Sunday, January 15, 2006

The Neo Liberal Canadian State

A Canadian Lefty in Occupied Land is fellow left wing blogger after my own politics I would say, and he recently linked to my article below on Voting for Capitalism on January 23. His analysis of this election is more about how the ruling class operates under capitalism with it's various internecine conflicts between elites. Its an interesting series of articles that folks would do well to read, especially American readers who visit here.

He observes that there is very little real difference between the Parties running for government as they reflect only aspects of opinion of the ruling elites in Canada.

It's a concrete stripping away of bullshit to look at the nature of the Neo-Conservative/Neo-Liberal (these terms are interchangeable*) State in Canada. A state that regardless of who wins on January 23 will not change much. It will only be a matter of degree.

The largest scandals under the Liberals HAVE NOT been addressed by the Conservatives or their syncophantic cheerleaders over at the Blogging Tory's or in the MSM. They can't address them because they are ideologically in agreement with them, that is the contracting out and privatization of state services.

The result for the last twelve years have been massive rip offs of funds, the failure to regulate third party service providers, and to monitor services they provide while costs have soared. The privatization and contracting out of these services has left the door open for conflict of interest rip offs by government empolyees who set up third party service organizations to sell back to government services they normally would provide as employees. This has been done predominately in the area of computer and IT services.

As I wrote here during the last election about the P3 Boondoggle that is the Firearms Registry, the Liberals under Chretien as PM and Martin as Finance Minister embraced the neo-liberal idea of restructuring the State in the market model of service delivery. They introduced public private partnerships, P3's, and fashioned the restructuring based on the book Reinventing Government that also influenced Blair and Clinton/Gore.

Reinventing Government, How the Entrepreneurial Spirit is Transforming the Public Sector, by David Osborne and Ted Gaebler published in 1993. It became the bible for the reduction in government services in order to reduce deficits by using contracting out, outsourcing and public private partnerships. It was the bible of the ‘new ‘ way for governments to do ‘business’. It was a liberal version of the harsher conservative view that all government services could and should be privatized.

It became the rallying cry of governments under siege from business and the right wing. In the United States it was embraced enthusiastically by the Democrats and Vice President Gore. In Canada it became the Chretien Liberals alternative to the Klein Revolution in Alberta. And it is the reason that Canadian Firearms Program ended up being a billion-dollar boondoggle.

Facing a massive deficit and debt crisis that was world wide, governments began to end their Keynesian approaches to social spending and embrace the new neo-conservative agenda. Reduce spending, outsource government contracts and increase tax cuts to business. The Liberals were no different, and Reinventing Government became an internal bible within the various departments. It was read by Cabinet Ministers, deputy ministers, and most importantly its ideas of contracting out and outsourcing was embraced in every department as a way of supposedly saving money.

It is important to understand that in the Ninties the provincial governments and the Federal government was besieged by the business lobby and its right wing political parties to change the way it delivered services due to the Debt and Deficit Hysteria. The current attacks on Martin for having cut back funding to provinces is hypocritical in the extreme, since this is exactly what was demanded of the right wing in Canada. The cut backs in funding to provinces dovetailed with the cut backs in funding that the Provinces were engaging in in delivery of services and funding to Health Care, Education, Post Seconday Education and Cities.

The whole MUSH sector was being restructured by financial cut backs preparing it for alternative delivery models of service, that is contracting out and privatization. Therefore the agenda which had been planed and promoted by the right wing think tanks since the 1970's; the end of Keyensian social welfare and its replacement with private sector delivery of public services, was coming to fruition. The Debt and Deficit hysteria was all that was needed to allow governments, provincially, federally and municipally, to end union contracts, and look to private sector servicing.

If the Debt and Deficit was so important then one has to ask why it is dismissed today as the United States enters into a record Trillion dollar debt and deficit regime. It was not important, even at the time few voices on the left could challenge the right on this issue, they dominated the debate. And the left and cosil democratic left failed to mobilize an effective counter attack.

Ralph Klein explained it best when he said that Alberta had to renovate its house, used mortgage payments and personal debt to get the average person to understand this complex issue of Government bonds and high finance. What he forgot to mention was that Alberta's debt was incurred because his government had given a tax holiday to the oil industry for a decade after the collapse of the oil market in the crash of the eighties. That the deficit was a temporary phenomena, for 1993 only after that the govenment has run surpluses ever since.

The fact was that Government has always incurred debt, its called bonds, and bond financing. Governments borrow money and also issue bonds and debentures for investments, thus they are always in debt, either to the market place or their own citizens. It was the deficits though that allowed them to combine the immediate financial shortfalls with the long term debt that created the image of a government on the edge of economic collapse.

Of course what was not talked about but is apparent even again today, is that business operates on debt financing as well. While it hopes for quarterly gains, thus avoiding a deficit, in the eighties and ninties most business was in debt financing, thus allowing it vulnerablity to take over in the market. The rise of mergers and aquistions, the use of hedge funds and junk bonds reflected this economic vunerability. Since then buisnesses that restructered, reduced workers, sold off assests, and relabled themselves have been successful. They also now sit on piles of cash. Which is why you see them buying back their debt, their shares. Not all though as the collapse of America's number one business; GM shows.

What the right did was create a sturm and drang about Debt and Deficit around the world, the Big Lie. The reality was that it was an excuse to implement their plans to reinvent government.

As I wrote in 2004 about the Firearms registry, this reinvention of government in Canada focused not so much on government services in general but a specific service sector; computers and IT. The Firearms registry is the very example of why P3's are a failure.

The Liberals began the promotion of private-public partnerships (P3’s) and contracting out not based on any real economic analysis but based on popular business ideology. One of the areas the government saw, as perfect for outsourcing was its IT needs. The computer and information technology boom meant that the government could easily contract out these services rather than developing them in-house. Various departments began wholesale contracting out of IT services, including hardware purchasing and installation, computer programming and data base construction, as well as data inputting.

Unfortunately in their rush to privatize and outsource, they failed to develop a business plan that would allow for project oversight, and worse they failed to tender specific contracts for services. The government became a slush fund for private sector IT companies which were not the small computer companies of struggling entrepreneurs of the Wired generation, but large-scale corporate monopolies.

Such was the case with the Canadian Firearms Program, as is clearly shown by all the audit reports. In the case of the creation of the CFC, not only was the IT contracted out but also so was all the staff who did data intake, customer service and data input. The entire Centre is one large venture in private delivery of government services. Cost overruns occurred because of having “ multiple headquarters deployments (Edmonton and Ottawa) and processing sites (Montreal and Miramichi).�? These were staffed not by public sector workers, but by contracted out workers.

Management was the only area that was not contracted out, but in this case the management also did not have the knowledge or experience to oversee the IT component of creating a brand new data base for registering Canada’s gun owners.

In the years following that more and more contracting out was done for computer technology, software and hardware purchases. It was the mystique of the boom, of the Wired world, that somehow all this computer stuff was specialized knowledge, was too difficult and too costly for Government to procure and operate in the old model. A new model had to be adopted to deal with the risky business of high tech transformation of information.

The result was theft by monopolies providing services ,second rate equipment, purchasing over priced computers, creating outdated software, updating that same software, holding proprietary ownership over the software. It was bait and switch, the largest swindle in history, and it was all wrapped up in the great Dot.Com boom of here comes the future. The government of Canada bought it hook line and stinker. And it has cost taxpayers billions not only in the failure of the Firearms registry, but in other sectors as well, where ever government bought computers or software, they contracted this out, earning third parties enormous profits at taxpayer expense. Some of those third parties turned out to be their own managers!

Such was the case with the Department of Defense scandal in 2004.

Ex-DND employee being sued over billing scandal

Updated Thu. Aug. 12 2004 7:03 AM ET News Staff

Paul Champagne, an Ottawa man who claims his wealth comes from the stock market, is being sued by the federal government and Hewlett-Packard.

They allege the former Department of National Defence employee stole over $100 million of taxpayers' money and they want to recover some of it.

But the fact remains that Champagne's signature appears on cheques he personally received from military computer sub-contractors. CTV saw one such cheque that was for $95,000.

"He was telling people the contracts were all top secret military work so no one really knew what was going on except Paul Champagne," said investigative journalist Andrew McIntosh of the National Post.

In court documents, the government and Hewlett-Packard allege that over a 10-year period, Champagne stole over $100 million using a phony invoice scheme.

Ex-DND employee's signing authority questioned
By Scott Foster, Ottawa Business Journal Staff
Mon, Aug 30, 2004 12:00 AM EST

Gordon O'Connor, defence critic for the Conservative Party, has said the Champagne case brings into question the system of checks and balances within DND.

But Howard Grant, founding partner and president of Ottawa-based Partnering and Procurement Inc., said the Champagne case is an isolated event and should not colour the public's opinion of public servants.

"The majority of public servants work hard and do their best to provide a good service to the public. We have tarred all public servants with the same brush and, in essence, told them we don't trust them."

Public servants must deal with a lot of rules designed to protect them from appearing to favour particular private sector vendors, said Mr. Grant.

However, some of those rules actually hinder public servants from making sensible business decisions, he added.

For example, if the government needs a small piece of business done quickly, public servants still have to tender to at least three companies, which is a "prolonged and expensive process for both the government and the vendors", Mr. Grant said.

"Vendors are unwilling to spend, for example, $3,000 to have a hope of winning a $20,000 contract. Approval processes leave projects hopelessly delayed before they even get started," said Mr. Grant.

Another example is when the government has selected a private sector vendor to do the first part of a project and then is unable to contract with that same vendor to do the next stage without again going out to at least three companies, he said.

"Assuming the private sector company has done a good job on the first phase, switching companies mid-project just doesn't make sense."

Currently, the system causes procurement officers to use "work-arounds" to achieve the outcome that was "the sensible decision" in the first place, said Mr. Grant.

"We see procurement officers having to split a large contract into several small ones because the approval processes to select one vendor are just so cumbersome.

"So sometimes when procurement officers are seen to be breaking the rules, they are actually doing so to get their projects underway and are improving the service to the public by saving time and money."

Mr. Grant believes the system needs an overhaul but said the government needs to move away from task forces that discuss the issues and move toward making "tangible changes that will support those public servants who want to be both accountable and do a good job for their departments and the public".

I am not the only one that has raised this issue of the Gun Registry Boondoogle being a failure of contracting out Computer and IT services. After I published my article this appeared at
July 1, 2004
Canada Firearms: Armed Robbery
By Mel Duvall

Nor am I the only one who is concerned that the increasing use of P3 models for government delivery of services, now including the sell off and lease back of Federal Buildings done under the Martin government, with barely a peep out of the Conservatives when in opposition (kind of hard to oppose an ideological position you promote).

Oracle of Ottawa has an interesting take on Department of Defense Contracting Out, the Bomarck Missile and P3's.

Part 6 - Outsourcing - Public Sector

My main concern about outsourcing in Public Sector IT is that it relinquishes much of any advantage and control IT provides the Public Sector. Once you outsource any Public Service activity you relinquish control to the Private sector which does not have the same focus as the Public Sector.

It's not in the Private Sector's interest to debate the merits of IT requirements with a Government client. The Private Sector ideal is to please it's Public Sector client by accepting whatever modifications may occur whether they be practical or not. The Bomarc is the best example of how we lose control of our Sovereignty once the Government outsources Public Services to another entity Corporate or otherwise.

Corporate entities do not have the same overall objectives or controls as the Public Sector. The trend in Government to outsource is very disconcerting as it's an abdication of the role of Government to Private interests. I don't know about you, but I have read so many news items of Government records and personal information landing up in open waste containers. I just shudder to think what would happen should a Government IT network be compromised.

I have deep concerns of what type of controls would be given to Private Sector employees having access to confidential Government information.

I don't know about you, but I have read so many news items of paper tax records and personal information landing up in open waste containers. I just shudder to think what would happen should an Government IT network be compromised containing millions of sensitive files.

I have deep concerns of what kind of controls would be given to a Private Sector employee have in access to Government confidential information.

Who does the Private sector employee report to, his Private sector Corporate employer or the Government ?

Unlike the Bomarc scenario, Government still controls IT in the Public Sector.

Do we really want a repeat performance of relinquishing control in such a sensitive area ?

The few dollars we save will cost us much more sometime down the road.

Where is the Internet Going ?

Part 5 - Outsourcing - Private Sector

In the United States the term used is Neo-Conservative, as if this new form of State Capitalism stripped of it's Keyensianism is somehow a return to pre-FDR Republicanism. In Europe they use the term Neo-Liberalism, which is far more descriptive, but because Amercians literally go apoplectic over the term liberal, the term they use is neo-con to describe themselves. What it is simply is the reduction of state delivered services in favour of the state paying for private delivery of services, and the reduction of government regulation (bueracrcy) in the market place.

Also see Privatization



No comments: