the mid to late 20^th century, a system of welfare state capitalism emerged as the core of the Western political economy. The model has been based upon striking a balance between the inherent risks, rewards and inequities of free markets, with the assurance of high employment, rising standards of living, and the government provision of education, health and other services to ensure equality of opportunity for all and social supports for the unlucky. This liberal-democratic ‘social compact’ was predicated on the idea that though some would take a disproportionately large slice of the pie, most would benefit from the growing size of the pie.

The data today shows that this arrangement has been eroding since the 1970s. In Canada, though the Canadian economy has grown significantly over the last 30 years, the real median income has barely budged – rising from $45,800 in 1976 to $48,300 in 2009, or just 5.5%. The trend has been similar in the US. In Europe, this wage stagnation has been coupled with an epidemic of youth underemployment, spurred on by rigid labour markets and protected cadres of entitled older workers.

The figures are stunning. Yet, the impact on middle class standards of living has been muted. The reason for this, as labour economist Robert Reich demonstrated brilliantly in The New York Times, is that household incomes have been supported by two somewhat surprising factors.

The first was the entry of women into the workforce en masse during the 1970s and ‘80s. Unquestionably a landmark progressive advance in gender equity for our societies, it also quietly served a critical economic purpose: boosting incomes for households that increasingly couldn’t get by with a single breadwinner. More recently though, households have become dependent on a second form of income supplement:  debt. In Canada, household debt to after-tax-income levels have spiked from 80% in 1970 to nearly 150% today. Canadians are by no means unique, as savings rates have fallen across the developed world.

Even the promise of post-secondary education, sold to recent generations as the ticket to prosperity, is proving somewhat of a chimera. In a recent article, former Obama budget chief Peter Orszag argued persuasively that college degrees in the US don’t provide the return on investment they used to: they are more expensive than in the past, less likely to guarantee a high wage, and less of leg up in times of high unemployment. Prospects are even bleaker for European graduates. Among other factors, this has been driven by the growing capacity to outsource or digitize work done by some segments of the white collar workforce, causing poorer job prospects and downward pressure on wages.

All of these trends paint a gloomy picture for the 21^st century worker. What is called for, suggest the MIT academics that co-authored an influential recent study on stagnant wages in the US, is a fundamental rethink of the linkages between workers’ wages and productivity growth in our economies. They urge the creation of “a new Social Compact, not in the mirror image or with the same institutions of the original Compact, but with policies, institutions and organizational practices suited to the current economy and workforce.”

The critical insight is that these three ‘difficult truths’ – the painful processes of economic restructuring, fiscal retrenchment, and renewal of the middle class social compact – represent thorny, integrated and long-term challenges. They will require policymakers to have the courage and foresight to make difficult choices in the public interest. And that electorates shed their aversion to change, and their intolerance for personal sacrifice. This will be profoundly difficult.

But the darkest hour is before the dawn. These challenging circumstances will compel public debate on some foundational questions that have been off the table in recent years, outside the boundaries of acceptable political discourse.

How can public expectations for services be aligned with a reasonable tolerance for tax? What sacrifices are required, and by which groups of citizens, to ensure a sustainable welfare state? What types of jobs do people want, and what policies can reorient the economy to create them? What role should the financial sector play in the economy? And what levels of income inequality and intergenerational disparity are tolerable?

These questions are daunting. Yet, they get to the heart of the core promises of Western liberal-democracy, such as fair and competitive economies, representative politics, social justice and equality of opportunity. What this reckoning provides is much needed reflection that must be embraced.

André Côté is an alumnus from the Class of ’09 at the School of Public Policy and Governance, University of Toronto. The views expressed are his alone.

China’s first aircraft carrier is back at sea.

The ex-Ukrainian warship has spent more than a decade being refurbished and modified in Chinese shipyards, and only had its maiden voyage in August of this year. To the world, Shi Lang (the carrier’s rumoured Chinese name) is the latest unsettling example of Beijing’s rapid military modernization. For China’s maritime neighbours, she also represents a powerful and unmatched addition to Beijing’s naval arsenal. This deepening of an already-inferior military balance has the region fearing that it will embolden China’s already-aggressive approach to territorial disputes, particularly in the South China Sea.

These fears may be somewhat misplaced and premature. China’s first aircraft carrier must be understood as a military asset and as a symbol of national prestige. As the newest addition to the People’s Liberation Army Navy (PLAN), Shi Lang is simultaneously China’s first hard naval power projection asset and the latest testament to the nation’s ever-increasing economic and military capability. But examined more closely, the carrier’s impact is far more nuanced than first believed.

While it is a genuine concern, China’s naval power projection is still a capability in development. On its own, Shi Lang does not significantly alter the global or regional naval balance. One must not forget to differentiate between possession and effective operation – simply having a carrier is not immediately equivalent to the military power and political influence of an American carrier strike group. After all, if this were the case, Thailand should have undisputed primacy in the South China Sea.

As with all military equipment, an aircraft carrier is only as effective to the extent that the operator has the skills and knowledge to utilize it. In order to project Chinese power, Shi Lang will have to sail beyond the protection of Chinese coastal defences, and thus require a group of escorts and accompanying logistical replenishment support. The PLAN remains relatively inexperienced in operating naval task forces away from home waters, and it does not have adequate fleet protection. Despite a numerical surge, China’s naval forces are heavily dependent on land-based aerial surveillance, combat aircraft, and coastal batteries. Worse, its submarine fleet and anti-submarine warfare (ASW) capabilities are critically weak. It will be some time before the PLAN can mount effective carrier operations away from home waters.

Even then, Shi Lang’s potential will be severely limited by her inherent design. The lack of catapult launch technology means that her strike aircraft will have to use the ski jump to take off, limiting their payload and fuel. This is particularly daunting for China since it has chosen the heavy and unproven Sukhoi SU-33 as its primary naval combat aircraft. Worse, the lack of catapults also precludes the use of fixed-wing airborne warning and control (AWACS) aircraft and aerial refueling tankers. Taken together, these shortcomings mean Shi Lang will not have the strike range or autonomous operation capability anywhere close to its American counterparts.

It is thus likely that Shi Lang is China’s ‘starter carrier.’ Rather than a fully-operational warship, she will serve as a training platform on which the PLAN can experiment and refine carrier doctrine and gain operational experience. A period of trial and error will yield lessons learned that can then be incorporated into future Chinese aircraft carrier design and operation.

While Shi Lang’s military importance may not be as serious as first thought, her symbolism cannot be understated. Like the new Chinese stealth fighter unveiled earlier this year, an aircraft carrier is a widely-recognizable item of tangible military power. It represents China’s economic power and industrial capacity as well as its mastery of complex military technologies. Domestically, there is no doubt that the carrier launch was a source of great nationalist pride. Shi Lang signaled, at least for Chinese patriots, an end to China’s ‘century of humiliation’ by the West and a return to the Middle Kingdom narrative. The fear is that the accomplishment will embolden China to assert its foreign policy more aggressively. The danger becomes especially potent when combined with increasing nationalist sentiment to do so.

Notwithstanding the military limitations above, a fully-operational Shi Lang can undoubtedly contribute to China’s foreign policy. Diplomatically, she can tangibly raise China’s ‘soft power’ profile through port visits and be used for non-military operations like regional humanitarian assistance and disaster relief missions. There is also no doubt that Shi Lang can be used to coerce weaker countries to do Beijing’s bidding. However, her effectiveness in this regard depends largely on those neighbours perceiving the threat to be genuine. To be sure, even a small PLAN task force could wreak substantial havoc in a militarily-weak Southeast Asia. But China is unlikely to do so. Resorting to military strikes would not only admit diplomatic failure but also instantly justify a decade of Western strategic literature trumpeting Sino aggression. Indeed, the mere sailing of a carrier into the South China Sea could be inflammatory. Beijing would have to consider such a move carefully.

More importantly, Shi Lang has put China’s neighbours on notice. It is no surprise that, even before its public unveiling in June, many Asian countries (including Indonesia, Vietnam, Malaysia, Singapore, and Australia) have or are acquiring modern submarines to capitalize on the region’s deep waters and the PLAN’s weak ASW capabilities. When combined with the acquisition of new attack aircraft, this significantly increases the region’s ability to hold China’s naval assets at risk. Whether Beijing is willing to accept even minor damage to Shi Lang or her air group – and thus its international prestige – is debatable. Despite capable escorts, aircraft carriers are inviting targets in a high-intensity confrontation. Indeed, a Chinese naval presence in the South China Sea can just as easily be accomplished with other modern warships in the PLAN inventory – it does not need to risk a carrier.

That having been said, Shi Lang nonetheless represents a stark departure from China’s existing maritime strategy. An aircraft carrier is a power projection asset that does not fit into Beijing’s defensive policy of ‘anti-access and area denial’ (A2/AD). Indeed, it would mean shedding many A2/AD advantages – the farther a PLAN force goes from the protection of its coastal defences, the more vulnerable it becomes to other countries’ naval and land-based defences. Nor does Shi Lang apply to the Taiwan issue – a carrier will make very little impact in the already-lopsided military calculus in the Taiwan Strait. In this respect Shi Lang is therefore likely the tip of an entirely different PLAN spear – one in which the PLAN will become increasingly more regionally active. China may be looking a long way into the future, envisioning itself displacing the United States as the dominant power in the region. Given the difficulty in developing doctrine and the political challenges at home and abroad in developing such a force, this is a future that is probably several decades away – approximately the same time it will take for the PLAN carrier capability to mature.

We must therefore be careful not to exaggerate or underestimate Shi Lang’s importance. Its current shortcomings in operational capability and the larger doctrinal issues with a ‘blue-water’ PLAN fleet mean that Shi Lang’s immediate impact will be slight. Symbolically, the carrier ignites the nationalist passions of many Chinese patriots who see it as a means towards regaining China’s historical regional glory. It is also undoubtedly a milestone in Chinese naval development and a likely indication of China’s future regional foreign policy. This future is far enough over the horizon that China’s neighbours and the United States have ample time to prepare themselves. This realization may be Shi Lang’s greatest impact.

Ernest Chong graduated from the Master of Public Policy program at the School of Public Policy and Governance in 2011. He also holds a Master of Arts in War Studies from King’s College London. He is currently assistant publisher at Global Brief magazine and is an affiliated analyst for Polaris Strategies, a Washington D.C.-based geo-political consultancy start-up. His areas of interest focus on defence and security issues in Canada, the United States, and the Asia-Pacific. This post is an updated summary of an assessment on China’s aircraft carrier for Polaris Strategies in September 2011.

Today, Canada 2020 will launch a book called “The Canada We Want in 2020: A Strategic Policy Roadmap for the Federal Government.” The publication highlights some key challenges for Canada over the next decade, and provides strategic policy advice specifically for the federal government on how to tackle them.  A series of five chapters on productivity, Asia, carbon, income disparities, and health care provides some clear policy advice for a majority federal government that is now in a position to provide strong leadership for the country and aims to raise the level of public debate around these key issues. If the federal government is going to act boldly, regardless of its majority standing, it will need the public to understand and support its actions.  Each topic is supported by pieces from various authors, and I was privileged to write one of the chapters on health care.

First, some disclosure: I’m on the Board of Canada 2020 so it should be no surprise that I think they are doing great work and I’m encouraged by the release of this book. That said, I really do think that the editors picked the right areas for the federal government to tackle. We know that Canada, for all its strengths, has a productivity problem that if addressed, could enhance our ability to do many other things we as Canadians would like to do. It could improve the quality of lives for our citizens, make our businesses more competitive, and enhance our ability to help people in need around the world.  We also know that the rise of Asia’s growing economies presents lots of opportunity for Canada. Despite strong immigration from many Asian countries, and therefore ready-made networks that are entry points to these growing economies, Canada has yet to fully capitalize on these new potential partners.

In addition, we know that dealing with carbon emissions is one of the great world challenges of our time. Canada has lagged in reducing carbon emissions as part of the our daily lives, and we have the additional challenge of being a major producer of fossil fuel energy.  Finally, while the Occupy movement hadn’t begun when the editors set income disparities as a theme for the book, we know that growing income inequality, characterized by strong increases in the wealth of the very top and declines in real income among the least well off, threatens our social cohesion and conflicts in some important ways. Thus, it seems clear to me that these four areas should be major areas of policy debate and attention as Canada moves towards 2020.

This leaves health care, the fifth priority area as designated by Canada 2020. Is health care one of the major issues Canada faces over the next decade?  On the one hand we have made tremendous progress. We can do all kinds of things for people that we couldn’t do a generation or two ago. And as a result, people are living longer, healthier lives and diseases that used to be death sentences are now managed effectively. It’s worth remembering this context of how far we’ve come when we think about whether our health care system is ‘working.’ But, of course, we have to pay for all this progress. And health care costs have been growing faster than GDP for most of the last few decades.  So what do we do? And what is the role for the federal government? First off, it is worth noting that we are not alone in this context. Most countries in the OECD, and all the countries that we like to compare ourselves to have the same problem of constantly growing health care costs. So this isn’t a problem with our Canadian Medicare system specifically.  Countries with more government involvement and with less government involvement all have the same financing problem.  But while it may be reassuring that many countries face the same challenge, it is also quite daunting. Every country in the world is working to make health care delivery more efficient, more effective, and of higher quality. And none, so far, have managed to get health care costs to growth more slowly than GDP.

There is lots we need to do to make the system more efficient:  incorporate more market mechanisms into our public delivery system, improve incentives, rationalize where and how we deliver care, pay less for more when technology reduces costs, and scrutinize when expensive new technology is worth our public money and when it is not.  All of this need to be done and many provinces are making strong progress in some or all of these areas. (And there are some great ideas out there about how to do things better – I hope our provincial governments take them seriously). But let’s be realistic about what we’ve seen around the world so far: rich nations are spending more and more on health care.  Given this reality, and coupled with the nature of our federal-provincial arrangements over who pays for care in Canada, it seems clear that the federal government is going to have to continue to be involved in securing a high quality, effective health care system in Canada well beyond 2020.  How the federal government can continue to support this goal, recognizing all the important work on the delivery side that the provinces need to do, is the subject of my contribution to this exciting project.

Mark Stabile is the founding Director of the University of Toronto’s School of Public Policy & Governance and a Professor at the Rotman School of Management.

**What is the Canada you want in 2020?**
Leave a comment in the response box below.
All respondents will be entered in a draw for a copy of “The Canada We Want in 2020.”

Over the past few months we, as a city, a province, a state, and a people, have been distracted. We have been busied by an economic crisis. Keeping up with Rob Ford’s vision for Toronto. Swept up in the largest social movement our generation has seen in support of Occupy Wall Street. But there are other interests at work and other dialogues to which to listen. Health care, I argue, is an issue deserving constant vigilance. To look away from it for a moment is to relinquish that moment to another interested party – one that, if left unchecked, could seriously damage the quality of health care we receive in this country.

Universal health care is a symbol of Canada, both to its citizens and to its global audience. ‘Universal’ is an assumption that has become natural to Canadians. But what does universal really mean? How is the Canadian health care system universal?

The answer to my former question is obvious to most. Universal could mean that everyone has equal access to health care in Canada, no matter their resources. Why is it a good thing? Because people who wouldn’t be able to afford health care have access to quality care. And to quote the common phrase, without our health, we have nothing.

The latter question is slightly more complicated to answer. First, let me take issue with the title, “Canadian health care system.” Discourse around the Canadian health care system is misleading. It is not so much ‘Canadian’ as it is a series of 10 provincial systems. There is no real national standard, nor the political will to formulate such at present. The Canada Health Act is vague. Violations go unfound and unpunished. If you consider that there are at least 49 surgical clinics selling medically necessary services in Alberta and BC combined[1], the ‘wild west of health care’ seems an apt name.

So how is the Canadian health care system universal? It simply isn’t[G1]  when you consider the health care alternatives that do not meet the strict definition of equal access. The number of private health care businesses has been growing in Canada since the 1990s, including a private for-profit surgical and diagnostic industry that emerged in the early 2000s.[2] In addition, more and more Canadians are turning to Complementary and Alternative health care, amounting to a 2006 estimate of $5.6 billion spent out-of-pocket on visits to providers of alternative medicine[3].

Enough Canadians seem to have formed opinions from pop culture, ie. Denzel’s 2002 performance in John Q, or heard cringe-worthy stats (like while the U.S. spends nearly twice as much per person on health care as Canada, more than 45 million people have no health care coverage at all[4]) to put the argument  for privatized health care on a shelf.

Enough Canadians, but not all. Terence Corcoran, in his October 4^th article, “Nurse, Get Me An Entrepreneur”[5] presents a purely ideological argument for privatized health. In Corcoran’s world, health care is ‘socialized’, doctors are ‘victims’ and facts are absent. Privatize health care and the entrepreneurs will flock to innovate, says Corcoran. Set aside your bleeding heart moral argument and accept that the health industry is just like any other business – open-market competition will make it thrive.

Aside from explaining to Corcoran that innovation does exist in public health care[6], I would point out that in a competition, someone always wins while someone else is sure to lose. How does this make sense for our health? Is it acceptable for a clinic to happily count its monies at the expense of patients suffering down the street? When it comes to health, it shouldn’t be business – it should be personal. It’s the well-being of our families, our communities, our population. Collaboration, not competition, is the key to healthy innovation to be shared by all.

But the Corcorans of Canada remain heard. And perhaps it is the polite Canadian in all of us who listens, and the most generous of all whom offers an ‘institutionalized ambivalent’[7]compromise: let two-tiered health care be the solution. Those who seek to privatize argue that this ‘compromise’ frees up resources in public health care. That opening the system up to more private funding is the only way to remedy escalating costs of care. Those in favour of public health care may agree or disagree. But most may not be equipped to debunk the fallacy.

It certainly can sound appealing to let Canadians who can afford to pay, pay, and allow those who cannot pay to reap the benefits of a lightened public system.  But reality doesn’t work that way[8]. To begin, it is unlikely that throngs of wealthy Canadians will race to shell out cash for the same service they could get for free publicly. Further, the private tier would take a disproportionate amount of resources out of the public system to provide faster service, pushing the public system to service almost the same number of patients with far less resources. Finally, we must remember that private health services are highly dependent on employer-sponsored benefit packages, which are subsidized with almost $3 billion in taxpayer money each year[9]. In other words, private investment does not get taxpayers off the hook for healthcare funding[G2] . A compromising compromise indeed.

It can also sound appealing to increase private investment in our system. Again, I question how private investment, which comes strapped to single-minded focus on producing a return for investors, makes sense for the health care industry. If the current trends were to continue, private health care business would open up in urban, densely populated areas, cherry-pick the ideal patient (read – ignore difficult patients who need care the most), and sell services patients may not need[G3] .

In Andrew Coyne’s recent talk, “Why we [the media] always get it wrong”, he lamented our reliance on the United States for policy learning and suggested looking elsewhere. I couldn’t agree with Mr. Coyne more. Australia, for example, has many lessons to teach, having expanded private health insurance in the same way Canada often considers. Now we can observe how Australian patients are struggling with longer public wait lists, higher overall costs, and unequal access to care[10] – but can we learn?

In the UK, attempts to create a market for primary health care via private financing initiatives (what this side of the Atlantic terms “public-private partnerships”) shifted power away from government and practitioners alike[11] and have ultimately been a deemed a failure. Instead of infusing more money and resources into the system, PFI-funded facilities had less capacity and were subject to overly expensive contracts, among other ills[12]. As of September 2011, 12 million patients were threatened as 60 hospitals teetered on the brink of financial collapse due to costly PFI schemes[13].

But at least the UK is open and honest about their two-tiered system. In Canada we have preferred to ignore the twenty-year trend, and with a lack of admission comes a lack of research, knowledge, and regulation; a lack of regulation that may be responsible for the recent infection alert at a ‘non hospital’ (read- likely private) clinic – an embarrassment that made the BBC headlines[14].

It is time to reach a consensus that universal health care is not a result of bleeding heart voters and purely ‘socialized’ medicine. Universal health care is the best system to provide quality health care for all in both an economic and social sense. But it needs government support through policy and practice. The bad news: the Federal Cash Transfer Program, in its current state, offers little recourse for direct violations of and loopholes found in the Canada Health Act. But the good news is that the two-tier trend is recent and thus reversible. Thus, in solution-speak I observe a crucial need for strict, federal standards regarding our not-so-universal health care system; robust regulation to protect our system from the problems plaguing our commonwealth comrades in Australia and the UK; a level of care to which provinces should be compelled to reach.