The biggest hurdle to reform: unions

At one of his sporadic encounters with the press the other day in Vancouver, a statesmanlike Prime Minister implored opposition members of Parliament to dispense with political games and “focus on the economy.”

Some readers may be inclined to suggest the Prime Minister should tell this to Stephen Harper. But he is hardly the first political leader to sound this theme: of the vital necessity of elected representatives maintaining a constant vigil on the economy, undistracted by elections, polls or any of the other things that politicians think about all day long, else the whole thing collapse.

It’s never entirely clear what this means. Is it that the economy is kept alive by a kind of collective wish of the political class, like Tinker Bell? (“Focus on the economy, boys and girls: focus really hard!”) Or are we to believe that the economy is waiting for them to actually do something? That would require no less of an imaginative leap: these days, the agenda facing governments at every level consists, in the main, not in fresh openings for the application of government’s miraculous healing powers, but in undoing the mistakes of past governments.

When we speak of free trade, for instance, we mean removing the barriers to trade that past governments have seen fit to impose. So it is with reforming the tax code, or health care, or education, or the post office, or public transit: it’s fixing previous messes that’s in order. Moreover, there is considerable consensus among economists on the sorts of policies that are needed. It’s just getting governments to implement them that’s hard.

There is scarcely an economist alive who prefers protectionism to free trade, or a tax code littered with credits and deductions to one that applies evenly. And while most economists favour public education and health care, few would recommend the kind of top-down, rigidly centralized systems that were the acme of progressive thinking decades ago, when these programs were implemented. Yet that is what we are stuck with.

Talk privately to politicians from the two major parties, what is more, and you will not find much disagreement, either with economists or each other. They differ more in their willingness to act. The difference is not partisan, but circumstantial. Either party has shown itself prepared in the past, when conditions were especially dire, to take on whatever reform was most urgent at the time—but only when there was no other option left.

What explains this bias against reform? A numb attachment to the status quo among certain sections of the public, on the usual devil-you-know grounds; the demands of special interest groups, whose intensity and focus more than make up for their lack of numbers. But the most effective deterrent to reform-minded politicians is the power of public sector unions to make their lives miserable.

Recent headlines are a reminder of this. In Wisconsin, public sector unions have been occupying the statehouse for the past week in protest at legislation that would restrict some of their powers and prerogatives. In Quebec, Crown prosecutors, on strike for two weeks in support of demands for a 40 per cent wage increase over five years, have lately been legislated back to work, while a bill introduced in the Ontario legislature would make the Toronto Transit Commission “an essential service,” after a series of strikes in recent years.

That governments are now willing to contemplate such measures is strictly owing to the gravity of their fiscal situations. The McGuinty government, struggling to come to grips with a projected $19-billion deficit, is steeling itself to the task of laying off as many as 1,000 employees—against the 180,000 employees it has added in the broader public sector since it took office. That’s unusual: most governments consider it an achievement to trim payroll by attrition, and generally fail even in that. For all the Harper government’s rhetoric of restraint, the number of full-time federal employees has ballooned by 33,000 since 2005, not counting uniformed police and military.

It isn’t that public employees are necessarily overpaid, though that is sometimes the case. But wages and benefits do make up the lion’s share of government spending. And when it comes to reform of public services, opening them to competition either from within the public sector or without, union opposition remains a significant, even decisive obstacle. Public services, in the language of economists, have been “captured” by their providers, who evidently consider themselves to have property rights in their employment.

That is not going to change. Indeed, nickelling and diming public employees in contract negotiations is unlikely to deliver either substantial savings or improved public services. The unions have only to wait. Eventually, whatever crisis moved the politicians to act will pass, and the public will tire of the confrontation. That hardly means a future of cakes and ale for public employees: the fiscal constraints, in the age of austerity, driven by population aging, on which we are now embarked, will be too great. But they can likely succeed in blocking attempts to “reinvent” or otherwise better manage government.

The only answer for either party in the long term is to move these programs out of the public sector altogether: to make government, wherever possible, the purchaser, rather than the provider, of public services—or to provide the wherewithal for individuals to purchase them.

If not, the future will be bitter indeed: a long and sullen stalemate that makes no one happy.