What is the breakpoint?
In other words, what is going to be the straw that breaks the camels back? This is the question that I ask myself in some of the cases, public and private, of entities we see maneouvering and flirting with disaster. The solutions that are provided to what ails them usually fall far short of what is needed, in an attempt to minimize pain/adjustment, and defer dealing with problems to some future date. Where and when will these institutions be forced to stop papering over the unsustainablity of their operations and actually adapt (or perish, as per the rules of Darwin) is the question this blog is concerned with today.
The first industry is forestry. How an industry that involves the simple exploitation of a natural resource for products (paper and wood) in constant high demand can perpetually be in "crisis" defies market logic. Either paper is underpriced and undervalued, or these companies have been terribly managed (I suspect both are true). How a company like Abitibi-Bowater can have exclusive cutting rights over much of Quebec's forests and be the recipient of 150$ million in loan guarantees from its government and be in bankruptcy protection has me scratching my head. That forests are not valued as a prized asset of biodiversity refuge, natural beauty, and carbon sucking vacuums (all well-known facts and common sense) that can be stewarded and managed as a public resource, but are rather controlled by a couple of inept cartels that can only talk about how many billion board feet they produce per year then cry the blues to the government that they are hurting from the tepid American housing market (news flash... that's underwater and ain't coming back. Do you overpaid forestry executives ever read anything on the newsprint your companies produce?) and ask for subsidies, guarantees and bailouts, then close plants and deny existing pension agreements anyway is a scandal. Not just a scandal, this is a ridiculous situation makes no sense for anybody anywhere. I'm just wondering when the bottom will truly fall out of it.
Airlines is another industry filled with multiple-bankruptcy, regular bailout requesting entities that it is impossible to make a profit in, and yet persists. Little wonder; I have not gotten through a year without taking a plane in probably ten. I am always amazed how despite fuel's increased cost and (we would assume) relative scarcity, tickets just get cheaper and cheaper. It used to take humans days to travel distances of less than 100 km - can airlines not offer 3 flights a week to a destination rather than 5 half empty flights a day so that there is less of a shock when they have to shut down overnight? Just an idea to get them started. Small airlines disappeared overnight in the past decade when they went bankrupt - what will happen to the big boys when the government is no longer in a position to throw them bones or if the cost of oil rises sharply?
These two industries do provide vital services. Like everyone, I have become accustomed to the convenience and usefulness of the products/services they provide, which I would probably be loathe to forsake. But acknowledging this as a real possibility now will surely lighten the blow when I am obliged to. This does not mean that we need to tear industries or the system down entirely, as nobody likes a "collapsitarian" who just pooh-poohs everything. It just means that industries will have to adapt or die, à la IBM between 1945 and now. It also means they will have to fundamentally re-evaluate their priorities and raison d'êtres. We need to move away from shareholder returns and profit growth being the sole rating system on which to base companies' values. Our primary concern should be their respecting of the current account balance of whichever of Earth's resources is necessary for their operations. Companies would have no choice but to comply with this if the consumer held them accountable in this regard, which means we shouldn't be expecting any reasonable change on this front anytime soon as the paradigm has not yet sufficiently shifted. That alone would to achieve this goal, but government quitting the handing out of reacharound tax deals and subsidies would greatly assist in bringing about change on this matter as well.
One area where more people do tend to pay attention to unhealthy economic bahaviour is in the public arena: the financial actings and doings of our government. The increased concern and attention is better than total apathy from the public, but it is hardly helpful in limiting stupid fiscal decision making, so the results of public finances are often as contradictory and logic defying as those of the private industries outlined above. That is why I was so annoyed last week to hear the premier of this province, Dalton "Kool-Aid" McGuinty, bleat on his usual faux-nice guy blather about how the federal government was wrong to raise EI premiums businesses pay and the Bank of Canada to raise the interest rate because of the "fragile" status of the recovery. No doubt, the feds have mismanaged EI under this regime - the program had a 54 Billion dollar surplus five years ago and should be mostly self financing - but the fact that they are taking steps to scale back the debt (and raising taxes on business) gets them some rare light props in this corner. Mr Kool Aid's government - with its 27$ billion army of overpaid admin staff, communications specialists, advisors, and fire, police and teacher pension, benefit, and indexed salary cartels- can learn something from this, i.e., not only does it not make sense to perpetually go deeper and deeper in debt as a country or province for no other purpose than subsidizing a bunch of overpaid peoples' standards of living to contribute to speculation and inflation that squeezes everybody else, it's no longer physically possible. So if the Bank of Canada raises the interest rate that raises the mortgage payment of people who couldn't afford their houses in the first place, while forcing the bank to pay me some interest to use the money that I saved, who wins there? The BoC or the lame out of touch wannabe father figure scolding me over skipping his recovery Sunday school class? I want people to be gainfully employed and for this province to be a better place too, but the Paul Krugman cult of throwing more fake money at the problem is dangerous and must be debunked in a non-ideological fashion by as many voices as possible. It's merely a delusional extension, and professors and premiers should think more of often of the simple beauty of Einstein's phrase - we cannot solve tomorrow's problems with yesterdays thinking.
The truth is, his government has no plan and their talk about building tomorrow's green economy is a bunch of PR bullshit. That is why no steps have been taken to improve the provinces finances, no transportation infrastructure has been built, no responsible zoning and land management policies have been put in place because the OMB is a one stop shop developer-rubber-stamp, vision lacking buck passing factory, and no reasonable solution has been offered to modernize the society that has sufficient population and assets living inside a small enough space to handle cutting edge rail/manufacturing/education/fiscally efficient structures and systems and have them put in place, managed, and facilitated by government on par with say, Japanese or German society. Instead, what we get are new "agencies" which are new layers of highly paid useless bureaucrats with extra euphemisms added to their titles (see: ehealth, metrolinx) that do nothing more than convolute and complicate problems that are not that hard to solve to begin with.
Sadly, much of the observations and commentary critical of these facts come from the Toronto Sun-CFRB-Conservative blogosphere crowd who love to criticize but for the wrong reason (profound hatred of anything with the name "liberal" attached to it), and without proposing any innovative solutions other than unbridled and unabashed return to the status quo. This irresponsible, libertarian approach will only aggravate and precipitate collapse and chaos. However, the Ontario liberals have driven both the management of the province and the public opinion of them to the breakpoint of reaching strongly negative with their well-meaning, but equally head in sand approach to solving the public issues that plague the province. But since they are in astronomical amounts of debt anyway, they could have at least ponied up the cash to accomplish something like build that frickin' subway to York University already. In Canada, however, we have another irrational and infuriating practice of having different levels of governments make announcements for things that will never happen. Let me be clear - I'm not talking about campaign promises. Those are obvious bunk, as evidenced in Toronto's mayoralty rase, since none of these candidates will actually have any power if elected to unilaterally dictate any of the changes they are proposing. What I'm talking about is the equivalent of standing up at a party where everyone's having a good time and standing on a chair and yelling "Ding! Ding! Ding! Attention everyone. Great news. Outside, in the parking lot, I have bought, for each one of you (cue Price is Right voice) A neeeewwwwwww carrrrrrrrr!"
The crowd turns around at each other and smiles at their good fortune and the benevolence of the announcement maker, but he's not done yet. "Your car will not start for several years, but I'm just telling you know so you can see and know and remember what a great guy I am. And of course, its contingent on my buddies Dwayne and Tony each chipping in a third of the money for my generous initiative, because I only have a third. Like you, they've never heard of this plan until now, but I know we can count on their support because a strong us is a strong them."
Ontario's government has a year to fix any of the things they've been promising to for eight. I'm not counting on it. I'm also not counting on them making any courageous or correct decisions, just as I expect the airlines and the paper makers to keep doing what they're doing. But if I hear one more fake funding announcement, veiled jab over not throwing more money down a black hole, or pronouncement made on behalf of "our families" and "folks" I will have to send my second letter to the government in less than a year. Telling them I've reached my being taken for a stupid ass breakpoint.