Five dumb things Politicians think about Economics and how they are hurting Nova Scotia
Generations of Nova Scotian politicians and bureaucrats have often had a muddled understanding of the economy they preside over. Nowhere is that more muddled today than in Pictou County’s Boat Harbour.
At the centre of it all is a pulp mill and its poison garbage dump on the north shore of Nova Scotia. It’s a place that takes the pitiful remnants of our forest and uses it to make the goop from which toilet paper is made. You may have heard of the Mi'kmaq first nation protests about it, or the political ‘studies’ and promises to ‘look into it”, or the fisherman’s blockade, or you may have read Nova Scotia actor/activist Ellen Page’s tweets about environmental racism in Pictou County.
“That’s the smell of money and politics” my Pictou county grandmother used to say when I’d wrinkle up my nose and ask her what the heck the stench was. My grandfather, less circumspect and much more closely aligned with the woods, waters and wildlife around Granton and Pictou Landing, would just hawk and spit.
That was 1967. For more than 50 years anyone with eyes, nose, and any respect for nature at all, knew it was wrong. The mill was one of those wack economic development schemes. “Come here to our rural region, forget the big city rules and university science talk” said the boosters, hucksters, and schemers in government, “You can do anything you want here. You can wreck anything. Just as long as you give us jobs doing the wrecking.” So there were studies and tests and promises. As recently as this week Prime Minister Trudeau assured concerned citizens in PEI that the government was “looking in to it.” And to this day it’s all come to nothing. Because… jobs (that’s pronounced ‘votes’).
Once a pristine tidal estuary sheltered from the open ocean, and a final scrap of nature left to the indigenous community of Pictou, today's Boat Harbour is nothing more than a cesspool for toxic mill waste, poison pumped over from the pulp mill at Granton. The water is churned up by aerators and only in this stirring the pot sense “treated” for release into the Northumberland Strait. Because, you know, “the sea will take it away”, as they used to say.
The size of 340 football fields, Boat Harbour is the largest polluted site in the province. Nothing living survives there.
It's full of decades of contaminants — including cadmium, dioxins, furans and mercury — and continues to take in roughly 75 million litres of effluent a day, piped from the nearby mill.
The Northern Pulp plant is an environmental scourge, and a shameful example of environmental racism (meaning this never would have been allowed in the town but was pumped over to the reserve) and provincial politics at their worst.
So let’s just shut it down. Right. We were dumb once, but now we’re older. Too old to be that dumb.
Not so fast… 50 years goes by.
Nothing has been done. And it now looks like another deadline in 2020 will go by and nothing will be done. Again.
What’s the problem?
Astonishingly, only one argument has ever been made in support of the mess and it has swayed (and bought) politicians and bureaucrats for 50 years. Sing it with me… Jobs, Jobs, Jobs.
Now on the surface of it that’s an economic argument. "That pulp mill is important in this town," says former Pictou mayor Lawrence LeBlanc in that kind of all knowing rural political voice that is the foundation of fact in absence of any actual facts. The regional, provincial and federal politicians are only slightly more clever in that they use dissembling language and platitudes; they hide behind studies, they say more research must be done.
"We've made a very clear position," current Liberal Premier Stephen McNeil says of the government's ‘deadline’ in the silly syntax of political speech. "People need to come together and determine what it is that they want to see for their community." That’s about as clear as the poisoned water in Boat Harbour. The opposition politicians positions aren’t much different. Ex Progressive Conservative Premier (and my childhood family doctor) John Hamm is, astonishingly, Chair of the Board of the Pulp Mill, which is surely the worst political optics in the province, if not fully a violation of the code of ethics of the medical association.
Five years ago the mill was given five years to fix the problem. It’s hard to imagine regular criminals getting this treatment but as we know corporate wrong doers in Canada are treated… specially. Their offered solution? Build a longer pipe. Pipe the ‘treated effluent’ as they euphemistically call this poison soup, out into the sea. The problem with that? The sea where the pipe would pump up to 100 million litres of yuck a day is right in the middle of the region’s most lucrative fishing and lobster grounds. This is a unique stand off. A Frankenstein legacy of the province’s economic development efforts facing off in a gun fight with a traditional fishing industry. This isn’t right v. left or conservatives v. environmental snowflakes. This is working people, the kind of people who still vote and openly support politicians, pitted directly against each other.
This week the mill says there’s no way they can meet the five year deadline. And the Editorial in the Herald says “Something’s Got To Give” implying it’s going to be the government.
Let’s talk about the economics of this stuff. Specifically, let’s talk about the mistakes politicians make in talking about economics and apply them to the mess at Boat Harbour in Pictou County. Don’t let the word economics intimidate you, and don’t be baffled by numbers. Economics is simply the story we tell ourselves about where our wealth comes from and where it goes.
Here’s the top five countdown of the economic mistakes that got us Boat Habour and what to do about it.
5/ People are rational and corporations are kept honest by the market
The notion that people are rational is a convenient fictional construct for politicians. Politicians forget that corporations, which were thought to be efficient but are full of irrational human beings acting in concert, must be properly regulated to inhibit fraud & theft, prevent natural risk-takers from getting carried away, and prevent bad ideas from driving out good ideas and destroying our economy and ecology.
Even today the most bland demand from Pictou County, that the federal government step in and investigate the mess, is met with crickets from Ottawa. The people of Pictou County have long been lulled into the idea of government as Mom, but when they get in trouble and call for her she’s… I don’t know the right metaphor… drunk at a VLT in the back of the local bar and doesn’t want to hear it?
It’s not so much that politicians in Pictou county don’t know there’s bad actors taking advantage of the province. It’s that they choose to behave as if that’s not possible. In Quebec the French have a word for it. They call it corruption. Here, our innocent minds can’t conceive of such a thing so it doesn’t exist.
Groupthink is a psychological phenomenon that occurs within a group of people in which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome.
For Nova Scotia’s politicians, almost all careerist, being a politician is the best job they ever had or ever will have. The most money, the most power, the most fame, the best pension and post retirement opportunities. They are going to do and think anything that keeps them on track and in the group.
They know pouring poison into our environment is wrong just like everyone else. But they have more important things to think about… themselves.
A properly functioning democracy is an argument we have with ourselves about the shape of things to come. It’s never settled. It should be messy and loud. And from time to time we should see politicians break ranks, speak out of turn, argue, and even quit in disgust. If we don’t see these features you can be sure that things aren’t working right. We’re not seeing them now.
Economist John Kenneth Galbraith described it as “a vested interest in error” on the part of the participants, who, as members of an in crowd are willing to suspend disbelief. Galbraith quotes Walter Bagehot – “all people are most credulous when they are most happy“. To this, he adds an elegant statement of the power of the vested interests who condemn and criticize doubting voices in an almost tribal manner. In Nova Scotia they call curious, questioning, concerned, citizens ‘naysayers’.
3/ Endless growth is possible
Since the end of WWII there has been a notion that growth is the answer to every economic problem. And within some narrow range that has been true. The amazing growth in the economy after WWII took a public war debt that seemed insurmountable and made it a trivial expense relative to the size of the powerhouse economy. There’s even pseudoscience to back endless growth up. The blind belief in human progress. As things get scarce the markets will always be incentivized to find a new technology and innovation will wipe away all obstacles to growth. Again, sure, but only up to a point.
Right away we run into trouble. There are in fact limits to everything. That’s the basic premise of economics… and an obvious fact of life. It is not reasonable to assume endless growth in a finite province, or world, with limited resources. It's the same with the ocean's capacity to absorb our crap. There's no doubt the ocean is big. But even it is finite. "The ocean will take it away." is now a kind of joke. We know there is no away. Poetically, the solution to pollution is not dilution.
The thing the politicians fail to understand is that on the economists famous graphs all lines are curves. Example. Let’s plot cake vs. happiness. No cake and we’re unhappy. A little taste of cake and we’re happy, a nice piece of our favourite cake and we’re happier still. A whole cake on our birthday and we’re genuinely glowing, if we have friends to share it with. Eating a whole cake… yuck. Living on just cake? Well, that’s a famously bad idea. Too much is too much and our happiness goes down. After a point cake becomes unhealthy, or even a form of torture. It’s likewise with everything. There are always limits. Even to an economy. In economics ALL lines are curves. It’s the politician’s task to know where we are on those curves, accept, and explain those limits to people who want more but should not and cannot have it for the greater good and their own.
It’s a task few politicians accept.
Growth is not the answer. But there is an answer. It's not a quick fix or easy way. It's not a big vote grabber. But throughout all of human history's troubles there is only one thing ever known to beat all. What magic can stop wars, cure disease, lift people out of poverty, make life cleaner and better for all, feed everyone all they need? Education. Education is the imparting of factual information and knowledge to the full capacity of every citizen. Endless education and self-improvment is possible.
2/ The Sunk Cost Fallacy
There’s lots of ways to explain the sunk cost fallacy. We’ve all made this error. The simplest way to explain the problem is to say that:
We shouldn’t hold on to our mistakes just because they cost a lot of money and we spent a long time making them.
In economics, a sunk cost is any past cost that has already been paid and cannot be recovered. It’s not hard to imagine examples in our personal lives. To continue the example above; we were hungry at the grocery store, bought a whole expensive cake, and carried it home, eating along the way. Now home and sick , we still feel responsible not to ‘waste’ the other half of the cake because it cost a lot and we don’t have any other groceries on hand. Behavioral economist Dan Ariely adds a fascinating twist to loss aversion in his book, Predictably Irrational. He writes that when factoring the costs of any exchange, you tend to focus more on what you may lose in the bargain than on what you stand to gain or the damage that might be done.
In Pictou County the politicians are counting votes and they are certainly more focused on votes to be lost. They are also aware of the 50 year provincial investment in the pulp mill economic development scheme that created the jobs that earned those votes.
The truth is the money to clean up Boat Harbour was spent 50 years ago when the government committed to the liability for the site. As my Grandmother in Stellarton used to say, "A promise made is a debt unpaid." It is a sunk cost. Sunk literally in Boat Harbour and growing with interest every day. Avoiding paying the debt may make the water more murky, but it won't make the debt go away.
1/ Economics in One Lesson – the biggest mistake in economics
This is the one. This is the biggest mistake in economics politicians make. Ready?
Economics in One Lesson is an introductory book to free market economics written by Henry Hazlitt published in 1946. It is based on Frédéric Bastiat's essay Ce qu'on voit et ce qu'on ne voit pas (English: "What is Seen and What is Not Seen").
The "One Lesson" is stated in one sentence:
The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
This is the heart of the whole mater.
We know what the politicians are looking at:
The line of talk is expansive. It's not only the 300 or so mill jobs that would feel the impact if the mill shuts down, but also ‘thousands’ more tied to the Maritimes' forestry industry.
Jack Fraser, a former mill worker, summarizes the idea to CBC.
"It's going to affect 10 major sawmills," he says. "It's the people who sell tires, sell gasoline, you know, sell building supplies to the mill ... like, it's widespread."
And the truckers, and the executives, the retirees, and the families, and don’t forget about the children.
The problem is that’s where the thinking stops. It seems too much of a mental burden to get the politicians to also, as Hazlitt proposes, look at the longer effects of any act or policy; trace the consequences of that policy not merely for one group but for all groups.
What Should Be Done – A Green New Deal
To summarize the issues from the politician’s perspective we have:
Those are the economics of the thing from their perspective. It seems they need to think bigger. Today lots of people are calling this new economics a Green New Deal.
The green new deal combines the economic stimulus ideas of the Progressive Era with the notion they should be focused on repairing the environment and combating poverty. It’s not a foreign notion in Nova Scotia. We’ve long known that we can best make our society better not by making more rich people but making fewer people poor; by raising up the lot of the poorest, weakest, and most vulnerable among us.
Jobs, Jobs, Jobs. When Canada finally decided to abolish the death penalty many things were considered. But the fact that Arthur Ellis (Canada's most famous and prolific hangman) would lose his job was not a factor in the decision because we were thinking more broadly. That sounds shrill, but the point is we don't just want jobs. We want good useful productive jobs that genuinely make the world a better place, or at least do less harm.
We could have three times 300 jobs cleaning up and restoring Pictou Landing and Boat Harbour. And it will draw in more federal money and private investment than the pulp mill ever would.
They would be great jobs. The kind of work people, the workers and the community alike, could be genuinely proud of. The kind of jobs that make the world a better place through our labours.
Keeping and attracting labour and young smart people. Kids don’t leave because there are no jobs. Kids leave because they don’t want to work in pulp mills. The new labour force required for cleaning up not just Boat Harbour but the whole idea of Pictou County will keep and attract the most inspired and inspiring young people in the country. Kids these days… they’re not lazy or stupid, they just don’t want to be part of the problem, they want to be part of the solution.
$130 Million for cleanup?
That’s not a cost. That’s an investment in our future. Certainly no worse than any of Nova Scotia's other current economic development schemes... *cough convention centre, cough ferry *. It will be recouped with interest a dozen different ways. Lessened public health costs – less lung disease and heart problems. Healthier lifestyles - less government services. Increased property values in Pictou County – it’s pretty hard to sell rural properties when the stench is overwhelming to newcomers. Less uncertainty – this has been a cloud over the community, literally, for 50 years. Increased tourism and tourism value – it really is a pretty county with rich history. New ideas – there’s only so much government largesse to go around, the money and time invested in supporting this mess can be put to new and better use. It's this Opportunity Cost, the loss of potential gain from other alternatives when one alternative is chosen, that should be of most interest. Let's invest our government, time, effort, creativity, and resources, in a hundred other things.
Compare that to the full ‘cost’ in the broad sense of continuing to support this mess.
The main “spin-offs” of the current mill are people scraping the bottom of the barrel of Nova Scotia depleted and degraded forests for the last scraps of pulp wood.
The clean up, the technology, the skills, the equipment, the innovation required – if ‘spin offs’ have a speed limit surely the spin and genuine excitement of the clean up is far greater than the circling of the toilet effect of the pulp mill.
The trucks used to restore the forest will run on the same tires, fuel and service, that the trucks used to destroy the forest do.
What’s a bright clean hopeful future worth? What’s it worth today? What’s it worth in the long run? You don’t need a number. It’s obvious it’s a lot. And it’s equally obvious that it’s bigger and better, and genuinely more fun, than building a longer pipe to flush the s&^%t from the pulp mill.
There’s only a dilemma if the government thinks only about its sunk costs with groupthink and a wilful blind eye to corporate maleficence, while imagining wrongly that our natural resources are without limit and that that limit is not long passed. If politicians looked at the longer and broader effects of the Pulp Mill and traced the consequences of the mill policy not merely for one group but for all groups, then the solution would be quick. Just stop it.
The legacy forest industries are holding back Nova Scotia's future, even for the people currently working in those industries. The sooner the failed idea is corrected, the sooner we can get to the future for the workers at the mill, for the future of families in Pictou county, and for all of Nova Scotia’s economic, environmental, and equitable health.
To get to our shared goal of a better more prosperous future for all, a healthy happy Nova Scotia contributing to a peaceful world, will take education. A new kind of education. Education in the duties of citizens, officeholders of the highest degree tasked with bearding power and expecting more and better; critical thinking, methods for deciding who and what to believe and to what degree; education about the natural and spiritual world around us; education about the people of the world and how they can differ profoundly from us, which is a challenge and opportunity, not a threat; education for work, vocation, which is the main way most of us connect and relate to the world. Education is a long game. But it's the only game. When and where do we start? It's the same as it is for the forest. The best time to plant a tree is 50 years ago. The second best time is right now.
Writing about life, citizenship, and Nova Scotia.