Has Public Sector Exceeded Critical Mass?

[pfezziwig]

Has the Nova Scotian public sector (or any other province) exceeded a critical mass? Meaning the public sector makes up so much of the workforce that no polician can stop its growth?

In NS we have seen nearly a 20% decline in enrollment of kids in schools over the last 10 years yet the school budget increased 40% over the same time period (..and no, we did not achieve spectacular results nationally).

In Greece the public sector was so huge it took a state of bankruptcy before politicians made policies to live within their means, is the same story playing out here, are the public sectors too big to stop with anything other than a state of bankruptcy?

[Michael Hardner]

Has the Nova Scotian public sector (or any other province) exceeded a critical mass? Meaning the public sector makes up so much of the workforce that no polician can stop its growth?

In NS we have seen nearly a 20% decline in enrollment of kids in schools over the last 10 years yet the school budget increased 40% over the same time period (..and no, we did not achieve spectacular results nationally).

In Greece the public sector was so huge it took a state of bankruptcy before politicians made policies to live within their means, is the same story playing out here, are the public sectors too big to stop with anything other than a state of bankruptcy?

Open GOV is a new approach to opening up the workings of government so that the citizens can have direct input, and review of government operations. I like to talk about it on my web radio show - listen in sometime.

[Moonlight Graham]

Has the Nova Scotian public sector (or any other province) exceeded a critical mass? Meaning the public sector makes up so much of the workforce that no polician can stop its growth?

In NS we have seen nearly a 20% decline in enrollment of kids in schools over the last 10 years yet the school budget increased 40% over the same time period (..and no, we did not achieve spectacular results nationally).

In Greece the public sector was so huge it took a state of bankruptcy before politicians made policies to live within their means, is the same story playing out here, are the public sectors too big to stop with anything other than a state of bankruptcy?

Sounds a lot like the North American car companies & the worker unions. The unions and the high worker salaries/benefits that kept going up and up have helped destroy the companies' competitiveness, and they'll all need to go bankrupt in order to break the unions and restore the worker salaries/benefits to levels based somewhere in reality. But of course the companies were bailed out instead, like putting a Flintstones band-aid on your neck to fix a lacerated jugular.

[Michael Hardner]

Sounds a lot like the North American car companies & the worker unions. The unions and the high worker salaries/benefits that kept going up and up have helped destroy the companies' competitiveness,

Is that really true ? Don't the Japanese plants pay much the same ? It seems to me that their problems were more complicated than that.

[dre]

Is that really true ? Don't the Japanese plants pay much the same ? It seems to me that their problems were more complicated than that.

Yeah, that narrative is horseshit. For the most part domestic car companies suffered because of really bad management, and series of big failures reading the market.

[Bonam]

Is that really true ? Don't the Japanese plants pay much the same ? It seems to me that their problems were more complicated than that.

The problem wasn't as much with salaries as with pensions. Salaries were indeed comparable or even higher at some of the Japanese plants, but the American plants had workers that had retired decades ago and were still being paid by the company. That was an immense burden that they had, that the Japanese companies did not. Of course, the factors dre mentioned contributed significantly to their failure as well.

[Shwa]

The problem wasn't as much with salaries as with pensions. Salaries were indeed comparable or even higher at some of the Japanese plants, but the American plants had workers that had retired decades ago and were still being paid by the company. That was an immense burden that they had, that the Japanese companies did not. Of course, the factors dre mentioned contributed significantly to their failure as well.

No, the problem was with GMAC getting into the mortgage bubble which whacked both GM & Crysler, GMAC's main owners, when the bubble popped. Ford - with similar employee pensions and benefits as GM - weathered the mortgage scam just fine.

Now that GM has been bailed out and 'fixed' GMAC, note that all the shifts are starting to come back to their plants. Next year look for the convertible Camaro model. Another big, boss North American car.

[madmax]

Sounds a lot like the North American car companies & the worker unions. The unions and the high worker salaries/benefits that kept going up and up have helped destroy the companies' competitiveness, and they'll all need to go bankrupt in order to break the unions and restore the worker salaries/benefits to levels based somewhere in reality.

Those who know the least about the automotive industry tend to spread the biggest myths.

But of course the companies were bailed out instead, like putting a Flintstones band-aid on your neck to fix a lacerated jugular.

Just a form of corporate Welfare. Corporate Welfare has been with Canada since before Canada existed. Just as Banks and Insurance companies are protected industries, with protected markets and government handouts.

Regardless, the NA Automotive industry has been joined at the hip with all the

other Auto "Foreign" manufacturers for over 30years globally. Same goes for

suppliers.

Meanwhile, has our Federal Government run a record $50Billion deficit? Yes. Are they giving money away they don't have? Yes.

Is the Ontario Provincial Government running a Record $20Billion deficit? Yes. Are they giving money away then don't have? Yes.

In the meantime, the Phoney war is being fought.

Elimination of Government services to the Private Sector. Essentially contracting out Public Sector work to Large American Firms who specialize in obtaining Pork Handouts and sweetheart deals from Governments.

Reducing public sector payrolls while private sector contracting cost go through the roof.

Now, I am not the one to defend Argus and his Public Sector job and all of his holidays and his bad attitude.

But do you really want to toss him out of work.

Edited December 10, 2010 by madmax

[madmax]

Is that really true ? Don't the Japanese plants pay much the same ? It seems to me that their problems were more complicated than that.

Back to the beginning.

In the 1990s, Auto industry, but more importantly alot of other North American Industry relocated to Mexico to take advantage of the lower labour costs with the advent of "Free Trade". In the mid and late 90s, key industry returned and continued operations to compete with the lean mean Canadian operations that generated High Quality, Little Waste and decent profits in a JIT environment. There isn't much more stress involved then being in a zero waste environment and JIT processes with $100,000 fines per day hanging over your head. (one of the biggest problems with Asian Production has been Trade and Patent Violations and knock offs along with poor quality control, with the latter industry is turning a blind eye towards because of the volume of production often is in margins just above the costs of the Raw Materials.) which is why the assemblers regardless of origin must deal with the Garbage in Garbage of the Auto Industry. That said Autoproduction and controlls are still better today then they were 30 y years ago. Just as the quality was better in the 1980s then in the 1950s etc. But there is little doublt that the auto industry has taken a big step back, and seeing Toyota recalls hitting the highest levels in their history, only goes to show the China Experiment, has come with some quality issues and Toyotas specs are challenged too late in the design process when they are Inaccurate.

Regardless, in the early 2000s, the Automotive industry, lead by the Mother of Auto, GM, make an executive choice to move operations to China and Mexico. Suppliers, profitable quality suppliers in Canada, received letters telling them to prepare to relocate because the Main Operations of ASSEMBLY would be done in these countries. In the meantime, GM, Ford, Chrysler were getting "TECHNOLOGY" grants that were huge in dollars while having little strings. GM laid off Hundreds of Engineers while the grant monies flowed in. Soon the announcements of the relocations followed.

But as they were moving, they were caught in chopping off their knees which was making these moves more difficult. More monies were required to do so and the goal of ALL corporations is to get some other Sucker to pay for it. (Think of a Football team and Stadium).

On top of this ... the wealthiest of the wealthy were not detered by the Kenneth Lays of the world and the Corporate Ponzi schemes of our financial Whizzes got exposed.

CAPITALISM (like in 1929) had no clothes.

Because little can contain the damage that Greedy Fraudulent People can do to the money markets.

In Canada, with our Protected Banks (The ones Martin and Harper wanted to Deregulate , fools that they are, we would have no banks within 3 years) the damage was minimal.

But in the US, the damage was Enormous.

With American banks unable to process loans (They had NO money), And with companies unable to pay bills to their Northern Neighbours (The banks had no moneys to release) everything went on a holding period for 3 months to 9 months.

Yes Capitalistic Bankers were at the trough

Asking for the largets Government bailouts in the History of the United States.

And they got it.

How this all reflects on the little guy .... well, we just read the corporate owned media, say corporate slogans and find some

obscure whipping boy to deflect attention.

I read alot crazy stuff by talking heads in the Business community. I don't think, these people represent anyone I know in the business community that is honest and hard working and cares about the product and company they are building or part of.

But there is a bigger dirtier element out there.

And they are messaging a bunch of BS to keep people from turning their attention to their transgressions.

As soon as Corporate propoganda is replaced by hard work ethic and honesty, instead of short term financial doublespeak and schemes, will this country and the rest of the global community get back to standing upright and with both feet planted.

Post spin and you will be spinning your wheels.

This is a political forum, expect alot of spinning.

Yes our economy and structure of our economy is for more complicated and intertwined, then the simplist mudslinging within this thread.

Some of the posters I know are better at their jobs then they are at this subject, be it mass production of public sector analysis. But if they took the time, they have the smarts, knowledge and brains to do an accurate appraisal of the situation.

Edited December 10, 2010 by madmax

[Zachary Young]

Average compensation amongst workers for the big three did reach a point which may have been nonviable but it is entirely besides the point. As spectators we should not have any sort of responsibility in deciding the nature of GM (or any other industry's) organization. That is the beauty of capitalism. Any company is free to try anything, no matter how revolutionary or absurd, in the pursuit of profit. The problem here is that we forgot companies were supposed to fail.

Failure is the most beautiful aspect of capitalism. Inefficient industries cease. There is hardship, people lose their jobs, factories are retooled, even entire towns and vanish and the pain here is tangible but it is the unseen gain, the steady accumulation of capital and savings and investment that marks constant progress. What is not considered in a million quick fix schemes is the moral hazards involved.

To digress back to the original topic, if I may, we could consider this question from a few different angles. First the political question. It is fairly self evident that rent seeking behaviour is the Achilles heel of our democracy. So yes, there is a critical mass point with regards to this whole mess, and yes we may very well be past it. Will anyone employed by the public sector ever vote themselves out of a job? Or think of all the families attached to those individuals.

[Shwa]

Back to the beginning.

In the 1990s, Auto industry, but more importantly alot of other North American Industry relocated ...<brevity snip only>...

A good post! The only thing I would add:

US Auto Sales for November 2010 - Wall Street Journal Market Data Centre

Now, back to our regularly scheduled thread...

[Wild Bill]

I read alot crazy stuff by talking heads in the Business community. I don't think, these people represent anyone I know in the business community that is honest and hard working and cares about the product and company they are building or part of.

As soon as Corporate propoganda is replaced by hard work ethic and honesty, instead of short term financial doublespeak and schemes, will this country and the rest of the global community get back to standing upright and with both feet planted.

Once again Max we appear to agree more than disagree!

After a career since the 70's with new, old, large, small and high tech business I can honestly say that 90% of the management I worked with was straight out of a Dilbert cartoon!

I read somewhere that Canada, Britain and the US are the only companies with formal management education. Every other country grows their management through hands-on experience moving up in the ranks from the floor up. Not surprisingly, those same 3 countries have a reputation for having the most inept management!

One of the major differences between the two approaches is that of hands-on experience. No matter how well something is taught from a book it's just not the same as with direct experience. Also, many people are much better thriving in a classroom than they are in the real world. So they may win positions in management ahead of those less scholastically gifted but with more innate talent for the job. Only socialists believe that all jobs are equal and any worker can do any job, after enough training. Anyone who truly believes that should make me their cook! Some of us just don't have the capacity to learn certain skill sets.

Western management tends to be simplistic, short-sighted and of a herd mentality. They follow each other blindly and never plan more than a business quarter or two ahead. That's why the Japanese in the 80's and the Chinese today have so successfully stolen their business. Those country's managers planned ahead by DECADES!

Governments have been just as "simple". How often have we seen them shovel corporate welfare dollars at companies only to watch those same companies use the money to pay to relocated production out of the country? Either they are too stupid to put strings on the money to make sure it is used for the public good or if the company breaks its agreement they don't bother to take them to court. Tony Clement of Harper's government is the first to ever sue a company (US Steel who had bought the old Stelco) for promising to maintain certain levels of production and jobs and then breaking their word. Their excuse was the global recession but they had enough steel demand to keep some American plants open at the expense of their Canadian one! They ship American steel up to their Stelco location to supply their Canadian customers, while the Stelco ovens lie shut down.

I don't know if Clement will actually win but I respect him for trying. As I said, it's never been done before. If nothing else, it will change the tone of negotiations with the next company asking for handouts to buy out a Canadian location.

When you talk about companies here relocating to low labour countries and getting bit by quality and scheduling problems you have to wonder about their management's collective brain power. These problems are usually rather obvious! These decisions are more what you'd expect from an inexperienced teenager in high school than someone who works in the board room.

Something happened to our industry during the 80's that affected their brains! Maybe they all were replaced by pod people from outer space. I'm reminded of how Lee Iacocca of Chrysler commented on business in the 80's, the decade of all the junk bonds, takeovers, quick flips and buying up troubled companies just to close them for the tax deduction. He had no respect for this type of thinking at all. He was raised in an environment where business created products or delivered services for their revenue, making or providing something worthwhile for society's needs. He called the new style of business just playing with dollars but producing nothing concrete, often bleeding from the wealth created by previous business but adding no value themselves.

All too often I fear the man was right!

[Topaz]

U.S. Steel wasn't the only US company to make promises than break them. The Navistar company did the same thing after getting loans from the provincial and federal governments back in 2003. The union there gave up $40 million, new hires would make half of what the others made and little benefits. When the new contract came up for renewal, they laid them off so they could collect EI and now most are off EI this month, welfare has gone up, crime gone up, foreclosures, people are leaving Chatham-Kent and the government didn't do anything and Navistar is still paying the loan off . Most believe the reason they haven't close the plant is it would cost big bucks to clean it up and for severence pay. Clearly, neither government was there for these people, just like they haven't been there for others in the same situation. When a company treats its workers as badly as Navistar has done, a person would be crazy to work for them.

[Pliny]

Average compensation amongst workers for the big three did reach a point which may have been nonviable but it is entirely besides the point. As spectators we should not have any sort of responsibility in deciding the nature of GM (or any other industry's) organization. That is the beauty of capitalism. Any company is free to try anything, no matter how revolutionary or absurd, in the pursuit of profit. The problem here is that we forgot companies were supposed to fail.

Failure is the most beautiful aspect of capitalism. Inefficient industries cease. There is hardship, people lose their jobs, factories are retooled, even entire towns and vanish and the pain here is tangible but it is the unseen gain, the steady accumulation of capital and savings and investment that marks constant progress. What is not considered in a million quick fix schemes is the moral hazards involved.

To digress back to the original topic, if I may, we could consider this question from a few different angles. First the political question. It is fairly self evident that rent seeking behaviour is the Achilles heel of our democracy. So yes, there is a critical mass point with regards to this whole mess, and yes we may very well be past it. Will anyone employed by the public sector ever vote themselves out of a job? Or think of all the families attached to those individuals.

Failure is a very important message. Although I wouldn't say that companies were "supposed" to fail they definitely need to be "allowed" to fail. No lessons are learned otherwise and the old and tired are continued on life support which stifles the new.

Too many western Corporations today are run out of their accounting offices and the interpretation of balance sheets, profit and loss statements tend to determine more aspects of a business's operations than the outside real world like, consumer demand or plain competition. There is a lot of maneuvering around government regulation, nervousness about taxation levels, and lobbying for favour. This BLOGputs it this way:

"engaging in financial engineering that ignores basic principles of fairness and economic realities to further political goals."

Although he is talking about Obama's handling of GM and putting on a happy face large companies like GM must pay attention to the political climate, taking every advantage and assessing constantly changing regulations.

[Pliny]

Clearly, neither government was there for these people, just like they haven't been there for others in the same situation.

Yet you keep expecting them to be there for everyone. They never will be.

[madmax]

Once again Max we appear to agree more than disagree!

yes we do. That is an excellent followup to where I would have taken the discussion myself.

You'd be a fun guy to have a beer with lol.

All too often I fear the man was right!

I was going to bring up Iacocca myself as I was reading the thread, Glad that u did. You have pinpointed the differences in management styles and corporate structures.

[Michael Hardner]

Too many western Corporations today are run out of their accounting offices and the interpretation of balance sheets, profit and loss statements tend to determine more aspects of a business's operations than the outside real world like, consumer demand or plain competition.

I think it's more of a reflection of the lack of innovation and thoughtful leadership. If the accounting office really ran corporations, would their pensions have been so underfunded ?

It's lack of vision, and short term thinking that I see as a major problem.

[Pliny]

...the Corporate Ponzi schemes of our financial Whizzes got exposed.

CAPITALISM (like in 1929) had no clothes.

I don't know what "CAPITALISM (like in 1929) had no clothes" means. How do you define capitalism in that statement?

Because little can contain the damage that Greedy Fraudulent People can do to the money markets.

Or economic imbeciles like Barney Franks, Chris Dodd and all those who pushed for there to be a mortgage in every American's pot.

In Canada, with our Protected Banks (The ones Martin and Harper wanted to Deregulate , fools that they are, we would have no banks within 3 years) the damage was minimal.

But in the US, the damage was Enormous.

Hardly a comparable political climate.

As soon as Corporate propoganda is replaced by hard work ethic and honesty, instead of short term financial doublespeak and schemes, will this country and the rest of the global community get back to standing upright and with both feet planted.

It isn't corporate propaganda so much as financial doublespeak and schemes. How does a corporation like Worldcom or Enron become so big? Creative accounting mostly. Most people can't interpret information from balance sheets and financial statements. I'm not an accountant and perhaps am opening myself up for a good slap by saying this but it seems to me that GAAP (generally accepted accounting practices) are designed to meet government's necessity to know a profit margin for tax purposes but not necessarily how the profit is achieved, which would be more along the lines of protecting the public's interests rather than ensuring government's own revenues.

Post spin and you will be spinning your wheels.

This is a political forum, expect alot of spinning.

Yes our economy and structure of our economy is for more complicated and intertwined, then the simplist mudslinging within this thread.

Some of the posters I know are better at their jobs then they are at this subject, be it mass production of public sector analysis. But if they took the time, they have the smarts, knowledge and brains to do an accurate appraisal of the situation.

You have to start with the right fundamental.

A fundamental of economics is that people will act to improve their position and will pick the easiest route to their improvement. It is only a sense of morality that prevents them from choosing criminal behavior which can basically be defined as taking something and giving nothing. When that is legitimized and institutionalized, such as in our welfare system, any sense of morality is degraded and the individual, despite efforts to boost self-esteem and pride, will, unfortunately never feel it.

Society as a whole is demoralized.

What rich people take and give nothing? Point to whoever you want Ken Lay, Bernie Madoff, they too are criminals.

Basically, tax the rich, is a simple and lazy slogan that people can get behind. It is not fundamentally or economically sound and is basically a threat. Government should be treating all equally under the law and not making some of their citizens targets and others resentful in order to make it seem a justifiable practice. The media promotes the lives of the idle rich further justifying the villification of the rich, especially the likes of Paris Hilton and other such celebrititties, prancing around. The fact is that most people that earn their money and are rich got that way by giving and having people give back. The media just highlights the insanity of the idle rich. The drugs, the partying, the affairs and all the gossip and rumour of which one could possibly conceive. No one realizes those people are miserable, as miserable as any one on welfare - and they suffer from the same affliction - wondering what they themselves can offer others that has some value.

[Pliny]

I think it's more of a reflection of the lack of innovation and thoughtful leadership. If the accounting office really ran corporations, would their pensions have been so underfunded ?

Are they underfunded? Management most often receives at least the same benefits won by the collective agreement.

It's lack of vision, and short term thinking that I see as a major problem.

Where does lack of vision and short term thinking originate?

[Michael Hardner]

Are they underfunded? Management most often receives at least the same benefits won by the collective agreement.

I understood that to be the case around the time that GM was talking bankruptcy.

Where does lack of vision and short term thinking originate?

In the investor's desire for short-term gains of course.

[pfezziwig]

Great story on 60 minutes last night highlighting State financial situations, looks a like a few of them will be forced to make draconian cuts this year. The New Jersey rep said he's taking on big and powerful public unions and ironically argued the cutbacks are needed if they want a pension 10 years from now!

These states in dire situations sounded better off the Ontario and Quebec, looks like 2011 will be the year of strikes and cutbacks, a little taste of Europe, I'll give 1-2 more years for Ontario to bite the bullet, and 3-4 for New Brunswick and Nova Scotia, Quebec can hold out longer with big juicy federal transfer payments from western canada .

[punked]

Great story on 60 minutes last night highlighting State financial situations, looks a like a few of them will be forced to make draconian cuts this year. The New Jersey rep said he's taking on big and powerful public unions and ironically argued the cutbacks are needed if they want a pension 10 years from now!

These states in dire situations sounded better off the Ontario and Quebec, looks like 2011 will be the year of strikes and cutbacks, a little taste of Europe, I'll give 1-2 more years for Ontario to bite the bullet, and 3-4 for New Brunswick and Nova Scotia, Quebec can hold out longer with big juicy federal transfer payments from western canada .

So anyway crazy you do realize the NDP in NS is looking to cut the education budget by 1/5th right? At least someone will address this problem which occurred under Liberal and Tory governments.

[punked]

Or economic imbeciles like Barney Franks, Chris Dodd and all those who pushed for there to be a mortgage in every American's pot.

You do know that is a Bush quote not a Frank or Dodd quote right? You do know that? Of course you don't because you know nothing.

[Shady]

Great story on 60 minutes last night highlighting State financial situations, looks a like a few of them will be forced to make draconian cuts this year. The New Jersey rep said he's taking on big and powerful public unions and ironically argued the cutbacks are needed if they want a pension 10 years from now!

I agree, it was an amazing story. And a great illustration of what happens when governments, but in particular public employees don't live by basic rules and laws of business and economics.

I found it incredible, but not suprising that California pays more in public employee pensions than it does on the state university system.

[Shady]

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