Brian Lee Crowley

Ottawa Citizen/Postmedia columns

  • Postmedia: Maritime Union is a non-solution to that region’s perennial economic underperformance December 8, 2012

    Dear senators: Maritime Union isn’t the answer; the effort required would be gargantuan and the likely results meagre at best. You have the region’s best interests at heart, so cut their allowance, which you and your colleagues actually have the power to do. Maritimers will sort out the rest. Read my full column below published in the Ottawa Citizen, Calgary Herald, Vancouver Sun, Montreal Gazette, Edmonton Journal, Saskatoon’s StarPhoenix, Regina’s Leader-Post, Windsor Star, The Province, Victoria’s Times Colonist and Canada.com.

     

    United in dependence

    By Brian Lee Crowley, Ottawa Citizen, December 8, 2012

    Imagine that you have a pile of money and several kids. Some of those kids work hard and are quite self-sufficient. Some of them, on the other hand, just never quite seem able to look after themselves. Because you’re rich and you believe all your kids deserve a similar standard of living, you pay the ne’er-do-wells a good allowance accompanied by lots of well-meaning admonitions to try and harder and make something of themselves.

    But you get this sneaking feeling that, far from using that money sensibly to become self-sufficient, these problem children are just going through the motions to placate you but aren’t actually doing much. In fact their appetite for their allowance only increases with time and you worry that your money may be making the problem worse.

    What to do?

    You could tell them to cut their expenses by moving in together, paying only one rent instead of several, sharing the phone and light bill and groceries.

    But what if the problem isn’t the inefficiency in how they spend the allowance, but rather the allowance itself? If the allowance is what encourages the children to live large, because they can do it at your expense, wouldn’t it be more effective to cut the allowance and make them decide how to make the most of the income that’s left, and perhaps even earn more of their own money to make up the shortfall?

    These thoughts came to me when I learned recently that several good friends in the Senate have been trying to revive the idea of Maritime Union as the solution to that region’s perennial economic underperformance. Surely people like the good senators reason, the region is over-governed when the 1.7 million people in Nova Scotia, New Brunswick and P.E.I. have three premiers, cabinets, court systems, legislatures, capitals and so forth and 13 million Ontarians make do with only one of each of those things.

    Far be it from me to disagree that the region is over-governed. I lived there for more than 20 years, and I saw its insatiable appetite for government boondoggles up close.

    The problem is that Maritime Union is a non-solution to those problems, and indeed is guaranteed to take huge effort (including a constitutional amendment whose success would be far from assured) while holding out the very real prospect of making matters worse, not better.

    Consider the evidence that has been gathered over the years from study after study of the closest equivalent of Maritime Union: municipal amalgamations. The results of those studies are unequivocal. Amalgamations, far from saving money, drive up costs; this is in part due, for example, to the universal tendency in such circumstances to level costs up to the highest level among the pre-existing units. Those costs are never levelled down.

    In any case, the reality is actually that the costs of the things that Unionists bang on about — extra premiers, legislatures, deputy ministers and judges — are quite small beer in the grand scheme of things. People get excited about them because of their symbolic value, but the cost of them is actually tiny relative to the size of government overall.

    What really costs money is the total number of civil servants and how much you pay them, for example. And a single Maritime province would likely have just as many teachers and nurses and civil servants actually delivering services at the same pay as at present — unless we change the incentives they operate under.

    Now back to the idea of cutting the allowance (i.e. transfers from Ottawa) as a way to get these provinces to change their behaviour for the better. The evidence is that this would have a far bigger impact than Union, and would be much easier to achieve. Ottawa can do it, and it doesn’t require constitutional amendments or agreement from powerful interests, like French-speaking New Brunswickers, who have zero interest in being a much smaller minority in a much larger province.

    The Maritimes would no longer be able to pass along to federal taxpayers the costs of too many civil servants at too-high salaries (relative to local pay). Local taxpayers would face the real costs of the excesses of their politicians and they’d start to demand real efficiencies to get the cost of government more in line with what the local economy can bear.

    Remember the economist’s golden rule: subsidize something and you’ll get more of it. Ottawa subsidizes government in the Maritimes, ergo there is more of it than is really needed.

    Dear senators: Union isn’t the answer; the effort required would be gargantuan and the likely results meagre at best. You have the region’s best interests at heart, so cut their allowance, which you and your colleagues actually have the power to do. Maritimers will sort out the rest.

    Brian Lee Crowley is managing director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: macdonaldlaurier.ca. @MLInstitute

    © Copyright (c) The Ottawa Citizen

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  • Financial Post: We can say no to CNOOC November 27, 2012

    In determining whether Ottawa should allow Chinese state-owned enterprise CNOOC Ltd. to buy Canadian energy firm Nexen Inc., much hangs on one question: Is Canada in a position of weakness or strength vis-Ă -vis China? In the Financial Post today, I argue that Canada is in a position of strength and we can say no to CNOOC. My column below:

     

    We can say no to CNOOC

    By Brian Lee Crowley, Financial Post, November 27, 2012

    If China is angered by a no on Nexen, it will only hurt itself

    In determining whether Ottawa should allow Chinese state-owned enterprise (SOE) CNOOC Ltd. to buy Canadian energy firm Nexen Inc., much hangs on one question: Is Canada in a position of weakness or strength vis-Ă -vis China?

    This matters because so much hinges on whether Canada will be benefited or harmed by the fallout from the decision, especially should Ottawa turn down the proposed acquisition.

    Proponents of the deal make two separate cases why we not only should but indeed must approve CNOOC’s bid. They argue, first, that Canada needs access to the Chinese market for our oil and gas. Second they claim that Canada needs access to Chinese capital to develop our natural resources. They then go on to argue that if we fail to get either form of access the national prosperity being generated by the West’s oil-fuelled boom is endangered.

    If they are correct about the consequences of not gaining access to Chinese consumers and capital, then their case in favour of the CNOOC deal is powerfully strengthened. Few Canadians would like to see our natural resource-based good fortune dissipated, and the arguments of those pushing the deal, like Justin Trudeau, the oil patch, the financial community, the Alberta government and others, are that that good fortune is deeply vulnerable to Chinese displeasure. But are they correct about the weakness of Canada’s position?

    Let’s look in turn at each argument, starting with Canada’s need to sell oil and other resources to China.

    The International Energy Agency, the best source of reliable data on the likely shape of future energy markets worldwide, said just this month in its World Energy Outlook 2012 that between now and 2035 most of the growth in demand for oil will take place in the developing world. Those non-OECD countries will be taking two-thirds of production by then. And China will be the single largest driver of the growth in consumption, with its demand rising 60% by 2035, followed by India (where demand more than doubles) and the Middle East. Finally, they foresee a modest rise in the value of a barrel of oil, to about US$125 in current dollars.

    In the IEA’s basic scenario, global oil demand increases fairly slowly from just over 87 million barrels a day in 2011 to reach nearly 100 million barrels a day in 2035. China will account for half of the net increase worldwide. Or put the other way, non-Chinese markets will account for every bit as much of the increase as China.

    These numbers tell us that the world demand for oil is growing and the price is rising. Lots of people besides the Chinese want oil. That’s a seller’s market, not a buyer’s market.

    And Canada is a highly desirable supplier of that oil because we are reliable, enforce contracts, have the rule of law and a stable regulatory, legal and fiscal environment. That’s why oil companies find it worthwhile to invest in the oil sands when extracting a barrel of oil there costs roughly US$80 versus less than US$20 to extract it in Saudi Arabia. Canada has a huge reputational and institutional leg-up on many other potential suppliers. Would you like to be reliant on dysfunctional Nigeria, thuggish Venezuela, unstable Iraq or nice polite Canada for your oil?

    Now think about the oil itself. Leaving aside marginal differences in quality reflected in prices, oil is a global commodity bought by global customers at a global price. Some buyers might be motivated by politics, like an angry China snubbing Canadian oil. But in a world where demand is rising and supply is limited, every Canadian barrel they snub must be replaced with a Saudi or an Indonesian or a Venezuelan barrel. But presumably those barrels also had buyers, who now have to make up the shortfall.

    Where will they look? Canada. We will now have spare production on the market and the new buyer will pay essentially the same price the Chinese would have had to pay. As long as oil is globally traded and we have the capacity to reach foreign markets, it is quite immaterial whether China buys from us or not. China may be anxious to tie up supply to protect the growth it thinks it needs for domestic political reasons, but that makes it an anxious buyer, a seller’s dream. Advantage: Canada.

    How about access to capital? What if an offended capital-rich China cuts off Canada’s natural resource industries?

    The stakes are not small. According to the Alberta government’s official website, the oil sands alone will require $218-billion in capital investment over the next 25 years. Sounds like a lot. But it’s less than $10-billion a year. By contrast, the assets of the global fund management industry increased 10% in 2010 to reach a record $79.3-trillion, of which only a small fraction is in the hands of sovereign wealth funds. This global pool of capital increases by roughly $8-trillion a year. The oil sands need a microscopic 0.14% of that. The investment pool of the Canada Pension Plan Investment Board alone is slated to grow faster than the capital needs of the oil sands over the coming years.

    The world is not short of capital. It is awash in capital hungry for a decent return. Yes, the oil sands need billions in investment, but in return investors get access to the third-largest oil reserves in the world. While there’s good money in bitumen, China’s fits of pique are also immaterial.

    Remember, too, that oil companies the world over invest in circumstances far more trying than Canada’s humble foreign-investment review process. Oil companies endure the risks of armed rebellion, insurrection, kidnapping of executives, corrupt officials, uncompensated nationalizations and far worse. BP’s leading executive in Russia fled that country in 2008 in fear of his life. Armed gangs attack Shell’s facilities in Nigeria. And still the companies come.

    In our oil patch you find companies from America, Britain, France, Norway and many other countries besides. As long as there is money to be made, capital will flow in and oil will flow out. Advantage: Canada.

    Now here’s a different question for the advocates of the CNOOC deal: If China and its SOEs are so trustworthy and market-driven, why is the argument that the Chinese will act petulantly, belligerently and contrary to their own economic interests (forgoing stable oil supplies at prevailing prices, for example) if Canada doesn’t do exactly what they want? In the sporting world that’s called an own goal.

    Financial Post

    Brian Lee Crowley is the managing director of the Macdonald-Laurier Institute, an independent non-partisan public-policy think-tank in Ottawa. www.macdonaldlaurier.ca @MLInstitute

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  • Postmedia Newspapers: Harper is wise to stay clear of premiers’ talks November 23, 2012

    Harper is wise to stay clear of premiers’ talks. The premiers are trying to save face by turning the PM’s absence into a “snub” that will prevent them from having a productive meeting about the economy. Their real complaint is that the PM isn’t willing to show up and be the butt of their manufactured outrage and whipsawed into new transfers while he’s struggling to balance the budget. Read my latest column below published in the Calgary Herald, Ottawa Citizen, Vancouver Sun, Montreal Gazette, Edmonton Journal, Saskatoon’s StarPhoenix, Regina’s Leader-Post, Windsor Star, The Province, and Canada.com.

     

    Harper is wise to stay clear of premiers’ talks

    By Brian Lee Crowley, Calgary Herald, November 23, 2012

    As every poker player knows, you can parlay a weak hand into victory with a good bluff. The cards you are dealt are only a fraction of the game; it is what you can make your opponents believe that matters most.

    If you are ever looking to make a few easy bucks, then, I highly recommend inviting the premiers to a friendly evening of poker. Their bluffing skills are pitiful and their hand weak. You are liable to rake in the chips.

    Their poker acumen has been painfully on display this week in the lead up to their meeting on the economy taking place in Halifax. Because premiers’ meetings are usually greeted with a national collective yawn, they have tried to turn their non-event into a story by making it all about the prime minister’s absence. The premiers’ line was perfectly captured by the headline on The Canadian Press story: Harper snub threatens to overshadow premiers meeting.

    The only snub, of course, is the one that the premiers have invented and then retailed to journalists, the more credulous of whom have duly parroted it.

    The reality is quite different. The premiers yearn for the glory days of first ministers’ meetings of the sixties, seventies and eighties, when three trends made those meetings a gold mine for the provinces.

    This was the era in which the welfare state was being built up and essentially completed in Canada. Hand in hand with that development came the loss of control over spending at both the federal and provincial levels. With much of the jurisdiction over social programs, like welfare and health care, provinces needed to be at the table and Ottawa was constantly putting huge sums of money on the table to get them there, budget discipline be damned.

    Bolstering this trend was the rise of a separatist Quebec nationalism. Both separatists and dubiously federalist leaders in the province were eager to turn every tiff between Canada and Quebec into federalism’s death rattle. Ottawa needed not only to engage the provinces, but to be seen to be engaging them, and such first ministers’ get-togethers came to be the established venue for this. Pierre Trudeau’s political career was made by his putting then Quebec Premier Daniel Johnston in his place at one such nationally televised event.

    Finally, throughout much of these golden days of first ministers’ meetings, there were powerful premiers at the table who were acknowledged leaders of national stature: Peter Lougheed, Bill Davis, Duff Roblin, Robert Stanfield, Allan Blakeney and others. Quick: name me two premiers today who are also leaders of national stature and are not Brad Wall. Thought so.

    The premiers collectively came to believe the illusion that they were national figures and that first ministers’ meetings were somehow the natural venue where the policy of the nation should be hammered out, with Parliament and the legislatures quaint antiques to whom such agreements were presented as so many faits accomplis.

    None of the factors that made first ministers’ meetings so important then, however, apply today. Once Ottawa needed the provinces, but today, as the pitiful posturing of the premiers shows, they need Ottawa, but the need is not reciprocal.

    The very last thing a modern prime minister needs is a first ministers’ meeting. Think of all the reasons that premiers love them. They create the illusion, for example, that the premier of P.E.I. or Manitoba is an equal of the prime minister of Canada. They create a huge incentive for the provinces to paper over their profound policy differences because the one proposition every premier effortlessly assents to is that Ottawa does not send enough money their way. Unless Ottawa agrees to provincial demands, these meetings invariably make the prime minister the bad guy, the only holdout at a table of 11. It’s no lose for the provinces, who either get new booty or blame Ottawa for the “failure” of the meeting. Most first ministers’ meetings can accurately be described as whining while dining.

    The premiers are trying to save face by turning the PM’s absence into a “snub” that will prevent them from having a productive meeting about the economy. How embarrassing. This amounts to claiming that they will not do everything within their power to promote prosperity within their respective provinces unless the prime minister comes and briefs them about his economic plans, plans on which the premiers and their officials are extensively briefed and about which they can read any day of the week in the newspaper.

    Their real complaint is that the PM isn’t willing to show up and be the butt of their manufactured outrage and whipsawed into new transfers while he’s struggling to balance the budget.

    I’d fold those cards, premiers. We can see in your eyes you’ve got nothing in that hand.

    Brian Lee Crowley is managing director of the Macdonald-Laurier Institute, an independent non-partisan public policy think-tank in Ottawa. @MLInstitute

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  • Latest column, “Aquaculture is the big fish that got away,” published across Postmedia newspapers, The Hill Times & the New Brunswick Telegraph-Journal November 17, 2012

    With more than two billion more people expected to be living on Earth by 2050, more food will be eaten in the next 50 years than in the whole rest of human history. What is the solution to feeding those hungry mouths? The sea. Unfortunately, Canada’s potential to seize this opportunity far exceeds our grasp. Read my latest column below published in the Calgary Herald, Vancouver Sun, Montreal Gazette, Ottawa Citizen, Saskatoon’s StarPhoenix, Regina’s Leader-Post, Windsor Star, Edmonton Journal, The Province, Canada.com, The Hill Times and New Brunswick’s Telegraph-Journal.

     

    Aquaculture is the big fish that got away

    By Brian Lee Crowley, Calgary Herald, November 17, 2012

    With more than two billion more people expected to be living on Earth by 2050, more food will be eaten in the next 50 years than in the whole rest of human history.

    Feeding those hungry mouths will be made harder because the green revolution that super-charged our ability to produce food in the 1970s and 1980s is now running out of steam. We have realized most of the potential gains.

    We can and will improve our ability to grow food on land, but really, doesn’t it make far more sense for humanity to dine out on the huge productive capacity of the waters of the Earth? And given that Canada has something like nine per cent of all the freshwater on the planet, the longest coastline of any nation, and the necessary technology, expertise and capital in abundance, shouldn’t we be leading this charge?

    The answers are yes and yes respectively. Unfortunately, as is so often the case, Canada’s potential far exceeds our grasp. And therein lies a (fish) tale.

    But first, the sea as the solution to humanity’s hunger. In 1973, Jacques Cousteau proclaimed we must farm the sea as we farm the land. The reasons are clear. A little simple math: food from the sea (both animals and plants) counts for a tiny 1.5 per cent of humanity’s food supply. And yet water covers seven tenths of the Earth and, with a little coaxing from human effort and ingenuity, those waters can and should be producing far more.

    The analogy with land-based farming is strong: if we depended solely on the unorganized bounty of nature to feed us, humanity would be a shrivelled shadow of its current self. The planet only supports so many billions of people because we have learned how to make land super-productive and are learning to do so with an ever-smaller ecological footprint.

    The so-called blue revolution, taking food production into the waters of the globe, is already well advanced. In fact, it is argued that aquaculture is the fastest-growing food production system in the world at the moment. We stand astride the moment when aquaculture production is finally overtaking the wild fishery as the largest source of protein from the sea, just as in the distant past, animal husbandry eventually overtook hunting as the primary source of meat.

    This has created a worldwide industry that is struggling mightily to satisfy a powerful human need. Global demand for seafood is increasing by almost 10 per cent a year. A fifth of humanity finds its main source of protein in fish, and those people are concentrated disproportionately in the developing world. By 2020, the UN’s Food and Agriculture Organization foresees a shortfall of 50 million metric tonnes in our ability to supply the world’s demand for food from the sea.

    Not only are people hungry for fish and seafood, but this food is perhaps uniquely good for us, too. Michael Crawford of Britain’s Institute of Brain Chemistry and Human Nutrition has even made the case that eating seafood, with its rich concentrations of things like Omega 3 fatty acids, at the right stage of the evolutionary process is what caused the human brain to evolve. We got smart because we ate fish.

    Alas for Canada, aquaculture is the story of the big fish that got away. While other countries with advantages comparable to Canada’s, places like Chile, Scotland, Norway and New Zealand, have seen their annual tonnage grow handsomely, our own aquaculture production has stagnated.

    Oh, in the early years of the industry we grew at a rate similar to our competitors. Then we stalled for a decade while others powered past us. As a result, our share of world production has fallen by 40 per cent.

    The explanation, incredible as it may seem, is that Ottawa still, after three decades of experience of the industry, cannot break itself of the mindset of the wild capture fishery. The stability, certainty and security that farmers enjoy through a secure tenure in their land, their crops and their livestock has allowed major investment in productive capacity. But as one aquaculturist said to me, trying to farm fish in Canada is like trying to operate a chicken farm under the rules of the Migratory Birds Act. Fish farmers have been punished, for instance, for harvesting their stock “out of season,” a nonsensical notion when the animals only exist because they’ve been raised by people.

    Add to that the NIMBYists who are offended by the sight of working farms in Canada’s waters and fearmongers with tall tales of Frankenfish, and you have the perfect recipe for squandering a vital piece of Canada’s ability to feed the world while creating year-round technologically sophisticated work in rural areas. Yet time and tide still wait for no man.

    Brian Lee Crowley is the managing director of the Macdonald-Laurier Institute, an independent non-partisan public policy think-tank in Ottawa. @MLInstitute

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  • Ottawa Citizen, Calgary Herald & Vancouver Sun: In praise of the fiscal cliff November 10, 2012

    The U.S. fiscal cliff was designed to provoke exactly the reaction we are all having. It was to strike fear into the hearts of politicians, journalists and voters, so that they would think seriously about solutions. To that extent it is working brilliantly. My latest column in the Ottawa Citizen, Calgary Herald and Vancouver Sun.

     

    In praise of the fiscal cliff

    By Brian Lee Crowley, Ottawa Citizen, November 10, 2012

    Far from being a harbinger of the End of Civilization As We Have Known It, the fiscal cliff that has so frightened Americans and Canadians is doing exactly what it is supposed to do and we owe a debt of gratitude to its creators.

    Like the prospect of a hanging in the morning, the possibility of dragging the U.S. economy back into recession is rightly concentrating the minds of all the members of Congress on the country’s out-of-control finances and burgeoning debt.

    For those not familiar with the fiscal cliff, a quick primer: partly by accident and partly by design, a breathtaking concatenation of measures will all kick in at midnight on New Year’s Eve — unless Congress decides otherwise. These measures include some stiff tax increases (the expiry of the tax cuts enacted under President George W. Bush, as well as of last year’s temporary payroll tax reductions and the new taxes needed for ObamaCare, for example).

    Also pending is a series of spending cuts affecting more than 1,000 programs in Washington. Hardly anything will be spared: defence, social programs and Medicare for instance, would all be sliced. Extended unemployment insurance benefits would also expire.

    The cumulative effect is about $560 billion all at once, money taken out of the pockets of American consumers, whether as tax rises, benefit cuts or lost public service salaries. The Congressional Budget Office, a non-partisan organization serving Congress’s need for expert advice on the effects of budget and other economic measures, thinks all this would reduce the size of the American economy by about 3.5 per cent. Since that economy has been quite anemic, our neighbours would find themselves back in recession just as they were beginning to show a little spark. Since we send about two-thirds of our exports south, and since a recession-wracked U.S. buys less from foreigners like us, our own less-than-stellar growth would likely also be badly damaged.

    Crazy eh? What were those clowns in Congress smoking? Whatever it was, it ought to be illegal, even in Colorado. Right?

    I beg to differ.

    Remember, a good part of the fiscal cliff was designed to provoke exactly the reaction we are all having. It was to strike fear into the hearts of politicians, journalists and voters, so that they would think seriously about solutions.

    To that extent it is working brilliantly.

    The Bush tax cuts were extended just long enough so that they would expire after last Tuesday’s election. The spending cuts were part of the deal struck between Democrats and Republicans during the battle over raising the amount of money the U.S. government is authorized by Congress to borrow (the famous “debt ceiling”).

    The debt ceiling could not be raised without the agreement of the House of Representatives. This gave the Republicans leverage which they used to work out a deal that held out some prospect of getting America’s addiction to debt under a modicum of control. A bipartisan commission was struck to examine both spending and taxes and to recommend a strategy that might win broad support in Congress.

    To make sure people took this effort to find compromise seriously, a good part of the fiscal cliff was created. The thinking was that if they made the penalty for failure sufficiently severe, the incentive to find a budget-balancing solution that would win bipartisan support would be overwhelming. That’s why the proposed spending cuts gore Democratic sacred cows (e.g. Medicare) and Republican ones (defence). The plan was never to enact these measures, but to come up with a “hammer” so painful that failure to find a more moderate solution would simply be too devastating to contemplate.

    Alas in the hyper-partisan atmosphere of Washington over the past two years, the necessary compromises were not forthcoming and the commission’s work was stillborn. But the clock is still ticking on the fiscal cliff, a time bomb that draws nearer every day.

    Fortunately, the timing is actually not bad. The election is over and the next one is two years away. Even in America they won’t start campaigning again for at least a few months. President Obama’s prestige is somewhat enhanced by his re-election, and on Friday he publicly committed himself to finding a solution and asked Republicans to do the same. Leaders of the majority parties in both houses of Congress are sounding conciliatory notes. No politician wants to be blamed for dragging America back into recession. If there ever was a moment when compromise might be possible, this is it. But without the fiscal abyss beckoning, the incentive to deal would be meagre.

    A punt is the most likely short-term solution, but the Republicans will not agree to getting rid of the cliff permanently. One day America must wake up and fix its finances. These periodic crises will make that moment come sooner rather than later. Two cheers for the fiscal cliff.

    Brian Lee Crowley is the managing director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa. @MLInstitute @brianleecrowley

     

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  • Ottawa Citizen, Calgary Herald and Vancouver Sun: Canada shouldn’t fear nixing Nexen purchase October 27, 2012

    Is Canada sending conflicting signals, claiming on the one hand we are open for business and on the other looking askance at CNOOC? We can be open for business but draw the line at “businesses” that are nothing of the sort, but are really agents of a foreign government and a rather intemperate impetuous government at that. We should judge China’s proposed investments on their merits, not because we fear they cannot be replaced. They can. My new Ottawa Citizen, Calgary Herald and Vancouver Sun column below:

     

    Canada shouldn’t fear nixing Nexen purchase

    By Brian Lee Crowley, Ottawa Citizen, October 27, 2012

    There are many reasons we should think hard about whether to approve CNOOC’s bid for Calgary oil company Nexen. Getting cut off from capital we need to develop our resources isn’t one of them.

    Especially in the wake of Ottawa’s turning down of Malaysia’s Petronas’s bid for Progress Corp, handwringing is the order of the day among the business community as the deadline looms for Ottawa’s ruling on the Nexen transaction. These decisions are creating uncertainty that will make oil companies very reluctant to invest in Canadian natural resources is the constant refrain from investment firms, financial journalists and the oil patch itself.

    I’ve been known to make these arguments myself. All other things being equal, companies will prefer to deal with places where the rules are known, operate transparently and whose outcome is reasonably predictable. Let’s grant that that is not how one would describe the conditions for foreign investment in Canadian natural resources after Ottawa’s thumbs down on Petronas and BHP Billiton’s bid for Potash Corp in Saskatchewan a couple of years ago.

    Still, the Nexen deal is one that could have long term consequences for Canada, since if approved it will form the template for bids that further state-owned Chinese oil companies will make for other oil patch assets. We are not approving a single transaction, but deciding whether we open to door to a significant change of ownership and control in the entire industry.

    Is Canada sending conflicting signals, claiming on the one hand we are open for business and on the other looking askance at CNOOC? We can be open for business but draw the line at “businesses” that are nothing of the sort, but are really agents of a foreign government and a rather intemperate impetuous government at that. Just because you are in the market for investors doesn’t mean you give up the right to distinguish between capital from a chartered bank, pension fund or the stock market on the one hand, and the mafia on the other. We are entitled to know who we are dealing with.

    Let’s suppose that we decide CNOOC and other Chinese state-owned oil enterprises aren’t people we really care to do business with, perhaps because they are Iran sanctions-busters, or they’re best buddies with Sudan’s ruthless regime or their parent company, China Inc., has a wretched record of stealing the intellectual property of western companies and is engaged in active espionage against Canadian companies and governments, or any one of a number of other reasons. Will our access to capital to develop our natural resources dry up?

    If it did, it would certainly deal a mortal blow to Canada’s hopes to turn its natural resources into the foundation stone of a thriving economy. The opportunity that the natural resource economy offers us to achieve reconciliation with Aboriginal peoples would be imperilled.  A vast source of tax revenue would be lost. We would be undeniably impoverished.

    How likely is it, then, that sending China packing would unleash these dire consequences?

    The likelihood is approximately zero.

    Consider that, according to the Alberta government’s official website, the oilsands will require about $218 billion in capital investment over the next 25 years. Sounds like a lot. But it’s less than $10 billion a year. By contrast, says Wikipedia, the assets of the global fund management industry increased 10% in 2010 (the latest year for which we have figures) to reach a record $79.3 trillion. So this global pool of capital increases by roughly $7 trillion to $8 trillion a year. And the oilsands need a microscopic 0.14 percent of that.

    The world is not short of capital. It is awash in capital hungry for a decent return. The oil sands need billions in investment. In exchange investors will be able to turn into cash the third largest reserves of oil in the world. There is good money in bitumen. That will ensure that the capital needed to develop those resources is forthcoming.

    Remember too that oil companies the world over invest in circumstances far more trying than Canada’s humble foreign investment review process.  Oil companies endure the risks of armed rebellion, insurrection, kidnapping of executives, corrupt officials, uncompensated nationalizations and far worse. BP’s leading executive in Russia had to flee the country in 2008 in fear for his safety. In Nigeria armed gangs attack Shell’s pipelines and other facilities. And still the companies come.

    Go to Calgary and you will find companies from all over the world (France’s Total, Britain’s BP, America’s Exxon Mobil, Norway’s Statoil and more).  As long as there is money to be made, capital will flow in and oil will flow out.

    We should judge China’s proposed investments on their merits, not because we fear they cannot be replaced. They can.

    Brian Lee Crowley is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca. @MLInstitute

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  • The Hill Times, Vancouver Sun & Calgary Herald: What’s with over-the-top reaction to renaming of Museum of Civilization to the Canadian Museum of History? October 22, 2012

    For the government to change the museum’s name and provide millions of dollars to assist with the shift to a more history-focused mandate is not undue political interference but an overdue decision to help bind Canadians together more firmly by celebrating rather than ignoring our shared experiences building this admirable society in the cold and sometimes forbidding northern half of the continent. Read my latest column below on the renaming of the Museum of Civilization.

     

    What’s with the over-the-top reaction to renaming of Museum of Civilization to the Canadian Museum of History

    By Brian Lee Crowley, The Hill Times, October 22, 2012

    While a rose by any other name would smell as sweet, to rename a museum is apparently to launch a scurrilous and underhanded attack on its very nature.

    That at least is the conclusion one might draw from the over-the-top reaction in some quarters to the renaming of the Museum of Civilization to the Canadian Museum of History. Now there is a national scandal worthy of the name: our largest national museum might now focus more tightly on preserving and celebrating the collective memory of Canadians, while not excluding the history of other parts of the world.

    Two criticisms of the re-naming seem to be most in evidence. First is the notion that the politicians will be reaching into the decisions of the museum itself. In fact all the protections that have insulated the museum from political interference remain robustly in place. One is an independent board operating under an act of Parliament that gives them both authority over and accountability for the museum’s operations. Another is a vigilant academic, cultural and historical community, much in evidence and in a celebratory mood at the announcement of the name change. Yet another is the museum’s capable CEO, Mark O’Neill, a dedicated civil servant with high ambitions for an institution he clearly loves.

    When Heritage Minister James Moore was asked whether there was some hidden political agenda behind the announcement, he looked around him at the artifacts of Canadian history surrounding him in the museum’s monumental Grand Hall and asked how one could politicize Champlain’s astrolabe, Maurice Richard’s hockey jersey, or Terry Fox’s support van.

    For the government to change the museum’s name and provide millions of dollars to assist with the shift to a more history-focused mandate is not undue political interference but an overdue decision to help bind Canadians together more firmly by celebrating rather than ignoring our shared experiences building this admirable society in the cold and sometimes forbidding northern half of the continent.

    The other criticism levelled at the government was that the renaming was further evidence of their desire to militarize Canadian history, to promote a distorted vision of Canada as a warrior nation.

    These critics were at the wrong museum. They should have been across the river at the Canadian War Museum, moved under the previous government into their magnificent new building in 2005. There you can visit, as over 90,000 Canadians already have, their impressive War of 1812 exhibit.

    The government’s decision to put significant resources into celebrating the 200th anniversary of the War of 1812 is taken as proof positive by the government’s critics that war is being glorified for crass political purposes.

    More likely it is the other way around. After years of soft-pedalling Canada’s distinguished martial past — in part because it inevitably recalls domestic conflicts over conscription — it is being given its due recognition.

    Historically we are more warriors than peacekeepers.

    Millions of Canadians know this directly. My parents, for instance, had a military wedding while my father served in Korea. My wife’s parents’ military wedding was during the Second World War. All four of our grandfathers served in the Great War. These conflicts involved the mobilization of virtually our entire society in some of the greatest collective endeavours ever undertaken by Canadians.

    They touched every family. They are seminal events in the epic story of who we are and for that reason alone deserve pride of place in our story telling.

    As for the War of 1812, one of the most moving events I have participated in over the past year was the 200th anniversary re-enactment of the Battle of Queenston Heights on Oct. 13. Over a thousand re-enactors took to the field, representing British, Canadian, aboriginal and American combatants. Fifteen thousand enraptured spectators cheered them on.

    Because of the celebrations around the 1812 conflict, I was inspired to read up on its history and discovered a moment when the nascent Canadian self-awareness hung in the balance. Much of Upper Canada was then settled by people who had come from the United States (including the famous Laura Secord). Some came as Loyalists, others as settlers seeking land. It was not obvious that they would take up arms against their erstwhile friends and neighbours in this conflict, nor was it obvious that they would be victorious if they did.

    But victory at the Battle of Queenston Heights, early in the conflict, signalled that the British and Canadians could successfully defend this land against a powerful invader.

    And the death of General Isaac Brock on the field created a hero and rallying point that inspired the locals.

    Whatever the merits of the conflict itself, it became an anvil on which a growing awareness of and pride in a separate northern society in North America was forged. And that is something to celebrate.

    Brian Lee Crowley (twitter.com/brianleecrowley) is the managing director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.

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    The Hill Times

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  • Ottawa Citizen, Calgary Herald & Vancouver Sun: EU Prize says much about Nobel committee October 13, 2012

    The award of the Nobel Prize to the EU tells us a lot more about who is giving the prize than it does about the worthiness of the recipient. Read my latest column in the Ottawa Citizen, Calgary Herald and Vancouver Sun below.

     

    EU Prize says much about Nobel committee

    By Brian Lee Crowley, Ottawa Citizen, October 13, 2012

    My mother could have told you why giving the Nobel Peace Prize to the European Union would produce such a predictable and deserved outpouring of derision.

    An aspiring writer, she took a creative writing course. One of the assignments was to describe a single person from the perspective of several others. She roped me in by asking me to describe what I thought of my elementary school principal. How did the principal look, my mother asked.

    Not too bad for someone who is a hundred years old or whatever she is, I replied.

    Her teacher’s response? This told the reader a lot more about me than it did about my principal, which wasn’t the point of the exercise.

    The award of the Nobel Prize to the EU likewise tells us a lot more about who is giving the prize than it does about the worthiness of the recipient.

    For those of you who are hazy about how the Peace prize is awarded, the rules were established under the will of Alfred Nobel, a Swedish industrialist who made a fortune selling things like explosives. Perhaps he had a guilty conscience. Be that as it may, he gave the job of awarding the Peace Prize (as distinct from Nobels for, say, medicine or physics) to a committee chosen by the Norwegian parliament.

    What was the prize to be for? According to Norwegian lawyer Fredrik Heffermehl, who has studied Nobel’s will and intentions, “this is not a prize for peace but a prize for champions of peace.”

    So with that in mind, before we get to the EU as this year’s recipient, let’s think about their award of the prize a couple of years ago to freshly elected U.S. president Barack Obama. As was widely said at the time, he won the prize, not for being Nobel’s “champion of peace,” for he had no track record, no evidence to show that he actually had the ability, or the knowledge or the drive or the character to be a champion of peace. He got the prize because the committee was thrilled he was not George W. Bush.

    Memo to the Nobel Peace Prize Committee: There is a price to be paid for awarding the prizes before the race is run, let alone won.

    Prizes are meant to be awarded for performance, not for potential, for results, not effort. Top-seeded players in tennis are occasionally beaten by obscure unseeded opponents, and much-hyped Olympic hopefuls sometimes choke in the event.

    We don’t give the prize to those we expected to win. We give it to those who did win. And now that we can actually examine Obama’s record, we see that he has continued many of the policies for which the critics (including the Norwegians) excoriated his predecessor. Guantanamo is still open. He (rightly) sends armed squads without permission into sovereign countries to kill terrorists. He makes more generous use of unmanned drones to rain fire down on both the guilty and the innocent, chiefly in the Muslim world. His peace overtures to the Muslim world lie in tatters in the wake of the highly organized terrorist attacks that caused the death of an ambassador and several other diplomats. It is now crystal clear that there are deep differences of philosophy, history and interest between America and powerful forces in the Muslim world, Russia, China and lots of other places, and a more sympathetic face at the helm in Washington is largely irrelevant. More than pretty talk is needed to be a champion of peace, and so Obama has little to show to justify his Nobel.

    Is the European Union, this year’s recipient, a more worthy champion of peace? Yes, while the EU has existed there has been peace between France and Germany, the longtime rivals whose conflicts repeatedly dragged the continent and the world into armed conflict. But is this thanks to the EU?

    After 1945 Germany engaged in much soul-searching and made itself profoundly resistant to war. Germany might be a worthy recipient of the prize for this self-transmogrification. The EU did not cause it but was its beneficiary. Moreover for decades Germany, France and the West generally faced in the Soviet Union a formidable and determined adversary. It was our collective determination to face down Soviet aggression that created a long era of peace. NATO and the (now defunct) Warsaw Pact are therefore far more plausible Nobel candidates than the EU. But they were associated in the minds of Norwegian parliamentarians with that nasty Cold War, whereas the EU is warm, cuddly and pretty inoffensive — unless you happen to be a Greek protesting against German-inspired austerity or a Turkish aspirant to EU membership constantly rebuffed by anti-Muslim politicians.

    Too bad that’s not what Alfred Nobel wanted to honour and why the Nobel Peace Prize is slipping into undeserved irrelevance.

    Brian Lee Crowley is managing director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: macdonaldlaurier.ca. @MLInstitute

    Copyright (c) The Ottawa Citizen

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  • Ottawa Citizen, Calgary Herald & Vancouver Sun: CEOs only have eyes for China September 29, 2012

    In my latest column for the Ottawa Citizen, Calgary Herald and Vancouver Sun, I caution Canadian CEOs to not only have eyes for China. Full column below:

     

    CEOs only have eyes for China

    By Brian Lee Crowley, Ottawa Citizen, September 29, 2012

    East is east and west is west, wrote Rudyard Kipling, and never the twain shall meet.

    Clearly dear old Rudyard was never exposed to the Canadian business class hot on the scent of Chinese profits.

    The twain appeared to meet with a vengeance at an Ottawa conference put on several days ago by the Canadian Council of Chief Executives on Canada in the Asian century. Clearly Canada’s CEOs never met a Chinese business opportunity they did not want to embrace. And yet these titans of our business world weren’t listening to what was being said at their own conference.

    Speaker after speaker sounded important qualifications and dangers about the opportunities offered by Asia.

    One of the most important was the observation that Asia was not a single thing, country, opportunity, or danger. India and Indonesia, Vietnam and even Japan were only some of the Asian economies and societies repeatedly singled out, for instance, for the opportunities they offered.

    The CEOs in the room only had eyes for China.

    Speakers told them the U.S. business class, five years ago equally bedazzled by China, is increasingly disillusioned. “Nobody makes money in China” is now their mantra, and while you are struggling to establish yourself in their market, your Chinese partners are often helping themselves to your intellectual property and showing you the door when they’re done.

    Our business leaders clearly thought that nothing like that would happen to us nice Canadians. One of them assured the audience that if only we came to know the Chinese as he has, we too would learn to trust them.

    Hmmm.

    Are we talking about the same Chinese with thousands of missiles pointed at Taiwan, who turn out large, militantly chauvinistic mobs at the drop of a hat to denounce neighbours whose behaviour the regime disapproves of, and who have been repeatedly exposed as engaged in military and industrial espionage on a large scale, including in Canada?

    Is this the same China whose ambassador to Canada threatened us recently that if we didn’t approve of a Chinese state-owned company’s bid for Nexen, a Canadian energy company, that we “wouldn’t be able to do business together”? The same China that ruthlessly and insouciantly throws peasants off land they have been farming for generations with little or no compensation because their presence has become inconvenient for Communist Party apparatchiks?

    The same China whose belligerent behaviour in Asia has driven most small and medium-sized Asian countries to beg the United States to increase its military and other commitments in the region to counter-balance this overweening behemoth? The China that executes more people every year than any other country in the world?

    I feel more warm and fuzzy already.

    Speaking of the United States, our business leaders were also reminded that China and the United States, while clearly sharing many interests, are also locked in a power struggle. This is not the first time, after all, that a dominant world power has faced a resurgent nation bitter at its treatment by a world adjudged hostile and exploitative. China has lots to complain about regarding its treatment by western powers and their allies over the last two centuries. But one of the reasons that such rises frequently end in tears is that the rising power is wont to cast aside the “corrupt” system that “kept us down.”

    That system would include, say, the regime of collective security that for decades has guaranteed the peace and freedom of western nations and their allies against external threats; America’s role as the guarantor of freedom of the seas; the rule of law and much more. China thinks these institutions are hostile to its interests. Canada and the U.S., in common with the vast bulk of responsible nations, see them as bulwarks of international order and prosperity. Out of this will arise unavoidable and repeated conflicts. Best to think now about how to limit the damage. Hint: not by heedlessly throwing in our lot with the Chinese.

    The CEOs spent most of their time whistling past the graveyard. To the warning of one of the conference’s distinguished speakers that Canada needs at all costs to avoid being caught between the U.S. and China, between our largest market and the fastest growing, most appeared to feel the correct response was to hope they had misheard.

    They hadn’t. It is time for them, and us, to do what the CEOs professed to admire so much about the Chinese: to think about our interests in terms of centuries, not quarters. If we do, we will follow the sage advice of another speaker: not to act as supplicants grateful for crumbs, but to maintain the leverage that our coveted natural resources and other advantages give us.

    China respects strength and resolve. So should we.

    Brian Lee Crowley is managing director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: macdonaldlaurier.ca. @MLInstitute

    Copyright (c) The Ottawa Citizen
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  • Calgary Herald & Vancouver Sun: Americans slow learners when it comes to understanding deficits September 22, 2012

    Americans just don’t get it when it comes to understanding deficits. And not only do they not get it, they don’t even understand what it is they don’t get. They think deficits are a sideshow, and what everybody cares about is taxes, social programs, defence spending and entitlements. Nobody cares how they are paid for. Our reply: Responsible political leaders have to shift that discussion because all of those things are themselves endangered by deficits and mounting debt. Read my latest column in the Calgary Herald and Vancouver Sun below:

     

    Americans slow learners when it comes to understanding deficits

    Canadians accepted that we all contributed to this national issue and therefore a national solution was required

    By Brian Lee Crowley, Calgary Herald, September 21, 2012

    Having just been in Washington talking about how Canada broke the back of its deficit, balanced its books, and thrived as a result, I can officially say Americans just don’t get it. And not only do they not get it, they don’t even understand what it is they don’t get.

    I am used to a “can-do” attitude on the part of Americans, a belief that if problems are faced honestly and squarely, no obstacle is insurmountable. But all I heard was a long list of things that “can’t be done” and an even longer list of reasons why Canada’s success cannot be replicated south of the border.

    No matter how you alter or iron it, the defeatist suit just doesn’t look right on the American physique.

    As former prime minister Paul Martin and former Alberta and Saskatchewan finance ministers Stockwell Day and Janice MacKinnon and I all told them, their problem appears to them insoluble because they are thinking about it the wrong way.

    They think deficits are a sideshow, and what everybody cares about is taxes, social programs, defence spending and entitlements. Nobody cares how they are paid for. Our reply: Responsible political leaders have to shift that discussion because all of those things are themselves endangered by deficits and mounting debt.

    As Martin so eloquently put it, we came to understand that if we wanted to save health care, we had to cut everything, including health care, so we could put it on a sustainable footing. And we had to do it while conditions, while bad, were not dire. If you wait until the next euro or peso or Asian crisis causes a raging contagion that drives your interest costs out of sight, you won’t be cutting here and there; you’ll be throwing a few keep-sakes out the window as the inferno engulfs the house.

    Many Canadians do not realize the immense debt we owe the generation of politicians in the 1990s, New Democrats in Saskatchewan, Tories in Alberta and Ontario, Liberals in Ottawa and British Columbia and others elsewhere who grasped the nettle of reform and got out and sold Canadians on the idea the deficit was a danger to all they held dear, and sacrifice was necessary to preserve and protect so much we valued.

    That’s lesson No. 1 that Americans one day will make their own: The entire political class has to shoulder this burden. Today, Democrats mount a lopsided defence of social programs and higher taxes on “the rich,” while Republicans typically denounce any tax increases or cuts in military spending.

    In Canada, progress on the deficit only became possible when the par-ties ceased to treat it as a matter of partisan contention and started to treat it as a matter of vital national interest.

    And once they do, the next play they’ll take from Canada’s book will be to define the deficit as a national issue, and one therefore that requires a national solution. We all contributed to the mess, and we all had to contribute to cleaning it up. No carve-outs were permitted for defence or trans-port subsidies or social programs.

    Some taxes went up, but reform had to fall most heavily on spending. We learned when we introduced the GST that simply increasing revenue wouldn’t make the deficit go away, not least because politicians too often see new revenue as a reason to spend. We had a spending problem, not a revenue problem, and it required less spending to solve it.

    All of the former finance ministers with me in Washington also agreed taking a hard-nosed but thoughtful approach to cutting spending was indispensable to winning Canadians’ support. Every bit of spending was measured against objective yard-sticks like protecting the central roles of government, value for money and affordability.

    And of course a simple, objective, easy-to-understand target caught the public imagination and focused everyone’s efforts. Canada as a nation became obsessed with getting the deficit to zero. Every budget season we looked to see what progress had been made. And virtually every government followed Paul Martin’s advice: Set a tough target for progress each year, but make very certain you meet that target. Every time you fall short you damage your credibility and give ground to doubt and despair.

    One day American politicians will understand all this, and when they do, they’ll get the most important lesson of all: Every government that grasped the nettle of reform didn’t merely defeat the deficit, but enjoyed tremendous public support and was handily re-elected.

    They dished out tough medicine, but did it on the promise of the right kind of hope and change: a hope that was neither vague nor rhetorical, and a change that was both practical and immediate. Almost 20 years later, Canadians still owe them a debt of gratitude.

    Brian Lee Crowley is the managing director of the Macdonald-Laurier Institute, an independent non-partisan public policy think-tank. @MLInstitute

     

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