Space Stock

Mark Weller

The MIR space station is surely the world's most glaring example of the failure of command economies to produce technological innovation. Old, unsafe, and cramped, MIR is a reminder of the glory days of the old Soviet Empire, and a further reminder that they were, in fact, not that glorious.

Even so, the Soviet space program is essentially the model that was adopted by other nations. After all, the reasoning went, the USSR was the first nation in space; they must have done something right. Viewed from this perspective, one can observe more similarities than differences between the European Space Agency, NASA, and the Japanese space programs, highlighted by the fact that all of them are completely owned and operated by the state.

But given the limited resources of today's governments, is there a role for the private sector in the exploration of space? Absolutely. And perhaps the best model to consider is the last great era of exploration.

Christopher Columbus sailed the ocean blue thanks to the sponsorship of Queen Isabella of Spain, which is to say, the state. But after this first wave of government-financed exploration, the second wave of explorers were financed largely by merchants.

There were many ways that companies were encouraged to sponsor these voyages. One was to give the merchant a proportion of the trade rights arising out of exploration, a kind of transferable quota. Another was to provide the company with landing rights-the land that was discovered would be given to the merchant to develop. These methods provided significant incentives, which were necessary to offset the risk and cost of the venture, and just the sort that could be employed to fund the second wave of space explorers.

If the solar system was opened up to competition, the potential for mining and manufacturing in space would hold significant commercial interest. At the moment, under international treaty, all of the land in the solar system is considered the property of the United Nations. However, if the surface of Mars was auctioned, it would create an incentive for private development of the planet, an incentive sufficient to offset the risk and cost of undertaking such a task.

Granted, in considering the exploration of the Americas as a model, many remember the unseemly events that transpired in the course of developing the New World. As well, the way in which the land was distributed is considered by many to have been inequitable. However, many of these arguments are not relevant in an interplanetary context. Barring the discovery of people living under the Martian surface, there should be few questions of title that could not be resolved through existing law.

Another alternative would be to allow the first "space squatters" to have the right to claim a portion of the area as their own. The Canadian West was largely settled through the use of a homesteading system. The Yukon Territory still recognizes the rights of squatters to the property they inhabit. Development of frontiers has always recognized the right of the first settlers to stake claims, and the settling of the "final frontier" could be handled in much the same way.

Some have suggested that Mars and the other planets should be preserved and kept free of development. The argument generally boils down to the following assertion: industry has "destroyed" the environment on Earth, and should not be allowed to do the same in space. This objection is invalid. First, development has been the key to improving the standard of living of people throughout the world. Furthermore, Mars has no environment to protect: it is a sterile, lifeless rock incapable of supporting life. Mars requires not only development, but the radical surgery of terraforming if it is to become a useful place for habitation and commerce.

Since the end of the Cold War many institutions around the world have been challenged to justify their existence, but few have found the task more difficult than the various national space programs. For one thing, the primary mission has been achieved. The space race, a nationalistic competition to see who could reach the moon first, has been over for over 25 years. What we have today are essentially the remnants of that race: a fleet of aging NASA shuttles first designed during the Nixon Administration, a ragtag collection of Soyuz space vehicles, and the dilapidated MIR space station.

In short, government-sponsored space programs are megaprojects whose time has past. The future of space exploration should instead belong to the entrepreneur-but even then it won't be easy. The Pathfinder Mars mission was required to comply with dozens of United Nations regulations before it was approved for launch. Obtaining a landing permit for a private mission would likely face even greater earthly hurdles.


Health Canada or Codex Alimentarius:                                Which is the Greater Threat to Our Health Freedom?

Cynthia Ramsay

Did you know that soon you will need a prescription to get vitamin C? Did you know that there is a global conspiracy to restrict your access to food supplements? These are just a couple of the myriad rumours that have been circulating about the possibility of an international food standard agency creating international guidelines with respect to vitamins, food supplements, and herbal therapies. Closer to home, there are additional concerns that the agency that is supposed to be protecting our health is actually restricting our ability to care for ourselves, by limiting our access to nutritional foods and supplements. These two issues are often misrepresented and incorrectly linked to each other. There is a potential threat to our health freedom but it is not coming from the "multinational drug lobby"[Letter from Svend Robinson, M.P., to his constituents (April 1, 1997)]or any other international organization. This is a domestic problem and it's time we started evaluating our policies at home rather than focusing our attentions abroad.

The greatest threat to health freedom?

The Codex Alimentarius Commission is officially known as the Joint Food and Agriculture Organization/World Health Organization (FAO/WHO) Foods Standards Program. Its name, Codex Alimentarius, comes from the Latin for food code.The [FAO is based in Rome, Italy, and WHO is based in Geneva, Switzerland. FAO and WHO are specialized agencies within the United Nations system]Codex is an intergovernmental body that was established almost 35 years ago. It has two main objectives: to protect the health of consumers around the world, and to facilitate the international trade of food products.[Taken from a speech given by Barry L. Smith of B.L. Smith & Associates to the Canadian Health Food Association on April 12, 1997, in Calgary, Alberta] Representatives from member countries meet regularly to discuss standards, guidelines, and other recommendations for food and food-related matters (contaminant levels, nutritional quality, labelling, etc.). For example, the Commission will decide upon the conditions that a food must meet in order for its seller or producer to claim that it is "cholesterol free," or "saturated fat free."

After having existed in relative peace for over 30 years, the Codex Commission has been the centre of some controversy since the German delegation proposed that the Committee on Nutrition and Foods for Special Dietary Uses consider the development of guidelines for dietary supplements of vitamins and minerals in 1992.

The proposed guidelines, among other things, would make recommendations for minimum and maximum quantities of vitamins and minerals in these types of supplements, establish lists of acceptable or unacceptable ingredients, and address certain labelling issues, including claims.[United States Food and Drug Administration, Department of Health & Human Services, Information Paper (December 6, 1996)]

The majority of Codex member countries decided to review these guidelines, and since this decision, the Commission has been labelled as "the greatest threat to health freedom in the world today" by some health care activists.[Zoltan Rona, "The Drug Lords Rise Again: Codex," Alive, No. 171, p. 17]Health Canada and the U.S. Food and Drug Administration (FDA) have been inundated with letters whose writers are concerned that these proposed guidelines would limit their access to vitamins and minerals.

The reality of Codex

At first glance, these proposed guidelines look rather ominous. However, they are not. First, Canada is a member of the World Trade Organization (WTO), and trade between countries is guided by agreements falling under its umbrella. Codex is one organization that develops standards that can be used by WTO member countries. However, member countries do not have to surrender their domestic legislative power and regulatory sovereignty to Codex; governments can use different standards. They then must enforce whatever standards they choose impartially to both foreign and domestic producers of goods and services. Basically, the standards, guidelines, and recommendations of Codex constitute a baseline or reference for trade with respect to food safety. For example, if a country adopts requirements more stringent than those of Codex, complaints can be lodged with the WTO against the offending country by its trading partners, with the problems being resolved by an arbitration panel. Sanctions can be levelled against the offending country if it cannot provide a scientific basis for being more stringent than Codex, but otherwise the WTO has no power to impose solutions.

Second, it is ironic that there has been such a stir here in Canada about these proposed guidelines because the Codex Commission and its recommendations are restricted to food and food-related issues. It has no say in determining standards of any other substances, such as those which are regulated as drugs. So, even if the proposed guidelines were adopted by Codex, they would not affect Canada because vitamin and mineral supplements are treated as drugs by the Health Protection Branch of Health Canada and, therefore, are not subject to the Codex guidelines.

In anticipation of the 22nd session of the Codex Commission in June 1997, the conspiracy theorists had a field day. Allegedly, the Codex discussion about vitamin and mineral supplements was part of an international effort by pharmaceutical companies to control the market for supplements-soon, Canadians would need a prescription for such things as vitamin C, and it would be illegal to buy more than a specified amount of a vitamin or food supplement.[Rona, p. 17] As well, the alarmists were predicting that at this meeting, Codex would set up an "expert panel" on herbs and botanical preparations to generate a herbal hit list; a list of herbs which would be banned internationally from public use.[John Hammell, "Codex: International Threat to Health Freedom," Life Extension (February 1997) p. 34]

The reality proved much different than the conspiracy theorists had predicted. The US and Canadian delegations, supported by Australia and Japan, objected to the development of international guidelines for vitamins and mineral supplements as "the development of international guidelines in this area would negatively affect the right of consumers to use these products, and there was no scientific basis for such restriction."[Report of the 22nd Session of the Codex Alimentarius Commission, Geneva, June 23-28, 1997, p. 27] It was decided that the proposal, which was at step 5 of 8 in the approval process, return to step 3 for further review, including a reconsideration of the need for such guidelines. With respect to herbs specifically, it was decided that this was a matter for national authorities and that no further action by Codex would be necessary; the matter was taken off the Commission's work program.[Ibid., p. 37]

Does this mean that there is no cause for concern-that we will always have the freedom to choose whatever vitamins, herbs, or food supplements that we feel would be most beneficial to our health? Unfortunately, there is a potential threat to our health freedom. It is not coming from any international government or from multinational pharmaceutical companies. The potential threat is much closer to home.

Protecting Canadians or restricting health freedom?

Part of the mandate of Canada's Health Protection Branch (HPB) is to protect Canadians against any health risks associated with either products or diseases. In this capacity, it conducts evaluations of food, drugs, medical devices, and some other consumer products. It also oversees the removal of unsafe products from the marketplace.[Taken from the Health Protection Branch's Branch Overview]As with many such regulatory agencies, there is a fine line between protecting the public and restricting people's freedom. In the last year, the HPB has restricted consumer access to numerous substances, herbal and otherwise, which do not appear to be a threat to the health of consumers: melatonin, golden seal, and kava kava, for example.[Canadian Coalition for Health Freedom brochure, "Your Right to Buy Natural Products is Being Threatened."]

Currently, there are no specific regulations dealing with foods that may have health benefits (functional foods) or foods that are packaged as pills, powders, or other medicinal forms (nutra-ceuticals).[The definitions of functional foods and nutraceuticals used here are proposed working definitions which come from Health Canada, Food Directorate and Drugs/Medical Devices Programme Discussion Document on Functional Foods and Nutraceuticals, prepared for a Consultation Workshop in Ottawa (April 30 to May 2, 1997) p. 6] However, all foods and drugs are regulated by the Food and Drugs Act, one of the legislative instruments from which the HPB derives its legal mandate. The HPB can, in effect, restrict consumer access to functional foods and nutraceuticals because of the ambiguous definitions of "food" and of "drugs" in the Food and Drugs Act. The definition of a "drug," most recently amended in 1927, states that any substance or mixture of substances (including foods) is considered to be a "drug" if it is represented as a treatment, preventative, or cure for certain diseases, disorders, or abnormal physical states such as asthma, cancer, diabetes, or heart disease. In other words, a substance is a drug if it claims to "lower cholesterol" or "prevent cavities."[Ibid., p. 7]

The current strict interpretation of the Food and Drugs Act by the HPB is a cause for concern, not only for the health freedom of Canadians but for Canada's competitiveness in the international health food marketplace. An HPB discussion document of the existing regulations with respect to health foods recognizes that "there are several limitations which may ... decrease the attractiveness of our market for investment in research and development of functional foods and nutraceuticals."[Ibid., p. 15. For more information, see Health Canada's website at http://www.hc-sc.gc.ca/main/hc/web/hpb]

The demand for change

To reduce the HPB's ability to make what many people perceive to be arbitrary decisions to restrict consumer access to certain substances, some activist groups are calling for a Natural Health Products Act. This Act would have natural health products regulated separately from foods or drugs. The Act would cover vitamins, supplements, herbs, and homeopathic remedies, and would be administered by an independent body knowledgeable in natural medicines. However, more legislation, another level of bureaucracy, yet another regulatory body, is not the way to increase freedom of choice in health care. Instead, two things should be done.

Legislative change

Rather than creating a separate piece of legislation for functional foods and nutraceuticals, the Food and Drugs Act should be amended to include a third classification for these products. The HPB should follow the recommendation of the aforementioned discussion document and reconsider the definition of a drug: "Is it appropriate to require that foods be sold as drugs because of [health] claims that increasingly are considered to be reasonable and supportable for food products?"[Ibid., p. 17] A drug should be redefined as any substance, excluding functional foods and nutraceuticals, which claims to have health benefits.

To some extent, the HPB allows a manufacturer of a natural product to make health claims if the product in question meets certain criteria: if it is used to "treat" only minor health conditions, and if the producer is willing to explain on the label that it is a "traditional herbal remedy." As with other non-prescription or over-the-counter remedies, this product must be labelled in compliance with the requirements applicable to drugs. However, this method of dealing with natural health foods and related products still treats them as a sub-category of drug. Functional foods and nutra-ceuticals should be treated as foods, and any health claims made for them should have to include a disclaimer of sorts: "This product may help lower the risk of contracting a disease, however, its effects have not been clinically tested." In essence, buyer beware.

The HPB does have a mandate to protect the safety of Canadians to the extent it is possible to do so. Drugs require clear labelling with instructions for safe use of the product, and there must be evidence to show that the product is effective and safe. Only prescription drugs are allowed to make claims regarding their therapeutic benefits in reducing the risk of a major health condition, such as cancer or heart disease. If functional foods and nutraceuticals are not regulated at all, they would enjoy a freedom not currently granted to substances such as drugs (both prescription and over-the-counter). If producers of food supplements or herbs are allowed to make health or therapeutic claims about the major health conditions their product addresses, then the restrictions on the claims that can be made by over-the-counter drug products also would have to be amended, to ensure a level playing field.

The private sector should take some responsibility

In addition to such legislative changes, there is something that the private sector should do to help itself. The producers and sellers of herbs, food supplements, and other health foods should voluntarily create their own body which would oversee the creation of a set of industry-wide quality standards. If those involved in the health food marketplace adhered to these guidelines, they would receive their body's "seal of approval." Such an organization would not preclude other groups from forming and creating their own list of quality and safety standards, and none of these bodies would be officially sanctioned by the government. In other words, no one group would be granted the exclusive right, through legislation, to "police" the health food marketplace.

Voluntary safety and quality guidelines would provide valuable information to the consumers of health foods and other related products. Groups would have to educate the public on the merits of their standards-their "certified" products-versus those of other competing groups. These private initiatives would make it harder for governments to justify the need for their intervention in the health food marketplace.

Conclusion

These recommendations, if implemented, would resolve many issues. With nutrients no longer being regulated as drugs, there would be increased freedom of choice in health care while maintaining a reasonable level of product safety. Allowing for health claims on the product label, coupled with the health food industry's own voluntary guidelines would provide more information for consumers, allowing them to make informed choices about the vitamins, food supplements, and herbal therapies they decide to consume. Moreover, a more open domestic policy towards vitamins and food supplements would actually bring Canada's regulations more in line with those of our biggest trading partners, perhaps stimulating investment in what is poised to become a growth industry. There is much to be gained from sensible policies in this area, and much to be lost if we focus too much of our attention on conspiracy theories and rumours.

Quotas Could Save the Pacific Salmon

Laura Jones

Could the problems facing the salmon fishery get any worse? The number of threatened stocks continues to increase, economic viability of the fleet remains elusive, and our own fishermen-commercial, aboriginal and recreational-can't agree among themselves, let alone with the Americans, about how to allocate fish.

The impasse with the Americans is just the latest in a long series of crises facing the industry. As with past crises, we are being short-sighted.

The real problem facing the salmon industry is not over-fishing, or low profitability, or even the Americans. The real problem is that salmon allocation and management decisions are made in the political arena and not in the marketplace.

Governments make fisheries-management decisions based on what will get them re-elected, not on what is best for the resource (the fish), those dependent on the resource (fishers), or the resource owners (the people of Canada).

Is this an impossible problem to resolve? Not at all. Fish or Cut Bait! The Case for Individual Transferable Quotas in the Salmon Fishery of British Columbia, a book recently released by the Fraser Institute, explains how using individual transferable quotas (ITQs) that grant fishers rights to the fish before they are caught would promote conservation, improve the fleet's economic performance, and last-but these days not least-provide a mechanism to resolve allocation disputes.

How do ITQs differ from current fisheries management? Currently, salmon management focuses on trying indirectly to control the number of fish caught through license limitation, fishing area, and time restrictions. This "effort control" style of management has been a failure world-wide; fish stocks are not conserved, and the value of the resource is marginalized. Conservation and economic viability suffer under current management, too, because the only way to establish the ownership of the fish is to catch them. Thus, the incentive is to catch as many fish as possible before another fisher has a chance to do so.

This leads fishers to invest in increasingly powerful boats and equipment, to which the government responds by implementing new fisheries regulations- shortening seasons, restricting areas, buying back licenses, and increasing gear restrictions. Needless to say, an increasingly powerful fleet operating under more and more bureaucracy is not conducive to either conservation or economic efficiency.

ITQs eliminate many of these problems because the allowable catch for each fisherman is predetermined. Once that is decided, fishermen can focus on minimizing their costs and maximizing the value of their product. When the B.C. halibut fishery switched from effort control management to ITQs in 1991, revenues increased, costs declined, and, for the first time, fishers did not exceed the total allowable catch. New Zealand and Iceland provide further evidence of how effective ITQs can be.

But what about allocation? First we have to agree with the Americans about who gets what. Once that general allocation decision has been made, the Canadian commercial, sports, and aboriginal sectors must divy up the catch.

Not surprisingly, every year this leads to political lobbying and disputes between sectors over who is the highest valued user of the resource. With individual transferable quotas this painful process is undertaken only once-when the initial quota allocation is made. After that, it is up to the market. If a sports fishermen wants more fish, he can buy the rights from a commercial fisher. If Alaskan fishers want more fish, they would have to compensate Canadians, and vice versa.

Will ITQs be the solution to the current dispute with the Americans? Not immediately. But they do have the potential to prevent such disputes from occurring in the future. Regardless of how many fish the Americans take this year, ITQs are a better way to manage fisheries. But until we take the politics out of fisheries management, expect the fish wars to continue.

[Fish or Cut Bait! edited by Laura Jones and Michael Walker, was published in July by The Fraser Institute. Copies of the book are available for $19.95 plus G.S.T., shipping, and handling. Call the Institute at (604) 688-0221, ext. 325 for details.]

Mockery of "Competition" at Canadian NSERC

Alexander Berezin

[For some years, The Fraser Institute has been interested how university-based research is funded in Canada. The question that always arises is should government be involved in the process of this funding at all? Is it not something that could be effectively addressed by the corporate sector? Given that the government is involved, surely the process by which applications are screened and the money granted should be as efficient and effective as possible. This author, who is a recipient of both corporate and NSERC funding, explains that there is significant room for improvement.]

The Natural Sciences and Engineering Research Council of Canada (NSERC) is the prime source of research funding for university research in science. Industrial funding also plays some of this role, but it is often unavailable, especially for fundamental areas like theoretical physics or astronomy.

The mechanism of distributing the research funding at NSERC critically affects the vitality of Canadian science and its competitiveness on the international scene. NSERC's officials constantly brag that their system promotes true "competition for excellence" and hence the only problem is the insufficient level of government funding. The two major mantras on duty at NSERC are: "Just give us more money and we will be even more excellent"; and "we [NSERC bureaucrats] know better than you how to use these [your] dollars."

In reality both mantras are red herrings and NSERC's so-called competition for excellence is a perversion of the idea of a true competition which is both stimulative and interactive. The net result of NSERC granting policy is precisely the opposite to its stated goal: conformism and mediocrity are reinforced, and risk-taking and innovation are suppressed.

There are several reasons for this, but two are the most important. The first is that NSERC's Grant Selection Committees (GSCs) are composed primarily from the top grant recipients themselves. All claims to the contrary notwithstanding, this constitutes a fundamental conflict of interest the very legality of which is open to question. Regardless of any personal qualities GSCs members may have, their prime objective is generous funding for themselves-the "me first" principle. Only after this is done are the leftovers allocated, and those leftovers go primarily to those who support the establishment's agenda.

In order to ensure the highest possible level of funding for their own projects, GSCs members strive to raise the averages of the research grants in their respective disciplines. This, in turn, requires that many applicants be left unfunded. Presently about 40 percent of all eligible and research-active Canadian professors in science and engineering have no NSERC grants and often have to maintain their research programs from their personal salaries. At the same time, some privileged grantees (usually current or former GSCs members) are funded (or, more correctly, overfunded) at the rate of hundreds of thousands of dollars a year.

The second detrimental facet of NSERC functioning is the misuse of the peer review system. According to NSERC claims, those who are top-funded are "the best," while those who are denied funding are the "dead wood," and hence do not deserve to be funded (so called "NIL Awards"). The alleged ground for such apartheid is the peer review ranking of proposals. Despite the fact that at first glance this may look to be as fair a route to the best quality as possible, in reality it fails to work this way. Often these NIL-awards go to researchers with established international reputations, with high levels of on-going research activity and graduate students to supervise, and who are regularly published in reputable journals. Usually, after GSCs members have finished awarding themselves their own grants, there isn't any money left for all the other qualified researchers with excellent research programs.

The very idea of peer review ranking of "proposals" has been questioned by many reputable scholars, including several Nobel Prize laureates, the physicist Heinrich Rohrer and biochemist Albert Szent-Gyorgyi among them. All that "expert peer review" can do more or less reliably is to identify clearly incompetent and unprofessional work. But when it comes to ranking the work that is not yet done-the "proposals,"-it turns into a hopeless futurology on a par with Nostradamus' predictions. As suggested by another Nobel laureate, Arthur Kornberg (Stanford University), the research grants should be awarded based exclusively on the prior track record of the applicant. The latter can be assessed with a significantly smaller margin of error than the proposals. In short, "fund researchers, not proposals."

The present process of selecting who gets funding is secretive, has no form of external review, and the appeal system in place is totally inadequate, being completely controlled by the very system whose actions the grant applicants are appealing. Therefore, in addressing the political dimension of the problem, primary attention should be directed to rectifying the distribution system first before throwing more money into its funding. To begin addressing this issue, the following 2 measures should be taken:

•NSERC should be required to remove from its funding panels all those members who are grant recipients themselves. Unquestionably, there is a sufficiently large pool of expertise in this country among those who do not use/need NSERC funding to fill the panels.

•An independent inquiry into the effects of NSERC funding policies on Canadian science and technology should be conducted. All people who are willing to provide evidence for such an inquiry should be given an opportunity to make a submission, and all such testimonies should be included in the public report on the issue.

It is certainly true that some NSERC-funded projects are of a high calibre and impact. However, in the present context, they became so largely in spite of the system rather than because of it. The overall vector of the discriminative and secretive funding policy of NSERC is directed towards encouraging sure-fire, low-risk projects. Often really innovative work can only be maintained if the researchers use clever decoys to hide the most important and novel facets of their research behind a mainstream, in-vogue facade.

It is not surprising that the consequences of this policy are devastating to the competitiveness of Canadian research on the international scene. Fewer and fewer people still adhere to a belief that the "Centres of Excellence" really do produce much of it, all the official pronouncements, political hype, and glossy reports notwithstanding.

Contrary to what we often hear, the major problem with research funding is not underfunding, but the system of centralized mismanagement of the available resources by NSERC's old boys club. The "Competition for Excellence" is not at all a competition in the best meaning of this word. In reality, it primarily favours those who follow the party line and who are keen on using the package of the latest trends, buzzwords, and fashions in their respective areas of research.

It is symptomatic that out of 14 Nobel Prize laureates in science that Canada has produced in recent decades, only 4 remain in Canada. If we want to survive as a first-rank research nation, the NSERC system must be radically reformed. Without such a major change, a rapid stagnation of our research infrastructure is just around the corner. More money is not the solution. A radical reform of the distribution system to stimulate genuine creativity and interactive competition is the start of the real answer.

Child Poverty: You Get What You Pay For

Karen Selick

Back in 1989, the House of Commons fixed the year 2000 as the deadline for eliminating child poverty in Canada. According to recent headlines, we haven't even made a dent in the problem since then. Surprised? Don't be. The solutions that have been proposed are virtually guaranteed to fail.

The National Child Benefit System proposed by the federal government in February is a perfect example. Anti-poverty spokespeople pronounced it a good start, although not sufficiently generous. In fact, the program would probably do exactly the opposite of what it's supposed to, increasing rather than decreasing the number of poor children.

The proposal would eliminate the current Working Income Supplement of $500 per family, merging it with the so-called Child Tax Benefit (which isn't really a tax reduction, but rather a monthly cheque sent to both taxpayers and non-taxpayers). The merger would produce a larger benefit that escalates with family size. A low-income family with one child would get $1,625 per year, and each additional child would bring in $1,425 annually.

Subsidize anything, and more of it will be produced, economists tell us. This rule holds true for milk, poultry, jobs, Canadian literature, recycling centres, methanol-you name it. Is there any reason to believe this law of economics will miraculously be suspended when it comes to the production of babies?

Baby bonuses were first introduced in this country in 1669 by the king of France. They've been used in many other times and places. The goal has always been to encourage people to have more babies. Everyone has always understood this. Why, suddenly, do politicians no longer grasp that if you pay people extra money for each child they have, it will encourage people to have more children? Calling it an anti-poverty measure instead of a baby bonus won't make people respond differently to the same economic incentive.

We can thank the Quebec government for giving us a dramatic demonstration of this phenomenon. It began a program of generous baby bonuses in 1988, expressly for the purpose of reversing the province's declining birth rate. It worked. Over 3 years, Quebec's birth rate increased by 21 percent, compared with only 8 percent for neighbouring Ontario and a 1 percent decline for Newfoundland.

The proposed federal child subsidies will be even more generous than Quebec's. They will be ongoing, annual payments instead of one-time payments at the child's birth. Furthermore, since the subsidies will be available only to low-income families and will phase out as the family's income increases, the incentive to produce more children will be strongest among the very poorest in society. Already we're told (although it's highly debatable) that 25 percent of Canada's children live in poverty. With higher birth rates encouraged among the poor and not affected among the middle class or wealthy, we can expect to see the proportion of poor children, as well as their absolute number, climb even higher.

Readers might object that nobody would actually be induced to have another child by a mere $1,425 per year, since the child would cost more than that to support. In fact, many people decide to have children under financial circumstances that readers of this column would consider totally unacceptable.

Today's poor children did not all tumble into poverty because their parents lost their jobs. Many of them were conceived and born to parents who must already have known they couldn't support them in comfort. That segment of the population who were prepared to raise their children in poverty before the new benefits were announced will be all the more willing to do so when it will mean an extra $1,425 per year in their pockets. Others who were debating whether to have another child will decide the extra money tips the scale in favour.

If we really wanted to improve the standard of living for existing poor children, rather than increasing their numbers, we would have to attach two conditions to the subsidy. First, it should be available only for children already alive, or at least already conceived, on the day the program is announced. This would eliminate the incentive for people to have additional children who would cost more to support than what they would bring in, thereby dragging their families deeper into poverty.

But we'd actually have to go even further. Some families who already have children but are considering having another might decide that even though the new child wouldn't come with any money attached, the enhanced benefits for the existing children would be enough to finance the addition of a new one. In other words, they might prefer to have one more child at a lower standard of living rather than the existing number at a higher standard. Some people actually do exhibit this preference, as demonstrated by the fact that welfare mothers frequently give birth to additional children. To prevent this, the program would have to provide that families who have new children would cease to receive benefits for the existing ones.

Would any politician ever have the guts to suggest this? I don't think so-which is why we'll never solve the problem of child poverty by giving subsidies to poor parents.

The Community Development Model:                                          A Vehicle to Enhance Local Government Efficiency

Brian MacRae

[This is the synopsis of the proposal by the Joint First Runner-Up in the 1997 Fraser Institute/Financial Post Economy in Government Competition. This year's contest focused on the efficient delivery of programs at the local government level.]

Traditionally, government agencies have assumed the responsibility of determining the public's needs for programs and services and then provided them directly. However, over the last decade, the rising demand for services and the ever-decreasing tax base has forced government agencies to explore alternative service delivery models to ensure the most efficient and effective delivery of programs and services.

This proposal addresses the relationship between government agencies and the citizens they serve, and, more specifically, the relationship between Surrey Parks and Recreation and the community.

This proposal recommends that government agencies adopt a new service delivery model-"the Community Development Model"-as an innovative vehicle for reducing costs, expanding service delivery levels, increasing customer service, and revitalizing the community.

While Surrey Parks and Recreation is still in the infant stages of implementing this model, the results achieved to date are in line with the department's established goals and objectives. Since January 1994, the Parks and Recreation Department experienced direct cost savings in the amount of approximately $2.5 million through community linkages and/or partnerships. In addition, it increased its program and/or service delivery levels to the public in the amount of approximately 63,000 hours (value: $1,071,000) through the efforts of approximately 16,200 volunteers.

The institution of Community Advisory Boards and Steering Committees has also facilitated the design of programs and services to better meet the needs of Surrey residents. Over the last three years, approximately 240 residents allocated around 15,960 hours of time (value: $271,320) to participate on 28 Community Advisory Boards and Steering Committees. The mandates of the Advisory Boards/Steering Committees varied from the development of policy, to the building of facilities, to the design, implementation, and evaluation of programs and services.

Lastly, the adoption of the community development framework has been instrumental in rebuilding and revitalizing a sense of community. Specifically, participants in the department's community development processes indicated that their involvement resulted in an increased sense of individual well-being, community pride, and civic ownership of facilities, programs and services.

The Parks and Recreation Department anticipates a significant return from its investment in the community development framework. To date, the demand for community-based initiatives has increased to the point where existing staff are hard pressed to keep up with the number of requests from community groups. This demand for support is expected to increase as the community continues to grow, as the service delivery system expands, and as community participation in providing opportunities is realized.

September Questions and Answers

Joel Emes

Q: How much does the federal government transfer to other levels of government?

A: In the 1996/97 fiscal year, the federal government transferred an estimated $38.2 billion in cash and tax transfers to the provincial, territorial, and municipal governments (see table 1). The main transfer programs are: equalization, territorial financial agreements, and the Canada Health and Social Transfer (CHST). The CHST replaced Established Program Financing and the Canada Assistance Plan at the beginning of the 1996/97 fiscal year. Equalization payments are intended to enable the provinces to provide their residents with reasonably comparable levels of public services at reasonably comparable levels of taxation. These payments are totally unconditional, which allows the province to direct the money to its highest spending priority. Ontario, Alberta, and British Columbia are often described as the "have" provinces, because they receive no equalization payments due to their relative prosperity. The CHST is a block fund to cover the federal government's share of spending on insured health services, post-secondary education, and social assistance programs.
Table 1: Estimated Federal Transfers to the Provinces, Territories, and Municipalities, 1996/97 (in $ millions, unless otherwise indicated)

Q: How have federal transfers to the provinces changed over the last few decades?

A: Federal transfers as a percent of total provincial revenue fell between 1990 and 1995 for most provinces and for all provinces between 1965 and 1995 (see table 2). Table 2 only tells part of the story, however. Table 3 shows that federal transfers as a percent of provincial GDP increased in every province between 1965 and 1995, and increased in four provinces between 1990 and 1995. The reason for this is that provincial government budgets have grown faster than federal transfers. The story behind table 3 highlights two very important issues: deficit financing and growth in the size of government. The last year the federal government had a surplus budget was 1969/70. Between 1975/76 and 1995/96 the federal deficit was at least three percent of GDP (it peaked at 8.32 percent in 1984/85). These free-spending years made it much easier for governments to grow than if they had faced a "hard budget constraint," i.e., if they had to balance their budgets each year. Total spending by all levels of government was 28.7 percent of GDP in 1965; by 1995 it had reached 47.9 percent. The provincial governments are either at, or working their way, towards budget balance. The federal government recently announced that it had its' first back-to-back monthly budget surpluses since the late 1970s. There has been a lot of discussion recently about the best way to spend the soon-to-be-realized federal budget surplus. Perhaps we should tackle the question of how large a government Canadians want at the same time.

September Graph

Joel Emes

Well-Defined Resource Ownership                                             Will Help Solve Forest Industry Problems

David Mark Odell

[This essay won David second place, (with a cash prize of $500) in the Institute's annual essay competition for Canadian students]

Incompletely, or ill-defined property rights lie at the root of many environmental problems. The forest industry in Canada is heavily subsidized by the Crown through the underpricing of forest resources, in part the result of a lack of individual property rights to the forest resource. Historically, forest companies have been able to obtain cutting permits for large tracts of forest for a minimal stumpage fee and the promise to re-plant. This "cut 'em and leave 'em" policy has left the Crown the proud owner of silted rivers, dwindling salmon runs and hill sides shorn of their valuable forest cover. A mechanism to ensure that all the costs and benefits of forest use and management accrue to the forest industry could tremendously benefit the industry, the Crown, and other forest users.

The value of rivers, forest ecosystems, and the salmon fishery have all been excluded from the costs borne by the forest industry, left to be paid for by others through lost productivity of the salmon fishery, loss of other uses of those forests, and lost bio-diversity. The Canadian government, acting on behalf of the Crown, failed to properly set fees for the right to harvest trees, and once harvested, failed in management of cut lands. The forest industry companies simply acted in their own best interests.

The solution to these problems is to ensure that the forest industry in Canada is able to include all currently externalized costs in its calculation of its best interest.

One method that could accomplish this would be to re-establish cutting fees so that they reflect external costs. Unfortunately, there are many barriers to government being able to ensure that cutting fees do reflect all costs. The external costs are not well understood, and are difficult to quantify. Insofar as they can be quantified, there is little agreement on how to do so. Many seemingly technical arguments can become areas for competing interests to further their causes. There are problems of "institutional capture," a concept that explains how, among the competing groups, one will manage to dominate, to the detriment of the public interest.[One example is the conflict among environmentalists, labour, and forestry companies. In setting cutting fees, these groups' interests will converge and collide in a variety of ways. If one group is able to dominate the process, as "institutional capture" predicts, the public interest will not be well served] For these reasons, it is clear that attempts to capture external costs through cutting fees will fail.

Rather than being sold the right merely to cut trees, forest companies should be sold or assigned the right to manage all the resources in a given area. This will ensure that all costs and benefits related to the management of that land will accrue to the forestry company. Harnessing the power of the forestry companies' self interest will ensure the best outcome.

Currently, forest companies see reforestation as a cost associated with cutting rights and a public relations necessity. Little effort is put into managing the reforested regions because the company responsible for reforestation is not guaranteed the benefits of good management. Placing the forest in the hands of individual companies rather than government would ensure an appropriate investment in reforestation and forest management.

The first benefit would be through the realization of the value of the lands sold, if that route is taken. The government could capture the value of Crown lands through their sale, rather than leaving them as un- or under productive resources.

Through negotiation on pricing and selecting the areas to be sold, government will broker among the forest users for the most efficient allocation of the forest resources and the mix of forest uses. This would resolve on-going conflicts between competing groups, such as forestry, tourism, environmentalists, and the broadly defined public interest. A question that is left to be dealt with is the mechanism by which uses would be assigned. There is a conflict between a potential market mechanism that would have the resource go to the highest market value use, and uses of the lands in the form of public goods, (such as parks, or wilderness) where the market value of the land use may not reflect the whole value of the land to the Crown and the people of Canada. A political solution may be the best possible when it comes to defining which lands are available for particular uses.

The most challenging part of the process is the initial distribution of land uses. Land assignments would be permanent, with allowance for change only when it is essential. The potential for cheap expansion of forests for harvest would reduce incentives for appropriate management. As land is assigned to forestry the maximum size of the forest industry will be more or less defined, with some potential to expand harvests at the intensive margin. Lands set aside for forestry must be sufficient to ensure a long term harvest that will support the size of forest industry that is consistent with a healthy industry, a healthy environment, and the most efficient use of the resource.

There are inherent problems in using government to set up the forest/land management regime and assignments of land for particular uses. The potential for error in allowing government to broker among competing interests is large. However, since in this model the government involvement is only at the outset, the effect of error will be limited. Any long-term problems resulting from a poor initial assignment/sale of rights would either be corrected through market transactions or through renegotiation among the affected groups, with the government working to minimize transaction costs. In either case, the on-going problems associated with the sale of short term cutting rights will be avoided.

In order to ensure that costs associated with poor practices are included, there must be some reflection of the interest of the salmon fishery and other river uses in the on-going cost structure of the company that receives the rights or title to land that includes or is an important upstream factor in the health of a river. A likely method would be through agreements about stream quality, struck among the forest company, downstream users, and the salmon fishery, with appropriate remedies available. Probably this would not be a large source of conflict since a well managed forest resource is unlikely to cause damage to river eco-systems.

The forest industry will have the opportunity to reap other harvests under this scheme. A well managed forest, even when not being harvested actively, has the potential to generate income. For instance, sheep grazing could be promoted in replanted areas (which can lessen competition between seedlings and grasses), as could tourism and associated wildlife uses. Additionally, a healthy forest will provide some additional external good in the form of a healthy eco-system promoting bio-diversity.[This recognizes that the re-planted forest will likely be a mono-culture; however, diversity of tree species can be ensured through management of areas set aside for non-forestry uses. Here, bio-diversity refers to other plant and animal species which can tolerate a mono-culture forest]

Through more completely defining property rights to forest resources, efficient management of those resources can be ensured. Many of the problems currently associated with the forest industry could be alleviated by harnessing the power of the industry's self interest in forest management, ensuring that once made available to industry, resources will be put to their most valuable use. A mechanism that ensures that the costs and benefits of forest use and management accrues to the forest industry could provide tremendous benefit to the industry, the Crown, and other users of the forest resource.

If Robespierre Were Alive Today,                                              He'd Be Teaching Law at UBC

Owen Lippert

Are Canadian lawyers economic illiterates? One way to examine that question is to look at who's teaching them, and what they understand about economics. By that criteria, one has cause to fear not just how much, but what lawyers know about economics. It's darn scary.

I submit, as evidence of what Canadian law schools teach about economics, a new book, Just Words: Constitutional Rights and Social Wrongs, written by Joel Bakan, a law professor at the University of British Columbia, and published this year by the distinguished University of Toronto Press.

Lest someone think that I'm picking on a marginal character unrepresentative of his profession, Bakan holds a firm place in Canada's academic legal elite. Leon E. Trakman of Dalhousie Law School spouts on the back cover that "Joel Bakan is speedily becoming one of Canada's finest constitutional lawyers." The inside jacket blurb, presumably written by an editor and not by professor Bakan himself, enthuses that "Just Words is cutting-edge commentary by one of Canada's rising intellectuals."

In his introduction, Bakan cites 49 individuals as having read and commented on his draft work. The list reads as a Who's Who of Canadian legal scholars. They include past and present deans of the law schools at UBC, the University of Victoria and McGill. The luminaries include Lynn Smith, Rod MacDonald, David Cohen and Maureen Maloney. Bakan singles out Andrew Petter, BC's Minister for Intergovernmental Relations, as having inspired the book in the first place. Whatever else he may be, Bakan is not a kook in the eyes of his peers, and he has the grants to prove it.

It's surprising, then, that in his book Bakan throws a bucket of slop at the Charter of Rights and Freedoms. He states in his introduction: "I argue that the Charter is only paper, dead tree, with ink on it. Its fine-sounding words of justice are only words, just words.... The Charter has done little to promote social justice in Canada despite its just words."

Bakan dislikes the Charter because it allegedly stops government from actively combating capitalism. He states, "the economic dimensions of social inequality, and poverty, in particular, are beyond the reach of the Charter ... rooted in intersecting relations of class, gender and race, not in particular acts of government or private actors." In Bakan's view, education, hard work and entrepreneurship count for little in the racist, sexist, and class-ridden hell-hole known as Canada. Only an "activist state" can improve the lives of Canadians and the Charter is not delivering. He calls, instead, for a "Social Charter" to bring to life all the socialist schemes hatched in the law faculty lounge.

Bakan is correct, nonetheless, in concluding that the Charter of Rights and Freedoms, at least as it's written, restrains government from a full-scale assault on the private sector. The Charter does focus exclusively on the actions of governments, rather than of private companies and citizens. It does place procedural restrictions on the arbitrary acts of governments. It does require that any legal action take place between two real actors rather than between an "oppressed minority" and "the causes of inequality and other social ills." Thank goodness for small mercies.

Bakan, furthermore, sees no hope that Canada's judges will free the Charter from such shackles as the petty bourgeois fixation with private property. He dismisses the judiciary as a pathetic prisoner of its class background: "Notwithstanding sincere attempts by judges to be impartial, principled, and professional, they cannot escape the personal and structural conditions that determine a partial and elite perspective." White guys, it seems, can't judge.

Bakan then goes as far as to question whether judges, as a result of their insidious class loyalties, ought to be obeyed at all. He ponders, "It is not clear why oppressed and marginalized groups that do not share that perspective should trust and obey [my emphasis] decisions that reflect it, particularly when all too often those decisions simply reinforce the very structures of domination, oppression and exploitation that affect them." Imagine that 49 distinguished law professors read this manuscript and, presumably, none saw much amiss with the idea that it's okay to disobey the law if you're feeling "oppressed."

As to how many of us suffer capitalist oppression, Bakan is a most generous person. He argues that, "It would be artificial, however, to draw a sharp distinction between poor people and the majority of the so-called middle class. Poverty is only the worst expression of the economic inequalities endemic to capitalism." Do you work for someone else? If you do, come on down, join the downtrodden and start tearing up parking tickets.

At the root of Bakan's critique of the Charter is his cartoonish nineteenth century Marxism. Even left-wing economists would cringe today at his rehash as gospel Karl Marx's long-discredited labour theory of value and "iron law of wages." He writes, blissfully unaware of a century of economic research, that, "Enterprises in turn extract as profit the difference between their production costs (primarily workers' wages) and the revenue generated by selling their product or service. Social insecurity and other deprivations are not mere by-products of this system, not random events, but inevitable results. Profit and worker's wages are inversely related: lower wages mean higher profits." Whom but law professors could take Bakan seriously when he states that "much of business has a positive interest in the existence of economic insecurity and poverty"?

What's depressing is not that Bakan is a Marxist. What's depressing is that "one of Canada's finest constitutional lawyers" can unchallenged write a socialist diatribe disguised as a law book. What's even more depressing is that his ignorance of economics and disdain for the law garners the apparent applause of a cross-section of the nation's top law professors.

Professor Bakan was probably not expecting a favourable review in Fraser Forum, but one can only try as hard to be understanding as he tried to be sensible.

Oh, and in case you've forgotten, this fall he's again teaching the next wave of law students soon to hit the shores of the Canadian economy. One can only hope that they already know more economics than their instructor.

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Last Modified: Wednesday, October 20, 1999.