Table of Contents
Articles Focus
3 Up Front: Ezra Levant speaks freely 6 Why are Quebec’s students failing? The former Western Standard publisher discusses his Peter Cowley battle with the Alberta Human Rights Tribunal which The exam failure rates in Quebec’s public schools—which ended 900 days after it began. account for roughly 82% of the province’s secondary school enrollment—are more than double those of private schools 8 Self-interest benefits everyone in all subjects except basic mathematics. Niels Veldhuis Self-interested individuals and businesses are the 7 Quebec’s agriculture in jeopardy backbone of our economy, vital to economic progress Jean-Francois Minardi and the well-being of society. To ensure the viability of Quebec’s agricultural sector, the province should phase out its supply management regime 9 Measuring entrepreneurship and eliminate farm subsidies. Keith Godin & Niels Veldhuis The Canadian provinces trail the US states on six different 21 Cars and climate change measures of entrepreneurship. Diane Katz The government of Quebec is preparing to impose the 13 Canada’s physician supply nation’s most stringent regulations on auto emissions. But Nadeem Esmail these regulations are more likely to endanger lives than The current supply is insufficient to meet the demand change the climate. for physician care and falls well short of what is being 29 Water rights under threat in Quebec delivered in other developed nations with similar Diane Katz & Jean-Francois Minardi approaches to health care. Bill 92, if enacted, will rob Quebecers of their property rights and discourage investment in the province. 18 Missile defense goes global Alan W. Dowd Canada should partner with the United States and other Western countries on the international missile defense system. 33 Economic freedom in the Francophonie nations 24 Competition in health care Louis-Philippe Beland Maureen Hazel Francophonie nations, more than 80% of which are The recently reformed Dutch system provides an example developing countries, have some of the lowest levels of of a better approach to universal health care coverage. economic freedom in the world.
32 Economic freedom reduces poverty 35 In Closing: “Tough love” for the downtown eastside Amela Karabegović & Fred McMahon Former Vancouver police chief Jamie Graham, known for Nations with high rates of economic growth and his “no-nonsense” approach to the law, speaks to Fraser higher levels of economic freedom experience poverty Forum about Insite, homelessness, and reforming Canada’s reduction. criminal code.
Further Reading
Waiting Your Turn: Hospital Waiting Lists in Canada, Economic Freedom of the World: 2008 Annual Report by 18th Edition by Nadeem Esmail and Maureen Hazel with James Gwartney and Robert Lawson with Joshua Hall and Michael Walker. Studies in Health Care Policy: $15.00 Seth Norton. Book: $29.95
Transportation Performance of the Canadian Provinces A Breath of Fresh Air edited by Nicholas Schneider. by David Hartgen, Claire Chadwick, and M. Gregory Download free at www.fraserinstitute.org. Fields. Studies in Transportation and Infrastructure: $15.00 To Order: E-mail [email protected] or call our toll-free order Bulletin des écoles secondaires du Québec : Édition 2008 line: 1-800-665-3558, ext. 580. There are extra charges for by Peter Cowley and Tasha Kheiriddin. Download free taxes, shipping, and handling. These publications are also at www.fraserinstitute.org. available through our website at www.fraserinstitute.org. From the Editor Fraser Forum Publisher Fraser Institute Chief Editor Mark Mullins Managing Editor/Layout and Design Kristin McCahon and Kristin Fryer Coordinating Editor Tasha Kheiriddin The need for policy Contributing Editors reform in Quebec Peter Cowley, Nadeem Esmail, Diane Katz Cover Design Bill Ray Cover Image Elena Elisseeva, iStockphoto.com A number of years ago, I had the opportunity to visit the wonderful Copyediting province of Quebec. It was a school trip, and thus was intended to be Mirja van Herk “educational,” but I think it could have been more accurately described Media Relations as “cultural tourism.” We went to a Montreal Canadiens game (a must Dean Pelkey Advertising Sales for hockey fans and non-hockey fans alike), skated on the St. Lawrence Advertising In Print River (which stays frozen for a good portion of the year), and visited Tel: (604) 681-1811 a genuine “sugar shack” (where maple sap is collected, processed, and E-mail: [email protected] served). We also spent part of the trip lodging with a Quebec family so Fraser Forum is published 10 times a year by the Fraser Institute. that we would get a more authentic picture of normal life in Quebec. The idea of “authentic” travel has caught on recently. The feeling of The Fraser Institute’s vision is a free and prosperous world where indi- viduals benefit from greater choice, competitive markets, and personal “been there, done there, got the t-shirt” has been causing people to seek responsibility. Our mission is to measure, study, and communicate the out less conventional travel opportunities that allow them to connect impact of competitive markets and government interventions on the wel- fare of individuals. Founded in 1974, we are an independent research and with locals and walk in their shoes for a while. In essence, the goal of educational organization with locations throughout North America, and this kind of experience is to find out what a place is really like, absent the international partners in over 70 countries. Our work is financed by tax- deductible contributions from thousands of individuals, organizations, happy face it puts on for visitors. As a typical tourist, it is often difficult and foundations. In order to protect its independence, the Institute does to get a sense of the deeper issues facing a particular area. not accept grants from government or contracts for research.
When I visited Quebec, I was aware of some of the local issues (the For additional copies, or to become a supporter separation question, for example, was very prominent at the time), and and receive Fraser Forum, write or call Fraser Institute, 4th Floor, 1770 Burrard Street, Vancouver, BC V6J 3G7 was quite interested in how they could affect the rest of Canada. Of Telephone: (604) 688-0221; Fax: (604) 688-8539 course, those who live in Quebec have a much greater interest in the Toll-free order line: 1-800-665-3558 policy debates of their province, as these issues affect them directly. (ext. 580—book orders; ext. 586—development) This issue of Fraser Forum explores a number of serious issues facing Copyright © 2008 Fraser Institute ISSN 0827-7893 (print version) | ISSN 1480-3690 (on-line version) Quebec. For example, Quebec’s agricultural sector is in deep trouble. De- Printed and bound in Canada.
spite millions of dollars in subsidies, 30% of farmers are not covering their Return undeliverable Canadian addresses to expenses, and some food prices remain high because of the province’s Fraser Institute, 4th Floor, 1770 Burrard Street, Vancouver, BC V6J 3G7 supply management system (“Quebec’s agriculture in jeopardy,” pg. 7). The contributors to this publication have worked independently and opinions Quebec’s education system is not faring well either. Almost 40% of expressed by them are, therefore, their own and do not necessarily reflect the opinions of the supporters, trustees, or other staff of the Fraser Institute. This students in Francophone public schools and 30% of students in Anglo- publication in no way implies that the Fraser Institute, its trustees, or staff are phone public schools are failing standardized basic math tests (“Why are in favour of, or oppose the passage of, any bill; or that they support or oppose any particular political party or candidate. Quebec’s students failing?” pg. 6). And the water rights of Quebecers, nearly half of whom rely on the groundwater beneath their property, are Fraser Institute Board of Trustees Hassan Khosrowshahi (Chairman), R.J. Addington, OBE (Vice Chair- being threatened by Bill 92, which would subject homeowners to the man), Edward Belzberg (Vice Chairman), Mark Mitchell (Vice Chair- regulatory whims of provincial bureaucrats (“Water rights under threat man), Salem Ben Nasser Al Ismaily, Louis-Philippe Amiot, Gordon Ar- nell, Charles Barlow, Everett Berg, Tony Boeckh, T. Patrick Boyle, Peter in Quebec,” pg. 29). Brown, Joe Canavan, Alex Chafuen, Elizabeth Chaplin, Derwood Chase, There is much need for policy reform in Quebec. It’s up to Quebec Jr., James Davidson, Stuart Elman, Greg Fleck, Shaun Francis, Ned Good- man, Arthur Grunder, John Hagg, Paul Hill, Stephen Hynes, David Laid- voters to push for changes that will strengthen the province and allow it ley, Robert Lee, Brandt Louie, David MacKenzie, William Mackness, Hu- to flourish. bert Marleau, James McGovern, Gwyn Morgan, Eleanor Nicholls, Roger Phillips, Herbert Pinder, Jr., R. Jack Pirie, Conrad Riley, Anthony Ses- sions, William Siebens, Arni Thorsteinson, Michael Walker, Catherine — Kristin Fryer ([email protected]) Windels, Michael Perri (Secretary-Treasurer)
2 Fraser Forum 11/08 www.fraserinstitute.org Up Front
Ezra Levant speaks freely
Former Western Standard publisher discusses his battle with the Alberta Human Rights Tribunal
On October 16, the Fraser Institute hosted outspoken publisher Ezra Levant in Calgary as part of its Behind the Spin speaker series. Levant gave a comprehensive presentation on the state of free speech in Canada as demonstrated by the actions and judg- ments of the provincial and federal human rights commissions. Levant maintains that these commissions are quasi-judicial bodies that undermine our fundamental freedoms of speech, of the press, and of religious belief. Some 900 days after Levant was charged with the “offence” of republishing the Danish cartoons of Muhammad in the Western Standard magazine, the Alberta Human Rights Com- mission acquitted him of “discrimination.” He does not con- sider this a victory for freedom of the press, however, because he believes his dismissal shows that Alberta’s press is not free— it is still subject to government oversight. In his Behind the Spin presentation, Levant discussed sev- eral cases brought before human rights commissions (HRCs) across Canada, including the well-known case against Mark Steyn and Maclean’s magazine, as well as less publicized cases. Through his examples, Levant exposed the surprising scope of the commissions’ influence and authority, and the adverse ef- fects of many commission decisions. Most targets of the HRCs choose to accept offered settlements to avoid lengthy investiga- tions and their costs, according to Levant. Because of his own experiences and his knowledge of other rights, rather than a shield protecting them.” There are human cases, Levant considers HRCs to be unjust. He says the com- rights commissions in every province and federally, Levant ex- missions routinely violate due process and ignore common- plained, so any legislature in Canada could start making the law rules and the rules of the Canadian court. During a necessary changes. For example, British Columbia has dis- lengthy interrogation held as part of the Alberta commission’s banded its commission, but the province’s tribunal still exists. investigation into his publication of the cartoons, Levant chal- Levant is the focus of other lawsuits, human rights com- lenged both the moral and the legal basis of the complaint filed plaints, law society complaints, and other nuisances at the against him. hands of the “human rights bullies.” Regardless, Levant vows to Levant urges that the commissions be “denormalized.” This continue to fight against what he calls the “human rights indus- means demonstrating how they disregard Canadian values and try” because he will not grant the government the authority to showing “how they have become a sword attacking human tell him or any other Canadian what he can or cannot say.
www.fraserinstitute.org Fraser Forum 11/08 3 About the Authors
Featured Authors
Peter Cowley (peter.cowley@ Diane S. Katz (diane.katz@fra Jean-Francois Minardi (jean- fraserinstitute.org) is the Direc- serinstitute.org) is the Director francois.minardi@fraserinsti tor of School Performance Stud- of Risk, Environment, and En- tute.org) holds a Master’s degree ies at the Fraser Institute. He is ergy Policy Studies at the Fraser in economics from the Universi- co-author of the Institute’s series Institute. She has an M.A. from té Paris XII. He is a Senior Policy of report cards on Canada’s el- the University of Michigan. Analyst, Québec et la Francoph- ementary and secondary schools. onie, at the Fraser Institute.
Contributors
Louis-Philippe Beland (louis-philippe.beland@fraser Maureen Hazel ([email protected]) institute.org) is a Policy Analyst in the Centre for Global- is a Health Policy Analyst at the Fraser Institute. She ization Studies at the Fraser Institute. He holds an M.A. in completed her B.Com. (First Class Honours) and M.A. economics from the University of British Columbia. in economics at McGill University.
Alan W. Dowd ([email protected]) is a Se- Amela Karabegović (amela.karabegovic@fraserinsti nior Fellow of the Fraser Institute, conducting research tute.org) is the Associate Director of the Centre for Glo- into defense and security, and Senior Editor of Fraser balization Studies at the Fraser Institute. She holds a B.M. am.eri.ca. He is also a contributing editor with both The (Great Distinction) in general management from the Uni- American Legion Magazine and World Politics Review. versity of Lethbridge, and an M.A. in economics from Si- mon Fraser University. Nadeem Esmail ([email protected]) is the Director of Health System Performance Studies and Fred McMahon ([email protected]) is Manager of the Alberta Policy Research Centre at the the Director of the Centre for Globalization Studies at Fraser Institute. He has an M.A. in economics from the the Fraser Institute. He has an M.A. in economics from University of British Columbia. McGill University.
Keith Godin ([email protected]) holds an Niels Veldhuis ([email protected]) is M.A. in public policy from Simon Fraser University. He is the Director of Fiscal Studies and a Senior Economist at a Senior Policy Analyst with the Centre for Entrepreneur- the Fraser Institute. He has an M.A. in economics from ship and Markets at the Fraser Institute. Simon Fraser University.
4 Fraser Forum 11/08 www.fraserinstitute.org Self-interest benefits everyone The market meltdown wasn’t caused by greed
Niels Veldhuis The reality is that “greed” is a con- Economically free societies, in which temptuous word that is purposely used individuals and businesses are free to act The common story now making the to stir emotions and negatively smear in their own self-interest and to engage rounds is that Wall Street’s “greed” is at the principle tenet of human behaviour, in voluntary exchanges, enjoy substan- the root of the financial crisis and that self-interest. Simply put, self-interest is tially higher living standards. Increased this “greed” needs to be reined in. Con- the human desire to improve our situ- economic freedom has been shown to sider, for example, that US presidential ation or the “concern for one’s own ad- increase per-capita incomes, economic candidate John McCain has promised to vantage and well-being,” according to growth rates, investment, life expec- put an end to the “unbridled greed that Merriam-Webster. tancy, civil liberties, and environmental [has] caused a crisis on Wall Street,” while The writings of Adam Smith, an performance, while reducing poverty. Barack Obama claims that the financial eighteenth-century philosopher and the Of course, individuals and businesses crisis is a “direct result of greed that has father of modern economics, provide can also do harm if their self-interest is dominated Washington and Wall Street great insights into the positive impact channelled improperly through deceit, for years” (Wall Street Journal, 2008, Oct. that individuals acting in their own self- corruption, force, fraud, or theft. That 4; Langley, 2008, Oct. 14). interest can have on society. As Smith is precisely why it is critical to maintain However, “greed” (or, less derisively famously noted, “It is not from the be- sound institutions (a sound legal system, and more accurately, “self-interest”) is nevolence of the butcher, the brewer, or protection of private property, an inde- not the problem or the reason for the the baker, that we can expect our dinner, pendent and unbiased judiciary, etc.) to current crisis. Wall Street, Bay Street, but from their regard to their own inter- provide people and businesses with the Main Street, my street, and every other est” (Smith, 1981: 26–27). right incentives and to hold them ac- street in North America is built on in- The quality of food and high level of countable for wrong doing. dividuals and businesses pursuing their service we receive at our favourite restau- This brings us back to the current fi- own self-interest. Self-interested indi- rant is not the result of a kind act by its nancial crisis. Of course, self-interested viduals and businesses are the backbone owners; rather, the owners are self-inter- investors and banks played a part in the of our economy, vital to economic prog- ested and wish to operate a profitable res- current crisis by lending money to un- ress and society’s well-being, and ought taurant. They do not provide us with great qualified applicants, issuing unsound to be celebrated rather than demonized. food and service because they like or care mortgages, and trading in risky mort- Let’s start with the definition of greed, about us; they do so to secure our business, gage-backed assets. Home owners also “a selfish and excessive desire for more of money, and our continuing patronage. acted in their own self-interest when something than is needed,” according to The same holds true for Sam Walton, taking on these loans. However, what the Merriam-Webster dictionary. But founder of Wal-Mart, Howard Schultz of is rarely mentioned is how government who exactly should determine what is Starbucks, Bill Gates of Microsoft, Steve policy provided the incentives to do so. really “needed,” and by what measure? Jobs of Apple, and any other successful The Federal Reserve kept interest Do we all really “need” mobile phones entrepreneur. All acted in their own self- rates historically low for too long, in- and iPods? Is it “excessive” for a family interest and provided us with great in- creasing the demand for mortgages and to have two cars and a 2,000-square-foot novations, cheaper products, better ser- fuelling the housing boom. In addition, house? Do we “need” to eat out as often vices, and technological improvements. government-backed mortgage giants as we do or buy the latest clothing fash- All became extremely wealthy by pro- Fannie Mae and Freddie Mac increased ions? What is “needed” is a subjective viding benefits to others, benefits that their purchases of mortgages issued to judgment and makes the definition of have vastly exceeded the private benefit low-income earners, thereby funding bil- “greed” vacuous. gained by these entrepreneurs. lions of dollars in loans, many of which
www.fraserinstitute.org Fraser Forum 11/08 5 were sub-prime. The Community Rein- vestment Act also played a part as it fur- Why are Quebec’s ther encouraged banks to make high-risk loans to low- and moderate-income fam- ilies. In general, lending standards fell to students failing? accommodate a social policy objective: increasing home ownership among those who are least able to afford a home. It wasn’t greed that fuelled the crisis; banks, borrowers, and investors simply Peter Cowley high failure rates are common among acted rationally and in their own self- Quebec’s CSs. interest, following a set of rules created Try to imagine how you would feel Indeed, the overall results shown by poor government policy. about a school where students routinely in table 1 mask even worse fail rates Canadians and Americans have ben- fail province-wide examinations in key in some individual CSs. For example, efited tremendously from individuals secondary school subjects at the rate of 30.7% of students enrolled in the CS de and businesses pursuing their own self- 25% or greater. You probably would not l’Estuaire in the Côte-Nord region of interest. While it may not be popular to want to send your child to that school. Quebec failed their first language exam. endorse self-interest, vilifying it is to Yet, in Quebec, high failure rates on ex- At the CS de la Seigneurie-des-Mille-Îles, condemn the economic system that has ams in subjects such as language arts, a large district of over 38,000 students significantly improved our lives. physical sciences, mathematics, and his- in the Laurentides region, 35.2% of the Nobel Prize-winning economist Mil- tory are all too common. physical sciences exam writers were ton Friedman (1979) said it best: “The Clearly, it is the teachers’ responsibil- given a failing grade. Finally, at the large, world runs on individuals pursuing their ity to equip each student with the skills suburban CS de Laval, an astonishing separate interests … the record of his- and knowledge that are embodied in 40.3% of students failed their advanced tory is absolutely crystal clear: that there the curriculum to the extent that the math exam.1 is no alternative way so far discovered of students can at least pass an objective In the province’s Anglophone school improving the lot of the ordinary people assessment. But too many teachers in boards, the story is much the same. At that can hold a candle to the productive Quebec are failing to fully discharge this the small CS Eastern Shores, 31.7% of the activities that are unleashed by a free en- responsibility. history exam writers failed. Among stu- terprise system.” Table 1 shows that Quebec’s public dents in the largest Anglophone board schools—accounting for roughly 82% of in Quebec—CS Lester B. Pearson in References the province’s secondary school enroll- Montreal—36.8% failed the basic math ment—drive the high failure rates. In exam. Friedman, Milton (1979). Milton Friedman all six of the exams studied, in both the While the data are silent regarding why – Green. Video. YouTube.
6 Fraser Forum 11/08 www.fraserinstitute.org Quebec’s agriculture in jeopardy Farm subsidies, protectionism hinder la belle province’s competitiveness
Jean-Francois Minardi 25 years (Quebec, 2008: 53). Overall, the prices led to a decline of percent PSE to Pronovost Report shows that Quebec 18% in 2007” (OECD, 2008a: 7). Accord- In January 2008, the government of farmers receive more government subsi- ing to the Pronovost Report, it would be Quebec published a report on the fu- dies than other Canadian farmers. very difficult to establish a PSE for Que- ture of the province’s agricultural sector, Using data on producer support pay- bec; however, as noted above, the report which currently is facing serious chal- ments (PSE) collected by the Organisa- shows that agricultural producers in lenges. Many farmers are unable to cover tion for Economic Co-operation and Quebec receive more financial aid than their expenses and many are becoming Development (OECD), a comparison their counterparts in the rest of Canada. increasingly dependent on government can be made between agriculture sub- subsidies (Quebec, 2008: 47–48). sidies in Canada and those provided in The supply management The Report of the Commission on the other industrialized countries. Accord- system Future of Quebec’s Agriculture and Agri- ing to the OECD, the PSE is an indicator food Industry, also known as the Prono- of the annual monetary value of gross The other mainstay of Quebec’s agricul- vost Report,1 was highly critical of the transfers from consumers and taxpayers tural policies is the supply management status quo, although it did not question to agricultural producers, measured at system. It was introduced in Canada in Quebec’s supply management system the farm gate level, arising from policy the early 1970s to support the incomes of (Quebec, 2008: 69)2 or agricultural sub- measures that support agriculture, re- farmers who were facing a highly volatile sidies (Quebec, 2008: 72). The Doha ne- gardless of their nature, objectives, or market at the time (OECD, 2008a: 6). It gotiations, organized by the World Trade impacts on farm production or income. is a mechanism of supply regulation that Organization (WTO), which could have It can be expressed as a total monetary guarantees stable prices for producers of jeopardized the existing system col- amount, but is more usually quoted as dairy, poultry, and eggs who, for the most lapsed in July. a percentage of gross farm receipts (per- part, are located in Quebec and Ontario. In its current state (discussed below), cent PSE) (OECD, 2008b). Over 80% of Canada’s dairy farms are Quebec’s agricultural sector is unsus- The PSE index shows that farm sub- located in the two provinces, while 60% tainable. In order to ensure its viability, sidies in Canada have been higher than of all poultry production takes place the province should phase out its supply in the United States in recent years, but in Ontario and Quebec (Vieira, 2008, management regime and work towards a lower than in Europe (Agriculture and Aug. 5). Thus, a significant portion of complete elimination of farm subsidies. Agri-Food Canada, 2007). Government Quebec’s agricultural sector specializes support for Canadian agriculture, as in livestock and dairy products. Subsidies measured by the percent PSE, fell from Supply management is, in essence, a 36% in 1986-88 to 22% between 2004- quota system intended to confer a com- According to Statistics Canada, Quebec 06—well below the OECD average petitive advantage on domestic products farmers received $725 million in direct (29%). Thus, Quebec farmers, in general, and maintain artificially high prices for payments3 in 2004; $722 million in 2005; have become less reliant on government the agriculture industry. High tariffs and $838 million in 2006 (Quebec, 2008: subsidies in recent years. However, ac- are imposed on imports,4 and domestic 53). That was in addition to $67 million cording to the OECD report (2008a), production is constrained through sup- in annual tax assistance from the federal “Canada is almost unique in having ply quotas. government and $136 million from the backtracked since the late 1990s: the Consequently, food costs in Quebec province. Government support for agri- percent PSE rose from a low of 14% in are much higher than in other markets; culture has increased 248% over the past 1997 to 23% in 2006 before higher world consumers pay for the direct subsidies
www.fraserinstitute.org Fraser Forum 11/08 7 Quebec’s agriculture in jeopardy
4 “These customs tariffs are presently 299% (through taxes) and they pay artificially hand, farming is regarded as an inte- for butter, 246% for cheese, 155% for whole inflated prices under the supply man- gral part of Quebec’s identity that must turkeys, 238% for whole chickens, 164% for 5 6 agement system. These higher prices be preserved. From this viewpoint, the shell eggs and 238% for hatching eggs” (Que- impose an especially heavy burden on closing of small non-competitive farms bec, 2008: 68, translation). low-income households, which spend is perceived as an existential threat. On 5 “The farm price of milk is twice as high a greater share of their budget on food the other hand, a powerful lobby that in Québec as in the USA. In Canada, US$58 (OECD, 2008a: 10). exerts great influence on the political per 100 kg of milk; in the USA: US$28, ac- parties and the government persists in cording to the Bulletin de la Fédération Trade liberalization blocking any attempt to reform the sys- internationale de laiterie, Bruxelles, 2007” tem in order to preserve the status quo. (Quebec, 2008: 50, translation). The Doha round of global trade negotia- 6 “Our roots in the rural world are still evi- tions was launched in 2001 by the World Conclusion dent in many ways, as most have become city Trade Organization (WTO). The talks dwellers only recently. Aside from produc- were focused on cutting tariffs and farm The Quebec agricultural sector needs ing food, agriculture represents a way of life subsidies, as well as liberalizing trade to become a more competitive envi- and is a dynamic method to occupy our vast in services. Ultimately, the negotiations ronment in which consumers pay less territory” (Quebec, 2008: 12, translation). failed. Canada’s position—defending for better quality products and farmers supply management while, at the same have incentives to be more creative, pro- References time advocating trade liberalization—is ductive, and innovative. Agriculture and Agri-Food Canada (2007). untenable. For these reasons the Quebec and fed- Government and the Agriculture and Free trade is in the interest of the Ca- eral governments should phase out the Agri-Food Sector: Producer Support Es- nadian economy, including part of the supply management regimes in favour of timates (PSE) and Agricultural Policies agricultural sector. Canada is the OECD’s market forces, and should work towards in Canada and Other Countries.
8 Fraser Forum 11/08 www.fraserinstitute.org Measuring entrepreneurship Canada’s provinces trail US states on key indicators
Keith Godin & Business creation Unfortunately, the Canadian prov- Niels Veldhuis inces fell behind their US counterparts Business creation is the process of start- in terms of net business creation. While Entrepreneurship is one of the most ing a new enterprise, the primary way Alberta (11th), Ontario (21st), and British important parts of an economy and is in which entrepreneurs commercialize Columbia (24th) performed moderately increasingly being recognized as a key ideas and one of the most important well, six Canadian provinces ranked in driver of economic progress. Govern- measures of entrepreneurship. the bottom 10 jurisdictions. In fact, five ments at all levels and in many countries Business creation is measured in Canadian provinces—Newfoundland have made promoting entrepreneurship two ways in the study. First, it is mea- and Labrador, Saskatchewan, Nova Sco- a priority. However, despite the growing sured in terms of business start-ups, tia, New Brunswick, and Prince Edward interest and focus on entrepreneurship i.e., the number of new businesses cre- Island—had negative rates of net busi- there is still no adequate comprehen- ated throughout the year as a percent- ness creation. In other words, in those sive measure of entrepreneurship. Con- age of the total number of businesses provinces more enterprises went out of sequently, there is no way to assess the that existed at the beginning of the year. business than were created on average effectiveness of public policies aimed at The second measure is “net” business during 2002/2003. entrepreneurship. creation—the number of enterprises Earlier this year, the Centre for En- created throughout the year less the Self-employment trepreneurship and Markets at the number that went out of business as a Fraser Institute released the first study percentage of total businesses. Net busi- Self-employed individuals are those who in a long-term project aimed at measur- ness creation is a particularly insightful make an occupational choice and take the ing and comparing entrepreneurship indicator of entrepreneurship as it cap- risk of working on their own rather than across jurisdictions. Measuring Entre- tures, at least in part, the dynamic aspect for an employer. Along with business cre- preneurship: Conceptual Frameworks of entrepreneurship that consists of new ation, it is one of the most commonly used and Empirical Indicators examined ideas, products, and processes replacing indicators of entrepreneurship. the most important definitions of en- existing ideas, products, or processes Canadian provinces generally had high trepreneurship, as well as widely cited that are no longer competitive. Joseph rates of self-employment (as a percentage and used measures of entrepreneur- Schumpeter (1942) famously referred to of total employment), and as a result, all ship.1 The study also examined six po- this process as “creative destruction.” were in the top half of the 60 jurisdictions. tential indicators of entrepreneurship Overall, Canadian provinces per- British Columbia was the top-ranked ju- and presented results and rankings for formed moderately well with respect to risdiction with a self-employment rate the 10 Canadian provinces and 50 US business start-ups (figure 1). For start-ups, of 11.9%, while Quebec (24th) was the states. Ultimately, the goal of the proj- the top-ranked Canadian province, New- lowest-ranked Canadian province with a ect is to develop a multi-indicator index foundland and Labrador, ranked 9th out self-employment rate of 7.3%. of entrepreneurship for Canada and the of all of the provinces and US states with Though these numbers are useful, United States. an average start-up rate of 16.6% from there are problems with self-employ- Figure 1 presents a summary of the 2002/2003 (latest available data at time ment as a measure of entrepreneurship. rankings for the Canadian provinces on of publication). It was followed closely Research shows that about half of the the six indicators of entrepreneurship. in Canada by Alberta (16th) and Brit- variation in self-employment rates can Overall, the Canadian provinces trailed ish Columbia (19th). Quebec generated be explained by industrial composition their US counterparts on numerous as- the fewest number of new businesses in and demographics (Glaeser, 2007). For pects of entrepreneurship. Canada and ranked 54th overall. example, a jurisdiction with a larger www.fraserinstitute.org Fraser Forum 11/08 9 Measuring entrepreneurship
Figure 1: Empirical indicators of entrepreneurship, Canadian provinces, rankings out of 60
AB Business start-ups - 16th MN Business start-ups - 29th Net business creation - 11th Net business creation - 49th Self-employment - 21st Self-employment - 14th Small businesses (1-9) - 22nd Small businesses (1-9) - 59th Small businesses (10-49) - 42nd Small businesses (10-49) - 1st Venture capital - 34th Venture capital - 42nd Industrial R&D - 46th Industrial R&D - 48th Academic R&D - 19th Academic R&D - 7th Patents - 42nd Patents - 52nd
SK Business start-ups - 27th Business start-ups - 37th Business start-ups - 19th ON Net business creation - 21st BC Net business creation - 24th Net business creation - 57th Self-employment - 8th Self-employment - 1st Self-employment - 9th Small businesses (1-9) - 55th Small businesses (1-9) - 17th Small businesses (1-9) - 13th Small businesses (10-49) - 10th Small businesses (10-49) - 46th Small businesses (10-49) - 44th Venture capital - 13th Venture capital - 17th Venture capital - 25th Industrial R&D - 22nd Industrial R&D - 34th Industrial R&D - 55th Academic R&D - 6th Academic R&D - 12th Academic R&D - 4th Patents - 51st Patents - 56th Patents - 47th
Source: Godin et al. (2008).
portion of the economy made up of an categories. In the number of firms with cantly trailed the leaders: Massachusetts industry with higher self-employment 1-9 employees as a percentage of to- and California had the highest levels of rates will rank higher than another juris- tal firms for 2003-2004, the numbers venture capital with $379 and $296 per diction that has a smaller portion of its ranged from 78.9% in Quebec (second person, respectively. economy made up by that same indus- out of 60) to 70.1% in Manitoba (59th try. In addition, some government poli- out of 60) (figure 1). Canadian provinces Research and development cies, such as favourable tax treatment or managed to occupy both the top and other regulations, may induce individu- bottom spots when the number of firms Research and development (R&D) is als to become self-employed for reasons with 10-49 employees as a percentage of broadly defined as the pursuit of a new other than entrepreneurial impulse. total firms was measured. product or process with an unknown outcome. R&D measures the entrepre- Small businesses Venture capital neurship that occurs within existing and typically larger firms. Small businesses are defined as enter- Venture capital refers to the resources Canadian provinces trailed US states prises that have 1-49 employees. Small raised for the purpose of investing in on industrial R&D spending as a percent- businesses are an important measure of potential high-growth businesses. Ven- age of GDP. Only two provinces were in entrepreneurship because they represent ture capital is an important measure of the top half of the rankings: Quebec (18th) another way in which entrepreneurs entrepreneurship as it entails develop- and Ontario (22nd) with R&D spending bring new ideas to the market. There is ing new innovations and using targeted of 1.7% and 1.5% of GDP, respectively, for very little variation among the Canadian financial support and expertise to bring 2003 (the latest data available at the time provinces and US states in the number of those innovations to the market. There of publication). The remaining provinces small businesses relative to the number of was only one Canadian province in the generally occupied the bottom quarter of all businesses. In order to develop some top 10 jurisdictions: Quebec (7th) re- the rankings (figure 1). Canadian prov- distinction among jurisdictions, the mea- corded $93 in venture capital per person inces performed better on academic R&D sure of small businesses can be divided in 2005. Only three other provinces— spending; however, this result should be into two categories: firms with 1-9 em- Ontario, British Columbia, and Sas- read with caution given that academic ployees and firms with 10-49 employees. katchewan—ranked in the top half of R&D represented about one third of to- The Canadian provinces were scat- all 60 jurisdictions (figure 1).2 All of the tal R&D spending in all jurisdictions in tered throughout the rankings for both Canadian provinces, however, signifi- 2003 (Statistics Canada, 2006).
10 Fraser Forum 11/08 www.fraserinstitute.org Measuring entrepreneurship
QC Business start-ups - 54th Business start-ups - 22nd Net business creation - 51st Net business creation - 60th Self-employment - 24th PEI Self-employment - 2nd Small businesses (1-9) - 2nd Business start-ups - 41st Small businesses (1-9) - 25th Small businesses (10-49) - 60th Net business creation - 58th Small businesses (10-49) - 24th Venture capital - 7th NS Self-employment - 5th Venture capital - 32nd Industrial R&D - 18th Small businesses (1-9) - 34th Industrial R&D - 57th Academic R&D - 2nd Small businesses (10-49) - 29th Academic R&D - 5th Patents - 54th Venture capital - 35th Patents - 59th Industrial R&D - 53rd Academic R&D - 3rd Patents - 57th
Business start-ups - 34th Business start-ups - 9th NB Net business creation - 59th Net business creation - 56th Self-employment - 18th Self-employment - 17th Small businesses (1-9) - 14th NL Small businesses (1-9) - 3rd Small businesses (10-49) - 47th Small businesses (10-49) - 59th Venture capital - 31st Venture capital - 54th Industrial R&D - 51st Industrial R&D - 59th Academic R&D - 14th Academic R&D - 8th Patents - 58th Patents - 60th
ship study contains another measure of ven- Patents there are other important indictors of ture capital for the provinces that excludes entrepreneurship (business expansion, government-sponsored venture capital. See The number of patents in a jurisdic- innovation, initial public offerings, and Godin et al. (2008) for further details. tion, similar to R&D, is a proxy for the business losses), current data are either innovative aspect of entrepreneurship. not available or not comparable for the References Unfortunately, all Canadian provinces Canadian provinces and US states. Un- were in the bottom third of the rankings. fortunately, the indictors for which we Brander, James, Edward Egan, and Thomas In 2005, the number of patents per 1,000 have comparable data show that Cana- Hellmann (2008). Government Spon- population in the provinces ranged dian provinces trail their US counter- sored versus Private Venture Capital: Ca- from 0.091 in Alberta to 0.004 in New- parts on some of the most important nadian Evidence. NBER Working Paper No. 14029. National Bureau of Economic foundland and Labrador. In comparison, measures of entrepreneurial activity. Research. the top six US states—Idaho, Vermont, California, Massachusetts, Oregon, and Notes Glaeser, Edward (2007). Entrepreneurship and the City. Harvard Institute of Eco- Minnesota—generated more than five nomic Research Discussion Paper No. times the number of patents relative 1 More specifically, the study explores the 2140. Harvard University. to population than Canada’s highest- common aspects and differences among the ranked province, Alberta. three major schools of thought on entrepre- Godin, Keith, Jason Clemens, and Niels neurship: German, Chicago, and Austrian. Veldhuis (2008). Measuring Entrepre- neurship: Conceptual Frameworks and Conclusion The study uses the common aspects found in these schools to develop a comprehensive Empirical Indicators. Studies in Entre- framework (definition) for measuring en- preneurship and Markets No. 7. Fraser Analyzing jurisdictional differences in trepreneurship. See Godin et al. (2008) for a Institute. entrepreneurship is critical in assessing more in-depth discussion. Schumpeter, Joseph (1942). Capitalism, So- the effectiveness of public policies aimed 2 This measure of venture capital includes cialism and Democracy. Harper & Row. at increasing the level of entrepreneur- all sources of venture capital spending, in- Statistics Canada (2006). Estimates of Ca- ship. Analyzing six different indicators, cluding government spending. In Canada, nadian Research and Development Ex- Measuring Entrepreneurship: Conceptual government-supported venture capital penditure (GERD), Canada, 1996 to 2006, Frameworks and Empirical Indicators is represents about half of all venture capital and by Province 1995 to 2004. Catalogue the first step towards a comprehensive investment in the country (Brander et al., No. 88F0006XIE – No. 009. Statistics measure of entrepreneurship. While 2008). As such, the Measuring Entrepreneur- Canada. www.fraserinstitute.org Fraser Forum 11/08 11 Why are Quebec’s students failing? continued from page 6
A much more likely reason for the Table 1: Quebec compulsory examination failure rates by high failure rates is one that has been language and sector, 2006/2007 school year demonstrated consistently in the In- Francophone Anglophone stitute’s school performance reports schools schools in Quebec and other provinces—even when the students’ family and personal Public Private Public Private characteristics are taken into account, First language 20.7% 8.4% 8.8% 2.0% some schools are more successful than Reading in a second language 30.2% 10.6% 47.2% 22.8% others in ensuring their students’ success. This new analysis suggests that the more Basic mathematics 38.8% 23.4% 30.0% 18.5% successful schools are not randomly dis- Advanced mathematics 30.0% 12.2% 21.0% 7.3% tributed across Quebec, but are concen- trated in higher-performing CSs. Physical sciences 27.2% 7.6% 26.3% 9.9% Directors of education at Quebec’s History of Quebec and Canada 15.1% 4.2% 19.4% 4.8% commissions scolaires should be pre- pared to demonstrate to the families Source: Based on data provided by Quebec’s Ministry of Education, Leisure and Sport; cal- they serve that they have solid plans to culations by author. reduce failure rates in all of these key subject areas, and the Ministry of Edu- cation should resist any pressure that it might receive from these same directors to take the easy route and simply make the tests easier. A reduction in these failure rates will Introducing … mean that more of Quebec’s second- ary school graduates have acquired the knowledge and many of the skills they will need to successfully continue their This October, the Fraser Institute launched FraserTV, a series of short, studies and move on with competence snappy videos that explain our research and policy recommendations, and confidence into the world of work. and capture speakers from our many events.
Note Recent videos highlight lead 1 All examination results quoted in this pa- researchers such as Nadeem per are based on data provided by Quebec’s Esmail explaining our hospital Ministry of Education, Leisure and Sport. waiting list report, Brett Calculations were made by the author where Skinner examining provincial required. health care spending, and Dr. Mark Mullins discussing the Reference global credit crunch. Pineault, Jean-Philippe (2008, October 22). Les Meilleures et les pires commissions Visit www.fraserinstitute.org to watch FraserTV! scolaires. Le Journal de Montreal: 1–5.
12 Fraser Forum 11/08 www.fraserinstitute.org Canada’s physician supply Doctor-to-population ratio will decline unless Canada becomes more reliant on foreign-trained physicians
Nadeem Esmail health insurance programs for which In the early 1990s, however, specific data were available (table 1) (OECD, policies on physician supply were intro- In recent years, Canadians have been 2008; Esmail and Walker, 2007; calcula- duced following the publication of what paying a significant amount of attention tions by author). has come to be known as the Barer-Stod- to the supply of physicians in Canada. These facts, when combined with evi- dart report. In 1991, researchers Morris Reports and commentaries on the is- dence that increased spending on phy- L. Barer and Greg L. Stoddart published sue of physician supply appear regularly sicians has been related to reduced wait a discussion paper for the Federal/Pro- in the nation’s news media, while stud- times for treatment in Canada (Esmail, vincial/Territorial Conference of Deputy ies on the issue have been produced by 2003), clearly suggest that the supply Ministers of Health. Their report recom- research organizations, professional as- of physician services in Canada is not mended, among other things, reduc- sociations, and government committees meeting the demand. ing medical school enrollment by 10%; across the country. Most of these discus- This article seeks to add to the- cur reducing the number of provincially sions and studies have come to the con- rent understanding of Canada’s physi- funded post-graduate training posi- clusion that there are too few physicians cian shortage and show how Canada’s tions by 10% to meet the needs of stu- practicing in Canada today. physician supply may evolve in the com- dents graduating with M.D.s in Canada; That conclusion is supported by the ing years. and reducing Canada’s reliance on for- available evidence regarding Canadians’ eign-trained doctors over time (Barer unmet health care needs and the rela- The evolution of Canada’s and Stoddart, 1991). Governments re- tive supply of physicians in this country. physician supply sponded in 1992 by accepting all three of For example, in 2007 slightly less than these recommendations, with the goal of 1.7 million Canadians aged 12 or older In the early 1970s, Canadians enjoyed maintaining or reducing the physician- reported being unable to find a regu- one of the highest physician-to-pop- to-population ratio in Canada (Tyrrell lar physician (Statistics Canada, 2008). ulation ratios in the developed world and Dauphinee, 1999). Similarly, a research poll completed in (OECD, 2008). Such generous relative Figure 1 reveals the effect of these de- 2007 found that 14% of Canadians (ap- access to doctors was, in light of recent cisions: a physician-to-population ratio proximately five million) were without a evidence, unquestionably beneficial for that increased continuously from the family doctor, more than 41% of whom Canadians. Unfortunately, in the early- early 1960s to the late 1980s, peaking in (approximately two million) were un- to mid-1980s some government officials 1993 at 2.1 physicians per 1,000 people. successful in trying to find a family doc- voiced concern about the generous and (The projections included in this figure tor (CFPC, 2007). growing number of physicians, and rec- will be discussed later in this article.) Further, after accounting for the fact ommended that governments reduce Since then, Canada’s physician supply that most other developed nations have the number of medical school admis- has been growing just fast enough to a greater proportion of seniors (aged sions and training positions available maintain a ratio of 2.1 physicians per 65 and older), and thus a greater de- (Tyrrell and Dauphinee, 1999). While 1,000 people (except in 1997, when the mand for health care services (nations their calls for reform were not met with ratio fell to 2.0), now one of the lowest with younger populations naturally re- a specific policy on physician supply, ratios among nations that guarantee quire fewer health services),1 Canada’s medical school admissions were re- their citizens access to health care insur- physician-to-population ratio in 2006 duced slightly in the years that followed ance regardless of ability to pay (table 1). ranked 26th among the 28 developed (Tyrrell and Dauphinee, 1999; Ryten et In other words, Canada’s policies have nations that maintain universal access al., 1998). restricted the growth rate of the phy- www.fraserinstitute.org Fraser Forum 11/08 13 Canada’s physician supply
Table 1: Age-adjusted Figure 1: Canadian physician-to-population ratio, 1961 to 2017 comparison of physicians per 1,000 population for select 2.5 OECD countries, 2006 Projections
Rank Country of 28 2.0 1 Iceland 4.5 2 Greece (2005) 4.4 3 Netherlands 4.0 1.5 4 Czech Republic 3.8
4 Norway 3.8 Physician-to-population ratio 6 Belgium 3.7 1.0 6 Ireland 3.7 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 6 Slovak Republic (2004) 3.7 6 Switzerland 3.7 Sources: AFMC (2007); McArthur (1999a); OECD (2008); and Ryten et al. (1998); calculations by author. 10 Denmark (2004) 3.6 11 Austria 3.4 11 Spain 3.4 sician-to-population ratio in order to seven to 10 years (the amount of time 13 France 3.2 maintain a level that is now below what it will take for these students to become 13 Sweden (2005) 3.2 other nations provide through their practicing doctors in Canada). It is also universal access health programs, and important to consider what will hap- 15 Australia (2005) 3.1 below the current demand for physician pen to the physician supply over that 15 Italy 3.1 services in Canada. time in order to better understand the 15 Germany 3.1 The potential health benefits associ- impact that government controls have 18 Portugal (2005) 3.0 ated with having a higher physician-to- had on medical school admissions and population ratio (see, for example, Or, post-graduate training during the late 19 Hungary 2.9 2001, and Starfield et al., 2005) were lost 1990s and the early part of this decade. 19 Luxembourg 2.9 as a consequence of these restrictions. 21 New Zealand 2.7 While it is clear that the current Graduation rates and physician physician supply is insufficient, the 22 Finland 2.6 supply to 2017 numbers to the left of the projections 23 Korea 2.4 marker in figure 1 tell us nothing of the Extrapolating from Canada’s medi- 23 Poland 2.4 future. According to recent statistics cal school graduation rates, it is pos- published by the Association of Facul- sible to estimate the number of new 23 United Kingdom 2.4 ties of Medicine of Canada, provincial doctors who will be entering the work- 26 Canada 2.3 governments have been increasing the force in the coming years. To estimate 27 Japan 1.7 number of medical school admissions the future supply of doctors accurately, significantly over the last six or seven however, it is important to take into 28 Turkey 1.6 years (figure 2). In order to better un- account the number of physicians cur- Note: Figure for Turkey was not age ad- derstand how Canada’s physician sup- rently working in Canada who will die, justed due to a low 65+ population not ply will evolve over the coming years, retire, or leave for employment in other conducive to meaningful adjustment. it is important to consider the impact nations, as these physicians must be re- Sources: OECD (2008); Esmail and Walker these changes in school admissions placed in order to maintain a constant (2007); calculations by author. will have on the number of physicians supply of physicians over time. An ar- entering the workforce over the next ticle published in the Canadian Medical
14 Fraser Forum 11/08 www.fraserinstitute.org Canada’s physician supply
Figure 2: First-year enrollment in Canadian Association Journal sheds some light on faculties of medicine, 1994-95 to 2006-07 both issues. In early 1996, Ryten et al. followed up with 1,722 medical school graduates 2,500 (from an entry class of approximately 1,780) who received their degree in 1989 (leaving them sufficient time to com- 2,000 plete post-graduate medical training). They found that only 1,300 of the gradu- ates were actively practicing in Canada 1,500 seven years after graduation. A further 216 were still training to practice in Medical school students Canada, while 13 students remained in 1,000 1994-951995-961996-971997-98 1998-991999-20002000-012001-022002-032003-042004-20052005-062006-07 Canada but were not in active practice. Meanwhile, 193 had left the country (fig- ure 3). In total, only 88% of those who graduated in 1989 were practicing or Source: AFMC (2007). training to practice as Canadian physi- cians in 1996. Ryten et al. also found that the number of Canadian-trained physicians entering Figure 3: Location and professional activity of 1989 the workforce was insufficient even to Canadian medical school graduates in 1995-1996 maintain the current supply of doctors at that time. In the mid-1990s, the authors In Canada estimated that approximately 650 to 750 Outside Canada new physicians would be needed each year in order to keep up with historical rates of population growth (the physi- In practice In training Inactive cian supply must grow with the popula- tion in order to maintain a constant ra- tio). The authors also determined that a further 900 to 1,100 physicians would be needed to replace those who either re- tired or died, and that roughly 300 to 350 136 new physicians would need to be added in order to replace those physicians who left the country. In other words, main- 1,300 taining the physician-to-population ra- tio in the mid 1990s would require add- ing 1,900 to 2,200 new physicians to the workforce every year (between 3.1% and
Medical school graduates 3.6% of the 1996 physician population)— a substantially greater number than the 55 1,516 new Canadian-trained additions (who were either in practice or still 216 2 training to practice in Canada) from the 13 class of 1989. By applying the proportions deter- mined by Ryten et al., as has been done Source: Ryten et al. (1998). previously by McArthur (1999a), to www.fraserinstitute.org Fraser Forum 11/08 15 Canada’s physician supply
Figure 4: New Canadian-graduated doctors in practice compared to meet current demand and will fall to the number of new doctors required to maintain physican-to- well short of demand in the future given population ratio, 1995 to 2017 that Canada’s health needs will increase 2,500 as our population ages. Making one additional assumption— Physicians required that the Canadian population will con- tinue to increase at its average growth 2,000 rate since 1990 (~1.0%)—allows us to estimate how the physician-to-popula- tion ratio will evolve in Canada in the coming years (figure 1). Clearly, without Physicians 1,500 a significant addition of foreign-trained Physicians added doctors, the Canadian physician-to- population ratio will decline between now and 2017,5 just as it would have 1,000 through the 1990s if foreign physicians 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 had not been used to make up for the shortfall caused by insufficient medical school admissions. Sources: AFMC (2007); McArthur (1999a); OECD (2008); and Ryten et al. (1998); calculations by author. Conclusion
The current physician supply in Can- the number of students who enrolled constant 3.3% of the current physician ada is clearly insufficient to meet the in medical schools in Canada and the population over time (which is equal to demand for physician care under the number of students who were awarded the addition of 2,000 new physicians in present structure of Medicare,6 and M.D.s from 2000 onwards, it is possible 1996, the low-middle point in the Ryten falls well short (in terms of the supply to estimate the number of new Cana- et al. estimates above).3 It also assumes of physicians relative to population) of dian-trained physicians who will be that only Canadian-trained doctors will what is being delivered in other devel- entering the workforce up to 2017.2 As be added to the physician supply be- oped nations that also maintain univer- figure 4 shows, if 88% of medical school tween 2006 and 2017.4 sal approaches to health care insurance. graduates are part of Canada’s physician This replacement rate is a conserva- Without a significant intake of foreign supply seven years after graduation, and tive estimate: at present approximately physicians, the physician-to-population if only 97% of those admitted to medical 35.9% of Canada’s physicians are aged 55 ratio will fall in the coming years because school graduate (as was the case for the or older (CMA, 2008), which suggests there are not enough new doctors being class of 1989), then current enrollment that the number of physicians needed trained in Canada. It would seem that and graduation rates suggest that only to replace those who retire or die (900 a government-imposed limitation on 2,095 Canadian-trained students will be to 1,100 doctors in the mid-1990s) will the number of physicians being trained added to the physician supply in 2017. rise significantly in the coming years. in Canada is a policy choice that is not Figure 4 also shows the number of In addition, this estimate does not take serving the best interests of Canadians, new physicians required to maintain the into account the effects of demographic be they patients in need of a physician physician-to-population ratio. This num- changes in the physician workforce, the or capable students who wish to become ber exceeds the number of Canadian- consequence of which may be that, in doctors but are unable to access medical trained physicians entering the work- the future, more physicians will be re- training in this country. force every year through 2017, though quired to deliver the same volume of this difference is small in 2017. This num- services being provided today (see, for Notes ber of physicians required assumes that example, Esmail, 2007). Furthermore, the number needed to replace those lost this is only the number of new physi- 1 The methodology used for age-adjustment to death, retirement, or emigration, and cians required to maintain the stock of here is that employed by Esmail and Walker to keep up with population growth is a physicians, which is clearly insufficient (2007).
16 Fraser Forum 11/08 www.fraserinstitute.org Canada’s physician supply
2 This estimate uses graduation rates for practice, and pricing, and to introduce user McArthur, William (1999a). The Doctor students awarded M.D.s between 2000 and charges. This would increase the supply of Shortage (Part 1). Fraser Forum (June): 2007 (who, between 2007 and 2014 will be services while simultaneously encouraging 15–16, 18. at the same point in their careers as the stu- more informed use of medical practitioners’ McArthur, William (1999b). The Doctor dents studied by Ryten et al.), and enroll- time (thus reducing the demand for treat- Shortage (Part 2). Fraser Forum (July): ment rates for students entering medical ment overall and improving the allocation 20–21. school between 2004/2005 and 2006/2007 of physician manpower and effort). Such a who will, in general, be at the same point change in policy would bring Canada more Mullan, Fitzhugh (2005). The Metrics of the in their medical careers between 2015 and in line with some of the world’s top-per- Physician Brain Drain. New England 2017 as the students studied by Ryten et al. forming universal access health care pro- Journal of Medicine 353, 17: 1810–18. were in 1996 after graduating in 1989. All grams (Esmail and Walker, 2007). Unfor- graduation and enrollment rates are from tunately for Canadians, the introduction of Or, Zeynep (2001). Exploring the Effects of AFMC (2007). user fees and extra billing are not permitted Health Care on Mortality across OECD under the current federal legislation guid- Countries. Labour Market and Social 3 This replacement value is smaller than the ing Medicare. The analysis here takes the Policy – Occasional Papers No. 46. 3.5% estimate of physicians leaving prac- current legislation as given and discusses OECD.
Alan W. Dowd could have done much less. In the end, he in and around Hawaii. In December followed the Hippocratic Oath when it 2003 then-Japanese Prime Minister Ju- In 2005, after then-Prime Minister Paul came to missile defense: he did no harm. nichiro Koizumi gave military officials Martin decided Canada would not par- By endorsing missile defense, Clinton the go-ahead for construction of a Japa- ticipate in the US-led international mis- reflected the emergence of broad agree- nese missile defense system, in close sile defense system (IMD), Washington ment in the US on the issue. As General partnership with the United States. moved ahead without Ottawa, as ex- Henry Obering, director of the United Word of Australia’s participation in the pected. What was less expected, perhaps, States Missile Defense Agency (MDA), IMD coalition also came in December was the very different reaction Washing- observes, today’s missile defense pro- 2003 (Dobell, 2003, Dec. 5). The United ton’s missile defense plans received in gram is the product of four administra- States and Australia signed a 25-year pact other allied capitals—and the wide-rang- tions, 11 Congresses, and $115 billion in on missile defense cooperation in 2004. ing progress missile defense has made. US investment (Obering, 2008a). It was also in 2004 that Ottawa for- Missile defense advocates can be Thanks in part to this convergence mally notified Washington of its desire thankful that the IMD coalition didn’t of opinion on missile defense, Bush was to participate in the blossoming missile wait on Canada. able to accelerate the program. First, he defense program. Citing “the growing notified Moscow of America’s intentions threat involving proliferation of ballistic Yesterday to scrap the anachronistic Anti-Ballistic missiles and weapons of mass destruc- Missile (ABM) Treaty. He promised to tion,” Canadian defense minister David Before recapping IMD’s progress slash America’s nuclear arsenal from Pratt informed his US counterpart that since Martin politely rebuffed President 6,000 warheads to 1,700 and assured the the Martin government envisioned “a George W. Bush, it pays to recall some of Russians that IMD would not upset the mutually beneficial framework to ensure the history that preceded Martin’s sur- US-Russia deterrent balance. At the time, the closest possible involvement … in prising reversal. Vladimir Putin agreed, albeit less than the US missile defense program” (Pratt, Some critics of IMD—in both Can- wholeheartedly, concluding that Wash- 2004). That same year, Ottawa ordered ada and the United States—believe ington’s decision “does not pose a threat Canadian personnel at the North Amer- it was Bush who forced the issue and to the national security of the Russian ican Aerospace Command to share mis- pushed missile defense from the realm Federation” (BBC News, 2001, Dec. 14). sile-launch information with their US of theory into the arena of international Then Bush began to build the IMD counterparts (Struck, 2005, Feb. 25). politics. In fact, this shift began in the coalition. But then Martin had a change of late 1990s, after a Congressional com- In February 2003, the British gov- heart, and Canada backed out in 2005. It mission raised a number of warnings ernment agreed to needed upgrades was not exactly a profile in courage. As about ballistic missile threats and, as if of ground-based radar stations in the the Globe and Mail editorialized, “When on cue, North Korea test-fired a three- United Kingdom. Denmark soon ap- Mr. Martin put his finger in the air over stage rocket. President Bill Clinton then proved similar upgrades at radar and missile defense, he felt a chill” (Struck, signed legislation that paved the way for satellite-tracking stations in Greenland. 2005, Feb. 25). deploying a system “as soon as is techno- Tokyo had been cooperating quietly In a recent Fraser Institute report, logically feasible” to defend against “lim- with Washington on missile defense Alexander Moens, Sean McCarthy, and ited ballistic missile attack” (National since the late 1990s. But it was not un- Cassandra Florio concluded that “Can- Missile Defense Act of 1999). til February 2003 that Japan’s Defense ada worsened the situation by delaying its Clinton’s critics say he could have Agency announced its intention to join decision and eventually refusing to take done more, which is true. But he also the US military for missile defense tests any responsibility for cost-free participa-
18 Fraser Forum 11/08 www.fraserinstitute.org Missile defense goes global
tion in ballistic missile defense” (Moens Today, there are 32 (Arms Control Asso- ceptor missiles on Polish soil. The bed et al., 2007: 3). As Moens and Barry Coo- ciation, 2007). As many as 12 of them are of interceptors will work in tandem with per explained in an earlier study, the costs unfriendly, unstable, or uncertain about a new radar facility in the neighbouring to Canada of participating in the missile their relationship with the West.1 With Czech Republic. defense program would have been low— twin terror programs that seek to match To prepare Moscow for this eventual- “a near free ride”—and the benefits high rockets with nuclear weapons, North ity, US officials held 10 formal IMD dis- (Moens and Cooper, 2005). Korea and Iran top this list. cussions with their Russian counterparts “The Bush administration had asked In July, Obering reported, “Iran or- in 2006 and 2007. Washington even of- for little more than moral support for chestrated launches of several short- and fered to allow Russian personnel to be the new system,” as the New York Times medium-range ballistic missiles capable stationed at IMD facilities in Central observed (Krauss, 2005, Feb. 27). But of striking Israel and the US bases in the Europe. Martin lacked the political capital to Middle East” (Obering, 2008b). However, Moscow was not pleased provide even that. Once deployed, Iran’s latest variant of with the deal. “Poland,” warned Russian Then-official opposition leader Ste- the Shahab rocket will be able to hit tar- General Anatoly Nogovitsyn, “is expos- phen Harper criticized Martin’s decision gets in southern Europe and across the ing itself to a strike” (AP, 2008, Aug. 15). at the time, and during his first bid for Middle East. The Defense Intelligence Russian foreign minister Sergey Lavrov prime minister raised the possibility of Agency estimates that “Iran could have called the basing of US interceptors in reopening talks with Washington on mis- an ICBM [intercontinental ballistic mis- Poland “a threat to Russia’s security” (AP, sile defense. As prime minister, Harper sile] capable of reaching the United States 2008, Sep. 11). has hinted at his support for the program, by 2015,” Obering notes, ominously add- To cut through all of Moscow’s bluster, noting, as the Associated Press reported ing, “We should not assume that we have consider an everyday example: few of us in 2007, that he recognizes the need for full understanding of ballistic missile ac- would think of a cop wearing a bullet- “a modern and flexible defense system” tivities around the world. We have been proof vest as threatening, but most of us against missile threats (AP, 2007, Mar. 5). surprised in the past” (Obering, 2008a). would consider a gunman loading his But trying to corral a minority gov- That brings us to the current regime weapon as provocative and threatening. ernment has pushed missile defense to in North Korea. Over the past decade, The gunman that the IMD coalition the bottom of Harper’s inbox. The re- Pyongyang has test-fired long-range is worried about is not in Moscow, and sult: Harper’s hopes remain in a hold- rockets and detonated a nuclear weapon, the bullet-proof vest offered by IMD is ing pattern and Canada remains on the surprising Western intelligence agencies not designed to neutralize Russian mis- sidelines. on both occasions. This September, we siles. Putin and his generals know this. It’s worth noting that other voices in learned that North Korea conducted tests It pays to recall that, due to both the Canada have expressed support for mis- on rocket engines for a newer long-range placement of the system and the num- sile defense. In 2006, for instance, the missile and constructed a new facility for ber of Russian missiles, IMD elements defense committee of the Canadian Sen- ICBM tests—and launches (Hess, 2008, in Poland could never defend against ate endorsed participation in the IMD Sep. 10; Harden, 2008, Sep. 17). Russia’s arsenal. “Ten interceptors in program, with a note of common sense. Yet if proliferation gives us reason to Poland could absolutely not match the “If there is the tiniest chance that it could worry, IMD’s important strides this year hundreds of interceptors and thousands [work], why would we turn up our noses offer reason for hope. of warheads that the Russians have de- at the opportunity to be a partner in On the diplomatic front, NATO of- ployed,” Obering observes (2008b). this project?” a committee report asked ficially endorsed the IMD system - dur Plus, as an MDA report explains, (CBC News, 2006, Oct. 5). ing its summit in Bucharest earlier this “There would not be sufficient time to de- year. No longer noncommittal on mis- tect, track, and intercept” Russian mis- Today sile defense, the alliance now envisions siles launched toward North America us- a “NATO-wide missile defense architec- ing the radars and interceptors planned We can debate IMD’s chances for success, ture” that will extend “coverage to all Al- for Central Europe (MDA, 2007: 8). but one thing is certain: the chances that lied territory and populations not other- a rogue missile attack or accidental mis- wise covered by the United States system” Tomorrow sile launch will occur are growing. (NATO, 2008). Three decades ago, there were nine In August, Poland and the United Beyond Europe, Washington and countries that possessed ballistic missiles. States agreed on deployment of inter- the United Arab Emirates (UAE) an-
www.fraserinstitute.org Fraser Forum 11/08 19 Missile defense goes global
20 Fraser Forum 11/08 www.fraserinstitute.org NATO (2008). Bucharest Summit Decla- ration. News release (April 3).
Figure 1: Carbon dioxide emissions in Figure 2: Carbon dioxide emissions in Canada Canada from light-duty vehicles compared from light-duty vehicles, 1990, 1995-2005
to total CO2 emissions, 1990, 1995-2005
1,000,000 Total 50,000 Light-duty vehicles 800,000
600,000
45,000 400,000 Kilotonnes Kilotonnes
200,000
0 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 40,000 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Source: Environment Canada (2007: Annex 8). Source: Environment Canada (2007: Annex 8).
Years of government nagging have increase the risk of fatalities in crashes— Consequently, the number of vehicle largely failed to induce drivers to forego and not just crashes with larger vehicles. miles traveled actually increases overall their autos for a bus or to slow their According to the National Academy of when fuel efficiency is improved, result- speed for a hypothetical risk. Mean- Sciences (2002), the “downweighting” ing in no net reduction in fuel consump- while, billions of dollars in subsidies and downsizing of autos likely resulted tion or emissions. Meanwhile, to the already are supporting the develop- in an additional 1,300 to 2,600 traffic fa- extent that the regulations increase the ment of so-called renewable fuels. But talities in 1993 alone. sticker prices of new vehicles, consumers petroleum substitutes are hardly envi- Researchers at Harvard University tend to delay a new car purchase, which ronmentally benign, and they remain and the Brookings Institution likewise keeps older, less fuel efficient vehicles on too expensive to replace conventional found that, on average, for every 100 the roads for longer periods of time.4 gasoline. pounds shaved off new cars to meet Quebec officials apparently have also Fuel efficiency already has increased Corporate Average Fuel Economy failed to consider the additional emis- measurably over time, a consequence (CAFE) standards, between 440 and 780 sions that would be generated by the of improved aerodynamics, reduced additional people were killed in auto ac- manufacture of vehicle components engine friction, direct fuel injection, cidents, or a total of 2,200 to 3,900 lives from lightweight materials such as alu- and front-wheel drive, among other ad- lost per model year. Using data from the minum, plastics, or composites needed vances. For example, the maximum fuel National Highway Traffic Safety Admin- for downsizing. According to a recent efficiency of passenger vehicles traveling istration (NHTSA) and the Insurance study by the National Academy of Sci- at 60 miles per hour was 17.5 miles per Institute for Traffic Safety, USA Today ences (2002), “while increasing [fuel ef- gallon in 1973; by 1997, the maximum calculated that size and weight reduc- ficiency] standards might reduce green- efficiency exceeded 31 miles per gallon tions of passenger vehicles undertaken house gas emissions from automobile (US Department of Energy, 2008). to meet CAFE standards resulted in tailpipes, these reductions would be Reducing the overall weight of a ve- more than 46,000 deaths. offset by increases in emissions from hicle delivers the most significant fuel There have been other unintended the new technologies needed to produce savings, but it also entails the most dire consequences to regulating fuel effi- more efficient cars.” risks. A variety of studies have docu- ciency. For example, stricter standards Since 1992, the government of Que- mented that smaller, lighter vehicles allow drivers to travel farther at less cost. bec has pledged allegiance to United
22 Fraser Forum 11/08 www.fraserinstitute.org Cars and climate change
Figure 3: Mean maximum temperatures in Environment Canada (2002b). Canadian Montreal (January and June), 1976 to 2007 Climate Data. Last updated April 11, 2005.
Maureen Hazel The health insurance market ernment subsidies intended to assist in the payment of premiums3, 4 (Statistics Health care expenditures are grow- The Dutch system is one of universal Netherlands, 2008). ing faster than GDP in most developed coverage delivered through private insur- Any supplementary insurance must nations—and Canada is no exception ers only. Fourteen insurance companies be paid for by the individual. Notably, (Kotlikoff and Hagist, 2005). In fact, (van de Ven and Schut, 2008) provide more than 90% of Dutch citizens pur- Canada spent 10% of its gross domestic basic coverage (the contents of which are chase additional coverage for services product on health care in 2006, up from determined by government) using a com- such as dental care for adults, physio- 8.8% a decade earlier (OECD, 2008). Yet, munity-rated premium.1 Insurers who therapy, eyeglasses, alternative medicine, despite high levels of spending, Canada cover an above-average mix of high-risk and select cosmetic surgeries (van de has been shown to provide substandard individuals are compensated through a Ven and Schut, 2008). access to health care services (Esmail risk equalization fee from the tax-funded In addition to government-deter- and Walker, 2007). Risk Equalization Fund (REF).2 mined basic coverage and the coverage However, as reforms in countries The government-determined stan- provided by optional supplemental in- such as Sweden and Switzerland show, dard package of benefits is fairly generous surance, the tax-financed Exceptional costs can be reduced and access im- and incorporates virtually all essential Medical Expenses Act (AWBZ) ensures proved by introducing competition. care, including medical care (all services that citizens are insured for expenses in Competition can also have an important by GPs, hospitals, medical specialists, seven other areas: household care, per- and beneficial impact on health expen- and obstetricians), hospital stays, dental sonal care, nursing, supportive guidance ditures (Lofgren, 2002; Gerdtham et al., care for those aged 18 years or younger, (e.g., help with organizing one’s daily life, 1997; Herzlinger, 2004). By promoting specialist dental care and false teeth for day care), activating guidance (e.g., help responsiveness to consumer preferences those older than 18, select medical ap- with adapting one’s behaviour or learning and greater efficiency, competition pliances, pharmaceuticals, prenatal care, new skills), treatment (e.g., rehabilitation means that consumers can get better patient transport (e.g., ambulance), and after a stroke), and accommodation (e.g., value for their money. paramedical care (Klazinga, 2008). sheltered housing, constant supervision, In this regard, the Netherlands of- Citizens must buy private health institutionalization) (Netherlands, Min- fers a prime example of what competi- insurance from the company of their istry of Health, Welfare and Sport, 2007). tion can do for a health care system. On choice, and are able to switch their in- Applicants can choose to receive services January 1, 2006, the country markedly surer and/or plan once a year (de Jong in kind or receive cash payments. increased competition in the health in- et al., 2008). Insured individuals are also The success of the insurance mar- surance market by introducing a set of responsible for covering deductibles, but ket reforms can be assessed in two health care reforms that allow consum- will be refunded a portion of their pre- ways: whether the insured are shopping ers to shop around and choose their own mium if they do not receive care during around and switching insurers accord- insurers. While there is still a need for the insurance period (Dudgeon, 2007). ing to their preferences, and whether in- further reforms in the health care de- Of the total cost of insurance, 50% of surers are competing among themselves livery market, the Dutch system is an total premium payments are paid by in- by providing competitive premiums. example of how combining competition dividuals as a direct premium payment Shopping for insurance has been fa- and consumer responsibility with uni- to insurance companies, while the other cilitated by a Dutch government website versal coverage can help contain costs 50% is paid by the REF (essentially, by where consumers can compare price, and ensure basic coverage for all, regard- employers). Those having incomes be- services, supplementary insurance, con- less of ability to pay. low specific thresholds qualify for gov- sumer satisfaction, and performance
24 Fraser Forum 11/08 www.fraserinstitute.org Competition in health care
(http://www.kiesbeter.nl/). Preliminary inga, 2008). These budgets are fixed, surers to access the most efficient care data reveals that 18% of those insured irrespective of services provided, and for their customers: limited financial switched insurers in 2006 (Douven et al., vary according to hospital administra- risk for insurers, limited price negotia- 2007). There is evidence that switching is tive parameters such as number of beds, tions for hospitals, and limited selective motivated by consumer preferences: in- nursing day admissions, and specialists’ contracting between insurers and pre- surers with higher premium levels were beds (Van De Ketterij et al., 2002). Un- ferred providers. found to have a greater chance of seeing der this system, there are fewer incen- increased numbers if they had greater tives to improve efficiency than there Going further with the Dutch perceived quality (Douven et al., 2007). would be if all hospital production were system Also, insurer mark-ups (above health DTC-funded (Esmail, 2007). care expenditures) are low and not in- In response to the factors limiting The Dutch reform has had apparent suc- creasing, suggesting increased competi- the control insurers have over efficiency cesses in the insurance market but less tion on premiums among insurers. In- and health care expenditures, an exten- success in the health care purchasing deed, mark-ups were “lower [in 2006] sive safety net has been established. Four market. The potential for market forces than the operating expenses of many ex-post payment schemes were devel- to drive down the price of hospital care former public health insurance funds oped and covered by the REF: high-risk has been limited by regulations that sti- and private insurance companies in the past” (Douven et al., 2007: 4). This The Dutch model has been praised for attaining mark-up fell between 2006 and 2007, though insurers faced an estimated €570 “health insurance for everyone, coupled with a million and €40 million loss on basic tighter lid on costs.” Canada, on the other hand, insurance packages and supplementary packages, respectively, in 20065 (Dou- has been shown to provide substandard access to ven et al., 2007). It is too early to predict health care services at a relatively high cost. how premiums will evolve over time.
Health care purchasing market equalization, retrospective equalization, fle incentives for hospitals and insurers retrospective adjustment of hospital and hinder their ability to focus on de- Optimally, health care providers care costs, and a bandwidth scheme for livering more efficient and cost-effective should compete for patients by provid- hospital care costs (see Douven et al., services in their contracts. Furthermore, ing quality health care at a reasonable 2007, for details).8 These schemes greatly hospitals are denied flexibility in their cost. In the health care purchasing mar- reduce costs (and thus risks) for a given pricing strategies with insurers, and ket in the Netherlands, the most poten- insurer in the event that its hospital care there is little information on provider tial for improvements in efficiency un- costs exceed that of other insurers and quality, which in turn reduces incentives der the newly introduced structure can therefore undermine competition. for insurers to contract more selectively. be found in the marketplace for hospital Selective contracting can also have care. Notably, individual insurance com- important beneficial impacts on both Comparison with Canada panies do not yet have a large amount of prices and quality in the marketplace. influence on charges for family doctors However, the majority of insurers in the The Dutch model has been praised for or drug-prescribing behaviour.6 Netherlands have contracts with nearly attaining “health insurance for every- Dutch hospitals are mostly private all hospitals, suggesting that they fear los- one, coupled with a tighter lid on costs” non-profit organizations whose care is ing customers since premiums do not yet (Naik, 2007, Sep. 6). Canada, on the other financed by health insurers. Ten percent differ significantly between free-choice hand, has been shown to provide sub- of all hospital services are reimbursed and limited-choice insurance policies standard access to health care services at according to “diagnosis treatment com- (Douven et al., 2007). Moreover, a lack of a relatively high cost (Esmail and Walker, binations (DTCs),” a classification of information regarding provider quality 2007). While data on the post-reform per- hospital cases into groups with similar may have restricted insurers’ willingness formance of the Dutch health care system hospital resource use.7 The other 90% to select providers (Douven et al., 2007). is limited due to the fact that the reform of services are reimbursed through In sum, three main factors have re- is still fairly recent, some indicators are “function-oriented budgeting” (Klaz- stricted the ability and incentives of in- available to compare the two systems.
www.fraserinstitute.org Fraser Forum 11/08 25 Competition in health care
Figure 1: Health outcomes for Canada and the Netherlands, 2004 Prior to the 2006 reforms, the Dutch experienced worse health outcomes than 2,500 Canadians (figure 1) while spending less on health care as a percentage of GDP Canada (figure 2). According to the most recent 2,000 The Netherlands OECD health data (figure 2), Canada has had consistently higher spending relative 1,500 to its GDP than the Netherlands between 1997 and 2006. This has been coupled 1,000 with better health outcomes, as measured by mortality amenable to health care, po- and cancer ratios tential years of life lost, and breast can-
Mortality per 100,000 cases 500 cer and colorectal cancer ratios (Esmail and Walker, 2007; Nolte and McKee, 0 2008).9, 10 Since the Dutch health care MAHC (2002/03) PYLL (2003) Breast cancer Colorectal cancer system seems to have provided inferior mortality (2002) mortality (2002) outcomes for less expenditure, it is not clear which system was more efficient in terms of reducing mortality. Notes: 1 Mortality Amenable to Health Care (MAHC) represents mortality per 100,000 cases where More recent information, however, death considered preventable. collected after the 2006 reforms, sug- 2 Potential Years of Life Lost (PYLL) represents mortality per 100,000 cases where death gests that the Dutch are receiving fairly considered preventable, weighted by years left to live. quick access to health care services 3 Breast cancer and colorectal cancer ratios represent the ratios of incidence (per 100,000) compared to Canadians. According to over mortality (per 100,000). a survey conducted by the Common- Sources: Esmail and Walker (2007); Nolte and McKee (2008). wealth Fund (Schoen et al., 2007), wait times for an appointment with a doctor, surgery, or ER treatment in Canada are substantially longer than they are in the Figure 2: Health care expenditures as a percentage Netherlands (figure 3). Thus it seems of GDP, 1997-2006 that while the Dutch spend less than Canada on their universal access health 12 insurance program, they are receiving quicker access to health care services. Unfortunately, there are no comparable Canada wait time series data available. 10 Conclusion
The Netherlands Competition will, in any market, pro- mote responsiveness to consumer pref- 8 erences as well as greater efficiency. The Percentage of GDP Netherlands, along with Germany, Swit- zerland, Belgium, and the United States among others, has introduced compe- tition between health insurance com- 6 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 panies in order to improve quality and lower costs. Since its implementation in 2006, the Source: OECD (2008). Dutch health care reform has resulted
26 Fraser Forum 11/08 www.fraserinstitute.org Competition in health care
Figure 3: Selected wait times for Canada and the Netherlands 5 It is still unclear how mark-ups will evolve based on survey responses, 2007 in coming years and whether insurers will increase their mark-ups once a customer base is built. 50 6 Currently, family doctors receive capita- Canada tion (per head) payments, and their con- 40 The Netherlands tracts are negotiated with insurers. Phy- sician payments are expected to become 30 increasingly DTC-based (Klazinga, 2008). Competition is also limited in the control of drug prices since they are set out in a vol- 20 untary agreement between the Ministry of Health, Welfare and Sport and the pharma- cists, health insurers, and drug manufactur- 10 ers (Douven et al., 2007). Percentage of respondents
0 7 This figure is expected to rise to 20% in Waited for surgery Waited to see doctor Waited in ER 2008 (Douven et al., 2007). 6 months or more 6 days or more 2 hours or more 8 High-risk equalization means that 90% of costs over a certain threshold are divided Source: Schoen et al. (2007). among insurers. Retrospective equalization means that 30% of additional costs (above the average for all insurers) incurred for hos- premium applies to every member within in increased competition in the health pital care are divided among insurers. Ret- each of the 12 Dutch provinces and does not rospective adjustment of hospital care costs insurance market, as consumers shop vary with age or risk (Stam, 2007). around for insurers with the best price- means that 35% of costs are reduced retro- to-perceived quality of insurance service 2 The REF is funded by income-related spectively. Finally, the bandwidth scheme ratios. Contracting between insurers contributions paid by the insured through for hospital care costs means that any costs above a certain threshold, after the three and providers of care, however, has been taxes. Employers reimburse the insured for first adjustments, will be cut by 90%. limited due to excessive financial protec- the entire contribution. These contributions represent 6.5% of the first €30,000 of annual tion of insurers and restrictions on hos- 9 The infant mortality rate in Canada (5.4 taxable income or 4.4% for those without an per 1,000 live births) is lower than it is in the pital pricing. A further liberalization of employer (Klazinga, 2008). The government Netherlands (4.9 per 1,000 live births). Fur- the health care market—specifically, in also contributes to the fund for children un- thermore, the rate of improvement in infant terms of the delivery of health care ser- der 18 years of age. mortality over the most recent five-year vices—would enable competitive forces period is higher in the Netherlands, which 3 The Care Allowance Act stipulates that to improve efficiency in the purchase of experienced a 9.3% improvement, than it the recipient of the subsidy and his or her health care services. is in Canada, where the rate declined 3.8% partner must have an income of less than Despite a need for reforms in the (OECD, 2008; calculations by author). €40,100. The claimant receives the maxi- health care delivery market, the Dutch mum yearly subsidy of €1,155 if the couple’s model is a promising avenue in light of 10 In Canada, mortality amenable to health combined income is less than €17,500. A re- care was 76.83 per 100,000, compared to spiraling health care costs in Canada cipient without a partner must earn €25,100 81.86 per 100,000 in the Netherlands. Poten- 11 and around the world. The Dutch sys- or less. A claimant who earns €17,500 or less tial years of life lost were 2,345 per 100,000 tem offers a combination of competition, receives the maximum yearly subsidy of in Canada and 2,484 per 100,000 in the consumer responsibility, and universal €403 (Statistics Netherlands, 2008). Netherlands. Breast cancer and colorectal coverage, which can help contain costs cancer ratios (incidence over mortality) 4 The financial impact of the reform on and ensure basic coverage for all, regard- were 25.0 and 38.2, respectively, in Canada households depends on their previous in- less of ability to pay. and 31.7 and 46.5, respectively, in the Neth- surance status (social health insurance or erlands. See Esmail and Walker (2007) for private insurance) and their age (if they a discussion on how these are indicative of Notes were covered by private insurance). One health system performance. study shows that the purchasing power par- 1 Health insurers are free to set their own ity of households increased by 1.5% in 2006 11 Incidentally, the Dutch model is, in many premiums, with the restrictions that the (Greb, Manouguian, and Wasem, 2007). ways, similar to the 15-year-old Swiss model, www.fraserinstitute.org Fraser Forum 11/08 27 Competition in health care
which also maintains a competitive private www.commonwealthfund.org/usr_doc/ Schoen, Cathy, Robin Osborn, Michelle M. insurance marketplace within a universal Netherlands_Country_Profile_2008. Doty, Meghan Bishop, Jordon Peugh, access health insurance model (Federal So- pdf?section=4061>. and Nandita Murukutla (2007). Toward cial Insurance Office of Switzerland, 2006). Higher-Performance Health Systems: Kotlikoff, Laurence J., and Christian Hagist Adults’ Health Care Experiences in Sev- (2005). Who’s Going Broke? Comparing en Countries, 2007. Health Affairs 26, 6 References Healthcare Costs in Ten OECD Coun- (Web exclusive): w717–34. tries. NBER Working Paper Series No. de Jong, Judith D., Atie van den Brink-Mui- 11833. 28 Fraser Forum 11/08 www.fraserinstitute.org Water rights under threat in Quebec Bill 92 ignores property rights, market forces Diane Katz & ples of the provincial economy. The im- at Environment Canada (2003), “[a] loss Jean-Francois Minardi position of a costly regulatory scheme of this magnitude does not appear to be would thus dissuade investors and un- placing significant pressure on water re- The government of Quebec is proposing dercut the economy. sources” (table 1). to abolish all private property rights to The proposed legislation is riddled The legislation prescribes the applica- water and to empower regulators to dic- with vague and arbitrary provisions, and tion of the “prevention principle” to wa- tate who may use water, how much they it grants virtually limitless regulatory ter regulation—that is, the principle that may use, and how they may use it. Propo- power to the minister of sustainable de- environmental quality is best achieved by nents claim that such measures are nec- velopment, environment and parks. For avoiding pollution rather than mitigating essary to protect the natural resources of example, all water withdrawals of 75,000 impacts. But it is possible to ascribe risk the province. But such overzealous regu- litres or more per day would require au- to almost any use of water and thereby to lation offers no guarantee that water will thorization from the minister who, at her prohibit many perfectly legitimate—and be apportioned wisely. Instead, it prom- discretion, may “refuse to issue or renew economically beneficial—activities. ises to politicize every aspect of water an authorization, or, on the minister’s Quebec’s water supplies are hardly use, dissuade industrial investment, and own initiative, modify the conditions to threatened. The province contains 20% deprive citizens of basic rights. which it is subject.” of Canada’s freshwater land area and en- Bill 92, if enacted, would declare There already exist prohibitions on compasses more than 3% of the world’s both surface water and groundwater to bulk water withdrawals and diversions fresh water reserves (Environment be “part of the common heritage of the under provincial, federal, and inter- Canada, 2004). The renewable reserves Québec nation” and off limits to appro- national law. However, the proposed of groundwater in Quebec’s inhabited priation “except under the conditions legislation is specifically structured for regions total an estimated 200 cubic ki- defined by law.” Currently, surface water subsequent imposition of water royal- lometres (200 trillion litres), according is considered to be a public resource, but ties. Indeed, at the press conference to the Ministry of Sustainable Develop- legal precedent in the province holds following her introduction of Bill 92 ment, Environment and Parks. Still, 75% that property owners have a claim to the last year, Line Beauchamp, minister of of Quebecers are concerned that provin- groundwater beneath their land. sustainable development, environment cial water reserves will be commercial- This is no small matter for several mil- and parks, announced that water royal- ized (Girard, 2007, Oct. 14). Moreover, lion Quebecers whose private wells con- ties would be imposed in the near future 66% of Canadians surveyed in 2004 stitute their primary source of drinking (Radio-Canada, 2008, June 5). opposed the idea of water sales to the water. Indeed, nearly half the population Agriculture and industry do siphon United States (EKOS Research Associ- of the province relies on the groundwater hundreds of millions of litres of water ates, cited in Lasserre, 2005: 7). beneath their property (Quebec, Minis- from the Great Lakes-St. Lawrence River try of Sustainable Development, Envi- Basin. But Canadian withdrawals have Who owns the water? ronment and Parks, 2003). To terminate declined by 30% since the mid-1990s these private property rights would con- (Environment Canada, 2003). Moreover, The policy framework adopted by the stitute a massive transfer of wealth from the vast majority of waters withdrawn are province in 2000 noted “a certain ambi- citizens to the government.1 returned to the basin, often after treat- guity with respect to defining the legal Economic growth and investment ments that improve water quality. Only status of water, leading to many debates in Quebec are also at stake. Industry about 5% is actually “consumed” (de- as to its ownership” (Quebec, Ministry and agriculture—both of which require pleted) by human activity (Environment of Sustainable Development, Environ- ready access to water supplies—are sta- Canada, 2003). According to researchers ment and Parks, 2002). www.fraserinstitute.org Fraser Forum 11/08 29 Water rights under threat Table 1: Uses of water withdrawals in Quebec, 2002 ment. To get this catchment authoriza- tion, environmental and hydro-geologi- Uses of water withdrawals Millions of litres per day cal studies must be conducted and must Public 4,164 show that water catchment will not have Domestic 271 harmful effects on the environment or on Irrigation 34.9 the quantity of water available for neigh- bouring activities. This legal supervision Livestock 72.3 ensures the public that there will not be Industrial 475 excessive pumping by bottlers that could Fossil Fuel 178 degrade the resource or deprive neigh- Hydro Power 1,150,371 bours of access to the resource. The fears Total 1,155,566 of local communities when a bottling plant is installed are thus unfounded.” Among some environmental activists, Source: Great Lakes Commission (2002). bottled water is Public Enemy No. 1. For example, the municipality of London, The government of Quebec, in its try of Sustainable Development, Envi- Ontario, has banned the sale of bottled 2002 Quebec Water Policy, attempted to ronment and Parks, 2000). water in municipal buildings. The City of end the debate with a simple declaration: As previously noted, enacting Bill 92, Toronto is slated to consider such a ban “Water, both surface and groundwater, is in its current form, would extinguish this fall. Vancouver, Kitchener, and Ot- recognized in the Civil Code of Quebec those private property rights. While for tawa also have shown interest in a similar as something whose use is common to some this may seem justified for the sake prohibition (Tison, 2008, Aug. 22). But all, subject to rights of use or limited of protecting the water table, evidence in reality, withdrawals related to the bev- appropriation rights that may be recog- abounds that private property rights, in erage industry, in general, and bottled nized.” The status of water as “common many cases, result in superior environ- water specifically, do not approach those to all” effectively empowered the provin- mental stewardship than government of industry and agriculture (Côté, 2006). cial government to regulate all water use regulation (Anderson and Leal, 2001). According to the Quebec Water Bottlers’ (Quebec, Ministry of Sustainable Devel- Association, spring-water bottlers use opment, Environment and Parks, 2002). The bottled water exemption only 0.08% of the annual total volume of Bill 92 is an attempt to codify that groundwater extracted in Quebec. declaration as well as other elements of Bill 92, if enacted, would prohibit the the Quebec Water Policy. The bill is con- out-of-province transfer of any water Conclusion trary, however, to legal precedence in the withdrawn in Quebec. However, the leg- province that suggests land owners do islation does exempt “water withdrawn Proponents of Bill 92 may be sincere have property rights to the groundwater … to be marketed for human consump- about ensuring the sustainability of beneath their parcel. As noted by Rob- tion, if packaged in Quebec in contain- Quebec’s water supplies. However, given ert Dutrisac (2002, Sep. 11) in Le Devoir: ers of 20 litres or less.” the actual rates of withdrawal and con- “The jurisprudence suggests that water Quebec’s water-bottling industry is sumption, any fears of water depletion taken from the water table belongs to the undergoing rapid growth; it currently are overblown (figure 1). owner of the land lying above it, even if generates sales of $75 million a year (Ag- To the extent that local action might this water table is not often confined to a riculture and Agri-Food Canada, 2000). be warranted, government officials have single lot or a single piece of land.” However, the industry is already wholly ignored market-based incentives, The Ministry of Sustainable Develop- tightly regulated by the province. As such as tradable water rights, as a stew- ment, Environment and Parks likewise Daniel Colpron (2003), former presi- ardship method. But as noted earlier, recognizes landowners’ rights to ground- dent of the Quebec Water Bottlers’ As- property rights and market incentives water, stating on its website: “Under the sociation, explains: have proven far more effective than reg- Civil Code of Quebec, groundwater is “Since 1994, nobody can take water for ulation in protecting the environment. considered to be property under private bottling purposes without first obtaining As noted by researchers Clay J. Landry ownership linked to the ownership of a certificate of catchment authorization and Laurel E. Phoenix (2003), “there is immovable property” (Quebec, Minis- from the Quebec environment depart- a broad recognition and understanding 30 Fraser Forum 11/08 www.fraserinstitute.org Water rights under threat Figure 1: Types of water withdrawals in Quebec, 2002 brary of Parliament. Millions of litres per day Girard, Mario (2007, October 14). Eau: Line Beauchamp veut renforcer la réglemen- 200,000 tation. La Presse. Great Lakes Commission (2002). Great 100,000 Lakes Regional Water Use Database. 378 Amela Karabegović & African nations, along with Venezuela centage-point reduction in the $1-per-day Fred McMahon and Myanmar, continue to have the low- poverty rate and a 5.22 percentage-point est levels of economic freedom. The 10 na- reduction in the $2-per-day poverty rate. Canada ranked seventh, just ahead of tions with the lowest levels of economic As for non-monetary measures of the United States, in the latest global freedom are Zimbabwe (2.67), Angola poverty, the authors found that in mostly rankings of economic freedom released (4.10), Myanmar (4.19), the Republic of unfree economies (a rating of less than 5) by the Fraser Institute. Congo (4.64), Niger (4.67), Venezuela 72.6% of the population have access to Hong Kong once again ranked first (4.76), Guinea-Bissau (5.01), Central Af- safe water, while in the mostly free de- among the 141 nations and jurisdictions rica Republic (5.01), Chad (5.12), Rwanda veloping nations (a rating greater than 7), ranked in the Economic Freedom of the (5.23), and Burundi (5.23). nearly 100% have this access. Similarly, World: 2008 Annual Report. Another life expectancy for people in the mostly high-ranking jurisdiction was Chile Economic freedom and poverty free group is over 20 years greater than it which, at 6th place, was the first Latin is for those in the mostly “unfree” group. American country to break into the top The 2008 edition of the economic free- Furthermore, Norton and Gwartney 10. The 2008 report is based on 2006 dom report includes new research by found that for every 1,000 births, 64 data, the most recent available. Seth Norton and James Gwartney on the more infants survive in mostly free de- The cornerstones of economic free- relationship between economic freedom veloping countries per year than in the dom are personal choice, voluntary ex- and poverty in developing nations. Us- mostly unfree developing nations, and change, freedom to compete, and secu- ing both monetary and non-monetary for every 1,000 children under the age of rity of private property. In other words, measures of poverty, they found a posi- five, 109 more children survive in mostly economic freedom measures the extent tive relationship between economic free- free developing nations each year than in to which individuals and families are dom and poverty reduction. those countries that are mostly unfree. free to make their economic decisions For instance, the weighted (by pop- Overall, the authors found that nations regarding where to work, what to buy, ulation) $1-per-day poverty rate was with high rates of economic growth also what to sell, where to invest, and so on. 29.7% in 2004 for countries with eco- experience poverty reduction. Economic The index is based on 42 different nomic freedom ratings of less than 5, but freedom plays a key role in this process. measures which are grouped into five only 7.7% for countries with economic Research has shown that economic free- broad categories: (1) size of government; freedom ratings between 6 and 7. Fur- dom is the most important driver of eco- (2) legal structure and security of prop- thermore, Norton and Gwartney found nomic growth and prosperity. Economic erty rights; (3) access to sound money; (4) that the $2-per-day poverty rate declines freedom provides the institutions, such freedom to trade internationally; and (5) from 51.5% to 46.2% to 38.9% as one as rule of law and protection of private regulation of credit, labour, and business. moves from the least free (a rating of less property, that are necessary for entrepre- Economic freedom is measured on a than 5) to more free (a rating between 5 neurship and wealth creation. Without scale from zero to 10 where a higher value and 6) to the most free (a rating between these institutions, sustainable economic indicates a higher level of economic free- 6 and 7) developing nations. (No devel- growth is unachievable. dom. The top 10 most economically free oping nation in the sample had an eco- nations are Hong Kong (8.94), Singapore nomic freedom score greater than 7.) Reference (8.57), New Zealand (8.28), Switzerland Moreover, econometric analysis indi- Gwartney, James, and Robert Lawson with (8.20), United Kingdom (8.07), Chile cates that a one-unit increase in a nation’s Seth Norton (2008). Economic Freedom (8.06), Canada (8.05), United States (8.04), economic freedom rating between 1980 of the World: 2008 Annual Report. Fraser Australia (8.04), and Ireland (7.92). and 1995 was associated with a 5.21 per- Institute. 32 Fraser Forum 11/08 www.fraserinstitute.org Economic freedom Economic freedom in the Francophonie nations Louis-Philippe Beland shorter life expectancies at birth and 5.23); Chad (133rd, 5.12); Central African lower infant survival rates compared to Republic (134th, 5.01); Guinea-Bissau Francophonie nations have some of developed countries. One of the goals of (134th, 5.01); Niger (137th, 4.67); and the the lowest levels of economic freedom the OIF (2008) is to help its developing Republic of Congo (138th, 4.64). Mauri- in the world, according to a recently members integrate with the global econ- tius performed the best among the Fran- released Fraser Institute report, La lib- omy and effectively fight against poverty. cophonie developing nations, ranking erté économique dans la Francophonie As La liberté économique dans la Fran- 41st worldwide with a score of 7.26. (2008). In 2006, the Francophonie na- cophonie (2008) shows, a lot remains to Among the developing members, six tions had an average economic freedom be done. countries became considerably more score of 6.15, compared to 6.81 for the free between 1990 and 2006: Albania Commonwealth Nations, 6.70 for the Results3 (from 4.12 to 6.99), Bulgaria (from 4.08 Arab league nations, 6.66 for Central to 6.54), Democratic Republic of Congo and South America, and 6.26 for Asia Economic freedom is measured in five (from 3.28 to 5.14), Egypt (from 5.03 to (Gwartney and Lawson with Norton, areas: (1) size of government; (2) legal 6.79), and Romania (from 4.73 to 6.58). 2008; Beland et al., 2008). The Fran- structure and security of property rights; Francophonie developing nations cophonie nations are below the world (3) access to sound money; (4) freedom performed most poorly on measures of average in all five areas of economic to trade internationally; and (5) regula- legal structure and security of property freedom. The report, based on the Eco- tion of credit, labour, and business. Eco- rights. Twenty member countries scored nomic Freedom of the World: 2008 An- nomic freedom is measured on a scale of below 5.0 in terms of the quality of their nual Report, analyzes in detail for the zero to 10 where a higher value indicates legal systems. Six of them scored below first time the economic freedom of the a higher level of economic freedom. 3.0: Central African Republic (2.99), countries that are members of the Or- The average score of the Franco- Haiti (2.59), Togo (2.46), Republic of ganisation Internationale de la Fran- phonie nations was enhanced by the Congo (2.35), Chad (2.28), and the Dem- cophonie (OIF),1 and provides policy presence of six developed nations that ocratic Republic of Congo (2.06). recommendations for increasing eco- have relatively high levels of economic The rule of law—the enforcement nomic freedom and prosperity. freedom: Switzerland (4th in the world) of contracts, an impartial court system, The Economic Freedom of the World with a score of 8.20; Canada (7th) with and an independent judiciary—is es- index measures the degree to which the a score of 8.05; Luxembourg (21st) with sential to the protection of property and policies and institutions of countries a score of 7.58; Belgium (44th) with a the security of contracts, both of which support economic freedom. As shown score of 7.20; France (45th) with a score are cornerstones of a market economy. If by many peer-reviewed studies, eco- of 7.19; and Greece (54th) with a score the powerful can steal property or vio- nomic freedom is the most important of 7.03. late contracts at will, then they can build driver of economic growth and pros- The remaining Francophonie nations businesses and deprive the rest of the perity. Economic freedom has also been are developing nations that generally do population of economic freedom. With- found to reduce poverty, increase other very poorly overall and across different out the rule of law, economic growth freedoms, and improve quality of life.2 areas of economic freedom. Some of the and prosperity are not possible. Twenty-nine of the 35 members of Francophonie members are among the Francophonie developing nations the Francophonie included in the report least economically free nations of the also scored poorly on measures of free- are developing nations. They have low 141 countries ranked in the world index: dom to trade internationally and regula- GDP per capita and remain deplorable Democratic Republic of Congo (130th, tions measures. In terms of freedom to in terms of their development, having 5.25); Burundi (131st, 5.23); Rwanda (131st, trade, four countries scored below 5.0 www.fraserinstitute.org Fraser Forum 11/08 33 Economic freedom out of 10: Niger (4.46), Rwanda (4.39), Developing Francophonie nations fectively reducing the poverty of many Burundi (4.31), and Central African Re- need to focus on increasing economic of their citizens. public (4.03). In terms of their regula- freedom to promote growth and de- tions, six countries scored below 5.0: Ni- crease poverty. The Francophonie and, Notes ger (4.98), Egypt (4.93), Central African in particular, the Francophonie develop- 1 The 35 members of the Organisation Inter- Republic (4.91), Chad (4.81), Togo (4.77), ing nations should have three priorities: nationale de la Francophonie for which eco- and the Democratic Republic of Congo ■ Establish the rule of law in order to nomic freedom scores were computed are: (4.26). protect property rights, encourage Albania, Belgium, Benin, Bulgaria, Burkina Faso, Burundi, Cameroon, Canada, Central investment, and reduce corruption. Reducing poverty African Republic, Chad, Democratic Re- Without proper mechanisms of public of Congo, Republic of Congo, Côte dispute resolution and the security Because developing Francophonie na- d’Ivoire, Egypt, France Gabon, Greece, of property rights, many mutually tions have a low level of economic pros- Guinea-Bissau, Haiti, Luxembourg, Mace- beneficial exchanges are prevented, donia, Madagascar, Mali, Mauritania, Mau- perity and economic development, they thus undermining the market ex- ritius, Moldova, Morocco, Niger, Romania, also have high levels of poverty. Recent change system. Although crucial Rwanda, Senegal, Switzerland, Togo, Tuni- research shows that economic freedom for prosperity, improving the legal sia, and Vietnam. Associate members and reduces poverty. According to Seth W. system is a complex task that cannot observers have not been included. Norton and James D. Gwartney (and be achieved overnight. Developing Any state or government that wishes to join Lawson, 2008), authors of chapter 2 nations must be both determined the OIF must make a formal request. The of the Economic Freedom of the World: and patient, and should be inspired fact that French is not the official language 2008 Annual Report, there is a strong to follow in the footsteps of similar of the requesting country does not consti- positive relationship between eco- countries that have been successful tute an obstacle to its accession. However, nomic freedom and poverty reduction the place of the French language in the can- in this area. for both pecuniary and non-pecuniary didate country is one of the criteria for eligi- indicators of poverty (see previous ar- ■ Remove trade barriers. Developing na- bility (OIF,2008). ticle, “Economic freedom reduces pov- tions tend to have smaller domestic 2 For a sample of literature on economic erty,” pg. 32). markets and, therefore, could benefit freedom, see http://www.freetheworld.com A similar pattern can be observed from opening their market to inter- 3 For more results and analyses, see Beland among the Francophonie countries. national trade by gaining access to et al. (2008). Freer Francophonie countries have bigger markets and more buyers. higher GDP per capita, higher growth, higher life expectancy at birth, and ■ Simplify business regulations to en- References lower infant mortality. They also obtain courage investment and business creation by eliminating unnecessary Al Ismaily, Salem Ben Nasser, Amela higher scores in the areas of corruption Karabegović, and Fred McMahon (2007). regulatory barriers, reducing corrup- levels, political rights, civil liberties, and Economic Freedom of the Arab World. environmental quality. tion, and decreasing administrative Fraser Institute. 34 Fraser Forum 11/08 www.fraserinstitute.org In Closing “Tough love” for the downtown eastside Vancouver’s former top cop on Insite, homelessness, and making streets safer Last month, the Fraser Institute hosted former Vancouver police disease, to reduce the transmission of HIV and hepatitis. And chief Jamie Graham as part of its Behind the Spin series in Van- all you have to do is read the research and the work that’s been couver. done—in that narrow area of dealing with addictions, it seems Prior to the event, Fraser Forum editor Kristin Fryer spoke to have been somewhat successful. with Graham about his views on the problems faced by Vancou- I’m having a difficult time reconciling the harm reduction ver’s downtown eastside, and what can be done to improve the philosophy which allows the continued use of drugs when situation. there is not a stronger focus on the education component. If * * * they want to demonize something, let’s demonize the use of Kristin Fryer: Vancouver is seven years into its “four pillars” drug drugs itself. You should never be able to talk about drugs and strategy, those four pillars being prevention, treatment, enforce- drug addiction without a clear, articulate message that drugs ment, and harm reduction. Do you think this strategy is working? are bad, they’re wrong. I’m not a big fan of Nancy Reagan’s phi- losophy, but I remember her “Say No to Drugs” campaign. We Jamie Graham: If you look at the strategies that are mentioned don’t hear a lot of that anymore. in the four pillars, the one that needs attention is treatment. We just finished a long tour today of the downtown eastside, KF: Do you think Insite should continue to operate? and there’s an overwhelming need for more treatment facili- ties, more beds. You come across people who are suffering, be JG: Very seldom are you going to hear a police officer or cer- it from mental illness or addiction, and they need to get into a tainly me, in the position of a retired police chief, saying “Yes.” treatment facility. But there are simply insufficient numbers. Issues related to the continuation of Insite are medical decisions, There’s no easy answer to the cure for drug addiction—there government decisions that have to be made by the people who just isn’t. It’s a very complicated formula, and you have to look are knowledgeable in addictions medicine. My job is to enforce at it from multiple levels. What I have found in my experience the law. Whatever the government decides to do—whether policing is that when someone is addicted and gets to that stage they want to close Insite, or give it another term to continue— in their lives where they need help, and they seek treatment and we will simply enforce the law. someone is able to connect with them, there has to be a place The thing that bothers me is the demonization of the peo- they can go. ple who dare to criticize Insite. If you criticize Insite, there are forces that will mobilize against you—you become the enemy. I KF: Insite, Vancouver’s safe injection site, has been a controversial think that we have to encourage dialogue; we have to get people project. What kind of impact has it had on the downtown east- to talk about Insite, about the benefits versus the mistakes, and side? Has it been successful? allow the government to make an informed decision. JG: You have to accept the fact that it has had impact. The open- KF: In the past, you have been a strong advocate of getting more ing of Insite occurred around the same time as we put 60 ad- police officers for Vancouver. Why do you think this is so impor- ditional police officers in the downtown eastside. That had a tant? huge impact. Insite itself, the facility itself, is one more way that people JG: There is tons of research that indicates that more police of- can try to get help. If they don’t use Insite, if they don’t go in ficers mean more safety. If you put more police officers in a com- there and get a clean rig, then they use a needle and flush it in munity, crime is going to go down, people are going to feel safer, dirty pond water and continue infections. One has to realize they’re going to interact with their neighbours, they’re going to what the original goals of Insite were—to deal with infectious get out of their homes and enjoy what they’re supposed to enjoy. www.fraserinstitute.org Fraser Forum 11/08 35 In Closing Retired police chief Jamie Graham (left) leads event attendees on a tour of Vancouver’s downtown eastside, stopping at the Vancouver Native Health Society on East Hastings Street. We [the VPD] did fairly detailed research in 2005 at the re- change and what kinds of policies should be put in place? quest of city council to determine the exact number of officers we needed. The numbers were put forward to council, and after JG: There’s a certain number of priorities the Vancouver police a series of discussions and decisions, we did not get the number have put forward to be considered at the federal level. They have of police officers that we needed. The current police chief, Jim to do with amendments to the criminal code. I know they’re Chu, has done an admirable job of liaising with the city finance looking for stronger legislation dealing with the non-returnable people to come to that point where the city is prepared to spend warrant issue, meaning the people who are wanted and take the money to hire the additional cops. flight from other provinces, come to Vancouver, commit crimes here, and are simply not returned to their home area. Jim Chu KF: According to a count done by the Greater Vancouver Regional created the “con-air” program and we’ve sent people back. That’s Steering Committee on Homelessness in March 2008, there are a temporary fix. We need some legislation to deal with offenders about 3,000 homeless people in Metro Vancouver. This number is in multiple jurisdictions so that they can be dealt with quickly. up more than 20% from 2005. Why do you think the number is The habitual offender program is a never-ending issue. These growing? What can be done about homelessness? are people who commit multiple offenses, over and over again, but have not felt the full force of the law. We think there should JG: It’s not a simple formula, seeing someone who’s living on be substantial jail terms for people who commit serious indict- the streets and getting them into a home. Many of these people able offenses on a continual basis but seem to be able to skip choose to be homeless; many of them are very hard to house be- through the process. cause of mental health issues. But there’s no question that if you can find a home for somebody, some place they can call their KF: The title of your talk tonight is Tough Love: The Right Treat- own residence, where they can keep their own materials, and ment for the Downtown Eastside. What is a “tough love” ap- are able to close the door and feel that they’re secure, then that’s proach? the beginning. You cannot expect to have people in treatment and getting well if they’re on the streets where they face the ele- JG: It’s all about responsibility and accountability. People have ments and are victims of the continuing criminal element. It’s to be responsible for their actions. The downtown eastside is an absolutely crucial. interesting microcosm of Vancouver. It’s a wonderful commu- nity combined with a number of people who are down on their KF: This week, Canadians elected a new federal government, luck and a number of people who prey upon the vulnerable. and next month, Vancouverites will elect a new city government. I think we’re on the right track. So far, progress is slow, but What can they do to improve the situation? What policies should we’re moving ahead. And I’m optimistic about the future. 36 Fraser Forum 11/08 www.fraserinstitute.org