When governments have to govern
The players want to win the competition, not simply compete.
by Michael Janigan and Anu Bose
Former President Harry S Truman once puzzled why, "the next generation can't learn from the one before until they get knocked in the head by experience." The stumbling realization by politicians, north and south of the border, that business and markets won't produce results that are in the public interest without a framework of strong rules and the means to enforce them, is yet another example of such a re-learning cycle. Governments of the past two decades eagerly tore down the fabric of regulation built in the sixty years before to safeguard health, safety, environmental and pocketbook concerns of ordinary Canadians. In its place, deregulation, reliance on market forces and promotion of industry self-regulation, became unassailable doctrines. In the midst of national elections, both in Canada and the United States, the reasons for the discarded regulatory model became jarringly apparent. The credit crisis shaking the entire US economy, and the ongoing revelations in Canada of the fragility of our protection of consumers in food safety, are perhaps the most obvious examples of the failure of both countries to heed President Truman's lament. Moreover, there has been a sea change in attitude about regulation in the general public: a national poll conducted by the Los Angeles Times in early October, showed that at least 70 percent of respondent Americans in each of a wide range of demographic categories blame the absence of regulation for the nation's economic troubles, and by a margin of 45 percent to 27 percent, they also thought that there was too little regulation for business. While it is easy to find the ideological origins of the recent deregulation craze in the Thatcher and Reagan era approach to dismantling big government, it is a mistake to confine the identification of its practitioners in Canada to the acolytes of former Premier Mike Harris, or the occasional zealot like Maxime Bernier. In fact, the Liberal governments preceding the Harper government had shown substantial buy-in to the philosophy of a retreat from citizen protection and private sector supervision. Spooked by big business' infatuation with the Mulroney regime, and faced with increasing demands for money in health, education and welfare, Liberal governments gambled that an unfettered Canadian big business could produce revenues to keep government delivering on entitlement programs. In return, deregulation would allow the slashing of costs for industry oversight in key services such as transportation, health, telecommunications and consumer protection among others. The liberation from rules would, in turn, garner business political support. The preoccupation with deficit reduction in the 90s hid the extent of the potential damage to Canadian quality of life caused by this strategy. Unfortunately the Harper government parroted or attempted to one-up their predecessors on deregulation, when the Liberals shambled into opposition in 2006. The problem with seeing deregulation as an objective, and not a means to objectives, is that we have to rely on markets acting to benefit all, rather than simply the biggest players. In many key industries, such as banking, the biggest customers are the overwhelming targets of opportunity for profit making. Without rules to ensure fairness, smaller customers lack the clout to compel reasonable terms of service. Competition is a tool that can provide incentives for efficiency, innovation and consumer benefits. But the players in any market want to win the competition, not simply compete. As in a hockey game, the government must act like referees in the market, enforcing rules that protect competitors and consumers from conduct that runs afoul of competition law, or consumer protection, environmental, health and safety standards. Banishing the referee is not likely going to improve the game, or lead to a result where the team playing the best hockey prevails. Instead of committing themselves to becoming irrelevant in important markets such as airlines, telecommunications, energy, drugs, or food, the new Harper government must look first to see if it is meeting the objectives of governing legislation as well as the expectations of Canadian producers and consumers in relation to what is being bought and sold in Canadian markets. We currently have many instances of deregulatory rules made to fit a desired ideological result desired independent of market consequences. In telecommunications, for example, it was accepted for the spectrum auction that three wireless carriers were not enough for meaningful competition, but the government is content to leave unregulated duopolies in place for wire line telephony, internet and digital television. And finally, the government must quit pretending that the interests of ordinary Canadian consumers are protected without a ministry to act in the consumer interest. Such interests are too important to be subordinated within an Industry portfolio focused on the constituency needs of producers. We may not need big government, but we do need a government that can recognize that the public interest is not synonymous with its disappearance from meaningful consumer protection in the marketplace.
Michael Janigan is the Executive Director and General Counsel of the Public Interest Advocacy Centre; Dr Anu Bose is the Head of Option Consommateurs Ottawa office.
Links and sources
Posted: October 29, 2008
Voices of privatization
Feedback and dialogue
Public Values (PublicValues.ca) is a project of the Golden Lake Institute and the online publication StraightGoods.ca