September 5, 2011

Oct 6: McGuinty's grand plan has hit some snags

On paper, Dalton McGuinty's Liberals are peerless. They go into next month's Ontario election armed with a blueprint that, in theory, is bold and comprehensive.

Their plan seamlessly links the environment to job creation while, at the same time, promising a modernized and improved health system.

It should be a winner. Had it been sketched out in a university-level political science essay, it would deserve an A.

But sadly for the Ontario premier, the grand plan hasn’t been working.

Indeed, McGuinty’s travails provide a cautionary tale for any politician enamoured by big ideas: On paper, they may look superb. But in practice ….

The centerpiece of McGuinty’s big idea is his Green Energy Act. By encouraging alternative energy production through windmills and solar panels, it is designed to attack pollution and climate change.

Yet at the same time (and this is its theoretical brilliance) it is an economic strategy aiming, through government subsidies, to finance an entirely new green industry in Ontario that will make and design these panels and windmills for export.

All of this is to be nurtured by a modernized, business-friendly fiscal system that cuts corporate income taxes and replaces Ontario’s loophole-ridden provincial sales tax with the far more elegant HST.

The new tax regime is supposed to encourage business to invest. Meanwhile, new local health integration networks are supposed to create a more rational — and inexpensive — way to deliver medical care.

All of this, in turn, is designed to give Queen’s Park more money for services such as elder care (which, on paper, has also been modernized).

That is how it was all supposed to work. But in the real world, the grand plan has become hopelessly entangled.

First, there was the general problem of incompetence. Lured by the McGuinty subsidies, farmers and others did invest in solar panels, giving a boost to nascent green firms.

Yet it seems that Queen’s Park hadn’t taken into account the reality of Ontario’s electrical distribution system. There just aren’t enough transmission wires in place to transfer this new power from where it is being generated to where it is needed.

In the case of local health networks, new bureaucracies were simply grafted onto old ones which produced — no surprise —more bureaucracy.

Second, there was the perennial problem of democracy. For reasons ranging from health to aesthetics to raw localism, McGuinty’s windmill strategy ran into stubborn popular resistance.

All of this, in turn, hampered the growth of those green firms that were supposed to provide new jobs.

The third problem has to do with the nature of time. It may be true that lower corporate taxes and an integrated HST will, at some point in the remote future, encourage business to invest.

But in the here and now — the time period in which most of us live — none of this has come to pass. In spite of their new tax breaks and the elegant HST, corporations are reluctant to build new factories. The world economy is just too uncertain..

For Ontarians who must finance all of this through new sales tax levies on previously exempt commodities like home heating fuel, the new fiscal regime is hardly a good deal.

None of this was inevitable. As China today (and Japan or Singapore in the past) have demonstrated, coherent, state-driven industrial strategies can work.

But to succeed, they must be carefully thought out and then even more carefully implemented. With McGuinty’s big idea, too little of either happened. His Liberals can only hope the voters are forgiving.

Thomas Walkom writes for Record news services.