A look to the future

[ruxted]

A look to the future
Link to original article

The Ruxted Group has consistently pressed for a return to an old, traditional foreign policy ambition.  We want Canada to be a leader amongst the so-called ‘middle powers.’

By any and all measures Canada is a middle power and it is amongst the most powerful of them.  Canada is one of the world’s ‘top ten’ by any sensible measure of political and economic power. There are several competitors for the eighth, ninth and tenth positions on that list including Brazil, India, Italy, Mexico, Russia and South Korea but, even if Canada is occasionally ‘bumped’ it will be, for the duration of any reasonable policy planning period, one of the world’s top 10%.  Two or three of the top ten are or might be superpowers, four or five might be major, even ‘great’ powers – the next 50 or 60 countries, on most lists, are middle powers – Canada is one of them.  It is not a state we can (or want to) discard.

The question is: Being an important middle power, shall we aspire to be a leader?

Ruxted detects three broad ‘bands’ of opinion in Canada:

1.  Little Canada - a greedy, timorous nation which turns its back on the world in order to address its own, domestic social, economic and political problems.  This is the view of Canada offered by Pierre Trudeau in the 1970 Foreign Policy White Paper. Many eminent Canadians, including Allan Gotlieb, and Jennifer Welsh suggest that Canada either cannot or should not aspire to be a leader amongst the middle powers.

2.  Reluctant Middle Power – a variant of Trudeau’s vision in which Canada does take a more active, even ‘leading’ position in world affairs but does so as a ‘model global citizen,’ attempting to ‘lead’ by example. This is the so-called “Soft Power” option. 

3.  Leading Middle Power – this is the position established as policy for Canada by then External Affairs Minister Louis St Laurent in 1947.  It remained Canada’s policy until 1970, although it began to be diluted in 1968. 

Option 1 is, Ruxted estimates, the most popular with many, perhaps even most Canadians.

It is ‘cheap’ – the Canadian defence budget might endure another decade of darkness and still meet the minimal burdens we think many Canadians are willing to bear.  It is safe – Canadian troops would not, because they could not, be put in harm’s way.  It has a very high ‘feel good’ factor – Canadians would see images of soldiers in baby-blue UN berets and medical service arm bands feeding little black babies.

Option 1 does nothing for Canada and it does nothing for the world.  When an important middle power decides to ignore the strategic realities – the ‘global war on Barbarism’ – the whole world suffers.  Equally, Canada’s voice in the world’s social, political and economic affairs and the degree to which other countries care about or pay attention to our views diminishes directly as our ability and willingness to carry a fair share of the global security burden is reduced.

Option 2 is something akin to the status quo.  It is, probably, ‘sellable’ to most Canadians.

It involves doing less and less over time and doing it less effectively.  It allows Canadians to send troops, maybe 2,000±, on difficult even dangerous missions, one mission at a time.  It is sustainable in the short and medium term because the current government has taken some drastic but necessary action to correct some key military capability deficiencies.

Option 2 does less harm but no good for Canada and the world.  It is the classic compromise, but is essentially a “no growth” option for Canadian diplomacy or business, and runs the long term risks of option one; the erosion of our influence at home and abroad.

Option 3 is Ruxted’s preferred option.  It gives Canadian governments the military tools needed to exercise leadership amongst the middle powers.

It involves substantial growth in defence spending and concomitant increases in the size and capabilities of the Canadian Forces.  It is affordable.

Option 3 strengthens Canada in the world.  It helps us to advance our economic, political and social views in the world. 

What does a “leading middle power’s” military look like?

We decided to examine a few of the middle powers Canada aspires to lead.  We selected ten countries (Argentina, Australia, Brazil, Italy, Malaysia, Mexico, Netherlands, Thailand, Singapore and Sweden).  Some are larger than Canada, others richer, some others are smaller and poorer.  We used an old (2002/03) but consistent data base* to measure defence budgets as a percentage of GDP and permanent force military manpower as a percentage of population.  According to that database Canada spent 1.12% of its GDP on defence and 0.18% of its population are in the full time military.  Amongst the other 10 middle powers the numbers range from 0.53% of GDP (Brazil) to 4.8% of GDP (Singapore) – nearly a full order of magnitude difference, and military manpower range from 0.11% (Mexico) to 0.61% (Sweden).  The averages for the 10 are: 2.36% of GDP is spent on defence and 0.46% of the population serves in the military. Canada, in other words, spends less than half than the average middle power on defence and has just over ⅓ of the average full time military manpower.

To what should we aspire?

The Ruxted group contends that we do not need to have as high a percentage of people in uniform as Thailand, nor do we need to spend as large a share of GDP as Singapore.  A good manageable target might be: 2.2% of GDP, year after year – declining, perhaps, to 2% of GDP after 15 or 20 years.  That would be about $31 Billion (given our 2006 GDP (according to the IMF) of $1.4 Trillion) – that is half again as much as DND says it will receive in 2010.  Ruxted contends that Canada’s skilled bureaucrats can find another $10 Billion from within the current spending envelopes, without raising taxes or cutting vital social programmes.  That extra $10 Billion, year after year, ought to ‘buy’ us as many as 15,000 more full time military personnel and the equipment they need – brining us up towards the same (percentage) personnel level as Argentina and Australia.

The Ruxted Group estimates that we need about 75,000 full time military personnel and a $30+ Billion defence budget by, say, 2012 – five years from now

There are military capabilities we think a leading middle power needs, including:

• Surveillance and warning systems – terrestrial, airborne and space based – to allow us to ‘see’ (in near real time) all the territory and inland waters we claim as our own, the contiguous coastal waters (out to and beyond 200 miles) and the airspace over both.  We must be able to detect and identify every ‘intruder’ – ship, aircraft or land element – and classify them as ‘friend,’ unidentified’ or ‘foe.’

• Territorial/sovereignty patrol/intercept forces – sea, land, air, with which we can intercept the ‘unidentified’ intruders and deal with them appropriately.  That may mean arresting them, escorting tem out of our airspace or coastal waters, and so forth.

• Joint homeland defence forces – regular and reserve, to deal with land intruders and also to act as reserves for expeditionary forces.  The latter task will be part of a size determinant – if we decide we want to be able to deploy two battle groups and two support elements overseas, at any one time, then we will need six battle groups and enough people for six support elements ‘in reserve.’  The Defence of Canada Forces will require at least one highly mobile (almost certainly parachute) army unit which is specially trained and equipped for operations in the far North.  All these forces are available for aid to the civil power and civil assistance (fighting floods and forest fires, etc) tasks.

• Joint expeditionary forces.  These are joint naval/air and land/air forces which will be deployed to places like Afghanistan and Darfur, typically to conduct so-called ‘Three Block’ operations wherein relief/development, traditional peacekeeping and war fighting are operations are undertaken simultaneously.  All these forces are available for aid to the civil power and civil assistance (fighting floods and forest fires, etc) tasks when they are not deployed overseas.

• Special forces.

• Logistics and training forces to sustain all these forces.

There is one key issue.  Whichever defence and foreign policy option Canadians choose, it must be applied by a country with a strong economy. Even though substantial increases in defence spending are necessary they must come from within the current framework – more for defence means we need a growing economy and we need to spend less on other, lower priority programmes. In order to spend more on anything, including national security and defence we need a bigger economic pie.  We get a larger part of that pie if our global trade balance improves.  We get our ‘way’ in global trade if we are a trusted partner.  Spending more on defence to do more in the world is part of the price we pay to ‘grow’ our economy.

Canada is a middle power and it is amongst the most powerful of them. If we want to maintain this fortunate position in the world, then Canadians will have to step up to the plate and assume our responsibilities as a Leading Middle Power. To walk away from these responsibilities, to refuse to shoulder the military, diplomatic and economic costs of leadership is to abandon our place in the world, to become “Little Canada” in fact as well as spirit. Canadians deserve better for ourselves and our children.

 

[Edward Campbell]

In a Globe and Mail article (repeated here on Milnet.ca) Prime Minister Harper is quoted as telling the CDA that ‘his government will raise the "automatic" annual increases in the defence budget from 1.5 per cent to 2 per cent, starting in the 2011-12 fiscal year, to "thoroughly reverse the so-called rusting-out of the Canadian Forces."’

Not good enough, I’m afraid, not nearly good enough.

Canada needs to move, quickly, towards 2%+ of GDP for defence – that’s $30 billion per year, year after year, starting before 2011, not $20 billion. Anything less means a return to Pierre Trudeau’s policy of disarmament by stealth.

Although 2% is better than 1.5% neither is anywhere enough to cover even the rate of inflation for military hardware. Even fuel prices are likely to rise by more than 2% in the coming years.

I encourage Prime Minister Harper to grow some balls and to be honest with Canadians – or at least with the soldiers who are fighting and dying at the behest of the Parliament of Canada. That being said, he is infinitely preferable to Celine Stéphane Dion or any of the other pretenders in the LPC.

 

[Panzer Grenadier]

Campbell, your statements, as always, seem eloquent - to the point and backed up by facts.  Unfortunately the majority of the population will never back the required financial amounts that will need to be heaped on the CF - now, not dribbled out, in order to prevent the eventual "rusting-out".  Only in a WW2 type of conflict where the majority perceives a direct threat to them and their way of life will they bow to the will of the CF's monetary requirements - only so begrudgingly.

 

[Edward Campbell]

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Globe and Mail is a commentary by Sen. Colin Kenny, Chair of the Senate Committee on National Security and Defence, hat reinforces Ruxted’s thesis that the Government of Canada is, seriously, under-funding DND:

http://www.theglobeandmail.com/servlet/story/LAC.20080610.COHILLIER10/TPStory/?query=Colin+Kenny

Our military badly needs repair
We can't defend Canada's sovereignty and advance its interests in the world for pennies on the dollar

COLIN KENNY
Chair of the Senate committee on national security and defence

June 10, 2008

Don't get me wrong, General Rick Hillier is for real: a man among men, an inspirational leader and a Newfoundlander to boot. He's as close as you will get to a Canadian folk hero these days.

But if you think Lieutenant-General Walter Natynczyk, who is taking over as Canada's Chief of the Defence Staff from Gen. Hillier, is going to have big boots to fill, you're only half right. He is also going to have big boots to repair.

The Hillier brand sells: a rugged, no-nonsense straight-talker who stared down politicians and led Canada out of what he called a "decade of darkness" for the Canadian Forces.

I credit Gen. Hillier with instilling new pride among Forces personnel, and for restoring respect for the Forces among Canadians generally.


He has rightly prodded the Harper government to provide at least some of the equipment those troops need to survive the conflict in Kandahar - a conflict Gen. Hillier concedes is proving to be much more dangerous than he expected.

Under Gen. Hillier, the Canadian Forces have also added warrior credentials to peacekeeper credentials. That has come at a real financial and human cost, but toughness matters in the realpolitik of international affairs.

So why, with all those positives, is our military badly in need of repair? Two reasons: Stephen Harper and Rick Hillier.

First, the General. When Gen. Hillier took over, he promised to grow and transform the Canadian Forces even as Canada played a significant role overseas in one or more places like Afghanistan. To accomplish his vision, he was going to need two things: a transformation plan and money. Unfortunately, Gen. Hillier's transformation plan was flawed. Worse, he couldn't convince Mr. Harper to give him the money he needed, let alone transform the military.

Gen. Hillier's transformation plan superimposed a U.S.-style blueprint onto the Canadian military. Until a few years ago, the Canadian Forces had a Chief of the Defence Staff; a Deputy Chief of the Defence staff in charge of all operations, domestic and foreign; and a Vice-Chief of the Defence Staff who took care of internal issues and long-term planning. They pretty well did their jobs and stayed out of each other's way.

The new system featured a Chief of the Defence Staff, Gen. Hillier, and four commands reporting to him - in layman's terms, Canada Command, Overseas Command, Supply Command and Special Operations Command. Each built up its own sizable bureaucracy, draining the Forces of senior personnel needed for training and commanding troops. On top of that, Gen. Hillier's staff grew to more than 100 and too often micromanaged what should have been the work of the four commands.

Unfortunately, Canada's military is too small to carry an American-style command structure. Turf wars and duplication have abounded. A report brought down by three former senior officers recommended the new setup be blown up - but not until after the Olympics and Afghanistan were out of the way.

Anyone who thinks such organizational details are not newsworthy should understand that this muddle has created major problems, and Gen. Hillier's successor is going to have to untangle them or face unsustainable financial and personnel problems.

Meanwhile, Canada's commitment in Afghanistan has been sucking the marrow out of the Forces' bones. Skilled trades have been leaving for domestic jobs; recruitment has barely kept up with attrition; Ottawa cut its commitment to increase the Forces' regulars by 15,000 to 10,000, and cut its commitment to increase the Reserves to 10,000 down to 1,000.

The Harper government has announced it will increase military spending by 1.5 per cent per year until 2011, at which point increases will rise to 2 per cent annually. Even if military costs rose at the same level as the consumer price index, military spending would probably shrink every year under this plan, in terms of spending real dollars adjusted for inflation.

But military costs increase more quickly than the CPI, primarily because of ever-advancing technology, so spending after adjustments are made for inflation will shrink even more. We need to hold defence spending at a reasonable percentage of GDP, as other countries do.

There aren't a lot of votes in defence spending, and this government, which likes to parade around in fatigues, is the latest in a string of governments to starve Canada's military. Consider this: Pierre Elliott Trudeau was considered an enemy of the military, but some of his military budgets hit 2 per cent of GDP. Our current spending is 1.2 per cent of GDP - well below most middle-sized countries with similar interests, and second-lowest in NATO.

I estimate this government's stated budget plan for defence will drop that percentage to 0.87 per cent in 10 years. The Conference of Defence Associations estimates the percentage could fall as low as 0.77 per cent in 15 years.

In this year's strategic-needs reports, all three branches of the Forces projected dire deficiencies in their capacities to operate into the future under current funding projections. Whether you are a pacifist or a warmonger or somewhere in between, you should know that you can't defend your country's sovereignty and advance its interests in this world for pennies on the dollar.

This government will point to all kinds of expenditures it has made on expensive equipment. It will tell you that 1.5 per cent and 2 per cent annual expenditure increases are reasonable. But they are not reasonable when they won't even keep up with inflation, let alone get us out of the defensive hole Canada is quickly falling into.

The government, instead, should be committing to spending 2 per cent of GDP on defence, which would create a military budget of $35-billion in 2012. Its current blueprint won't get us to that figure until 2028. That means 16 years of serious underfunding.

Anyone who thinks Gen. Hillier succeeded in getting the government to revitalize our military better do the math.

I am too long retired to comment on the pluses and minuses of transformation reorganizations. I remain firmly committed to the idea that we should be organized into unified (joint) formations and I prefer a few large, multi-purpose HQs to many specialized ones.

I am, I believe, on much firmer ground when I agree with Sen. Kenny on the budget issue.

1.2% of GDP for defence is perilously close to disarmament by stealh. If Prime Minister Harper really does want Canada to play a lead role amongst the world’s middle powers then, first, he better make us one.

Talk is cheap. Soldiers are paying for the Government of Canada’s policies with their lives; it is time for politicians to screw up their courage and tell Canadians the horrid truth: doing the right things in the world and doing things right costs real money. If Canadians don’t want an effective military then we can, indeed must/u], stay on the sidelines and bleat, like lambs, when the Americans do not do as we might wish – to continue to under-fund the military and, simultaneously, want it to do tough jobs in dangerous places is dishonest. Sailors, soldiers and aviators deserve, have earned better.

 

[Kilo_302]

I think most Canadians accept that we should play a prominent role in the world, but it becomes a hard sell when we have so many problems at home. There should be enough money for both domestic projects and strong foreign policy (including a robust military), but successive Canadian governments have been lowering taxes, particularly corporate taxes. If we take Western European nations as an example, its obvious their corporatist system allows their populations to enjoy both excellent social services, and, what are for the most part well equipped and well trained forces.  While I think its painfully clear that the CF needs more money and needs it now, we don't want to end up like the United States, with segments of the population living in what are essentially third world conditions because we have let our tax bases erode and spent what money we have on military assets.

 

[Edward Campbell]

I think most Canadians accept that we should play a prominent role in the world, but it becomes a hard sell when we have so many problems at home. There should be enough money for both domestic projects and strong foreign policy (including a robust military), but successive Canadian governments have been lowering taxes, particularly corporate taxes. If we take Western European nations as an example, its obvious their corporatist system allows their populations to enjoy both excellent social services, and, what are for the most part well equipped and well trained forces.  While I think its painfully clear that the CF needs more money and needs it now, we don't want to end up like the United States, with segments of the population living in what are essentially third world conditions because we have let our tax bases erode and spent what money we have on military assets.

Except for the bit about needing to fund a robust foreign policy with the concomitant armed forces, I disagree with almost everything you say:

• Corporate taxes are a farce; they are nothing but an inefficient form of taxation designed to lull the ignorant into thinking that someone, anyone other than them pays the taxes. Corporate taxes should be set at zero - not a penny higher;

• Europeans have adequate, at best, social services, at tax rates higher than Australia, Canada or the USA;

• Europeans have inadequate military forces; and

• We, and the Europeans, already have third world ghettos – as badas and sometimes even worse than anything in the USA.

I’m afraid, Kilo_302 that I find no merit in your solution. 

 

[jollyjacktar]

• Corporate taxes are a farce; they are nothing but an inefficient form of taxation designed to lull the ignorant into thinking that someone, anyone other than them pays the taxes. Corporate taxes should be set at zero - not a penny higher;

Could you please elaborate further on this point?  I would like to hear more.

 

[Edward Campbell]

Could you please elaborate further on this point?  I would like to hear more.

Essentially, in law, corporations are individuals and they are taxed in much the same way: on their net income.

The first thing corporations do, just like me, is to reduce their tax burden to the legal minimum. Like me, they, for example, give to charity – in the process lowering their net taxable income; and like me they ‘sell off losers’ to offset capital gains, further lowering their net income. Unlike me, the corporation has a fiduciary responsibility, in law, to its shareholders: when the government raises my taxes I can choose to pay myself less and pay Ottawa more; the corporation must find ways to continue to maximize value for the shareholders, not for Ottawa; when corporate taxes are levied, at all, or raised it must increase profits (or lower costs) to pay them.

In other words, in the end, every single penny of corporate tax is paid by the consumer of the corporation’s good and services. The corporation’s staff just acts as another inefficient layer of tax collection and accounting – just what we need: more tax collectors! It has to be that way or the corporation would be a useless thing – it isn’t, the corporations, aided by governments, serves the interests of their shareholders.

We should recognize that there is just one taxpayer: you and me and Kilo_302 and Mike Bobbitt and so and so forth ad infinitum. We pay local property taxes, we pay fees that might as well be taxes, we pay school taxes, we pay provincial and federal sales taxes, we pay provincial and federal income taxes, we pay excise taxes – sometimes directly when we import something, but also, on a daily basis, we pay them indirectly because the corporations add their excise taxes to the end price of the goods or services we buy from them and, of course, we pay the corporate ‘income tax’ too – as part of the sale price of a home, a car, a suit of clothes, an insurance policy, a bank charge, an airline ticket and a bag of rice.

 

[jollyjacktar]

Makes sense, thank you.  What in your opinion would be a more effective/fair way of collecting tax in order to fund all that is needed by society?  Would perhaps a straight flat tax, as has been suggested in some quarters be a better way to go?

 

[Edward Campbell]

In that famous ideal world we would rely, in the main, on:

1. Consumption taxes (the GST, PSTs and VATs) - the very taxes that Prime Minister Harper cut by 25%; and

2. User fees for services.

Because:

1. Most taxes other than consumption taxes are, in effect, taxes on savings and they take useful money out of the investment pool - penalizing us taxpayers twice.

2. User fees are fair.

But: There has to be some sort of mechanism to rebate consumption taxes and user fees to the working poor; and that's a tricky exercise if, in the ideal world, there is no income tax.

 

[jollyjacktar]

Thank you again.

 

[Kilo_302]

Perhaps I should clarify a few things. Firstly, I am not suggesting that European nations are without problems related to "ghettos" etc. I am merely suggesting conditions in many cities in the United States are far worse than anything you might find in say Germany or Belgium. When you define social services in Europe as adequate, you are assuming that there is indeed a basic level of needs being met. You could also define social services in the United States as adequate, yet they do not even attempt to to provide a basic form of universal health care. Most Western nations now are finding that their social services are indeed in need of repair, but basic levels of care are still being met. There is a danger however, in being too generous. A while back Maclean's featured an article that outlined the UK's problems in providing services I would say define "too generous" . The figures escape me, but for example, the UK provides monetary assistance to a single parent for something like 6 years after a child is born, whereas Norway (I think) provides the same service for only three years. As a result there were cases where it was actually more beneficial for a household to rely purely on social assistance than actually work, so long as the parents kept having children. This clearly makes no sense.

As for corporate taxation, I would argue that at some point in the last 50 years, most Western governments have shifted from protecting the general population from corporate interests, to protecting corporate interests from those of the population. Of course, both of these interests are not mutually exclusive in a capitalist society, but there needs to be a balance. The corporatist system that is prominent in many European nations is a good example. Labour, business and government form a triad of mutually supporting interests, that ends up benefiting society while still maintaining economic growth. Another issue is corporate benefits. The Canadian government basically gives money to corporations in the form of tax breaks, which in many cases, ends up being a waste of money (take the recent Oshawa truck plant announcement for example).  By doing this, the Canadian government erodes its own tax base, and we left with the familiar "guns vs butter" debate, when in reality, in a nation of our wealth, we should have both.If we relied only on consumption taxes, then people would consume less, and this would damage our economy. There needs to be a progressive income tax in place on both individual income and corporate income. I think the problem you are getting at Mr. Campbell, is as you aptly stated yourself, that corporations are defined as individuals, and from this reality, stem most problems with corporate taxation.

As for European nations not possessing adequate military forces, as with any bureaucracy, the tendency to grow beyond what is necessary is always present. Even at the zenith of its military power relative to the rest of the world (in 1990-91) many in the United States were calling for increased military spending. The problem is, if you don't spend the money you are allocated, then in the next annum you'll get less. So the need to find new programs to justify more spending is always present. This applies to any government agency. Now I would agree that many Western European nations need to spend more on defense, but if you compare their forces per capita with ours, it becomes apparent that they are still much better off than we are, in both defense capability and social services. There is no ideal world, but I am afraid Canada is veering off from the course that would at least allow us to approach it.

 

[Edward Campbell]

Sometimes Stephen Staples gets it (partly) right. With a bit of judicious editing (by me) his recent letter to the editor of the Globe and Mail, reproduced here under the Fair Dealing provisions (§29) of the Copyright Act, makes sense:

http://www.theglobeandmail.com/servlet/story/LAC.20080611.LETTERS11-6/TPStory/Opinion/letters

Fix the policy, then spend

STEVEN STAPLES
Rideau Institute

June 11, 2008

Ottawa -- Senator Colin Kenny is right in that what most ails the Canadian Forces is a matter of misplaced, or absent, policy direction. But his solution of throwing even more billions of dollars at the problem would only make matters worse (Our Military Badly Needs Repair - June 10). The last white paper on national defence was written in 1994, and Paul Martin's International Policy Statement lasted as long as his minority government. Under Stephen Harper, special interests have lobbied for their own interests rather than the Forces as a whole.

For instance, infighting over whether to buy a small fleet of long-range transport aircraft or a large fleet of medium-range aircraft ended with the Conservatives buying both at a total cost of $5-billion. A debate over wheeled or tracked tanks ended with an $800-million order for new Canadian-built Stryker vehicles being cancelled in favour of buying 100 Cold War-era Leopard tanks from the Netherlands.

Mr. Kenny's notion that pumping billions more tax dollars into National Defence will solve the policy crisis is wishful thinking. Let's get Canada's defence policy straightened out first to ensure that the $19-billion we spend on the military every year is used to meet the real needs of our armed forces.

We do need something better than the recently announced but misnamed Canada First Defence Strategy to guide defence planners and spenders. The Government of Canada owes those planners a clear policy statement – and then the resources to make implanting it possible.

Stephen Staples is right that those who ask only for “more, more, more” money are engaged in wishful thinking. Not because “more, more, more” isn’t the right amount of money but, rather, because, absent a clear policy statement, it is unlikely to be spent to accomplish clear aims and objectives – preferably aims and objectives that have been tested in parliamentary debate and the like.

 

[Edward Campbell]

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Globe and Mail is a column by Jeffrey Simpson that is germane to this discussion – and a few others in Army.ca:

http://www.theglobeandmail.com/servlet/story/LAC.20080613.COSIMP14/TPStory/TPComment/?query=

This report will tick off every government in Canada

JEFFREY SIMPSON

June 13, 2008

Seldom in recent years has one authoritative report gored so many Canadian sacred cows. As such, it should be mandatory reading.

The Organization for Economic Co-operation and Development (OECD) reports are written in suffocating prose, but the message in this week's report is clear: Canada has been doing well, economically speaking, relative to other countries, but it could do much, much better.

The OECD's recipe for how Canada could do better will irritate every government in Canada, and plenty of interest groups, too. For starters, the OECD says taxes should be shifted toward consumption and lowered on incomes and businesses. So much for the Harper government's GST tax cut: already panned by economists at home, now panned by those at the OECD.

The OECD notes that the Harper government has emptied the federal treasury of surpluses, raising the prospect of a small deficit. So much for the Conservatives' fiscal management. To Ottawa and the provinces, the OECD addresses this missive: You've been spending too much because of the commodities boom. These growth rates likely are not sustainable.

The country's biggest challenge - but the one no politician will talk about - is improving productivity. Why? Because the population is aging. Unless productivity improves, per capita income growth will stagnate. The word productivity is too toxic. It scares too many people. So it isn't used.

The OECD's list of what would help improve growth and productivity will infuriate interest groups from coast to coast. But the OECD is right: Without better productivity, social programs will be hard to sustain at current levels.

Start with supply management in agriculture where "nowhere ... are the distortions greater," especially in dairy farming. The OECD values milk quotas at $26-billion a year, or 2 per cent of GDP, or $26,000 a cow. Says the OECD: "Such rents are a blight on the economic landscape and are totally unjustifiable in a world of skyrocketing dairy prices." Indeed, the OECD takes aim at the whole agriculture sector, saying it is subsidized to the tune of about $16,600 per farm.

As for biofuels - the latest farm-subsidy program dressed up as a climate-change program - the OECD says this program should be reconsidered. Alas, the OECD's advice arrived too late. The Commons just approved the subsidy.

Canadian banks are too small to compete effectively overseas. Therefore, says the OECD, "it is now time, 10 years after the first merger proposals were blocked by government, to welcome competition in financial markets by allowing Canada's leading financial institutions to become global players by lifting the ban."

Provinces still have too many barriers to internal trade, says the OECD. Their spending on health care is not very efficient. The five provinces that have refused to harmonize their sales taxes with the national GST should do so as fast as possible. All these are smart recommendations that have been made innumerable times - to little discernible effect.

Unemployment insurance policies should be the same across Canada to spur labour mobility. That would mean dismantling the special regional benefits for areas of high unemployment, especially in Atlantic Canada.

Alberta, recommends the OECD, should follow Norway's lead and sock away much more royalty money in the Alberta Heritage Fund. But the Stelmach government has already dismissed that idea, preferring to keep taxes low, spending high and contributions to the Heritage Fund low.

Alberta's plans for reducing greenhouse gas emissions are grossly inadequate - a 20 per cent increase by 2020. The OECD passed over this policy and, instead, cast polite doubt on the Harper climate-change policy, saying it was based too much on "technological breakthroughs" yet to be proven.

The OECD even disagrees with the Bank of Canada. This week, the bank refused to lower the prime rate, but the OECD says some "further easing" of monetary policy is warranted to help the economy cope with world economic turmoil and the sluggish U.S. economy.

When an organization, ever so politely, blasts important parts of Ottawa's tax and fiscal policies, takes on sacrosanct provincial policies, urges Alberta to remove its blinkers, criticizes farm subsidies (especially supply management), underscores Canada's lousy climate-change record, and doesn't agree with the Bank of Canada's monetary policy, it's done the country an important favour.

A synopsis of the OECD’s Report is here.

First: Jeffrey Simpson detests the Conservatives, so much so that he rarely uses the word, preferring Harperites or Harper’s government and so on. He, like his Globe and Mail colleague Lawrence Martin, wishes fondly for the old Progressive Conservatives of Bob Stanfield, Joe Clark and even Brian Mulroney – pale imitations of the Liberals: Canada’s natural governing party; both are low level anti-Americans, like most Canadians, but they are deeply committed haters of George W Bush and all his works and all his friends and, indeed, of those who dare to not hate Bush.

Second: Regarding his comments, per se –

“For starters, the OECD says taxes should be shifted toward consumption and lowered on incomes and businesses.” I agree: the GST is good – it could be much better, and income and property taxes are bad. But: Canadians, like most people in the Western world, are accustomed to and even ‘comfortable’ with income taxes (which tend to be on the radar only once per year for most) and they hate the GST and PSTs and VAT type taxes which, in a honest system, ‘appear’ on nearly a daily basis. Lowering the GST was poor economics but very, very good politics;

“The OECD notes that the Harper government has emptied the federal treasury of surpluses, raising the prospect of a small deficit.” That’s right, too, in so far as it goes. Harper, while not quite as bad as George W Bush, is a free spender. That’s bad policy but, again, good politics – especially in Canada where about 95% of the population is economically illiterate.’ I repeat what I have said several times here in Army.ca: we could have another $10-15 Billion, per year - year after year, for defence without raising taxes by one penny. All we need to do is cancel dozens of programmes (that do little good for most Canadians and do real harm to the economy and social fabric) and transfer the funds to DND;

“But the OECD is right: Without better productivity, social programs will be hard to sustain at current levels.” The OECD is dead right but Canadians hate discussions of productivity fearing, rightly, that they will be asked to work harder and smarter for less money. Bad politics again;

“Start with supply management in agriculture where "nowhere ... are the distortions greater," especially in dairy farming. The OECD values milk quotas at $26-billion a year, or 2 per cent of GDP, or $26,000 a cow. Says the OECD: "Such rents are a blight on the economic landscape and are totally unjustifiable in a world of skyrocketing dairy prices." Indeed, the OECD takes aim at the whole agriculture sector, saying it is subsidized to the tune of about $16,600 per farm.” Quite right again, but the Conservatives, like the Liberals and the NDP and the BQ and the Greens are terrified of the Québec farm vote and they will continue, ad infinitum, to be economically stupid cowards;

“As for biofuels - the latest farm-subsidy program dressed up as a climate-change program - the OECD says this program should be reconsidered.” Right again – and see the discussions in the Canadian Politics/Global Warming super-thread here on Army.ca;

“Canadian banks are too small to compete effectively overseas. Therefore, says the OECD, "it is now time, 10 years after the first merger proposals were blocked by government, to welcome competition in financial markets by allowing Canada's leading financial institutions to become global players by lifting the ban."” Right again! But: Canadians hate big banks more than they dislike George Bush and they take great delight in denying banks - and themselves, through their pension plans – an opportunity to prosper by merging. It is stupid but stupid people get to vote in much, much larger numbers than do smart people (because the stupid outnumber the smart by about 10:1) so we will continue to have good politics and bad policy for a long time to come – no matter which party forms the government;

“Provinces still have too many barriers to internal trade, says the OECD. Their spending on health care is not very efficient. The five provinces that have refused to harmonize their sales taxes with the national GST should do so as fast as possible.” Also right;

“Unemployment insurance policies should be the same across Canada to spur labour mobility. That would mean dismantling the special regional benefits for areas of high unemployment, especially in Atlantic Canada.” Yes, indeed! But good politics trumps good policy every time;

“Alberta, recommends the OECD, should follow Norway's lead and sock away much more royalty money in the Alberta Heritage Fund.” I’m not sure this is a sound recommendation. There are many, many differences between Alberta, within Canada, and Norway – maybe too many to make that sort of recommendation;

“Alberta's plans for reducing greenhouse gas emissions are grossly inadequate - a 20 per cent increase by 2020.” That’s not clearly (to me, anyway) correct, either - but time will tell; and

“The OECD even disagrees with the Bank of Canada. This week, the bank refused to lower the prime rate, but the OECD says some "further easing" of monetary policy is warranted to help the economy cope with world economic turmoil and the sluggish U.S. economy.” This time the OECD is talking rubbish. The primary responsibility of The Bank of Canada is price stability (controlling inflation). The Bank is doing the right thing and it is doing it right, too.”

On balance, however, The OECD and Simpson are on the right track - and Canada is not.

 

[Kirkhill]

"But the OECD is right: Without better productivity, social programs will be hard to sustain at current levels.” The OECD is dead right but Canadians hate discussions of productivity fearing, rightly, that they will be asked to work harder and smarter for less money. Bad politics again

I find myself agreeing with you across the board - including your "ad hominem" on Simpson. 

I just highlight this because, as I have mentioned elsewhere, I am living this situation just now.  I can build a plant for a specific commercial purpose based on one big, expensive (capital) motor that would allow all the raw material the company has available now and in the future.  It would only need 3 people for 5 days a week, 8 hours a day. 

The alternative is to a number of small motors to match the many small motors that the company alhr teady has and then hire an additional 3 or 4 shifts of staff to run the many, small motors 24/7.

The business case is easy.  Changing the psychology of empire building is hard.

I asked in one distant thread if a single Sergeant-Mortar Fire Controller and a 2 gun Troop of Howitzers under a Lieutenant could achieve the same effect as a World War 1 Brigade of Guns under a Brigadier then should the Responsible Person be the Sergeant, the Lieutenant or should the Lieutenant be a Brigadier?

One of the advantages of a large empire is there are many bodies over which responsibility is distributed.  If the Brigadier can observe the target, decide the ammunition and press a button that activates his Robo Cannon there aren't many other people to blame if the wrong round hits the wrong point of impact.

A bit of a digression - but I take exception to notion that it is difficult, and painful, to improve productivity.  Psychologically it may be.  Economically it is easy.

Curiously, one of the concerns of those that oppose productivity increases is jobs for the kids.

There are no kids.

Those there are don't want those types of jobs.

They want a job that involves making many decisions (rapidly-with no responsibility and no consequences) and the opportunity to exercise their well developed thumb muscles.

I can build those types of plants (minus the requirement for no responsibilty and consequences).  But the mindset of the managers and investors hasn't changed.

 

[Edward Campbell]

I’m trying to keep this topic ‘front and centre’ because it is related to the old adage that ”amateurs debate tactics while professionals debate logistics”. Neither logistics nor tactics nor the military personnel and hardware to do both are possible without adequate funding.

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s National Post is a ‘spot on’ comment by Prof. Elinor Sloan of  Carleton:

http://www.nationalpost.com/todays_paper/story.html?id=592230

Stretched to the breaking point

Elinor Sloan

National Post
Published: Tuesday, June 17, 2008

The federal government's Canada First Defence Strategy (CFDS) sparked significant confusion when it was released in May. Most of the strategy is not new. Defence Minister Peter MacKay noted that Canada has purchased strategic airlift and is in the process of buying tactical airlift, battlefield helicopters, main battle tanks, arctic offshore patrol vessels and joint support ships. The Minister also highlighted some new commitments, including ships to replace the navy's destroyers and frigates, maritime patrol aircraft, next-generation fighter aircraft and a family of land combat vehicles.

How much will all of this cost? Press accounts and government statements offer up a purchase price of about $18-billion. To that one must add several billion dollars already committed for the purchasing of new army trucks and maritime helicopters and upgrading frigates and maritime patrol aircraft. Other critical projects include fixed-wing search-and-rescue aircraft and unmanned aerial vehicles. In addition, shortfalls have already been identified in some project commitments, notably the joint support ship. Finally, and significantly, there is the cost of maintaining new equipment over a 20-year period, which conservatively adds about 50% to the overall cost. All of this amounts to roughly $45-billion over the next 20 years.

At first glance the money available for capital acquisitions seems to correspond with the identified costs. But in fact, the Conservative government's long-term funding formula does not meet the Canadian Forces' needs. This is because most of the $45-billion must come much sooner than later. Reduced investments in defence in the 1990s have led to a situation in which a whole range of major military platforms -- supply ships, destroyers, maritime patrol aircraft, fighters, battlefield helicopters, light armoured vehicles -- must be replaced within the same five-year window of about 2012-2017. The CF needs approximately $30-billion for capital acquisitions over the next 5 years to begin the procurement process. After that, our Forces will need about $15-billion over the period to 2028 to maintain the equipment.

And equipment is not the only issue. The government's commitment to a force level of 70,000 is at least 10,000 people short of what is necessary for the Forces to be able to do all that it is being asked to do. More immediately, it is imperative the government address the issue of how to actually increase the force size. Since 2005 the army has actually decreased in size, despite a large and continuous commitment to Afghanistan, and despite needing to find forces to fill newly created units and command structures. A recent assessment reveals the army "is now stretched almost to the breaking point." The lack of crew availability is also impacting the air force's ability to carry out its commitments, and the navy has the equivalent of a full ship's company of vacant positions on each coast. Because recruiting takes time, part of the answer here may lie in increasing retention through financial incentives.

Today, Canada's military has a level of public support that has not been seen in decades. Canadians recognize the good work of the Forces and see defence as a necessary expenditure. The defence reductions of the 1990s set the stage for a perfect storm of existing shortfalls in personnel and looming gaps in equipment. The government should seize, not squander, the opportunity to make the necessary investments.

Elinor Sloan is a senior research fellow with CDFAI and an associate professor of international relations at Carleton University.

A longer version of Prof. Sloan's analysis is available at www.cdfai.org

Regular participants in Army.ca will know that I fully endorse Prof. Sloan’s views. The Government of Canada, the Conservative Government of Canada – representing the party of which I am a paid up member to which I am a regular donor – is blowing smoke. The Canada First Defence Strategy IS better than what the Liberals provided during the ”decade of darkness” but it is wholly inadequate to do what Prime Minister Harper has said he wants to do: to rebuild a country ” that punches above its weight.”

Some commentators have speculated that there is a psychological ceiling above which Canadians are unwilling to see defence spending move; that speculation says that ceiling is at $20 Billion, now, and cannot be moved to $30 Billion for many, many years. If that is the case then Prime Minister Harper has failed to explain his strategy, his aims and his policies to Canadians. Perhaps he is just a poor communicator, or, perhaps he just doesn’t have much in the way of a strategy or an aim or a policy.

 

[GAP]

Or, Harper just does not understand. A lot of these commitments are very likely going to come about AFTER he has left office, or so he assumes......

 

[Kirkhill]

Or, in line with the "psychological ceiling" he doesn't think he has a monkey's of selling the concept ..... especially in the current political climate.

I agree though.  For whatever reason, it hasn't been marketed and it hasn't been sold and it hasn't been done.