Speer: I was wrong about Canada’s state capacity

Good reflections. The other point I would make is that the political and bureaucratic levels need more policy “modesty” and need to consider, and value, input from the operational side (where “truth to power” may need to be strengthened). More focus, not necessarily more or less resources. Money quote:

“The key takeaway then is that our politics ought to dedicate more energy and attention to the question of state capacity. Our political debates need to go beyond bigger versus smaller government and address good versus bad government. Everyone should be able to ultimately agree that the former is better than the latter.” 

The idea of “state capacity” has attracted considerable intellectual and political attention in recent years. It started with a blog post in early 2020 by leading public intellectual Tyler Cowen about what he called “state-capacity libertarianism” to describe a policy framework for a limited yet effective government to provide basic public goods and solve for market failures. His influential essay has since spawned dozens of articlescommentaries, and papers on the topic. 

State capacity broadly refers to a government’s functional ability to carry out its market-supporting activities in an efficient and effective manner. The key insight here is that while debates about the proper size and scope of government are highly important, we ought to dedicate similar energy and attention to questions of state capacity and competency. 

Cowen’s chief contribution was to catalyse a renewed intellectual movement focused on “better or worse government” rather than merely “bigger or smaller government.” The timing couldn’t have been more apposite. His essay was published mere months before the COVID-19 pandemic. 

The pandemic experience brought the ensuing conceptual debate about state capacity into practical focus. It necessarily put governments in Canada and elsewhere around the world to the test. The results were mixed, to say the least. 

Prior to the pandemic, it was something of an axiom that Canada is home to strong public institutions, a professional public service, and high-quality public administration. It has, in other words, high levels of state capacity. 

I subscribed to this view. I’ve even authored and co-authored articlespapers, and newspaper columns in favour of a larger role for government in supporting science and technology and industrial development. It may be a reach to say that I was fully wrong. But in hindsight, I now concede that my analysis probably overstated Canada’s state capacity. 

The pandemic exposed that our governments are slower and more sclerotic than many of us fully understood. It turns out that Canada has a state capacity problem. 

Start with the federal government. The pandemic revealed that Ottawa’s state capacity has been hollowed out in recent decades. It still proved capable of creating new cash transfer programs like the Canada Emergency Relief Benefit and distributing cheques to households with minimal scrutiny or oversight, but otherwise the federal capacity for procurement, logistics, and service delivery was shockingly weak. The federal government has effectively been reduced to a revenue collection entity that exists to transfer dollars to seniors, families with children, First Nations, and other levels of government. 

This state capacity weakness manifested itself in a series of federal pandemic failures that’s quite long, including its confusing and often contradictory public health diktats, its initial vaccine procurement (including a bizarre contract with a Chinese state-owned enterprise), and the $25 million spent on the ArriveCan app. 

The post-pandemic period has similarly been marked by high-profile cases of government failure. The most obvious example is the country’s passport backlog which has led to lengthy delays, long line-ups at Service Canada offices, and canceled summer vacations. 

This case is particularly salient because it is so basic. How can a government that cannot issue passports on a timely basis reasonably expect to reduce poverty by 50 percent in 2030 or engineer an energy transition by 2050 or fulfill any other major policy ambition over the coming years? 

The provinces aren’t much better. Their collective failure to reform their health-care systems prior to the pandemic in spite of mounting evidence of limited capacity and poor outcomes was a major factor behind the country’s lengthy and stringent lockdowns. The risk of hospitals collapsing essentially held us held hostage for more than two years. 

This point cannot be overstated: we now know that children suffered long-term learning loss and others forewent diagnostic tests, surgeries, and treatments in large part because a generation of provincial bureaucrats, politicians, and special interests chose to protect the failed health-care status quo. 

These recent examples raise legitimate questions about our governments’ ability to deliver on their core functions and responsibilities. Lines of people in front of their local Passport Canada offices with lawn chairs like they’re waiting for a concert or playoff tickets is a powerful rebuttal to the pre-pandemic narrative about Canada’s world-class state capacity. 

It’s important to emphasize that these observations are neither partisan nor necessarily arguments in favour of a smaller government. Governmental failings have been broadly distributed on the Left and Right and, in any case, research tells us that the correlation between state capacity and size of government is imprecise. Denmark, Finland, and Israel have governments that are similarly sized or even bigger and yet seem able to deliver more effective and expeditious public services than we can. 

The factors behind our state capacity weaknesses are complex and would doubtless be the subject of ideological and political debate. The Left would ostensibly argue that it’s a consequence of so-called “austerity” including previous rounds of privatization and spending cuts. The Right would instead point to Public Choice explanations including institutionalized risk aversion, perverse incentives, and union-protected mediocrity that undermine effective and efficient collective action. 

The key point here though is that the pandemic exposed that Canadians shouldn’t be self-congratulatory about our country’s state capacity to deliver on whatever we collectively ask of it through our politics. 

Which brings me to my mea culpa. My research in recent years on innovation policy has highlighted the rise of the intangible economy (which has been described as the shift from an “economy of things” to an “economy of thoughts”) and its unique characteristics and properties including its geopolitical and strategic consequences. This has led me to rethink the role of the state to support science and technology and cultivate sectors, sub-sectors, and technologies that may have high-value, strategic upside for the Canadian economy. 

As part of this work, we’ve considered the creation of new public sector organizations to better support breakthrough technologies and even grappled with the potential for a modern industrial policy. I have tried to root my analysis in a clear-eyed understanding of the limits of state action and other political economy risks. In a late 2021 paper, for instance, we argued for a new science and technology agency with a specialized staff and a high degree of autonomy so as to minimize the risks of bureaucratic inertia and political capture.  

But even with these political economy caveats (which were unfairly ignored by some critics), there’s probably an argument that my work has overestimated Canada’s state capacity. That is to say, I spent so much time worrying about the twin risks of bureaucratization and politicization that I failed to ask more basic questions like “can the government reasonably do this?”. The passport mess has provided a useful corrective. 

I stand behind most or all of my work on these topics. We do need to recommit ourselves to a more ambitious science and technology strategy and the market uncertainty of breakthrough technologies will invariably involve a role for government. But I now better appreciate how improving (or at least accounting for) the country’s state capacity is a crucial first step to greater progress on these issues. I admit that I was wrong—or at least a bit incomplete in my analysis. One consequence is I’m now probably more of an economic libertarian than I was prior to the pandemic. 

The key takeaway then is that our politics ought to dedicate more energy and attention to the question of state capacity. Our political debates need to go beyond bigger versus smaller government and address good versus bad government. Everyone should be able to ultimately agree that the former is better than the latter. 

Source: I was wrong about Canada’s state capacity

Speer: Let’s not prolong this pandemic for the sake of the expert class

An uncomfortable insight and a reminder how we all need to be aware of the incentives and motivations that affect our behaviour and positions:

I saw a fascinating tweet last week that reflected something that I’ve been thinking about a lot lately. University of Waterloo labour economist Mikal Skuterud wondered aloud whether the experts whose influence and profile have risen over the past twenty-four months or so may be consciously or subconsciously inclined to prolong the pandemic. 

Skuterud’s question doesn’t attribute malice or ill-intent. He’s not questioning whether academics or public servants would purposefully manipulate data or intentionally provide misleading advice. He’s making a far more subtle yet important point.  

He’s asking if our pandemic-induced emphasis on expertise may inadvertently create a powerful set of incentives in which these same experts may eventually find it challenging to surrender the sense of power and purpose that they’ve been given over the past two years. It’s a question worth asking.

As he rightly notes, the pandemic has necessarily elevated certain experts in our society. We’ve seen doctors, epidemiologists, and other public health experts come to have unprecedented influence over government policymaking and uncharacteristic prominence in the mainstream media and on social media. 

That’s somewhat natural in light of the circumstances. It’s to be expected that policymakers, the media, and the general population would come to value infectious disease experts in the face of a novel coronavirus. 

The result though is that a number of hitherto obscure academics and bureaucrats have never mattered this much before and probably never will again. It’s not normal for them to appear on television each day or increase their Twitter followings tenfold. 

Such a surge of influence and profile can bring with it a powerful set of incentives. It can contribute to a loss of perspective and an inflation of one’s ego. It can encourage individuals who may usually be scholarly and taciturn to be more quarrelsome and vehement. It can preference 280 characters over nuance. It can turn little-known academics into political actors. 

Skuterud’s question is therefore a good and honest one. How might this extraordinary yet temporary increase in the role of certain experts influence how they think about the pandemic and advise on pandemic-related policies including the continuation of public-health restrictions?   

The answer may lie in Public Choice theory, which the Nobel Prize-winning economist James Buchanan famously defined as “politics without romance.” Public Choice came about in the second half of the twentieth century under the intellectual influence of Buchanan, his regular collaborator, Gordon Tullock, political economist Mancur Olson, and various others. 

The basic idea is that our understanding of one’s motivations in the private economy ought to extend to his or her involvement in government, politics, and public policy. As economist Pierre Lemieux has succinctly put it: “He does not metamorphose into an altruist angel.” 

Most economic analysis starts with a basic premise: the market is comprised of rational actors pursuing their own self-interest. Yet these same assumptions about human behaviour aren’t always applied in the political sphere. The underlying presumption can be that activists, bureaucrats, and politicians are somehow beyond self-interest and are instead capable of making judgments about government policy without accounting for their own personal interests. 

Public Choice theory challenges this notion. It uses modern economics to analyse politics and political decision-making. It starts from the premise that different actors in the political process are self-interested agents who will seek to maximize their own utility function just like individuals do in the marketplace. 

In practice, it means that politicians may offer voters popular measures to get elected, public servants might conceive of new programs to obtain more funding and greater resources for their departments, and special interest groups—including unions and corporations—invariably lobby government to obtain new benefits such as tariffs to protect their businesses or laws or regulations that advance their own interests. 

This hardly seems like a revolutionary idea now. Public Choice theory has become a well-respected school of economic thought with a number of prolific exponents and a wide range of applications. But, at its infancy, it was seen as a radical proposition that brought into question the capacity of government to make collective decisions in the public interest.  

The consequence of Public Choice isn’t to challenge government’s basic legitimacy or reject it altogether. It’s instead a call for a clear-eyed assessment of the impulses and motivations behind different actors involved in politics and public administration. This extends to the experts and journalists who form part of the overall system and must be similarly understood as influenced by a broadly defined notion of self-interest. It’s not narrowly about monetary reward either—though financial gain may be a factor for some. It can extend to other rewards including influence, profile, or the sense of meaning and purpose that the pandemic’s emphasis on expertise has granted. 

It’s important to emphasize that this isn’t a description of moral failing. Recognizing the pull of self-interest isn’t a judgement of particular people in positions of authority. It’s an observation about human nature and the fact that government and politics are fundamentally comprised of humans and their inherent fallibilities. 

Which brings us back to Skuterud’s question. There’s no reason to think that most experts haven’t acted in good faith during the pandemic and sought to make a positive contribution to solving the extraordinary public health crisis. But, as Public Choice tells us, it’s also quite possible that at some level these incentives are shaping the questions that they’re asking, the data that they’re collecting, the analysis that they’re bringing to bear, or how they’re engaging in the public sphere.

The risk, of course, is that these forces come to obtrude collective decision-making and in turn prolong the pandemic. It’s hard to know the magnitude of the risk. But it’s presumably not zero. It must be something that we are cognizant of—especially as the policy choices become more complex and the subject of greater debate. 

The ultimate solution to the COVID-19 pandemic is imperfect: it will require a combination of critical thinking and judgement calls without any altruistic angels. This pandemic’s end will necessarily involve a series of trade-offs, calculated choices, and second-best options. It must in short be an exercise in a politics without romance. 

Source: https://thehub.ca/2022-01-20/lets-not-prolong-this-pandemic-for-the-sake-of-the-expert-class/?utm_source=The%20Hub&utm_campaign=dd5b5eb714-EMAIL_CAMPAIGN_2022_01_19_06_47&utm_medium=email&utm_term=0_429d51ea5d-dd5b5eb714-475403886&mc_cid=dd5b5eb714&mc_eid=7832dd2817

Forgotten working class could trigger populist backlash in Canada, says report by ex-Harper advisor

One difference between the US and Canada is that Canada has a stronger  social safety net (e.g., healthcare, more equitable public education etc) but then, of course, so did the UK). Populism in Canada tends to be more economic (e.g., Doug Ford, Jason Kenney) than immigration-based as it is in the US and elsewhere:

Canada risks a populist backlash if politicians fail to focus on the most economically vulnerable people, a new report says, as rosy economic data continues to overshadow the plight of many rural and non-educated workers.

A report by Sean Speer of the Macdonald-Laurier Institute, released Tuesday, argues that politicians across the political spectrum have broadly ignored pockets of working class Canadians who have failed to thrive in an increasingly globalized and technological economy. Resentments among those people, if left unchecked, could feed the same sort of reprisal that led to the election of U.S. President Donald Trump, Speer says.

“Over the long term, an economy that has nothing to offer people is going to create not just economic consequences, but political ones that can possibly cut much deeper,” he said in an interview with the National Post.

Speer, who previously served as senior economic advisor to Stephen Harper, stopped short of suggesting Canada was at immediate risk of encountering a towering, populist wave. But the report nonetheless emphasizes some of the current and deepening divides that are set to define the upcoming federal election: resentments in the oil-rich West toward eastern “elites”, anxieties among less educated working men who have been increasingly displaced by university-educated women, and a widening divide between urban and rural political values.

Both the Conservatives and Liberals have looked to tap into economic anxieties ahead of the looming federal election.

Conservative leader Andrew Scheer has centred his campaign around worries over the rising cost of living, criticizing the Liberals for their carbon tax and promising to help Canadians “get ahead,” according to the party’s official slogan. Prime Minister Justin Trudeau, meanwhile, has been touting policies like a promised boost to a tax credit that will support “those hoping to join” the middle class.

Speer is among a number of conservative-minded analysts who decided, after the election of Trump, to adjust their long-held beliefs about the specific role governments should play in the economy, and the degree to which they need to consider the least advantaged voters.

Trump won the U.S. election by a narrow margin, carried in part by working class voters who felt threatened by shifts in the global economy that have led to a deterioration in classic American jobs, like automotive manufacturing and coal mining. Maxime Bernier, head of the People’s Party of Canada, has taken on policy positions that partly resemble Trump’s, blaming political insiders for creating an inherently unfair economic system.

Much of the failure by the media, economists and policymakers to predict the Trumpian shift, Speer argues, was an obsessive focus on the so-called “headline” economic data. Strong GDP growth and falling unemployment in recent years has given the appearance of economic strength while failing to account for those “left behind” amid a shift toward a more globalized and technological economy.

Political turmoil in the U.S. and U.K. is “partly a consequence of this economic myopia,” Speer writes.

“The so-called ‘forgotten men and women’ grew tired of neglect and have since been the political backbones of these new, disruptive populist movements.”

Anxieties over job security and changing economic norms are mostly felt among workers from natural resource sectors like oil and gas, or in the manufacturing sector, many observers have said. It’s also widely visible in women’s growing share in the workforce.

Employment rates among working-age Canadian men has grown by an average 0.9 per cent between 1990 and 2018, according to public data, while female employment has increased 1.4 per cent over the same period. The trend is especially pronounced in struggling natural resource economies: male employment in Alberta shrunk by 0.5 per cent between 2014 and 2019, while female employment in the province has increased nearly one per cent.

Meanwhile, labour participation rates have fallen among men; where non-educated men outperformed women in the workforce by 5.7 per cent in 1990, they now underperform them by 5.8 per cent today. And the fallout applies to a wide swathe of people: Canada currently boasts 6.7 million working-age non-educated workers .

“If we just look at the headline numbers, we miss that there’s a lot more going on there, that there is a bifurcation occurring between women with post-secondary educations and men without them,” Speer said.

In a separate report released earlier this year, Speer teamed up with Robert Asselin, a former top advisor to Finance Minister Bill Morneau, to address Canada’s failure to boost its competitiveness compared with other countries amid an increasingly technology-driven economy.

Digital behemoths like Apple, Amazon and Google have created a concentration of wealth that has hurt smaller firms or companies in weaker industries, leaving Canada with a challenge that “transcends partisanship and political ideology,” the pair wrote. “Whichever political party wins the next federal election will be faced with these questions and challenges,” they said.

Even so, Speer himself is the first to admit that there are few obvious answers when it comes to stemming the tide of populism in Canada. But he said a failure to better understand the issue will only deepen resentments.

“I think it’s going to create a higher and higher level of inequality of opportunity.”

Source: Forgotten working class could trigger populist backlash in Canada, says report by ex-Harper advisor