Kevin Lynch tells us about policy making in testing times

It’s not often Canada’s top bureaucrat, Kevin Lynch, gives a major public speech. The Clerk of the Privy Council traditionally saves his advice to whisper in the ear of the Prime Minister.

So it was with some anticipation that I sat down to listen to a speech Lynch delivered today in Montreal. The McGill Institute for the Study of Canada asked Lynch to address the theme of its annual conference, “Public Policy in Crisis? Understanding Policy Making in Canada.”

But I didn’t come away feeling that Lynch had said anything fully satisfying about the way public policy is made in this country, in these worrying times.

He seemed to have three broad points to make: 1) the world is more complex and challenging that ever; 2) the need for smart, agile policy-making public servants is therefore greater than before; and 3) Canada, with its relatively sound banking system, is looking pretty darn well served by the bureaucrats we have now, thank you very much.

All three of his points reflect conventional wisdom. I’ll tackle what I took from Lynch about them in order.

Citing as examples the SARS outbreak, the Asian financial meltdown of the late-1990s, Sept. 11 and the broader terrorism issue, and of course the current economic mess, Lynch said today’s big problems all share the “globalization gene.” They have “global roots, global connections, global consequences.”

He added: “That’s quite different from if you go back 20 or 30 years, where the crises were more domestic.”

Really? I actually don’t remember an era of neatly contained domestic crises. Twenty years ago, to take one of Lynch’s historical comparison points, we were embarking on Canada-U.S. free trade, a policy reaction to globalized commerce. The fall of Berlin Wall upended the world order, effectively ending the Cold War (itself not precisely an era of domestic policy preoccupation). We were beginning to debate federal deficits in terms of how international markets would punish Canada for failing to tame them. There was AIDS.

So memory prevents me from accepting Lynch’s premise that the global nature of policy challenges is new or even greater in scope. But perhaps he means something more subtle. He spoke of how events move faster than ever, and communications technology has altered the policy-making environment. Which brings us to his second point, the need for better and nimbler policy makers than ever before.

“What’s remarkable about are times is not that they are challenging or changing. That’s always been the case. What’s remarkable today is the speed, the velocity, the acceleration of change, and the scale and the scope of the challenge,” he said. “That’s what’s changed.”

Again, I’m not sure. Let’s take economic change. Is it really likely that more substantial change will occur more quickly in the world in the next few years than it did, for example, as a result of China’s 1986-90 open-door policy? After China undertook its epochal shift in favour of harnessing market forces, global trade in manufactured goods, and then global balances of who lends and who borrows, were revolutionized in less than a generation. Talk about scale and speed. If something bigger and faster is unfolding, I’d be interested in hearing more about it.

It’s harder to quibble with Lynch’s observations about how the Internet, and related communications advances, have changed everything.

“It’s really about interconnectedness amongst individuals, amongst firms, amongst groups, among nations, amongst universities, researchers, you name it,” he said. “It’s a incredible network of connections that extend well past an historic type of relationship. And the complexity and the pervasiveness of it is often underestimated or misunderstood or just totally ignored until suddenly it can’t be anymore.”

He cited the obvious current example of how this interconnectedness can screw things up: a bad mortgage in, say, Iowa, securitized and sold, causes big problems for a bank in, say, Frankfurt. Next thing you know, your RRSP is worth a lot less.

But was that really a result of new ways of connecting? Didn’t the financial meltdowns of old also start in one flawed financial marketplace, and then spread to others, exposing their vulnerabilities? I accept that the density of linkages might be greater now, but I’d like to hear more about how today’s financial crisis is a different beast entirely, as a result of electronic interconnectedness. Or, for that matter, how are epidemics fundamentally different, or wars, or whatever border-hopping problem you’d care to name?

Maybe the nature of the problems hasn’t changed, only our way of talking incessantly about them. Lynch alluded to this factor.

“In this age of instantaneous communications also comes the demand for instantaneous responses. The 24/7 multi-channel communications universe now expects 24/7 responses from governments, public services, businesses, from whomever,” he said. “It fundamentally raises the issue of whether the speed of public policy making process can possibly match the expectation for the speed of communications responses.”

Indeed, this is an important point. But this is a matter of policy makers, including politicians, not succumbing to the demand for constant messaging. The point is not that today’s more insistent electronic information culture forces decision makers to think faster, but rather that all the buzz tries to suck them into talking before they’ve thought enough. These are two different things.

Lynch’s third point, that Canada’s policy makers have much to be proud of, is also a claim that I think needs to be considered closely. His prime example is everybody else’s too: stolid financial services regulation. Yes, Canada’s banks appear to be better regulated than those in the U.S. or Britain. This is well documented. Yet, along with sound regulation, there’s the nagging fact that the Liberal government blocked Canadian banks from merging with one another in 1998.

Had the mergers been allowed to go ahead, a couple of big Canadian banks with bloated global aspirations would likely have been far more exposed today than is our comfy banking oligarchy, of which now find ourselves so fond and thankful. But did Jean Chretien and Paul Martin, or their policy advisers, see the long-term financial-market pitfalls of bigger banks? I don’t think so. They saw the short-term political pitfalls of letting a lot of local bank branches close as banks combined forces. They anticipated consumers getting mad as their range of banking choices shrank.

The economic and financial policy elite, as least as I remember it, pretty much embraced the idea of bank mergers, arguing that Canada needed huge banks to compete with the Americans, Japanese, and Europeans. They wanted staid Toronto to feel more like swinging London. These days, of course, Toronto’s caution suits us just fine. But that’s thanks, at least in part, to crass political calculation, not lofty public-policy insight.

So Lynch’s talk raised more questions for me than it answered. He did not, at least I heard him, say much to back up his assertion that the world’s problems are more global and less domestic than ever.

He didn’t convince me that policy makers need to be smarter than ever, except perhaps in the narrow sense that they probably have to be more disciplined about not pronouncing on issues until they’ve thought things through.

And on his point that Canada is lucky to have such good policy makers, I assume that’s true, but I would have been more interested to hear something from him—given that he leaned so heavily on the banking example—about how pure policy considerations and messier political interests can come together.