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DEFICIT 0, TAKE 2, BY THE LIBERALS. Where will they take us?










Montréal, 03 October 2014

In the late 1990s, the Lucien Bouchard administration took aim at reaching deficit 0, which was achieved in 1999 with Bernard Landry as Finance Minister. We thought the monster deficit was put into cage for good, or at least for a long while.   We are now back at it, 15 years later, in 2014. Fifteen years may seem long enough, but the taxpayer finds it rather way too short. What have we done and what have we learned in the meantime? And where are we going this time?

Interestingly in this 15-year stretch, GDP grew by 42%, while government expenses grew by 116%. This neatly summarizes why we are facing yet again this monster and why governments have cunningly pick pocketed citizens by all possible means of taxation. Are we better off today than in 1999? Clearly, it seems not. We have serious problems on both sides of the equation: on economic growth and government expenses.

The initial deficit 0 drive, carried out with the zeal of a mission at all costs, brought a number of side effects, worth a revision:

  1. It institutionalized government by rationing for the top 3 ministries: Health, Education, and Infrastructure. Rationing established budget cuts and caps for services that are limitless in their nature, thereby hoping that better efficiency would make up for the cuts. It did not quite work out this way. As a matter of fact the verdict is rather harsh: Performance in these top 3 areas central to the government mission has been questionable at best, abysmal at worst.  For instance, It is nothing short but troubling that not all citizens are covered by a medical doctor when the health budget takes a whopping 43% of the total provincial budget pie. In education, we are playing the ostrich in the sand, tolerating dropout rates and analphabetic that have reached scandalous levels.   And our suspicions have lately been confirmed that infrastructures were the playground of corruption at the municipal level for the last 30 years, or ever since the fiasco of the Olympic stadium. Those 30 years of corruption have deprived Montreal of a significant architecture and design signature.   Shame on us, shame on them.
  2. The management of the economy by both politicians and bureaucrats has equally been dismal. Deficit 0 take 1 happened just as China was about to upset the established liberal order and shake out globalisation in 2001. Even if the writing was on the wall for all to see, we practically abandoned manufacturing with rather poorly designed and mostly reactive industrial policies. Most decision takers in government and professional associations proved incapable of outlining a vision in the face of this new industrial challenge. Consider that manufacturing as % of GDP has come down to 12% in Quebec, way below what the Germans consider the minimum critical mass of 20% for a healthy sector. The loss of jobs, R&D centers and head offices have been terrible. We got caught and distracted by the technology bubble of 2001 and the financial bubble of 2008. Still today, it looks like we are still chasing our tail in policy circles. We were saved by ores and mines, but this will come short in the future to keep our prosperity level at par. Oil alone will not save the Canadian economy and cheap electricity will not prop up anymore Quebec’s industries. Growth options will require astute direction, hard work and a measure of sacrifice.
  3. The baby boomers will likely get a harsh judgment in about 10 years’ time, just as the younger generation will finally take over and realize what was left to them. They will remind us the crumbling of values displayed by this generation. A generation initially raised by meritocracy as an offspring of the quiet revolution, but who, upon reaching decision making levels in their late 50s and 60s, turned to looking after themselves before the good of the community. ‘Doing the right thing’ just seems to have vanished as a reliable and guiding value! Scores of bad examples in hospitals, schools, political parties, unions and government offices have punctured our confidence in those entrusted to public leadership. Like mildew spreading into a house behind walls, rot seems to have infiltrated the governing middle class behind the cloth of democracy. We have tired of witnessing politicians ceaselessly tendering to special interests (often including their own), promoting partisan gridlock and being devoid of any vision.

And here again we stand at the junction of a new round of axing government budgets, all the while the economy is wobbling: our manufacturing sector is still reeling from unending closures, our technology strategy is falling behind swifter nations, and our unions are stubbornly dedicating themselves to protecting a declining pool of jobs at the cost of foregoing future employment. The challenges are immense.

We can only hope that the Liberal party will spare a moment of thought about the world we will be living in 10 years’ time and the position we would wish the province of Quebec to be in, to maintain prosperity and progress.   There is whiff of change in the air but considerable unease down the ground. Are we facing a depressing moment of largely unarticulated cuts without a drop of vision and hope for a better future? Will deficit 0 take 2 merely put an end to the fading dreams of the affluent society that marked the 20st century? Will it be one more signpost in a slow and irremediable decline?

In 10 years’ time, China will likely be in command of the largest economy in the world, on its way to complete its transition to a high value technology economy. It will be in a strong bid position to become the domineering power in commerce for a large share of the century. The digital economy will have leapfrogged and shaken traditional industries, professions and public services.   Cities and regions will have become the defining economic drivers for national economies.  In a nutshell, the rules of the game will have changed again, but not necessarily in our favour. Once more the writing is on the wall, with pressing issues calling for attention.

How do we reform our government structures and programs, and our guiding institutions to address the new challenges as we get closer to the end of the first quarter of the 21st century?   What knowledge and skills do we want to instill in our future leaders through our education system? How do we tame the health system that threatens bankruptcy to the province? How do we build new business champions, from start-up to international niche players? What infrastructures and institutions will revive Montreal as a beacon of entrepreneurship, creativity and scientific innovation within the north American landscape? How do we make our governments more transparent and accountable? These are questions that should be in front of our minds in this period of forthcoming austerity.

Keeping the status quo on a lower budget will not take us far. For all purposes, not far enough.

We are facing a defining moment, with the Liberals in command.

Where will they take us?

André Du Sault, MPA Harvard




Posted in Governance, Management ideas, Strategy & globalisation, World economy.

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