Wednesday, July 3, 2019

Mike Schreiner Talks About Capitalism

The second part of my interview with our MPP deals with some of the complexities and "nitty gritty" of how he sees our society can make a transition towards a sustainable society. Leadership doesn't just entail telling us where we should be going, it also involves navigating the pitfalls and traps set out to derail our migration to the "promised land".

Mike Schreiner, Guelph's member at Queen's Park.
Image from the GPO website.

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Hulet:  I did some articles about solid waste a while back and was horrified by the upfront and brazen way some businesses were trying to confuse the public and sabotage the Ontario government's attempts to control solid waste. One example were public relation campaigns aimed at people who use coffee pods to tell them that they were recyclable and compostable---they're not. Another example involved businesses spending lots of money to install computerized cash registers that separated out disposal fees from the "cost" of the product---instead of just burying the "eco-fee" in the cost of the product. They also put out advertisements  that didn't include the eco-fees in the listed price---which punished competitors who didn't separate the fees. And---just to add a cherry on the top---got caught charging too much! Another example was where the Stewardship Councils set up by the province to reduce solid waste simply ignored the reason why they were created in the first place and instead produced a report that suggested recycling could be cheaper if garbage collection was privatized.  

In light of all this "jiggery-pokery", I have a question for you. How do you think the Ontario government would be able to "house train" business? The system I refer to above---eco-fees and Stewardship Ontario---were attempts by both Conservative and Liberal government to use "market mechanisms" to make solid waste reduction part of their design criteria. Instead, they just played political games and sabotaged the system. You're a business person, how would you deal with this Tom Foolery?
Schreiner:  Yeah, good question. 
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Indeed, this is a very big issue.

It isn't just about solid waste issues either. Capitalism just doesn't play nice with either science or the public good. And contrary to what many people might think, there is almost always no government agency who's job it is to make sure that businesses "do the right thing". Instead, more often there are rules that say that businesses should hire consultants to do the research and then send the results to a government agency to look at. And, as a recent article in the National Observer points out, there is a conflict of interest inherent in that relationship that can result in pressure being put on researchers to "fudge" the results in a way that benefits the company at the expense of public interest.

One of the very first articles I ever wrote---for the Ontarion, in 1978---was about an investigation that was then going on in the USA into a scientific business named "Industrial Bio-Test Laboratories". It turned out that this company had done the "safety tests" on a huge range of different chemicals for various corporations and had often "fudged" the results in order to make sure that things got on the market, whether they were really safe or not. This included some of the most widely used farm chemicals, ones that my family had routinely used when I was a child. I was enraged to find out that scientists would lie about how safe something was in order to protect their jobs---and that the government had set up a system that was based on this insane conflict of interest. But as the article in the National Observer points out, this problem continues to this day.

Schreiner is just talking about the use of market-based solutions to control large amounts of relatively benign waste. But exactly the same issues apply to the greater issue of how businesses interact with any government regulations. That is, they have a tendency to take them over. Indeed, the phenomenon is so common that it has it's own name in academic research: "regulatory capture". So when you read what follows, remember that some of the issues that Mike identifies don't just apply to cutting down on solid waste, but also things like protecting salmon spawning beds and keeping toxic chemicals out of the water supply.

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One of the things is to design "rules of the game" that enable businesses to profit from "doing a good thing" and have enough "sticks" in place to push them along to do the right thing.  
Part of the problem with the way a lot of market mechanisms are designed---cap-and-trade is an example, Stewardship Ontario is another---is we make the market mechanisms so complicated, and so dependent on industry running them that they don't actually become market mechanisms.  
I think that this happens because government is afraid of "laying it on the line" with people , or, being brutally honest with people who try to hide things. So Stewardship Ontario was a way to try to hide waste management fees and costs. Cap-and-trade is a way to try to hide carbon pricing
One of the reasons I've always promoted individual producer responsibility is to get away from this whole industry-led bureaucratic apparatus like you had with Stewardship Ontario. You just say "industry, you're responsible for the cost of the waste you produce" and those businesses that don't produce that waste will have a competitive advantage in the marketplace.  
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Schreiner is raising an important point here, one that readers should understand. The current system we have with regard to solid waste (amongst a great many other things) is "industry-wide". Businesses form groups---like the "Stewardship Councils"---and they make collective decisions about how they should deal with a generic problem, such as solid waste. That's where regulatory capture takes place. "Individual producer responsibility" is very different. Mike's suggesting that instead of assigning a cost for a generic thing, such as "litter", and asking for the entire packaging industry to come up with a solution (eg: the Stewardship Ontario model), each individual business should have their own individual price associated with their part of the litter problem.

Consider the following scenario. After a particularly "festive and vibrant" Friday night in the city of Guelph, the downtown early-morning cleanup crews decided to do an audit of what gets left on the sidewalks---what percentage of chicken bones, styrofoam clamshells, half-eaten poutine, etc. Using this information, the city then ascertains what percentage of the clean up budget has been spent cleaning up the mess left by customers of which particular business. Then each of those establishments gets a clean up bill, but the amount varies widely based on what percentage of the mess came from their particular business. If this were done, the business models that create the most mess might find out that when the price of cleaning up is subtracted, they actually lose money. At that point, solid waste becomes part of the "design criteria" when each owner is creating a business plan.

The two points he is emphasizing are that businesses need to be individually identified (through the garbage audit), and, there should also to be significant individualized penalties (ie: the variable clean up bill) assigned to individual companies that will cause enough harm that it forces them to change how they do things. 

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From my perspective, the way to sell this to tax payers---and the government hasn't done a very good job doing this---is to be really clear that you are paying for waste right now in your property taxes. A huge portion of property taxes are dealing with waste, and waste management. So essentially, you as a tax payer are footing the bill and giving businesses an incentive to reduce the waste they produce.  
People mention "tax payer revolts"---I think people should revolt against having to pay for industry's wasteful practices. If we actually had full individual producer responsibility laws that, they would produce the incentives to reduce waste.
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This raises a good question. Just how much does Guelph spend on solid waste?

It's not a simple thing to answer. If you've never looked at a city budget, you might be surprised how complex it is. That's because it is possible to organize information in a lot of different ways. For example, many things the city manages are not paid for through taxes, but instead through revenue. The fees we pay for water and sewer, for example, are not taxes but monthly business fees---just like electricity. That means that this doesn't get included in the "tax-paid" part of the budget. More revenue comes through federal and provincial grants. Also, the budget separates out capital expenditures (eg: new buildings) from day-to-day costs (eg: paying the janitor that cleans the floors). As well, much of the budget is designed to aggregate things like labour costs under one heading instead of separating them out into separate departments.

Topping all of this off is the fact that budgets are obviously written in a hurry by people who's primary skill set isn't being able to express themselves clearly and precisely to the general public. Municipal bureaucrats also speak their own bizarre language that can be tremendously hard to understand. To cite one example, I spent quite a few minutes trying to figure out exactly what a "growth vehicle" is in one section---I think it might be a new garbage truck, but I could be wrong.

Solid waste can be particularly thorny to develop a figure for. Consider the following complications:

  • a significant fraction of the waste produced is dealt with by commercial and industrial institutions that have their own private solid waste contractors that by-pass the municipal system
  • there are user fees for people who drop off their own materials---so it isn't all tax-funded
  • recycled materials are sold on an extremely volatile spot market that means that from week to week the city has a wildly varying revenue stream that they add to the operating budget
  • Stewardship Ontario is already paying a significant fraction of the operating budgets of municipal waste systems
  •  the cost of "dealing with waste" isn't just a result of dealing with garbage that's been placed in bins and waiting at the curb---it also involves people in other departments (and other parts of the budget) doing things like picking up litter 

I tried to come up with a number for Guelph, but gave up after fighting with the budget document for about an hour. It isn't that important to the issue at hand---especially as Schreiner is a Member of the Provincial Parliament (MPP) instead of a city councilor. Suffice it to say, the number is significant. But the problem with coming up with a real number is part of that "transparency" thing that our MPP is talking about.

I could be argued that trying to figure out what particular business creates what particular fraction of environmental destruction would be far too much work. That's generally the reaction when people propose things like that. From the point-of-view of management there is some truth to this. But with modern computer technology it really shouldn't be that hard to do the odd audit for things like garbage pick up to find out exactly where the garbage is coming from, and charge businesses accordingly.

Where the real problems would lie, I suspect, would be in the realm of governance. Businesses are parts of interconnected webs of commerce and regulation. Create a new regulation on one node in this structure, and results propagate across the entire system. For example---to continue with the example of downtown pickup after an night of "rich and vibrant" activity in the downtown core---some of the businesses that create the filth are franchises. That means you aren't just dealing with the individual business, but the head office. Even if you have a rare independently-owned and operated business, they often have contractual agreements that lock them into buying specific products in exchange for a better price. Margins can be very tight, and a slight disturbance in "the Force" can make the difference between success and failure.

The old law saying that all beer in Ontario had to be sold in exactly the same type of bottle was a wonderful example of how a sustainable society could be organized. Yet it fell apart after Canada liberalized trade laws with other countries. It was simply against the law for the province to legislate packaging that seemed to give an "unfair advantage" to locally-produced beer. It is still against the law, and I would suggest that similar problems would come into play if Ontario tried to bring in "independent producer responsibility" and tried to make it the foundation of government policy.

The reason why it could work in the past but was legislated out of existence was because of a profound change in technology that led to a profound change in commerce. I once met an old economics prof who told me that when he was young he had an exam question that asked "Why will there never be a national beer company?" The point was that beer was a heavy, low-price product. That mean that shipping it thousands of miles would inevitably add a significant fraction to the cost, which would stop people from buying their suds from anyone else but local brewers.

It was exactly the same with several commodities: beer, soda pop, milk. This mean that there were no national bottlers, which meant that consumers were close to the bottling plants. This made it easy to have returnable bottle laws. The trucks were already going to the stores and homes to drop off the milk, pop, and, beer---why not have them pick up the empties and bring them back at the same time? But once the interstate highways, giant transport trucks, and, cheap diesel fuel came along, you could ship heavy, low price commodities long distances and still stay in business. (Bottled water is simply the latest example of this general process.) All the local soda pop producers, dairies, and, breweries went under, and so did the refillable bottle laws with them. There was a fundamental change in the economic ecosystem, and the laws followed suit.

This isn't to say that individual producer responsibility is a bad idea. It isn't even to say that it shouldn't or can't be done. What I am pointing out, however, is that it is a radical thing to suggest and do. It's also important to remember that governments do radical things all the time. For example, the excellent road system that allows transport trucks to move beer across the continent didn't exist at the end of WW2 (that was a conflict run on railroads.) The government decided to spend a lot of money creating them and in the process dramatically changed various aspects of the existing economy. In the same way, creating a system of "independent producer responsibility" would also be a big, radical, disruptive thing for the government to do---but it could do it. And it would also make radical changes to the economy. 

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I recently went to a panel discussion where an academic and Adam Donaldson joined several people who'd worked at the old Guelph Mercury to discuss local news. One thing that I kinda gagged on was the nostalgic blather about the "halcyon days" of working for the old Merc. I was an outside observer of the paper since the late 1980s, and by the time it folded it was a wan shadow of itself. And most of that couldn't be blamed on the Internet or Google---it had been looted by various "media empires" long before they came along.

The event did get me thinking about what this blog is all about, though. I'm obviously not doing straight reporting. Indeed, even when I try to just do traditional reporting---like this interview with our local MPP---things quickly degenerate into something else. The thing is, however, I would feel like I was only doing part of the job if I just hammered out quotes from an interview. I want to explain context. And that involves looking up facts and expanding the argument as best I can so the implications become explicit for the reader. I can only assume that that's not something that is taught or encouraged at journalism school---because so few reporters ever do it.


That means that I'm trying to do something more than just recreate the sort of reportage that you used to get from the Mercury---even before the junk bond artists looted it. If you think that this is a good thing, then why not subscribe through Patreon or PayPal

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Hulet: So it's not just the fees, it's the transparency as well?
Schreiner: It's the transparency and the simplicity. Part of the problem with things like Stewardship Ontario was that it was a bureaucratic entity that we just pay some money to so we don't want to think about solid waste as a business---and you guys just minimize the amount of fees we're paying. 
And that "quote", is a "market mechanism"?????  That's not a market mechanism. [You can hear the disgust in Schreiner's voice.]
Take Tim Hortons as an example. I don't want to pick on Tim Hortons---I will because I do a lot of roadside clean-up and Tim Horton's cups are one of the things we pick up the most. If Tim Hortons actually had to pay the cost of picking-up all those cups, they'd figure out a way to reduce the number of cups that go into the waste stream. But right now they have no industry incentive to do that---they just give all that money to Stewardship Ontario and don't worry about it. 
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I wrote earlier that I couldn't find a number for how much the city spends on solid waste, but I did find one number on one particular website.

This advertisement comes from the "Adopt A Highway Inc.".
Image used under the "Fair Use" copyright provision.
We've all seen the "Adopt a Highway" signs, but I think it's somewhat useful to stop and think about what is going on. People volunteer to pick up trash that was created by businesses as part of their business model. Isn't picking up the resulting garbage the same thing as if the local restaurant asked for volunteers to wash dishes and wait on tables so they didn't have to pay hired staff?

I suspect that the difference is that somewhere in our minds most of us have bought into the idea that that it was an individual "choice" for a certain segment of the population to throw garbage out of their cars---and you can't blame the business for that, can you? But maybe you can. If all human decisions simply came down to a conscious personal choice (eg: I freely choose to throw this garbage out the window---fully aware of the implications of that choice for all and sundry), why do we have an advertising industry?

Here's a classic television advert that I believe makes my point. What exactly is it trying to tell the public---that their brand of car is the best for mowing down British soldiers? I'd posit instead that it's suggesting that there's something intrinsic to the American psyche that muscle cars appeals to. Driving fast without having to think about hitting wildlife or creating a climate disaster is what it means to be "free". So if you are a patriotic American, buy one of our autos and "stick it to" those elites who want the government to regulate all the "fun" out of your life. 



Here's another example. This Tim Horton's advert appeals to the emotions and myths that Canadians like to tell about themselves. The immigrant dad brought ideas about life over from the "old country" that he tried to impose on his son. But because of way he was welcomed into his adopted country (the white guy giving him a coffee when he first came into the rink to see his son play), he "came around" and adopted "Canadian" values.


The important thing to realize is that you are rarely going to see someone argue that saving the planet is a bad idea. What instead happens is that that ideal gets "drowned out" by some other message. For example, American "FREEDOM!!!!!", or, Canadian "Can't we all just be nice to each other?"

Several times I've been told by professional advertisers that all they do is "help consumers choose between brands", and that their pitches cannot be blamed for having a bigger influence on society. But that is patent nonsense. Businesses build themselves around a specific message such as "convenience" or "caring", and this results in mountains of unnecessary crap.  And it's also patent nonsense to think that a restaurant who's business model is based on maximizing convenience while totally ignoring the environmental consequences---and sending off people in their cars with bushels of trash---has no responsibility for those who take the next logical step and just throw said trash out the window of their speeding death wagon while they look for British soldiers to run over.

This is such a "thing" that Family Guy even did a hilarious fake ad that lampooned the way businesses create ridiculous products that only appeal to our emotions and make absolutely no sense at all. (When I worked at the University I used to have to throw out heaps of sad veggies and fruit that well-meaning event organizers would order---and which often never got eaten---because a) food means you care, and, b) we all know people don't eat enough fruit and veggies, and, c) ultimately most people don't want to eat fruit and veggies at meetings.)



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I think things like re-instituting bottle deposit return programs is an example of that. I think the Brewer's retail has something like a 98% recapture rate---because people have a nickle or dime incentive to take their bottle back. Unbelievable what a little incentive like that can do to reduce waste. 
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I fear that Schreiner is being a bit optimistic saying that the Brewer's Retail is hitting a 98% recapture rate. The figure I found was 80%, which is still pretty good. It does raise the question, however, about what is going to happen with this bottle return system if Doug Ford and his merry band of "enablers" break up the existing "Beer Store" near monopoly. Will every convenience store and grocery be willing to take on the job of paying out deposits and collecting beer bottles and cans, plus wine and liquor bottles too?

This is the nub of the issue. What we call "free market capitalism" is a very strange thing. Contrary to the propaganda that people get force-fed from a variety of sources, it is not "free". In a totally "free" situation, businesses quickly make arrangements to fix prices. As the patron saint of capitalism, Adam Smith, observed:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. (Adam Smith, The Wealth of Nations, Book One, Chapter X, Part II, p. 152.)
A marketplace that's controlled by monopolies and cartels isn't really "free". The reason why we have something like a free market is through government intervention that creates a modicum of real competition.

One example of this is the way the Canadian Radio-television and Telecommunications Commission (CRTC) forces Bell Canada and the cable companies to provide bandwidth to independent Internet Service Providers (ISPs), so you can get decent service at a reasonable price. If they didn't, the only people you could buy access to the internet from would be Bell and Rogers---who would probably charge even more than they do now. (I'm a happy Teksavvy customer.)

So what Schreiner is saying is that society needs to expand the regulatory oversight of government to create a new "niche" where freedom can "invade" the marketplace---such as when the CRTC forced the "wire owners" to allow some new competition in the ISP market. As I pointed out in my hypothetical example of the downtown trash audit, there would have to be government mechanisms put into place before we could create a genuine system of "individual producer responsibility", that would force businesses to make environmental sustainability part of the "bottom line". Please note something interesting here. People often talk about "market mechanisms" versus "regulations" when it comes to developing public policy solutions, but as I've suggested above, you can't really have a market mechanism (or a "free" market at all) without introducing some pretty stringent regulations first. 

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This is probably a good place to stop and let the reader mull things over. I think this post---probably more than any other I've done---shows how complicated government policy can be. Because of the practicalities of the job, politicians have to be very brief in their pronouncements: the ten second sound bite on the news, a couple minutes at the doorstep, five minutes at an "all candidates debate". But still, they are dealing with profoundly complex issues. We voters should at least understand the difficulties people like Schreiner are labouring under as they attempt to do their job.

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Furthermore, I say to you---the climate emergency must be dealt with!

1 comment:

  1. A reader on Reddit has pointed out the following item on the City of Guelph website: https://guelph.ca/city-hall/budget-and-finance/property-taxes/. If you click on it, you can see a line that says that says that 5.3% of our taxes go to "solid waste resources". The website says that it was "last updated" on June 5th, so that might explain why I hadn't seen that before.

    I have been told by people who use the site regularly that it is badly designed, which makes it hard to find information---which I can attest to. I certainly tried to use search engines to find that info, and nothing came up.

    I'm not surprised that the line item comes to only 5.3%, as a large fraction of the costs are paid by Stewardship Ontario. Moreover, a great many businesses in our town pay for their own waste disposal. I think we can cut Mike Schreiner a little slack, however, as there are lots of environmental costs we bear because of our wasteful lifestyle. And, to be honest, I wasn't all that interested in restricting our conversation to just solid waste. I was using it as an example to illustrate the larger issue of how do we get business to stop trying to sabotage initiatives aimed at making the world a better place.

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