Rob Ford is a municipal politician who has toiled in obscurity for a decade, known for little more than penny-pinching, off-colour remarks, a hot temper and not-so-occasional displays of poor manners. He is a convicted drunk driver who once got tossed out of a Maple Leafs game for boorish behaviour, then lied about it. He is also quite possibly the next mayor of Toronto, a city with an annual budget that tops $10-billion, about the same as the province of Saskatchewan and more than each of the four Atlantic provinces.
The godless liberals who occupy the Centre of the Universe are grinding their teeth at this prospect. How could it happen? The Ford platform - his motto is "Respect for Taxpayers" and he harps on poor customer service at city hall - is rather simplistic. Yet it clearly has some appeal, or so the polls say. I think he has, by accident, hit upon of one of the underrated economic issues of our time, something that will likely crop up over and over again, everywhere.
It isn't about taxes - not really. It isn't about deficits. It's about what people get for those taxes and for that money we borrow. In economist-speak, it's a question of productivity, as it applies to government.
Productivity is a favourite buzzword of the dismal scientists now, and many of them can recite the statistics by heart. Canadian workers produce about three-quarters of what American workers do, per hour worked. Canadian productivity growth badly lags that of some other small rich nations, such as Finland, and even that of countries with terrifying demographics, like Japan. Closing this gap has become the holy grail. It will increase wealth, improve our fiscal situation, help our standard of living, make everyone happier. Bank of Canada Governor Mark Carney says so. Finance Minister Jim Flaherty is practically conducting weekly lectures on the topic.
Very well. But what is the cause of our lousy record on productivity? Well, that's easy, the economists reply. Canadian businesses don't invest enough in new equipment that allows them to work faster or better. They don't innovate enough. They don't spend enough on research. The productivity gap is not the workers' fault, by and large. Most of them are working quite hard, thank you very much, as businesses cut back the number of staff to adjust to a poor economy. (This has the ring of truth to it. Look around your own circle of family and friends: Assuming they've kept their jobs, how many of them are working less than they were a few years ago? Exactly.)
The overriding message is that Canada's productivity problem is the fault of the private sector, and must be fixed by the private sector. Just do more with less, will you? And populist politicians like Mr. Ford are able to strike a nerve simply by saying what a lot of taxpayers are thinking: yes, Mr. Government, and what about you?
Take the city of Toronto as an example. Here is the rate of increase in its spending, year by year, from 2004 to 2009: 4.8 per cent, 4 per cent, 6.7 per cent, 7.8 per cent, 4.8 per cent, 4.3 per cent (as calculated by the C.D. Howe Institute). The city's population is growing too, of course, and so are the demands on it, so spending is bound to go up. But the people aren't blind. They know that their garbage now sits around rotting for two weeks before the city comes around to collect it; they see that easy productivity gains (replacing the grumpy folks who sell subway tokens with machines, for instance) haven't been done. As the private sector struggles, the public sector satisfies itself with doing less for more - or so it appears.
It's at lower levels of government - municipalities but also provinces - that the productivity battle needs to be fought. As Barrie McKenna writes elsewhere in today's Globe, the provinces face a potential crunch of higher interest rates, rising debts, and imposing health care obligations from the boomer generation. They must get control of their books soon.
But their track record of efficiency is hardly inspiring. A quarter-century ago, provincial and territorial budgets equalled about 20 per cent of GDP. For most of that period, Canada's economy did very well; household wealth has grown; millions of jobs were created. Thanks to falling interest rates and cuts in government services in the 1990s, the proportion of government revenue that is consumed by debt charges declined. Meanwhile, the population grew by about eight million people. And today, the provinces and territories spend … about 20 per cent of GDP. Apparently, in government, economies of scale simply don't exist.