Want smarter government? Focus it

It doesn’t take much inattention for politicians to misallocate a billion here or there

Mark Milke

Troy Media Columnist

Murray Smith, a former Alberta cabinet minister in the Ralph Klein government, the one that privatized government liquor stores and licence registries in 1993, once told me about a side benefit of such divestments (and I paraphrase): fewer distractions, which led to more focused government.

That post-privatization, provincial politicians would have two less items about which a constituent might complain – lineups at licence registries and liquor store prices – might seem trivial.

After all, there are plenty of additional matters a politician might be overwhelmed by on a daily basis.

Leaving the question of focus aside for a moment, there are, of course, other, practical, reasons to privatize government-run businesses and Crown corporations: More efficient businesses, more accurate pricing, competition for consumer dollars (and thus better service), and the end of taxpayer subsidies.

Thus, starting in the late 1970s but especially in the 1980s and 1990s, governments around the world, of all political stripes and persuasions, wound down and sold off businesses. They did so because it never made economic sense for governments to own and run railways, airlines, telephone, and energy companies, among other businesses.

For example, consider the once federally-owned railway, Canadian National (privatized in 1995 under the Liberal government of Jean Chretien). As the Railway Association of Canada has noted, “there was a progressive increase in government and public awareness of the need to introduce more market forces in order to encourage self-sufficiency, competitiveness and efficiency.”

Beyond the provable benefits of privatization, Smith’s observation highlights the value of focus.

Why should politicians and civil servants employ a more focused approach? Because the cash collected and disbursed on our behalf is significant. In 2012/13, Canadian governments were a $738 billion Leviathan (based on spending by all levels of government).

Obviously, with numbers that large, it doesn’t take much inattention to misallocate a billion here or there. Soon, as the cliché goes, we’re talking real money.

When governments attempt too much, or individual politicians believe their mandate too broad, they inevitably lose track of items under their control.

One example: Alberta’s newest premier Jim Prentice wants to bring retail electricity rates down. In a recent interview the premier remarked that “we have been paying more for our electricity, in my view, than we should be,” citing power price spikes as a problem. He pledged to get to the bottom of it.

Except we already know the reason for power price spikes. When they occur, they are a warning signal that demand is about to outstrip the immediately available supply. That price signal is akin to those overhead highway signs that inform drivers of ice conditions ahead (so slow down). Mute the price signal or turn off the sign and you’ve abandoned the early warning system. (Besides, the permanent remedy to higher prices is not political interference but more supply.)

Rather than meddle in the electricity market after tens of billions of dollars have been invested, there are matters on which the new premier could focus his energy. One obvious item where his government has direct responsibility: the soaring cost of government sector pensions in Alberta.

Over the past decade, most Alberta government-defined benefit pension plans have either required a doubling of contribution rates, bailouts, or both. That was and is costly for the general public. This situation reveals a decades-long lack of attention to, and reform of, the benefit sides of such plans. Regrettably, the new premier just abandoned planned pension reforms in September – though one hopes, not permanently.

There are multiple reasons why governments choose the policy paths they do. Political survival is perhaps the most obvious explanation.

But as with any organization, divesting of unnecessary businesses, projects and tasks that are off-mission helps sharpen  the focus. That matters ifone cares about smarter, more effective government.

Mark Milke is a Senior Fellow at the Fraser Institute.-

 


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