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u A Roger Douglas moment? Continued from page 1


Tax revenues will fall sharply, further compounded by shrinking federal equalization transfers as the global oil collapse devastates Alberta’s economy. Then, we have Hydro’s white-elephant Keeyask project, which will end up adding $10 billion to Manitoba’s already high debt totals. The province could be cut off from debt mar- kets. It’s no mystery why the Pallister gov- ernment is talking up having the feds bor- row money on the province’s behalf. At some point, something has to give.


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Forget even higher taxes and fees which would yield little but further damage to a drowning private economy. As the private sector takes it on the chin, the public sec- tor, inevitably, will follow. Premier Pallister is already talking tough about cutting pub- lic sector jobs.


One grim lesson of ruining an economy


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is that provincial bankruptcy removes dis- cretion from the politicians. At that point, watch for massive, brutal public sector cuts. Not ‘Yes Minister’-style-Filmon-Friday-type austerity gimmicks, but clumsy, big – say 25% – cuts across the board. Bad choices got us into this mess. Could smart moves


take us out of it? Is there a better way to confront a quick- coming chaos? Obama’s chief policy advisor Rahm Em- manuel once famously said: “Never let a good crisis go to waste”.


NZ Labour government wields the axe History instructs us on the gigantic policy upheaval that


occurred in New Zealand a few decades ago. Once among the wealthiest countries in the world, it was approaching bankruptcy. After its major trading partner, Britain, joined the European Union in 1973, New Zealand’s largest mar- ket for agriculture products disappeared. To compensate, NZ politicians embarked on a course of government in- terventions and investments to diversify its economy. But trying to pick industrial winners failed badly, while


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growing the public debt. Public sector spending and the ‘regulatory state’ morphed out of control. Farmers became highly subsidized and manufacturers and industry oper- ated behind import barriers and other protectionism. It added up to slow growth, big deficits, and an unmanage- able public debt. Finally, in July 1984, NZ voters kicked out a tired con- servative regime. In came a Labour government, which under extreme pressure from the country’s nearing bank- ruptcy, boldly proceeded to clean up the country’s eco- nomic and public finance mess. The economy was opened up, taxes and regulations reformed, and government spending sharply reduced. In swift succession, the new government eliminated


Peter Holle Public Policy


all farm subsidies, removed import barriers, and signed a free trade agreement with Australia. To pay down debt, it sold off government assets and enterprises. Government departments providing services were con- verted into crown corporations, then priva- tized. Monopolies were broken. NZ Telecom, then a crown enterprise, was sold into a competitive, deregulated marketplace. Same with the electricity sec- tor, while, as a result of new cities legisla- tion, local government works departments were converted into companies and sold off. With mandatory financial and perfor- mance benchmarking, city councilors soon discovered that governments were poorly suited to be commercial operators. The most sophisticated of New Zea-


land’s reforms occurred within the core public sector – the line departments. The main driver behind the country’s dramatic policy rescue was Roger Douglas, Labour’s


finance minister. With his accounting background, Doug- las asked the bureaucrats what government services cost to get the ball rolling.


He was appalled when the bureaucrats admitted they had no clue. Full private sector accounting was brought into the public sector so internal costs could be calcu- lated. Civil servants were rewarded to buy services from outside suppliers if internal costs were not competitive. Departments were forced to value all assets and then pay something called a capital charge, effectively signaling to government managers that assets were not “free”. Unsurprisingly, once departments had to pay real costs


to use vacant or underused assets, they hastily stepped for- ward to sell off redundant assets. Hiring was opened up, decision-making was pushed down, and performance pay brought in, chopping out managerial layers while reward- ing efficiency. As part of a massive decentralization which empowered front line managers, central agencies became smaller advisory agencies as power to manage was shifted to departments. They effectively became bottom-line-ori- ented, customer-focused business units. Thirty years later these unique core public sector re-


forms remain intact. In fact, they have worked so well that all NZ political parties support continuation, understand- ing how foolish it would be to end them. Roger Doug- las’s dramatic structural reforms saved New Zealand, now enjoying a thriving economy and long years of balanced budgets. The Pallister Government faces very difficult choices.


Very smart ones are available. Peter Holle is president of the Frontier Centre for Public Policy, www.fcpp.org


Making It all work when the world is unpredictable


I


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have never been a personal aficionado of theoreti- cal mathematics. I appreciate the complexity, and I am thrilled that there are people whose brains are


captivated by this kind of thinking, but I have never been overly interested in exploring this domain in any depth. However, over the last few weeks, I have been repeatedly thinking about the idea of chaos theory. How can a person possibly explain the level of disarray and dysfunction in our lives these days? I thought that perhaps the concepts behind chaos theory might help me find a personal way forward for days that are complex and yet very scat- tered. The solutions I am trying to find to problems in my world are regularly messed up by complete unpredictability of future events. Hence, even though I am certain that I do not understand it, I am drawn to the idea of chaos theory to help me explain the environment I am experiencing these days.


The theory was summarized by Ed-


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4 whatsupwinnipeg.ca


ward Lorenz. “Chaos is when the present determines the future, but the approximate present does not ap- proximately determine the future.” Apparently what this means is that within chaotic complex systems that seem completely random, there are a whole series of connections, feedback loops, repetition, and self-orga- nization. It seems that key determinants in the final unpredictable outcomes are determined by initial con- ditions. (This somehow is related to that whole theory that a butterfly flapping its wings in South America can cause a hurricane in Arkansas.) Well, the underlying nugget in this mini exploration


Trudy Schroeder Random Notes


of chaos theory is that the “initial conditions” can have a huge impact on the final outcome. In terms of appli- cation to our coronavirus world chaos, the reset condi- tions that we apply to our organizations and commu- nities will have an unpredictable but massive impact on the outcome further into the future. For example, I did not realize how difficult it would be to plan a season for the symphony, when we do not know when it will be safe, desirable, or per- mitted for large groups of people to gather together. One tries to look into the future to see what types of hur- ricanes will be set off in the future of the Winnipeg Symphony Orchestra depending on the ticket prices or per- sonnel decisions we make today. There has to be some kind of deterministic positive impact of programs such as Sistema Winnipeg on the future of our community and on the viability of the orchestra in future years. For our community, there must be


a long term positive outcome from investing in hav- ing a vibrant music, theatre, visual arts, festival and museums resource for the benefit of our children and grandchildren. If the outcome is so dependent on the initial conditions, we do have an opportunity to reset some of the conditions that will make our community flourish or languish in the years to come. I am hoping to have enough wisdom to put some of the right ini- tial conditions in place to help the music community flourish in the years to come. Trudy Schroeder is the Executive Director of the Win- nipeg Symphony Orchestra.


May 2020


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