Monthly Archives: April 2020

Change Accelerator: COVID-19

 

Our business is at an inflection point. We can continue down the path we’ve been on … or we can make the significant and difficult changes necessary…”,[1] and so it may be with healthcare after COVID-19. Many crises have been predicted to produce lasting changes to society’s status quo ante, changes subsequently proven minimal to ephemeral[2]. It is just possible, however, likely even, that some long-advocated changes to healthcare’s organizational structure and ways of working will have been shown to be so effective that they will remain imbedded in the ‘new normal’ when the crisis is over. Normally a slow evolutionary process, often in the face of determined resistance, the pace of change in healthcare may prove to have been accelerated by tiny RNA virus particles infecting their new human hosts.

A telling example is the use of ICT[3] to supplement if not replace face-to-face with virtual contacts between people and their care-givers. Increasingly enabled and enriched by technology’s development over many years, the necessity of social distancing combined with decisions by governments to remunerate physicians for providing services virtually by telephone, e-mail, visual “apps” and the like, has almost instantly overcome previous objections and warnings raised against its use. It is hard to see this being ‘dialed back’ when the COVID-19 crisis is over.

Witness also the once intractable ALC[4] issue; necessity has proved again to be the mother of invention. Collectively, healthcare’s providers, working together region by region, have shifted ALCs out of acute care hospitals to create there the capacity to accommodate anticipated surges of patients suffering COVID-19’s worst life-threatening symptoms. It’s a good move for hospitals and for those acutely ill with the new virus but we don’t yet know its effect on the health and quality of life of those ALCs in their new out-of-hospital environments.

Also, a newly calm and controlled environment in ERs[5] has replaced that of crowded waiting rooms, ‘hallway medicine’, and ambulances lined up in the parking areas short months ago. Has this new normal been the result of family physicians now caring around the clock, on weekends, and as well for those absent patients? Or are they ill at home avoiding care they would have sought previously out of fear of contracting COVID-19 in an ER or clinic?

Such questions remain to be answered before the changes should be made permanent. But there is no doubt that the COVID-19 crisis has demonstrated that previous thought intractable problems of this nature can be resolved, and quickly, by local/regional care providers working together as integrated systems, using their own resources and ingenuity. Will such bottom-up, collaborative planning and execution continue to prevail when the COVID-19 crisis is over? There have been many as yet unsuccessful to failed attempts[6] to transform Canada’s infamous “field of silos” into systems of health and healthcare services. Will the stimulus of this crisis provide successful examples of how to build real systems successfully where top down direction by government Ministries and their proxies have failed?

We will await answers when the crisis has ended.

Duncan Sinclair
Don Drummond
Chris Simpson
David Walker
**Members of the Queen’s Health Policy Council


[1] Gavin Hattersley. Trouble brewing: Is Canada’s craft-beer industry headed for a spill? The Globe and Mail, 25 January, 2020

[2] Andrew Coyne. This changes everything unless it doesn’t. The Globe and Mail, 10 April, 2020

[3] Information and Communication Technologies

[4] Hospitals with many beds filled with patients classified as Alternative Level of Care, no longer requiring the sophisticated care of a hospital but there being no available alternative capable of providing the level of medical or supportive social care they still require

[5] Emergency Room/Urgent Care Centre

[6] Including the newest, Ontario Health Teams

The era of gigantic government is upon us

 

Authored by Eugene Lang,  Adjunct Professor, School of Policy Studies, Queen’s University and Fellow, Canadian Global Affairs Institute

(Originally published by IRPP Policy Options  – April 17, 2020)


We are in a paradigm shift around the size and role of government. It will lead to a post-COVID model that better protects our health and economy.

“This is the largest economic program in Canada’s history,” proclaimed Prime Minister Trudeau on April 1.  It was not an April Fool’s joke. 

In the battle against COVID-19, the federal government is acting on a scale and at a pace that was unimaginable even a few weeks ago. Unprecedented increases in government spending, record-breaking speed in the creation and launching of new government programs and initiatives, and new regulations on people and the economy the likes of which we have not seen in peacetime, have been put in place in the past month.

The era of gigantic government is upon us. And while this era will be short-lived,  it will also likely give way to a new post-pandemic government paradigm, replacing the basic model Canada has lived with for a generation.

Paradigm shifts  

Modern history tells us that economic crises produce paradigm shifts in thinking about the size and role of government. The Great Depression — the defining economic calamity of the 20th century — produced what came to be known as the Keynesian paradigm (named after the great British polymath John Maynard Keynes).

Post-war Keynesianism, designed in part to prevent Depression-era unemployment from re-emerging, meant in practice a vastly increased role for government in the economy, the expansion of the welfare state and relatively high taxes.

This model lasted about 40 years. But because it was invented to deal with a particular set of circumstances, eventually a new crisis came along that rendered it obsolete. The stagflation of the mid-late 1970s, followed by the brutal recession of the early 1980s, was just that crisis. Keynesianism was thus relegated to the history books as it was widely seen as not only ineffectual in dealing with that crisis but being partially responsible for it.

Enter neoliberalism, which had been hanging around in the background for years, but now gradually moved to centre stage in the US, the UK, Canada, Australia, various European countries and elsewhere. A more market based model of government, core neoliberal goals included privatizing state-owned companies and freeing markets from government intervention and regulation; reducing the reach and cost of the welfare state; embracing free trade, foreign investment and globalization; cutting fiscal deficits and taxes. In Ottawa, the neoliberal model of government was firmly rooted by the early 1990s in both the Liberal and Conservative parties and in the public service.

And it has remained the basic role of government model here ever since (though the Trudeau Liberals have not adhered to neoliberalism as faithfully as its predecessors did, having re-regulated industry to some degree, boosted income security programs somewhat and run modest deficits).Many people assumed that praying at the altar of the free market had finally been discredited as a public policy philosophy during the global economic and financial crisis of 2008-09, which was often seen as a by-product of the neoliberal program. As one sage put it succinctly, this crisis demonstrated how Adam Smith’s invisible hand had given everyone the finger.But while most countries embraced traditional Keynesian short-term “stimulus” spending during that recession — running deficits to supplement weak private sector demand — neoliberal principles and policies gradually re-exerted themselves as the recovery took hold.In the COVID-19 pandemic, however, neoliberalism has likely met its match. This crisis seems poised to end the neoliberal era once and for all.

From mild neoliberalism to gigantic government

The spread of the novel coronavirus has also produced a novel economic crisis, in which governments are deliberately stopping business and consumer activity in their tracks. This is truly a novelty in economic policy-making. American economist Paul Krugman likens the policy response to that of doctors deliberately putting a patient in a coma to save a life.

In Canada, this recession is being orchestrated by all three levels of government working in concert to encourage and enforce social or physical distancing and shutting down big sectors of the economy to achieve this. It is a degree of non-partisan and intergovernmental consensus we have not seen before in peacetime.

The government-induced recession is necessitated by the need to control the rapid spread of the virus by keeping people apart and by separating them from the economy. As Rahm Emmanuel, Barack Obama’s former chief of staff put it, “you have two different principles here at play. The public health (experts are) looking at this from how to segregate and separate people. The economy is built on the principle of how to integrate people. Those two concepts are in conflict.”

Meeting this unique challenge requires a paradigm shift in the role of government, the era of gigantic government, if you will. Gigantic government isn’t Keynesianism, which is designed to supplement weak private demand through government spending, at a rate of say 3 to 5 percent of GDP, as was common across the industrialized world in the 2008-’09 recession. Gigantic government is about putting a floor under the supply side of the economy, a much more expensive proposition, for which there is no play book from the past nor guidance from theory. In the UK, US, Germany and elsewhere, the starting point financially for such a program seems to be at least 10-15 percent of GDP and might end up being a lot higher (Japan is already at 20 percent of GDP). Ottawa has taken a somewhat more incremental approach but will likely get to those percentages soon enough. And just how governments are to execute this program effectively is totally uncharted waters.

Gigantic government in Canada so far seems to mean creating and then adjusting public programs and initiatives on a daily basis and at lightning speed, in a way we have never seen before. Process government — where respecting methodical government processes are as important to officials and ministers as the policy output itself — is a luxury that is out the window in this era. The number of new or enhanced programs Ottawa has announced in the past two weeks alone number in the dozens and is growing by the day. And the effort involves virtually every policy instrument in the government’s arsenal — including tax concessions, huge wage subsidies, loans, loan guarantees, spending programs, new and beefed up income transfers to people, massive  procurement efforts, and all manner of new regulations on the movement of people and goods and on business generally. The wartime economy analogy that some are using to describe this effort is not over-stated.


Post-pandemic government

While the era of gigantic government will end once the virus is eradicated, it will likely lead to a new model of post-pandemic government that rests somewhere between it and the status quo ante. A few features of the new model can be predicted with some degree of confidence.

Expect to see organizational change in Ottawa, as crises always expose cracks and gaps in the institutional architecture of government. If the SARS outbreak in 2003 spawned the creation of the Public Health Agency of Canada, and the 2003 North American power failure was the impetus for the establishment of Public Safety Canada, we can expect COVID-19 to lead to organizational innovations at least as big as those.

The degree to which countries, including Canada, were prepared for this pandemic will be debated if not investigated for years. Regardless, we can expect governments to put a lot more money into virus research and pandemic preventative measures when this is all over with. Pandemic policy will move from the back to the front burner of the government agenda for the foreseeable future and will command resources accordingly.

COVID-19 is also exposing that the most advanced countries in the world produce limited quantities and have inadequate supplies of basic goods and technologies including face masks, hospital gowns and ventilators. Weaknesses in the “just in time” global economy are on display like never before, and this is adversely affecting public administration. The concept of “sovereign capabilities” will thus likely take on new meaning henceforth. And when the pandemic is behind us, expect governments to stockpile large quantities of the goods that have been shown to be essential and in relatively short supply. “Strategic stockpiling” won’t just be in reference to barrels of oil going forward.

This crisis is also testing government procurement like never before. Competitive market procurement, a theology in Ottawa for years, will likely give way in some sectors to strategic sourcing relationships between the public buyer and private sellers.

It is sad that it takes a virus to highlight what has been well known for at least two decades — namely that the Employment Insurance program is fundamentally broken, covering only a fraction of the workforce today (the Minister of Finance admitted recently that more than 5 million Canadian workers are not covered by EI). Expect to see reforms to EI to expand its coverage, or perhaps the establishment of permanent supplemental employment insurance schemes to assist those millions of Canadians who the pandemic has shown have no support except welfare when they lose their job.

Ottawa will likely tell citizens that it will get back on fiscal track as soon as this crisis is over and start bringing public finances into order. The “fiscal anchor” — which the Trudeau government defines as a declining debt to GDP ratio — will be restored. Don’t bet on it. Government revenues will be weak for an extended period of time and efforts to bring government spending down to pre-crisis levels will be very slow. Expect to see big deficits for years to come, and don’t expect a balanced budget for a decade or more in Ottawa. Do expect to see your taxes go up over that time frame. The days of tax cuts — a defining feature of the federal government’s fiscal agenda for 20 years — are over.

Protectionism has been chipping away at globalization for years now, symbolized by the rhetoric and policies of Donald Trump. The assault on globalization will accelerate as some countries will blame others for infecting them with the virus, owing in part to the relatively free movement of people and goods, and the interdependencies that characterize a globalized economy (whether or not the health science supports such claims). Ottawa’s penchant for pursuing “free trade” and foreign investment protection agreements as cornerstones of its economic policy will subside as a result.

Canadians and their governments will gain new appreciation for the courage, capabilities and professionalism of the Canadian Armed Forces when they are deployed on the front lines of the pandemic across this country. We will learn just what the military can do and why it really matters as an institution. In the post pandemic model of government, more respect, priority and resources will be attached to the Armed Forces in dealing with domestic emergencies, most especially pandemics.

And there will be much more.

In short, the role of government in the economy, and in the lives of Canadians, is likely to be re-defined as a result of the COVID-19 pandemic. A new model will emerge, rooted in managing the economy and public finances in a way that better protects Canadians’ health and economic interests going forward, in an era when a virus born in a market in an obscure part of China can tip Canada into a simultaneous public health crisis and sharp recession the likes of which we have never seen.


Authored by Eugene Lang,  Adjunct Professor, School of Policy Studies, Queen’s University and Fellow, Canadian Global Affairs Institute

(Originally published by IRPP Policy Options  – April 17, 2020)

Release EI Data Fast to Track the COVID-19 Damage

 

Authored by Don Drummond, Stauffer-Dunning Fellow in Global Public Policy and Adjunct Professor, School of Policy Studies, Queen’s University.

(Originally published as an Intelligence Memo from C.D. Howe Institute  – April 17 , 2020)


From: Don Drummond
To: Ahmed Hussen, Minister of Families, Children and Social Development
Date: April 17, 2020
Re: Release EI data fast to track the COVID-19 damage

Many economists and policy authorities appear to have initially underestimated the economic blow from the COVID-19 pandemic, just as health authorities missed the depth of the blow to public health.

A consensus is emerging, however, that the economic damage will be sharp and prospects for quick and forceful recovery by no means certain. Yet this shift in economic opinion is to a large extent occurring in the absence of reliable information.

There are considerable lags in the release of key economic indicators, to allow for processing and ensure accuracy. But there is one indicator that could provide an almost real time tracking of the economic carnage: Employment Insurance (EI) claims. It is unacceptable that the Government of Canada is withholding this crucial piece of information.

The C.D. Howe Institute’s Crisis Working Group on Household Income and Credit has repeatedly called for release of this data, emphasizing its importance for Canadians to understand the rapidly changing trajectory of our economy.

Under the normal schedule of releases, information on EI for March 2020 would be released May 21, 2020. We have, however, had a few peekaboo glimpses of the numbers.

In a March 20 speech, the Prime Minister revealed that 500,000 claims had been processed for the week of March 16. Eight days later, there were media reports that the week’s number was actually 929,000, after the count was revised to include the weekend. That data observation was attributed to an unidentified and perhaps unauthorized source.

On April 7, there were media reports that 2.72 million EI claims had been made from March 16 through April 5. The source of the information is not clear.

Clearly, the Government of Canada collects the data on EI claims on a daily basis and can, if it wishes, release the figures with almost no lag. Yet it is not doing so. Instead we get little nuggets dropped on occasion with no indication whether the figures are official and even correct.

This is no way to operate. On almost any front we should be ashamed to have less data transparency than the United States. Yesterday, the US Department of Labor reported that 5.2 million unemployment benefit claims had been made during the week ending April 11, with a four-week tally of 22 million.

The Canadian Government could easily provide the comparable information on a comparable schedule.

The task could be handled by Statistics Canada. Its release last week of the March 2020 Labour Force Survey proved its worth. That release includes an excellent analysis of how the 2.2 percent increase in the unemployment rate, as shocking as it may seem, dramatically understates the weakening of the labour market.

In particular, the release featured a measure of “recent labour underutilization rate,” which combined the official measure of unemployment with those who recently worked and wanted a job but did not meet the definition of unemployed and those who remained employed but lost all or the majority of their usual work hours. The underutilization rate soared to 23 percent, almost double the worst reading during the 2008 financial crisis and ensuing recession.

Release of the EI claims data would help enormously in figuring out how the March 2020 Labour Force Survey, which was based on labour market readings from the reference week of March 15-21, could be updated in a rough fashion for more recent developments.

There is an understandable concern within the government that the EI claims data have a certain amount of unreliability in the form they are originally processed. With time, problems are typically sorted out before public release. But the need for current information is so pressing, it can release the data soon after compilation and make any revisions required after the fact.

There is a desperate need for accurate, timely information on the economy’s response to the pandemic.

Critical data are available. We have the professionals who can put it out on a timely basis with objective explanation.

What are we waiting for other than a quest for perfection when perfection seems the enemy of good?

And while we are at it, we should have weekly and official reports on the number of people applying for the new Canada Emergency Response Benefit. The timely data releases won’t make the economic suffering any less. But at least we will have a better idea of how the economy is faring and that will better inform how responses should be shaped.


 

Authored by Don Drummond, Stauffer-Dunning Fellow in Global Public Policy and Adjunct Professor, School of Policy Studies, Queen’s University.

(Originally published as an Intelligence Memo from C.D. Howe Institute  – April 17, 2020)

The views expressed here are those of the author. 

After the oil shock: Canada’s energy producers need support from Ottawa

 

Authored by David Detomasi  Adjunct Professor, School of Policy Studies; Associate Professor, Distinguished Faculty Fellow In International Business, Queen’s University

(Originally published by The Conversation   – April 15, 2020)


 

Buried underneath today’s coronavirus headlines is another shock that may, over the long term, be more consequential to the Canadian economy: the shaky collaboration between OPEC and Russia on the amount of oil they collectively dump on the global energy market.

Their former production alliance — cobbled together to help manage global oil prices upon which their respective economies desperately depend — broke down on March 9.

Saudi Arabia began dumping 10 million barrels per day (mbd) on the export market, sparking an all-out price war. Oil prices subsequently dropped between 20 and 30 per cent, much of it in a single day. Oil-producing countries have since reached a deal to cut production in an effort to stabilize oil prices.

The price disruption will still hurt Canada, and the pain will fall particularly hard on Alberta, where producers are still staggering from the 50 per cent drop in prices they suffered more five years ago. At one point, the price of Alberta crude fell below $5 a barrel on global markets.

They also today face relentless environmental criticism for the “dirty oil” they extract, bickering and indecision from provincial and federal governments, and a long consultative processes with outside stakeholders.

It’s no wonder major energy investors, ranging from Teck Resources to Warren Buffet now shun Canada, or that energy companies that once called Canada home are now leaving, taking jobs, expertise and tax dollars with them.

Could this perfect storm force Canada out of the oil production game for good? That should not be allowed to happen. It is in Canada’s national interest to remain a significant player in oil and gas production.

The case for Canadian energy production

First, the world needs — and will continue to need — carbon-based energy for decades to come. Before the current coronavirus pandemic, global oil consumption measured over 100 mbd, and in the absence of aggressive policy changes, is projected to rise 1.3 per cent per year until 2040, and then decrease. Canada contributes 4.5 mbd to that total, and its proven reserves add stability to a volatile global market.

Second, eliminating Canadian oilsands production will not contribute much to efforts to fight climate change. True, oilsands production is more carbon-intensive than conventional sources. But those emissions fade to irrelevance when evaluating global totals. In 2014, the oilsands contributed to 0.1 per cent of global emissions. Most emissions continue to come from burning, not extracting, oil.

Third, whatever oil Canada stops producing will be replaced by others whose economies are critically dependent on oil revenue and would be happy to fill the gap. Eliminating oil sands production would damage our economy, contribute little in ameliorating climate change and give a fiscal boost to other oil producers.

Finally, we are good at this. Canada’s strength in energy production — in engineering, finance and specialized ancillary services — took decades to build and the sector’s performance still matters to anyone who has a pension or exchange-traded mutual fund.

We have also built emerging strengths in environmental, social and governance performance (ESG), which investors increasingly care about. This mitigates the “resource curse” and gives us an advantage over many international oil competitors.

What should we do now?

First, companies need regulatory clarity. Without this, investment in technologies designed to reduce environmental footprints will be choked.

They also need a government that values its oil industry and is committed to helping it get through the current crises and beyond. Economic help could include price supports to keep prices from falling below a certain level, direct investments in companies that could later be sold at a profit or tariffs on imported oil. Others have used such measures effectively, giving plenty of historical precedent.

Canadian citizens can help by tempering altruism with realism. We can and should push for greener technologies and sources to take a greater portion of overall energy production. But it will take decades for green energy to fully replace carbon in the energy mix.

Meanwhile, carbon-based energy production generates jobs, taxes and expertise right now and Canadian oil companies can lead in ESG performance. It is OK to promote that too.


 

Authored by David Detomasi  Adjunct Professor, School of Policy Studies; Associate Professor, Distinguished Faculty Fellow In International Business, Queen’s University

(Originally published by The Conversation   – April 15, 2020)

COVID-19 and University and College Students

 

Authored by Don Drummond, Stauffer-Dunning Fellow in Global Public Policy and Adjunct Professor, School of Policy Studies, Queen’s University.

(Originally published as an Intelligence Memo from C.D. Howe Institute  – April 6, 2020)


From: Don Drummond
To: Post-secondary policymakers
Date: April 6, 2020

Re: COVID-19 and University and College Students

There are more than 2 million university and college students in Canada. Their face-to-face classes were among the first casualties of the COVID-19 pandemic.

As students and instructors quickly adapt to remote learning platforms, their attention will increasingly turn to what is next.

The timing of the pandemic could not be worse for student incomes. Normally about half a million graduating students would be joining the work force in what might have been the beginning of careers. For others, it would have been co-op placements or summer employment. All are now in jeopardy.

A policy response is necessary to protect the post-secondary students.

Studies show that students graduating into weak labour markets suffer long-term consequences. Their skills atrophy. They lose a few rungs on career ladders.  Employers look with suspicion at lack of experience. They often take jobs not well aligned with their interests and training and find it difficult to get back on the track they intended.

This all suggests the policy response must focus on income preservation and maintenance, if not enhancement, of skills so that students’ actual income and earnings potential are protected.

The most effective policy response to support students is to do everything feasible to contain COVID-19 so there can be an early return to what would have been normal activities over the spring and summer. However, those activities are likely to be disrupted for some time and other actions are called for.

Five recommendations to support post-secondary education students:

  1. Students whose job offer has vanished should be made eligible for the Canada Emergency Response Benefit (CERB). In effect this would mean treating foregone income as lost. The agreement might be a formal, legal job offer or it could confirmation from a would-be employer.
  2. Funds should be made available to universities and colleges to make more courses available remotely over the next several months. Universities already offered some courses online, but are scrambling to convert many others. The course coverage and quality of the remote learning modules would be enhanced with additional support over the coming weeks and months. Efforts could be made to attract revenues from international students, who pay $6 billion of tuition per year, which is now jeopardized. More and better online courses would not only help through the pandemic but would be an investment for the future as it seems likely more education will shift to this format.
  3. Funds should be made available to university and college instructors to hire student researchers and teaching assistants. The easiest transition into employment is in the post-secondary education environment where the students have already established a connection rather than trying to enter a new workplace remotely. The additional research capacity would benefit society in many ways. Graduate students could be used to help universities and colleges with the task of converting learning platforms to remote modes.
  4. Funds could be made available to school districts to hire post-secondary students as assistants to teachers. Over the past two weeks, teachers across Canada have been told that in very short order they must prepare online learning modules for their students. In many cases little guidance or co-ordination is being provided. Many parents are also struggling with how to best bring online learning into their homes. Who better to help than college and university students?
  5. Additional funding for scholarships will be required for students by next September.  Even with the programs recommended above, many students will suffer an income loss that could jeopardize their return to studies. Loan programs could be adjusted, but we should be leery of piling more debt on students. If history repeats, they may already suffer longer-term income losses as a result of the pandemic. Further, they may disproportionately bear the cost of the return to fiscal normalcy through higher taxes and contributions. So additional support should be more in the form of scholarships or grants.

Together the five programs would mitigate the harm that is going to fall on Canada’s university and college students and generate benefits for society. As it will be for other Canadians, it is still going to be a tough time for students.


Authored by Don Drummond, Stauffer-Dunning Fellow in Global Public Policy and Adjunct Professor, School of Policy Studies, Queen’s University.

(Originally published as an Intelligence Memo from C.D. Howe Institute  – April 6, 2020)

The views expressed here are those of the author.