Outside the City Walls:                                                                Not so Equal Access to Health Care in Canada

Cynthia Ramsay

People living in the outlying regions of Toronto and Vancouver are waiting longer to receive elective surgery than people living within those cities. They also have more limited access to most medical technologies than their Toronto or Vancouver neighbours. As the number of people living in the outlying regions of these cities increases, the situation will worsen unless the reasons for this unequal access to hospital services are addressed: the current method of hospital funding, and the prohibition of any private sector alternatives to complement those provided by the public sector.

Currently, hospital funds are allocated on a global basis by the provincial ministry of health. This method of allocating funding provides hospitals with operating budgets based on their previous year's budgets and inflation: negotiation focuses on whether to increase, decrease, or maintain the previous year's budget. With global funding, even though the ministries of health may allocate increases in funding on the basis of population to some extent, the core amount of a hospital's funding still relates to the initial allocation it received from the ministry; it is not sensitive to changing population demographics and patient needs.

The result is that the Greater Toronto Area [For the purposes of this article, the city of Toronto includes Toronto, Scarborough, Etobicoke, and North York. The Greater Toronto area comprises the Halton, Peel, Durham, and York regions (Oakville, Burlington, Milton, Georgetown, Mississauga, Richmond Hill, Newmarket, Markham, Ajax, Pickering, Port Perry, Newcastle, Uxbridge, Oshawa, Brampton, and Whitby)] (GTA) and the Greater Vancouver Area [This article distinguishes the city of Vancouver from the Greater Vancouver area, which comprises Burnaby, West Vancouver, City of North Vancouver, District of North Vancouver, Lions Bay, Richmond, City of Langley, District of Langley, Surrey, White Rock, Delta, Maple Ridge, New Westminster, Port Moody, Anmore, Belcarra, Pitt Meadows, Port Coquitlam, and Coquitlam] (GVA) are experiencing faster population growth rates but are receiving smaller portions of the hospital funding than the cities of Toronto and Vancouver. And, since the Canada Health Act prohibits a private clinic from offering any medically necessary service "closer to home," people living in the GTA and GVA have no choice but to join the queue for the services being publicly provided in the city. The result is an increasing number of people living in these outlying areas having to travel into the city at their own expense and on their own time for more specialized treatments, and even, in many instances, for primary and secondary care.

Lengthy waits for those living outside the city

Table 1 details the waits in the different regions to receive treatment from a specialist; ie. the hospital waiting lists. It shows that access to the services a specialist provides, many of which are only available in a hospital setting, seems to depend on where a person lives. Overall, for specialties such as general surgery, ophthalmology, and orthopaedic surgery, people living "outside the walls" of Toronto and Vancouver are waiting approximately 20 percent longer to receive elective surgery than people living within them.

Table 2 shows that the differences in waiting times between Toronto and Vancouver and their outlying regions for access to certain diagnostic technologies are also substantial. People in the GTA are waiting from 27 to 150 percent longer for access to diagnostic technology than are people living in Toronto, while people in the GVA are waiting 7 to 92 percent longer than are people in Vancouver. Table 3 documents the availability of selected health technologies in Toronto, the GTA, Vancouver, and the GVA. People living outside of Toronto and Vancouver have to go into the city to receive diagnosis or treatment involving most types of technology even though the GTA, for example, has a large enough population to support its having such technology as magnetic resonance imaging provided within the region.

Hospital funding, population and population growth

Provincial ministries of health are beginning to recognize that population growth is an important consideration with respect to hospital funding. For the last number of years, any increases in hospital funding in British Columbia have been based on a population demographic model, and 1996/97 hospital funding increases in Ontario were based on projections of population growth. The base amount of a hospital's funding, however, still relates primarily to the ministry of health's initial allocation decision. Therefore, hospitals within the cities of Toronto and Vancouver still receive the majority of the funding, while the high population growth areas in the GTA and GVA are short-changed, forcing their populations onto longer waiting lists for diagnosis and treatment.

Ontario's Ministry of Health plans to reduce hospital funding in the province by $1.3 billion over the next 3 years, and plans to reinvest $25 million of the savings into those hospitals in high population growth areas.[Hospital Funding Committee of the Joint Policy and Planning Committee (made up of representatives of the Ontario Ministry of Health, the Ontario Hospital Association, and hospital administrators), "Methodology Used to Calculate 1996/97 Transfer Payments to Ontario Hospitals," Reference Document #3-6 (13 March 1996); Ontario Ministry of Health, "Allocations to Hospitals in High-Growth Areas," Fact Sheet (April 1996)] Despite this reinvestment, the city of Toronto will still receive more than 72 percent of the total funding going to acute care hospitals in the Toronto-Greater Toronto area (table 4). If all specialty, paediatric, chronic, and rehabilitation hospitals are added to this calculation, the portion of total funding going to Toronto hospitals increases to almost 77 percent. This inequity is even more shocking if we consider that the GTA has 50.5 percent of the region's population and has been growing by over 3 percent a year since 1992, while Toronto's annual growth rate has been only 0.4 percent (table 5). Within the next 20 years, the GTA will have almost 60 percent of the area's population.

The Vancouver-GVA situation is similar. City of Vancouver hospitals receive 57 percent of the funds going to the Vancouver-Greater Vancouver area (table 6). However, the GVA has the majority of the region's population (71 percent) and it has been growing at an annual rate of approximately 2.3 percent since 1991 (table 7). The population of Vancouver has been growing at only 1.7 percent. This suggests that Vancouver receives a disproportionate amount of the hospital funding for the region, and that the disparity has the potential to grow, with waiting lists in the GVA getting longer as its population increases.

Conclusion

When hospital funding is not related to demand factors such as population growth, and there are no private sector alternatives available, the situation arises in which there is excess demand for the limited supply of services, and waiting lists begin to form. Basing increases in hospital funding on population growth is not enough. The entire process of how hospitals and other health care services are funded must be re-evaluated. Each region should be given a demographically determined budget which it spends on hospitals, medical technologies, and other health care services to meet the needs of its residents. While outlying regions might not have the population base to support some types of medical technology, this is a decision that should be made locally and not by the province. The regions should have the responsibility to develop contracts with public or private sector providers and to monitor the services being delivered.

A monopolistic and city-centric approach to health care funding and provision is becoming less acceptable as the inequities in access to timely health care grow. The number of people living outside cities such as Toronto and Vancouver is increasing; unless there is a more concerted move towards population-based funding and regional control over health care budgets, don't be surprised when the residents of the outlying regions begin to clamour at the city walls.


Reference-Based Pricing -                                                              A Dangerous and Costly Mistake

Bill McArthur, M.D.

Reference-based pricing (RBP) is a scheme aimed at containing public sector spending on pharmaceuticals. It categorizes drugs into therapeutic groups and then the government pays for only the least expensive drug in the group. This affects individuals whose medications are subsidized by government-generally the poor, the elderly, and the chronically ill. A limited RBP program was introduced in British Columbia in 1995 and will be extended soon to include drugs that are used to control elevated blood pressure.[Letter to British Columbia physicians from Mike Corbeil, Executive Director, Pharmacare, October 1996] Other provinces are considering a similar program, but first they should evaluate carefully the potential consequences of such a move.

It appears that the B.C. program was implemented without two essential questions being asked. First, is the cost of pharmaceuticals a serious problem? Second, if it is, will reference-based pricing solve the problem? On October 18, 1996, B.C. Health Minister Joy McPhail noted that Pharmacare costs increased by $174 million between 1989 and 1994. By itself this is a meaningless statistic. To evaluate whether this is an appropriate expense, it is essential to know what outcomes resulted from the extra spending, and whether these outcomes increased or decreased overall health care costs.

Between 1989 and 1994 a vast array of potent new pharmaceuticals came on the market, including agents that improve the management of disorders such as high blood pressure, heart failure, diabetic kidney disease and osteoporosis. It is virtually certain that these drugs reduced illness and the hospitalization caused by these ailments, but by how much? In British Columbia, and most of Canada, the data collected regarding sickness and hospitalization are so inadequate that it is impossible to reach meaningful conclusions regarding the economic impact of any drug. Thus the accurate response to the question of whether the $174 million increased spending on pharmaceuticals constitutes a problem is simple: we do not know the answer. This fact alone should cause governments to proceed cautiously with any drug policy reform measures.

The second question of whether reference-based pricing will cure a supposed cost overrun is easier to answer. Studies conducted in other countries are almost unanimous in revealing that this mechanism increases overall health care costs considerably.[A literature search produced over 50 papers which addressed one or more aspects of pharmaceutical cost containment policies, such as reference-based pricing. Of these, only one paper (Smalley et al., New England Journal of Medicine, June 15, 1995, pp. 1612-17), claimed to show overall cost reduction, and that with only one category of drug] Germany, Sweden, Denmark, the Netherlands, and Italy have introduced reference-based pricing within the last 10 years. The Italian experience is too recent to comment upon, but the Imperial College of Science, Technology and Medicine in London released a report in 1995 that showed the experience of the others. It noted that "control systems rarely generate the effect desired by regulators," and in this case such programs had actually accelerated the overall growth of pricing, with drug price increases being higher in countries with controls than those without them.[Zammit-Lucia J., Dasgupta R., "Reference Pricing-The European Experience," Imperial College of Science, Technology and Medicine, University of London, Health Policy Review, Paper No. 10, 1995]

In a large study involving over 12,900 patients in 6 health maintenance organizations (HMOs) scattered across the U.S., researchers from the Institute for Clinical Outcomes Research in Utah showed that restrictive drug programs were closely associated with increased illness and increased costs.[Susan D. Horn, et al., "Intended and Unintended Consequences of HMO Cost-Containment Strategies: Results From Managed Care Outcomes Project," The American Journal of Managed Care, vol. II, no. 3, Mar. 1996, pp. 253-64. This article contains 37 further references to the topic while pages 237-47 of the same journal describe the study design, baseline patient characteristics, and outcome measures as well as a further 37 references] Differences were substantial and comparison between the HMO site with no restrictions on drugs purchased and the site with the greatest restrictions revealed that the restricted site had 160 percent more prescriptions, 83 percent more visits to the doctor and 161 percent higher drug costs. Emergency department visits and hospital admissions were higher in the restricted formulary group than in the group with no restrictions.

Another study from Harvard Medical School involving over 2000 subjects and controls showed that when psychotropic drugs were restricted, patient office visits increased about 50 percent, there was a sharp increase in the use of emergency mental health services, and drug costs increased by a factor of 17.[Stephen B. Soumerai, et al., "Effects of Limiting Medicaid Drug-Reimbursement Benefits on the Use of Psychotropic Agents and Acute Mental Health Services by Patients with Schizophrenia," from Harvard Medical School and the International Organization for Migration (Geneva), New England J. Med., vol. 331, Sept. 8, 1994. pp. 650-5]

There is substantial doubt about whether drug prices constitute an economic problem in B.C. or elsewhere in Canada. However, reference pricing has been implemented in other countries, and repeatedly it has exhibited two fundamental flaws, one medical and the other economic. From a medical viewpoint it is associated with increased illness. From an economic standpoint it increases health care costs substantially. Reference-based pricing seems to be a cure that is worse than the alleged disease.

FTA-NAFTA:                                                                           A Winning Formula for Canada

Fazil Mihlar

Do you hear a giant sucking sound as jobs and investment move from Canada to the U.S. and across the Rio Grande to Mexico, as was once predicted by the critics of the Free Trade Agreement and the North American Free Trade Agreement (FTA-NAFTA)? It is pertinent to raise the question at this juncture, since the third anniversary of NAFTA is around the corner. In fact, the sound you do hear is the clatter of high levels of economic activity. The evidence suggests that trade is up, that investment levels have increased sharply in Canada, and most importantly, Canadian productivity is up.

Strange as it may seem to anti-free traders, FTA-NAFTA has helped to make Canada more attractive to investors. Increased competition from the U.S. and Mexico has spurred Canadian firms to improve productivity. To the dismay of many free trade opponents, the Canadian economy has also created 800,000 new jobs over the last four years.

Since the FTA was implemented, Canada has gone through a period of significant economic restructuring. Unit costs have fallen, and productivity has increased. Free trade has contributed to this process. Productivity changes have been greater in liberalized industries (i.e., sectors that have greater freedom to trade) than in non-liberalized sectors. Liberalized sectors of the economy had a 26 percent increase in productivity between 1988 and 1993, on average. In contrast, other sectors of the economy saw an average increase in productivity of just 6 percent over this period. Such evidence confirms the argument that trade liberalization leads to increased competition and, in turn, results in higher levels of productivity. Critics of FTA-NAFTA argued that there would be a diversion of investment from Canada and the U.S. to Mexico. Indeed, some firms have relocated to Mexico. Mexico's attraction as an investment location has increased because of NAFTA. However, the choice of location by firms is not only a function of labour costs, but also of labour productivity, intermediate input costs, transportation costs, and infrastructure. When it comes to long-term investment, Canada still appears to have the edge. Direct foreign investment in Canada increased from $5.9 billion in 1989 to $14.7 billion in 1995.

Contrary to the claims of the critics of FTA-NAFTA that there would be a "giant sucking" of investment and associated jobs down to Mexico, there is more investment in Canada. A higher level of investment will result in a faster growing capital stock and ultimately in higher economic growth. Hence, we can expect that free trade will continue to raise the standard of living in Canada.

The positive legacy of free trade speaks for itself. Two-way trade with the U.S. now represents almost 80 percent of Canada's total trade, compared with 69 percent in 1988. While the total value of imports from the U.S. has increased from $88.7 billion in 1988 to $168.8 billion in 1995, the total value of Canada's exports to the U.S. has increased even more, from $102.6 billion in 1988 to $201.7 billion in 1995, an increase of almost 100 percent. A recent C.D. Howe study found that in product areas liberalized under the FTA-such as paper, paint, and office equipment-exports to the U.S. increased by 33 percent between 1989 and 1992. In contrast, exports of the same products to other parts of the world increased by only 2 percent. Merchandise imports from the U.S. in liberalized product areas grew by 28 percent compared with 10 percent from other countries.

In the case of Canada-U.S. trade, NAFTA has picked up where the FTA left off. The value of Canadian exports to the U.S. have grown by 39 percent between 1993 and 1995. Canadian imports of American goods and services have risen by 34 percent during this period as well. The evidence suggests that FTA-NAFTA has been responsible for the rapid increase in trade flows between Canada and the U.S.

The success of the FTA-NAFTA is clear. An increase in trade flows, investment levels, and higher levels of productivity in Canada has occurred. Gains associated with greater market access, exploitation of economies of scale, and increases in productivity translate into lower prices, greater choice of goods and services, and a higher standard of living for Canadians.)

In the Interests of Children

Chris Sarlo

Having a child is the most important decision a couple will ever make. Nothing else one does (buying a house, choosing a mate, selecting a career) is even close. Bringing another human being into existence is an awesome responsibility.

In an ideal world, people would make the decision to have a child very carefully after considering their personal and financial fitness as parents. In an ideal world, every child would grow up with parents who would love, nurture, and be responsible for them. In an ideal world, parents would do nothing to deliberately harm their children. We do not live in an ideal world.

Late last fall, the Campaign 2000 group released a report on child poverty in which it claimed that there were 1.4 million poor children in Canada in 1994. If by poverty we mean that parents of these children have insufficient income to afford nutritious food, adequate shelter, and a range of other necessities, then this is clearly an exaggeration. However, setting that aside, Campaign 2000 has proposed its own solution to the problem of child poverty. It wants the federal government to create a children's fund similar to the Canada Pension Plan and the Employment Insurance scheme.

The proposed fund, which would direct between $16 and $20 billion to children annually, would be financed partly by a new tax on corporations, partly by a new surtax on income (rising to 2 percent on incomes above $100,000) and partly by redirecting current federal and provincial spending on children's services. The stated intent of the fund is to ensure that every child has a healthy start in life. It would do this by creating a "floor" of decent living standards for families; protect the living standards of children when parents separate; and provide college and university students with a grant of $5,000 per year.

No Canadian can be against the goal of a healthy start for every child. No one can object to "decent" living standards for all Canadian families. No one would object, I can say confidently, to equal access to education and opportunity for all children. However, the Campaign 2000 proposal is little more than a massive income redistribution scheme that will lead to greater dependency because it entirely misses the real cause of "poor" children.

Let's examine the plan to ensure a decent floor living standard. While the proposal is not specific about how "decent" that living standard should be, other reports by members of the Campaign 2000 coalition suggest that it would be equal to the Statistics Canada Low-Income Cut-Offs (LICO), at the very least. Many social welfare organizations-and the National Council of Welfare in particular-have for years condemned the provincial rates of social assistance as inadequate and inhumane because they are well below LICO, which is regarded as a poverty line in the social welfare community. Consistency would require that a "decent" living standard be at or above the "poverty" line.

A floor standard of living means that no family will be allowed to fall below that level. Presumably, if a family earns less than the floor, the fund will provide the income needed to bring it up to the floor. Let's be clear about the level of the floor. For a family of four in a large urban centre (such as Vancouver, Edmonton, Winnipeg, Toronto, Ottawa, and Montreal) in 1996, the guarantee would be about $32,000. For a family of three, it would be about $28,000. For a couple without children or a single parent living with one child, the guarantee would be $22,000.

Clearly, the main concern with guarantees at these levels is the disincentive to work. In 1994, there were about 1 million Canadian families (whose head participated in the labour force) with total annual earnings below $22,000. If someone is earning less than $22,000 in a job, the Campaign 2000 guarantees will make it difficult for that person to justify remaining in the labour force. If the level of social assistance, especially in Ontario in the early 1990s, attracted people onto welfare by the thousands, there is no doubt that these even higher guarantees would decimate the low end of the job market. This is a system that would push otherwise capable people into idleness. What impact will this have on children? Many more children than now will grow up in households that will be dependent on the state. What attitude will those kids have about such values as work effort, earning one's own way in life, and personal responsibility?

Financing this proposed fund with new taxes is unwise. Besides the likely adverse impact on investment and job creation, a tax-financed new program implies that state solutions work. It means that there must be clear evidence that the generosity of Canadians channelled through the state will in fact reduce poverty. But no such evidence exists. Indeed, tens of billions of dollars have been spent in recent years on so-called anti-poverty programs, the net result of which is more dependency, more single parent families, and more problem children. And if we listen to the social planners, we now have more poverty than ever. Why should we then give the state even more money?

Children in Canada are hungry, abused, unloved, and dysfunctional for reasons that have absolutely nothing to do with inadequate incomes. Campaign 2000 should focus its attention on the family itself, and examine what is going on inside many Canadian families. Why do so many young women have so little self esteem that they are leaving their families, getting pregnant, living with abusive men, and continuing to have more children? Why do so many low income families spend money on alcohol, tobacco, lottery tickets, etc., when they don't have enough for nutritious food for their children? And, given the well known benefits of breastfeeding and the long-standing recommendations of health experts that mothers breastfeed during the first year at least, why do fewer than 20 percent of Canadian mothers breastfeed for even six months? And why, given the increased health risks to children of tobacco smoke, do nearly 40 percent of Canadian children under the age of six live in a home where one or more persons smoke regularly? And given the strong link between pregnant smokers and low birth weight (and subsequent learning problems in children) why do 25 percent of pregnant women smoke? This is to say nothing about the scandalous levels of child abuse and neglect. If we want children to get a good and healthy start in life, what we need more than anything else is responsible parents.

Pension Fund Managers Want Tax Cuts                  and Debt Reduction in the 1997 Federal Budget

Ted Dixon and Fazil Mihlar

Results from the Fall Fraser Institute Survey of Senior Investment Managers are in. They reveal that Canadian fund managers responsible for approximately $150 billion in total assets under management want the next federal budget to have tax cuts, a target date for a balanced budget, and a legislated debt reduction plan.

An overwhelming 87 percent of Canadian pension fund managers surveyed believe that the 1997 federal budget should include tax cuts in order to stimulate the economy and create jobs. Thirty-one percent of those surveyed would like to see a cut in each of personal, payroll, and corporate income taxes. Another 22 percent expressed a preference for a cut in the federal personal income tax only, but by 30 percent over 3 years, while 18 percent preferred a reduction in payroll taxes only. A reduction in both income and payroll taxes was the preferred option for 16 percent of those surveyed. The results of this survey suggest that the Minister of Finance would find support among financial market participants for payroll, income, and/or corporate income tax cuts in the next budget.

Target date sought for balanced federal budget

Ninety percent of the survey respondents would like to see the Hon. Paul Martin set a target date for balancing the federal budget in the forthcoming budget. Forty-three percent of the fund managers believe that the budget should be balanced by the fiscal year 1999-2000, while 35 percent would like to see the budget balanced by the year 1998-1999. The results of the survey send a clear message to the Finance Minister that a target date for balancing the budget should be in his 1997 budget.

Federal deficit unsustainable

Ninety-eight percent of respondents strongly agreed or agreed that the size of the current federal deficit is not sustainable. When asked how the deficit should be eliminated, 94 percent of those surveyed suggested further spending cuts. Once again, the message seems to be clear: deeper spending cuts are necessary to balance the budget, not tax increases.

Debt reduction plan needed

The federal net debt has increased from $508 billion in 1993-94 to $602 billion in 1996-97. During this same period, interest on the public debt has escalated from $38 to $48 billion. Indeed, the federal government's net-debt-to-GDP ratio at 74.8 percent is one of the highest among industrialized countries.

Respondents were asked if the federal government should adopt a legislated debt reduction plan to reduce the debt load. Forty-five percent said yes, 37 percent said no and 18 percent responded with a don't know. In addition, 41 percent of the respondents suggested that the debt should be paid off over a 40 year period, while 22 percent would like to see the debt eliminated over a 30 year time horizon. A debt reduction plan would help shift the emphasis from deficit elimination to debt reduction. It is important that Ottawa consider a debt reduction plan in the next budget, since interest on the public debt diverts money from much needed programs during economic downturns.

Separation of Quebec likely

When asked whether Quebec will separate within the next 5 years, 63 percent of the respondents said it was either very likely or likely. This response is consistent with the last survey conducted in the summer of 1996. Given the on-going concern about Quebec separation, Ottawa would be well advised to deal with the unity file as a matter of utmost urgency.

Minister of Finance and Bank of Canada receive high approval

Fund managers appear to have confidence in the Minister of Finance. In fact, an overwhelming 89 percent of the respondents rated his performance as either excellent, very good or good. The Bank of Canada maintained its high approval rating as well. All of the respondents said the Bank of Canada was doing a good job in its conduct of monetary policy.

[The Fraser Institute Survey of Senior Investment Managers is conducted quarterly. The results are available by subscription. Call Fazil Mihlar at (604) 688-0221, loc. 319 for details.])

Institute News

Brian April

The most important Institute event last month was the conference held in Vancouver on the future of the British Columbia forest industry. This was the fourth in a series of conferences held on the province's resource industries, sponsored by a grant from the Donner Canadian Foundation. The conference, which included international perspectives from New Zealand and Sweden, highlighted options applicable across Canada. In Sweden, for example, 95 percent of the forests are privately owned, and conservation of forest resources is not an issue of public concern. The conference also featured a presentation by the Nature Conservancy, a non-profit organization dedicated to preserving biological diversity through the use of market mechanisms. In contrast to politically agitative environmental groups, the Nature Conservancy uses the money it raises to purchase land for preservation, and arranges for donation of privately held lands for this purpose. Papers and tapes of the conference presentations are available from the Institute.

During December, Michael Walker participated in a conference in Saskatchewan on the privatization of the provincial utilities. In addition, he and Prof. Steve Easton responded to an invitation to present a paper to the annual meeting of the American Economics Association. This paper used our work in the field of economic freedom to debunk resurgent academic interest in the concept of "market socialism." The AEA is the most prestigious group of its kind in the world, and the invitation extended to the Institute is both an honour and a recognition of the importance of our work in this area.

The Institute also completed its annual planning session in December, during which our priorities were set for the coming year. The planning process, which is restricted to Institute staff, involves three days of discussion to identify the most important emerging issues facing the country. In addition to our ongoing projects, the Institute decided to pursue a number of new initiatives in 1997. We also will be upgrading our membership services, with a move to a fully computerized accounting system.

The Institute is pleased to announce that Prof. Herb Grubel will be rejoining us as an adjunct scholar upon the closing of this parliament, or in the fall at the latest. Before entering parliament, Prof. Grubel contributed to a number of Institute publications, and his work is among the most widely cited in the world. We are looking forward to regaining his expertise and productivity.

The Institute received three substantial Christmas presents in the form of grants from the Lilly Endowment (general support), the Pirie Foundation (to support the Canada Survival Project) and the John Dobson Foundation (for the International Centre for the Study of Public Debt). Many members also made extra contributions or upgraded their memberships during the year. Thanks to the generosity of all of our members, Institute revenues increased during 1996, which will allow us to intensify and expand our efforts to stimulate public demand for sensible economic policies, and to provide policy makers with viable options for change.

The Right to Be Equal Under Arbitrary Laws

Karen Selick                                                                                                                                                                        [A version of this article has also appeared in Canadian Lawyer ]

You couldn't ask for a more striking example of courts running off in diametrically opposite directions than in two recent homosexual rights cases. In an Ontario case called M. v. H., a lesbian tried to sue her former lover for spousal support. She claimed Ontario's Family Law Act (FLA) violated her equality rights under section 15 of the Charter of Rights and Freedoms because it excluded same-sex partners from its definition of "spouse." The judge agreed, and rewrote the statute to include gay couples, even though the Ontario legislature had voted, less than two years before, not to make this change.

In Vriend v. Alberta, a gay man was fired from his job at a religious college because of his homosexuality. Again citing section 15 of the Charter, the man asked the court to add homosexuals to the list of groups protected from discrimination under the Individual's Rights Protection Act.

Alberta's Court of Appeal said no. It refused to amend the law where the legislature had deliberately declined to intervene.

Personally, I couldn't care less who has sex with whom, as long as it's done consensually. My views on these two cases have nothing to do with whether I approve or disapprove of homosexuality.

Nor am I one to suggest that the legislature is always right, or that the will of the majority should always govern. On the contrary, I'm as much concerned about the "tyranny of the majority" as I am about the tyranny of a dictator-or a judge.

Having said all that, I want to applaud the Alberta court, not for its promotion of moral purity or majority rule, but for a much subtler part of its message-a part that cries out to be developed further. The Charter of Rights, Justices McClung and O'Leary remind us, was directed at regulating government action, not private activity.

There's a good reason for this. An individual's relationship to the state is very different from his relationships to other individuals. The state is a monopoly, with the legal power to use force against its citizens to make them conform to its wishes. Its might is vastly superior to the individual's; it holds almost all the weapons, literally and figuratively.

The individual can't opt out of the relationship except, perhaps, by leaving the territory-and sometimes not even then. The theoretical justification for the state's existence is that everyone within its territory will benefit from the order it imposes. The nature of the relationship invests the state with a duty to act with scrupulous impartiality toward its captive, relatively powerless citizens. It cannot pick and choose whom it will benefit and whom it will burden.

Individuals have no such state-like advantages over each other. There is no monopoly. If you don't like the deal one person offers you, there are millions of others in the country to bargain with. No-one can legally initiate force to impose his will on you.

Section 15 of the Charter gives every individual the right to equal treatment under the law, without discrimination. It's easy to see how this applies to laws that govern the relationship between the state and the individual: the Criminal Code, for instance. Breach it and the state will punish you, regardless of who you are. But if section 15 is to be applied to laws governing the relationships between individuals, it can be rationally justified only if those laws themselves provide equal treatment for every individual.

The statutes complained of in these two gay rights cases do not treat people equally. Ontario's Family Law Act does not say merely, "The state shall enforce all mutually agreed-upon support obligations between people who cohabit." That is all it could say if it were treating everyone equally. Instead, it forces some people to pay money to other people, regardless of whether they ever agreed (whether by marriage ceremony or by domestic contract) to assume such an obligation. There is not even a pretence of reciprocity. Leslie may be ordered to continue paying estranged partner Robin money, but Robin will never be ordered to continue cooking, cleaning, and doing laundry for Leslie.

For people who already fell within the extended definition of spouse when the FLA was enacted (or when it was amended by the court in M. v. H.), and who therefore had no opportunity to escape it, this is clearly not equal treatment. Some people were handed a windfall, while others had a millstone hung around their necks.

Similarly, the Individual's Rights Protection Act (IRPA) does not treat people equally. It allows some people, namely employees, freedom of contract in employment matters. They can refuse to work for any employer, for any reason. But other people-employers-have their freedom of contract violated, rather than enforced, by the IRPA. The very essence of their employment relationships-namely, the identities of the persons with whom they may contract-can be dictated to them by the Human Rights Commission.

Adding new groups like gays to the list of protected minorities won't banish arbitrariness from the law until the law itself ceases to interfere arbitrarily in private, voluntary human activity.

Clash of the Titans

John Robson

Gad but the Internet is instructive. Now, I don't want you to think I'm one of those no-social-life geeks who spend all their time web-surfing. Far from it. I spend my time watching TV.

But I can see my computer from my couch, and what fascinates me about the Internet is that because it is inherently impossible to regulate, we get to see how unregulated markets work, instead of describing or imagining how they would work if only the government wasn't standing on their heads.

For instance, a story in the papers in August described the collision between software giant Microsoft and dominant web-browser Netscape corporation, with the release of Internet Explorer 3.0 by the former and Netscape 3.0 by the latter. As a registered user of both Netscape and Windows '95, I'm giving both a try, but not making any commercial endorsement at this stage. I don't yet know which is better.

What I do know is that each of these is much better than it otherwise would have been because the other exists. In competitive markets, if you let your rival get well ahead of you in any key technology, you're history. Moreover, the total number of firms necessary for competition in an industry is . . . one, because that one has to fear the entry of rivals. Netscape, for instance, was more or less alone for years, but they always dreaded the moment a powerful rival would arrive, and so they kept upgrading their product. Now Microsoft is after them anyway.

According to people who understand these things, there is a strong possibility that what were once humble web browsers will eventually displace conventional operating systems entirely, so this clash of the titans might involve much higher stakes than just domination of the web browser market. Who will win? Me! I will win!

You see, the victory of either Microsoft, Netscape, or some unheralded rival, or indeed the continued battle between them through the ages (in software terms, that means for literally months to come) is impossible to predict, but the reasons for victory or stalemate are easy: one will win if it produces a better, cheaper product than its rivals, a product that successfully handles web sites with the newer languages, is easy to use, has good e-mail,[This is more important than either seems to realize, because teenagers and other layabouts web-surf while productive people send e-mail. Both rivals need major improvements in that area, and I believe whichever contacts me first for suggestions (at "jspr@magi.com") will prevail in the web wars] allows easy WYSIWYG web site editing, integrates well with other applications and so forth. Stalemate will result if they all achieve this.

The point is, the winner will be the one who makes the best product, and that means the best product is the one I'm going to end up with, just by sitting here. It doesn't matter if I end up running Netscape 9.0 or Internet Explorer 9.0 in six years. I'll be running the better one, or there will be no difference between them so it won't matter which I use. Bill Gates may become the richest man in the galaxy, or Microsoft may go the way of the House of Fugger. It doesn't matter to me. All that matters is why he'll win or lose: service to customers. This battle may well end with one or other of the giants crashing in ruins to the earth, but if they do, they won't hit me, the consumer.

This is why people who say "Invest in the Internet" aren't necessarily giving you very good advice, by the way. Sure, the Net is here to stay, and whoever gets it right will make ye olde-fashioned killing. But, more than in any other industry, we don't know who will get it right and win. We just know why. If you're an investor, that is, a producer, you do need to know who. If you're a consumer, you don't.

This is also why government intervention in markets is so undesirable. Look at, say, the Canadian agricultural system (ugh!). Ask a politician about the Canadian Wheat Board. It protects farmers, she will say. Ask about CanCon. It protects artists and publishers, she will say. Ask about softwood lumber wars. It protects loggers, she will say. Supply management? Egg producers. Blah blah blah. Always producers, never consumers.[Of course it doesn't do that very well either; see for instance the Ottawa Citizen, September 9, 1996, p. A1 regarding farmer and agricultural journalist Paul Medrum, who has left for the U.S. rather than try to buy more Canadian dairy quotas. What our system really does is protect what is from what might be]

If politicians had their way, we'd all be forced to use CPM (remember the "C prompt"?), because it wouldn't be fair to its makers if we bought MS-DOS instead.

If politicians had their way, we'd buy Corel here in Ottawa because it's local (for those of you who don't live here, there was a big flap about government procurement of software from Microsoft instead of Corel recently). Now, I don't know whether they should have bought Corel or not, and I'm not taking a position on it either way. What I do know is that they should have made the decision based on the interest of users and payers, not producers.

And that's why it's especially absurd for people to call for government intervention in the belief that capitalism is rigged in favour of producers, and government in favour of consumers. What government commercial operation was ever wound up because customers hated it?

The only one that might be about to perish is Canada Post, and that's not because of a conscious decision. No, it's because of the Internet and that darned e-mail. Now I'm going to e-mail this to my editors. I might use Internet Mail, I might use Netscape Mail, or I might use something else. In fact, I'll use whatever works. In a free market, I get to do that. How can I lose?

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Last Modified: Wednesday, October 20, 1999.