2 minute read

The Prime Minister has already given us the right answer on the WE debacle: he ought to have recused.

At least, that looks like the right answer. As other commentators have noted, we don’t really know precisely, or even roughly, how this decision was made.

For any who’ve been incommunicado on, say, a cruise ship over the past two weeks, we refer to the government’s decision to have WE Charity run a $900 million program designed to pay young people to volunteer (sic). It did so without a transparent process, and the Prime Minister seems at a minimum to have “participated in the discussions” leading to that decision, notwithstanding the fact that he (and his wife, and his mother, and his brother) have longstanding links with that organization. In the case of his mother and brother, these links included speaking fees totalling hundreds of thousands of dollars, albeit possibly from (or intended to be from) WE Charity’s corporate sibling, ME To WE (sic again). An added dimension was that the Minister of Finance also had family links to WE.

We (the IOG) have no capacity to assess the qualifications of WE (the charity) for the job, or whether it was necessary to outsource the work in the first place. The issue, as so often in the public sector, is not the merits of the decision but the integrity of the process.

We do know, however, that the Prime Minister, like all ministers of the Crown and myriad senior officials, is subject to the Conflict of Interest Act (COIA). Among many other provisions, the COIA prohibits public office holders from making decisions (or influencing the decisions of others) where there is “an opportunity to further his or her private interests or those of his or her relatives or friends or to improperly further another person’s private interests”. Well, ahem…

Again, we don’t know the particulars of this decision. It may well be that WE was the best organization for the job. WE has claimed that public servants have “openly” stated that they recommended WE on the merits. If so, that would be odd, because public servants aren’t supposed to disclose their advice to ministers. It would suggest that there was at least some sort of assessment process; but public service advice does not override recusal requirements.

Conflict of interest rules work best within a culture of ethical awareness, combined with robust practices to remind people, including very senior people, to be vigilant about their obligations This would include other decision makers in the government not being influenced by knowledge of their leader’s preferences, no mean consideration. In any case, the Prime Minister has done a mea culpa, so perhaps we can hope for such vigilance next time.

2 minute read

In the Westminster system, the practice of preparing an annual budget of the nation’s finances is attributed to William Pitt the Younger. This prodigy, prime minister at 24, vastly reformed Britain’s chaotic public finances in the late 18th century and later led Britain through the Napoleonic wars in the early 19th. It never occurred to him that a war should stop him from presenting a budget.

But the Napoleonic and later world wars were not the COVID crisis, and our current government has not found its way to producing anything it dared to call a budget, although last week it did produce something called an “economic and fiscal snapshot”.

The history of Pitt’s reforms reminds us that a budget is as much about financial order and accountability as about taxing and spending. So it might come as a surprise that there is no legal requirement that the government present a budget each fiscal year, although Canada usually manages it. The Mackenzie King Government went nearly 16 months without a budget in 1943-44, less for the mere fact of world war than – get this – because it was awash with unexpected revenues and wasn’t sure what to do. Anyway, to get authority to spend money out of the consolidated revenue fund, the government need only present its spending estimates and receive the House’s approval for the requested allocations.

The “snapshot” earns its moniker in part by not telling us much about the future, notably how the exceptional provisions for the COVID crisis will be unwound and what comes next. It does tell us that deficit will be a whopping $343 billion and that the total national debt will reach some $1.2 trillion in 2020-21.

The government faced relatively little criticism for these numbers. Some Opposition voices have said things would be a lot better if the government hadn’t been running a deficit in the first place, but it’s a little hard to see the original deficit of $34 billion as a big factor in the actual deficit of $340 billion.

How bad is all this? Well, it’s not a straightforward question. Canada has always had public debt, and a key measure of a nation’s debt, like a household’s, is capacity to carry it. Our federal debt-to-GDP ratio will rise from 31% to 49%. Mr. Morneau would tell you this compares well to many other advanced countries – the US federal debt was over 100% of GDP long before its multi-trillion dollar COVID package, while Japan’s is well over 200%. And Morneau did point out that back in the 1990s debt service costs were 6% of GDP compared to 1% now. But national-only numbers can be misleading in federal states, as provincial debt has been climbing. And interest rates have nowhere to go but up.

Of course a sizeable portion of the deficit increase is due to declining revenues, and without fiscal support the losses would be higher – to say nothing of the human costs. But there will be a day of reckoning, and it will be a long time before all of this is behind us.

2 minute read

Honda. Levi’s. Lululemon. MEC. Unilever. All of these brands have something in common: they are united as part of the “Hit Pause on Hate” campaign and have committed to boycott their paid Facebook advertising until the social media giant takes more steps to prevent hate speech/hateful content on its platform. The boycott has hit the company hard, as stock declines reduced Facebook’s market value by more than US$50 billion.

Facebook released a publicly accessible report in February 2020 that stated “companies are intermediaries, not speakers” and that “holding internet companies liable for the speech of their users could lead to the end of these services altogether.” This leaves the organization with a moral obligation, a user-demanded need, and now a market expectation, to regulate the content shared by their users.

For those that attended IOG’s March Policy Crunch, Navigating the “wild west” of the internet from social media to digital governance, you heard that social media – while in many cases building a broader sense of community and encouraging the exchange of ideas – has also created a perfect storm of fake news, micro targeting, bots, and hate speech. Panelists reflected on the need for federal legislation that will govern this social media storm. The “Hit Pause on Hate” campaign, led by civil society, has brought the private sector into this conversation, in a big way, as corporate global brands hold their fellow big brand peers accountable to conduct themselves according to the norms of an equal and inclusive society.

This scenario brings about important governance questions, many of which are linked to the IOG’s principles of good governance:

1. Legitimacy and Voice: Laws in many countries, including Canada (Criminal Code 319), define hate speech. But who gets to decide what is hate speech across jurisdictions in an online environment? Good governance needs the voices of citizens, many of whom will have diverse views on any particular topic. Who decides?
2. Accountability: Who has the legitimacy to regulate and police hate speech online? How will platforms be held accountable?
3. Fairness: Who enforces the fine line between free speech and hate speech online? When does it become censorship? How do you ensure that the line is fairly applied?

An increasingly digital world demands more robust digital governance, policies and regulation. Weaving these into complex social issues will likely be a significant policy challenge for years to come. As technology advances faster and the demand for virtual presence increases exponentially over the current regulatory systems that pre-date the internet, government digital regulatory policy needs to be unplugged and plugged back in again.

What the boycotting has made clear: there is an urgent need for digital governance that establishes behavioural norms and expectations for online conduct. While we might be far away from a government regulated policy on online hate speech, change may come sooner, as citizens advocate for norm-setting against the online epidemic of hate. The question: is this a fair, legitimate and accountable approach to digital good governance?

3 minute read

By Bill James, Senior Advisor

—

Does COVID-19 illustrate the need to reform Canadian economic policy and industrial strategy to strengthen national security?

The most fundamental obligation of a national government is to protect the safety and security of its citizens. Canadians can be proud that our governance structures, institutions and the individual sacrifices of millions of workers have allowed us to relatively successfully navigate the COVID-19 pandemic thus far. At the same time however, the pandemic has laid bare the degree to which the health, safety and economic security of all Canadians can be impacted by events outside our country and by decisions taken elsewhere particularly in countries with different priorities and values. In recent days, it has become more evident than ever, that self protection, pursuit of economic advantage, and different values and perspectives can lead to interruptions and unreliability of essential trade and supply chains in times of economic and political challenge.

As a smaller, relatively open economy, Canada’s existing economic and regulatory policies in several important sectors have left it at the end of a long, intentionally offshored supply chain which has been structured to minimize cost and maximize corporate profit. While Canada will always depend on trade with other countries, the necessary conditions for safeguarding Canadians’ security are evolving, in a direction where economic aggression may exceed traditional military threats.

Canada’s experience in procuring basic personal protection equipment (PPE) such as masks and gloves during COVID-19 has provided a useful and painful illustration of the vulnerabilities of current industrial policy and supply chain structures: At the inception of the crisis, when Canada’s domestic PPE stockpiles were insufficient, additional foreign supply became unreliable, often diverted to higher bidders or sequestered for domestic use by exporting countries. For example, South Korea implemented measures to restrict exports in February, with its Finance Minister indicating that “The government will make sure that 90% of total mask production in South Korea will be supplied within the country,” “Around 140 companies that produce masks can provide 10 million masks a day, which means that 9 million masks will now be available for domestic sales.” Western governments such as Canada navigated a “wild west” international procurement competition, pitting normally allied countries against one another. Facing continued shortages, poor quality imports, and limited domestic supply, Canada was forced to ration its available PPE and effectively shut its economy down at unprecedented economic cost, as part of the necessary strategy to conserve medical capacity and mitigate the spread of the virus among Canadians.

To date, in part to the rapid deployment of masks and availability of testing supplies, densely populated South Korea has experienced only 282 COVID deaths on a population of more than 50 Million as compared to more than 2660 for Canada’s population of 36 Million. Fast forward a few months to today, and the Canadian government is now promoting a “Made in Canada” manufacturing strategy for PPE as the best way to ensure we can secure the PPE supply required to withstand a second wave of infections during the flu season this fall. While made in Canada PPE may be an achievable solution in this circumstance, if Canada is to emerge from the COVID experience as a more secure and economically resilient nation, a broader and fundamental review of our economic vulnerabilities, trade alliances, and dependencies in areas such as technology, medicine, advanced manufacturing and foreign ownership, is called for.

Part 2 will explore an example of the evolving risks faced by Canadians. Whether Canada should, for example, continue to be indifferent as to which countries control the supply of our most essential medications? Read it here.

1 minute read

By Bill James, Senior Advisor

—

This is the Part 2 of a two-part commentary on the need for a broad review of Canada’s evolving security risks. Read Part 1 here.

Should, for example, Canada continue to be indifferent as to which countries control the supply of our most essential medications?

During COVID-19, millions of Canadians who depend on prescription medications learned that their renewals were restricted to a thirty-day duration, in order to prevent shortages and guard against the risk of supply interruptions from off-shore sourced ingredients. It has been estimated that as much as 70-90% of the active ingredients required to produce our medications are no longer manufactured in Western countries, and are now sourced from only two places: China and India. This means that many basic lifesaving medicines, such as the antibiotics needed to treat common infections, are no longer manufactured in countries like Canada, the U.S., and Australia.

In reflecting on our broader economic vulnerabilities Canada should consider whether a different set of policies might better protect Canadians’ future security:

Multilateral alliances such as NATO have served Canada and other aligned countries well in addressing traditional military threats. Should Canada consider manufacturing and supply alliances with like-minded, rule of law countries to ensure security of supply of our most important medicines?

Canada’s approach to regulating strategic and essential sectors like banking and rail have served Canadians admirably both during the great financial crisis in 2008 and during the economic challenges of COVID-19. Should we take a similar approach with pharmaceuticals? As Canada already regulates prescription drug approvals, funds research, and many medicines are paid for through taxpayer funds – should manufacturers be required to utilize domestic or at least trusted democratic supply chains to guarantee security of supply from source material through finished product? In launching a consultation on the transparency of Canada’s national security policy in 2019, the government stated: “Canadians must know what the Government does to protect national security, how the Government does it, and why it’s important. Applying these principles more broadly in a post-COVID review of strategic economic sectors could provide a path to more comprehensive national security for Canadians.