Thomas Mulcair, leader of the federal New Democratic Party, says Canada has Dutch Disease. Ontario Premier Dalton McGuinty has implied similarly.
Canadians over 50 are forgiven if they run out and hire an arborist for confusing this ailment with Dutch Elm disease that wiped out so many trees in Canada two generations ago. The economic illness to which Mulcair refers is in fact much more serious than a gardening problem.
Dutch Disease occurs when one part of the economy — in Canada’s case, the oil extraction segment — becomes ridiculously popular on world markets. Cash flows in as foreigners buy up the resource, pumping up the exchange rate. This in turn makes it much harder for other parts of the country’s economy to sell goods and services abroad, as the higher currency makes their products more expensive in world markets.
The term was coined after the Netherlands discovered natural gas, which coincided with an appreciation of the guilder and a decline in the Dutch manufacturing sector. These three phenomena were linked by some analysts, leading The Economist magazine in the late 1970s to label the whole mess “Dutch disease.” The logic was that the natural gas find had increased demand for the guilder such that the exchange rate appreciated significantly, thereby damaging the competitiveness of the export-oriented manufacturing sector.
Mulcair believes Central Canada’s manufacturing sector — which has shed hundreds of thousands of jobs in the past number of years — is suffering the same fate today that the Netherlands faced decades ago. A Canadian dollar equal to the greenback, according to this analysis, is the by-product of the boom in the oilsands and high international demand for this commodity, which is allegedly killing the manufacturing sector’s export competitiveness.
But even if we agree with Mulcair’s analysis — and some economists do — there is almost nothing realistic that governments can do about it, which makes raising this economic bogeyman rather pointless and unnecessarily divisive.
Essentially, there are four ways to cure Dutch Disease.
The first — and most draconian — is to adopt a fixed exchange rate at a level to enhance export competitiveness, say 75 cents to the U.S. dollar. At such a value, Canadian goods-makers could keep selling abroad even in the face of a resource boom.
That policy, however, also throws out any ability of the Bank of Canada to control interest rates. In a fixed-exchange rate world, the sole goal of the central bank’s monetary policy would be to keep the loonie at 75 cents. There is little chance that any Canadian government would give up national economic sovereignty to fix an exchange rate. Moreover, Washington would never accept a Canadian dollar peg that was flagrantly designed to improve Canada’s manufacturing competitiveness at the expense of American companies. We would face all kinds of trade retaliation from the Americans were Canada to go down this road.
The second way to combat Dutch disease is to establish a large sovereign fund that would hold oil revenues offshore, bringing them into Canada gradually to “sterilize” them, which in theory should ease upward pressure on the loonie. Even abstracting from the highly divisive regional politics of creating an offshore fund designed to help Central Canada’s manufacturing industry at the expense of Western Canada’s resource industry, it is hard to see how such an instrument could even work technically in today’s world of massive, hyper-fast financial flows.
A third strategy for alleviating Dutch disease is the development of an activist industrial policy aimed at improving manufacturing productivity. A national industrial policy, however, would take such a long time to have a measurable effect on a manufacturing sector suffering Dutch Disease that the patient would probably be dead before the disease was cured. Worse still, if “industrial policy” turned out to be just a euphemism for protectionist measures, like tariffs or non-tariff barriers, the program would provoke so much trade retaliation that any beneficial effect on the economy would be totally nullified.
The final way to fight off Dutch disease is to impose much higher taxes or royalties on the extraction of the oil, coupled with severe restrictions on foreign ownership of Canadian resource companies and assets, thereby reducing the sector’s value, which would cause the dollar to depreciate. It is a strategy otherwise known as “making Canada poorer,” and would have all of the political appeal that slogan implies.
Canada may or may not have Dutch Disease. The disease itself might not even exist — many Dutch economists don’t believe the Netherlands actually ever had it. But, if we have caught this insidious virus, Canadians need to understand that it is kind of like a bad cold. There is no reasonable cure; you just have to let nature run its course.
Month: May 2012
We can save money and improve health care
Ontario needs to find $2 billion in annual health care savings.
Provincial premiers and health care stakeholders had been gearing up for a noisy battle with the Conservative government around renewal of the 2004 Health Accord.
Confounding expectations, in December 2011, Finance Minister Jim Flaherty announced a unilateral renewal of federal health funding. The “deal” provides six per cent annually for the next five years, and after that no less than three per cent per year. This unanticipated federal generosity leaves the provinces with the ability to manage federal health care dollars as they choose.
It also deprives them of the federal government as a convenient scapegoat.
It places full responsibility on the provinces for shaping the future of health care delivery within the universalist and public principles of the Canada Health Act.
The Ontario government is committed to holding spending growth in health care to 2.1 per cent per year, down dramatically from a historic, eight-year growth rate of 7.4 per cent. To meet its target, Ontario will need to find $2 billion of annual savings. The recent Ontario Health Action Plan highlights aggressive bargaining with doctors and health care unions as well as lowered drug costs as key cost-saving strategies. However, even if real zeros can be achieved in these areas, such strategies will yield only about half the required savings.
What other cost-cutting measures might the provinces consider that could improve patient care?
Fewer health organizations
Ontario’s Drummond Commission questioned whether the 2,500 separate governance bodies in the Ontario health care system actually result in effective governance. His answer: probably not.
More importantly, we should ask whether more governance means better health care.
Individual governance bodies are largely concerned with the quality of the care in their own institutions. Transitions of care are not governed by anyone; no single organization is responsible for the patient journey across many health care settings. The one per cent of patients with multiple conditions who account for 49 per cent of total health care costs, are under-managed. Many simply fall between the cracks.
Reform is therefore required not only for cost-saving reasons, but also to improve quality of care.
Get rid of processes that are unnecessary orredundant
In Saskatchewan, Premier Brad Wall is implementing the Toyota Corporation “lean” philosophy as a way of removing unnecessary and inefficient processes from health care delivery. Significant savings are being achieved.
At the same time, Ontario patients being discharged from hospitals may undergo as many as three home-care assessments, all before a single home-care visit takes place (one by the hospital to determine if home care is needed; one by the Community Care Access Centre to determine the appropriate kind and number of visits; and another by the actual home-care provider).
We are spending a disproportionate number of public dollars in the management and assessment of need rather than on the care itself. The government should cut out duplication, streamline administrative layers and put the money into front-line care and home-care visits.
Reduce unnecessary readmissions to hospitals
Unplanned readmissions to hospitals are significant and, according to various studies, often avoidable. Shortened hospital stays mean that patients may be discharged quicker but sicker. In Ontario, the readmission rate is around 15 per cent. This is high. Many different problems can emerge for patients post-discharge. However, a study conducted by the University of Toronto found discharged patients were about 28 per cent less likely to be readmitted to hospital within seven to 30 days if they had a home-care visit within one day of discharge. That statistic alone merits action.
Use health care professionals more effectively
In Ontario we operate on the assumption that each medical emergency call means an ambulance dispatch to the ER. In Nova Scotia, calls are triaged and dispatched by paramedics through one centralized system. A medical communications officer determines the right service for each patient, whether it is ground or air ambulance or an extended care paramedic (ECP). ECPs have advanced training in geriatric care and can treat elderly patients for things such as stitches, replacing catheters, etc. in their place of residence. One year into the program, more than 70 per cent of callers avoided a trip to the ER.
Move services out of hospitals
Today, about 80 per cent of all hospital surgery is conducted as day surgery on an outpatient basis. This represents a vast cost improvement for the hospitals. However, we are still conducting surgeries in the most expensive setting — one constructed to house infrastructures required for complex care and in which labour costs and staffing levels are very high. There are more than 700 Independent Health Facilities licensed in Ontario. Some of these facilities could provide uncomplicated procedures with higher efficiency and volumes.
It is also well known that volumes lead to better outcomes — practice does make perfect. At the Kensington Eye Clinic, for example, the volume of cataract surgery has led to economies as well as greater access.
Innovative change can curb health care cost growth while improving outcomes and patient safety. The challenge is to make innovation work for patients and for taxpayers.
Rescuing Policy: The Case for Public Engagement
This book argues that public engagement is the right response to the rise of the consumer model of politics and the crisis that it has created in public policy. The book is an authoritative and accessible guide to collaborative policy-making and the engagement processes that support it. With original case studies, this book will be of interest to students of government and governance from across the policy community.
This book draws on the findings of the Public Engagement Project, a two-year initiative involving seven provincial/territorial governments – British Columbia, Alberta, Saskatchewan, Ontario, New Brunswick, Newfoundland and Labrador and Nunavut – the Canada School of Public Service, the City of Hamilton and the Government of Australia.
Praise for “Rescuing Policy”
“Governments work best when they include people in the decisions that touch their lives. Lenihan’s work provides a thoughtful analysis of the factors that influence those decisions, and draws a roadmap toward new models of citizen engagement.”
Hon. David Alward, Premier of New Brunswick
“A great read and a reminder why I come to work each day…”
Chris Murray, City Manager, City of Hamilton
“…a must-read, particularly for the skeptics, who still think of engagement as utopia. It can be done, and Lenihan shows us how.”
Graham Fox, President and CEO, Institute for Research on Public Policy
“This book gives me hope that our elected governments really can work with the public to find sustainable solutions to the complex public policy issues of our generation”
Penny Ballem, City Manager, Vancouver
“Governments need to find new ways to restore confidence and generate new processes. Public engagement may just be the answer.”
Lynelle Briggs, Former CEO, Medicare Australia
“Lenihan delivers a sharp and telling critique of the shortcomings of contemporary policy-making… He also proposes a provocative way out…”
Giles Gherson, Deputy Minister, Consumer Services, Government of Ontario
“Don Lenihan sets out a blueprint for a new open-source democracy which is an ambitious call to action for citizens, elected officials, and policy leaders…”
Nik Nanos, President & CEO, Nanos Research
“…a persuasive and very readable book that makes a compelling case for public engagement…”
David Zussman, Jarislowsky Chair in Public Management, University of Ottawa
“This work…provides a valuable contribution to our discussions on effectively engaging citizens in the public policy process.”
Brian Manning, Former Deputy Minister of Executive Council, Government of Alberta
“…an important analysis of the challenges facing policy makers in an increasingly complex and interconnected world…”
Hon. John Milloy, Minister of Community and Social Services, Government of Ontario
“Rescuing Policy shines a much needed light on the damage “consumer politics” is having on Canadian society and offers an exciting alternative to realize the potential and promise of our communities.”
Karen Farbridge, Mayor, City of Guelph
“Don Lenihan accurately frames the emerging challenges confronting policy-makers created by changing demographics and expectations among citizens. There is growing need to rethink how government engages the public, and Lenihan’s ideas are part of the solution.”
David Eaves, Blogger and Public Policy Entrepreneur