Posts Tagged ‘Politics’

MP James Moore: Please Drop the Rhetoric

June 23rd, 2010

We tried to be civil. Unfortunately, Conservative Heritage Minister James Moore has decided to take the battle over Bill C-32 to a new low:

In the video, Moore frames all opposed to his precious copyright reform bill as fear mongers and evil doers who are against any kind of copyright reform. This kind of false rhetorical framing will not result in a copyright solution that benefits all affected parties. Instead, it just muddies the waters and makes it tough to have a real discussion about the important issues that are at hand.

As many have probably guessed from the contents of my website and twitter stream, I am against the current iteration of Bill C-32. That said, I believe strongly that copyright reform is necessary in this country. Our current laws were written before the internet really took off, and need to be modernized in order to effectively deal with new technologies and situations. Most of the proposed bill is quality content, but the Section 41, Technological Protection Measures and Rights Management Information, is not.

Mr. Moore needs to step down from his high horse, cut out the rhetorical bullshit, and join in on the discussion that we are having about his proposed bill. Plugging your ears and screaming ‘na-na-na-na-boo-boo’ just doesn’t cut it when you’re an elected representative of the people.

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A Letter to the Federal Government Regarding Bill C-32

June 16th, 2010

This week, I sent the following letter the a few key members of the Federal Government, outlining my concerns with the proposed Bill C-32. Those who have read my other posts regarding the bill may notice a great deal of similar language. As always, feel free to borrow this letter and to modify it in any way, shape, or form. Printed letters can be sent to Members of Parliament free of charge, and all Members’ contact information is available here.

To: The Right Honourable Stephen Harper
To: The Honourable Tony Clement
To: The Honourable James Moore

CC: Marc Garneau (Liberal Industry critic)
CC: Pablo Rodriguez (Liberal Heritage critic)
CC: Charlie Angus (NDP Digital Affairs Critic)
CC: Peter Braid (MP, Kitchener-Waterloo)

Dear Members of Parliament:

Last week, our Conservative government introduced Bill C-32, the Copyright Modernization Act. As its title suggests, the aim of the bill is to modernize Canadian copyright law, an admirable goal considering the incredible changes that the internet has had on our economy since our copyright laws were last reviewed in 1997. With respect to its stated goal, Bill C-32 is a reasonable proposal. It contains some much needed legislation that will indeed clarify and modernize our copyright code.

For example, the Network Services section of the Bill provides a safe harbour clause for Internet service providers and other network operators. In particular, the section provides legal protection for hosting service operators whose customers may have uploaded copyrighted works to their servers. Likewise, the Copyright Infringement section sets maximum monetary awards for copyright owners who successfully charge an individual with infringement of works for personal or commercial use. Given the astronomical awards granted by American courts in both the Capitol vs. Thomas (2007) and RIAA vs. Tenenbaum (2009) cases, this is an extremely important clause.

Unfortunately, every positive aspect of the proposed law is counteracted in the Technological Protection Measures and Rights Management Information section of the bill, wherein the proposed law explicitly bans the use, manufacture, import, distribution, sale, or rental of any technology or device capable of circumventing any technological protection measure (also called digital rights management, or DRM) schemes that have been placed on the digital content by its distributor. Should the bill become law, any use of the aforementioned technologies will constitute an immediate infringement of copyright and make the responsible party liable to all damages outlined within. Therefore, this section effectively removes all of the rights granted in earlier portions of the bill, including Non-commercial User-generated Content and Reproduction for Private Purposes, the two sections that the government is using to desperately peddle this bill as consumer-positive, when in fact it is nothing of the sort. In particular, the latter section proposes that it be made legal to create personal reproductions of copyrighted material (often referred to as time- or format-shifting, an activity that the vast number of Canadians already take part in) so long as a number of conditions are met, one of which is that “the individual, in order to make the reproduction, did not circumvent, as defined in section 41, a technological protection measure, as defined in that section, or cause one to be circumvented.”

Just like that, with a single sentence, all of the ‘rights’ that the Conservative government is waving around as they insist that their approach to copyright reform is not bought and paid for by foreign media conglomerates are struck from the record. With an anti-circumvention clause built into our copyright law, the ability to use legitimately purchased digital media in a fair and open manner (generally called fair use in the USA or fair dealing here in Canada) ceases to exist. The reason for this is that an excruciatingly small minority of the digital media that is sold today is unencumbered by some form of digital rights management. DVDs? Encrypted. Your player contains software that allows them to be read. BluRay discs? The very same. Video games? Every one. Perhaps this is the real reason that Bill C-32 was introduced at video game developer Electronic Arts’ Montreal studios. Cable television, Netflix digital downloads, eBooks, computer software of all sorts, online television services, and an uncountable number of other current and future consumer media products are all protected by some form of DRM. About the only type of digital media that you can actually buy that does not come coated in some form of technological protection measure is music, and yet millions of Canadians who purchased music from Apple’s iTunes store prior to January of 2009 still have affected tracks in their music collections. Under the proposed law, none of this digital content can be backed up, moved to a different device, transcoded to a different format, or otherwise tampered with, because to do so would require that its owner break the DRM that has been placed on it, thus making that person a criminal in the eyes of Canadian courts.

Perhaps the most interesting thing about laws of this sort is that they are known to be ineffective at stopping internet piracy. In 1996, before popular file-sharing services like Napster, KaZaa, Limewire, and BitTorrent were even invented, a group of countries that included Canada signed the World Intellectual Property Organization Treaty (WIPO), a document that required that signatory countries enact laws prohibiting the circumvention of digital rights management schemes. The United States did so in its 1998 Digital Millennium Copyright Act (DMCA), and twelve years later, the Canadian government is seeking to ratify the treaty under pressure from the United States and the European Union. Unfortunately for the government, a great deal has changed since the turn of the century, and many consumers are now aware of the problems that rights management schemes can cause them while trying to use their legitimately purchased media in seemingly normal and socially acceptable ways. In those same twelve years, the digital piracy situation faced by media companies worldwide has grown exponentially, and various media industries attribute billions of dollars per year in losses to digital piracy. If anti-circumvention laws were truly effective, piracy should never have become the problem that media companies claim that it is today; the DMCA put anti-circumvention laws in place in the United States a full year before the invention of Napster and three years before the introduction of the BitTorrent file-sharing protocol.

In truth, anti-circumvention laws styled after the United States’ DMCA serve only to reduce consumer choice while failing to prevent digital piracy in any capacity whatsoever. Lawmakers would do well to understand that DRM schemes are no more than the digital counterparts of real-world mechanical locks. There has never been, and will never be, a lock that cannot be broken by any determined party with time, knowledge, and resources on their side. Further, it is essential that lawmakers understand that a single defeat of the DRM scheme designed to protect digital media often results in the widespread availability of that media to any and all interested parties by way of the internet. Therein lies the problem with DRM as an anti-piracy measure: One does not have to be a determined hacker to access the media that a DRM scheme is intended to protect; one simply requires access to the internet, and knowledge of a website that distributes media that has been helpfully unlocked by other, more capable parties. The global nature of the internet ensures that the parties most interested in defeating digital rights management schemes need not operate in countries unfriendly to their cause. For these reasons, a government mandate that protects the sanctity of digital locks will not have the desired effect of preventing widespread domestic piracy. Instead, such a ruling will serve only to impact the ability of consumers to utilize their rightfully purchased digital media in a fair and open manner.

Since anti-circumvention legislation has not reduced piracy rates in countries where it has been introduced, and since the DRM schemes that it aims to sanctify do little to stop widespread piracy, but do make common criminals out of legitimate customers on a wide scale, it is a simple matter to conclude that this type of legislation is not, and never will be, in the best interests of the consumer. Gentlemen, I urge you all to reconsider the laws proposed in Bill C-32. As a young entrepreneur and a professional employed in our strong technology sector, I cannot help but be concerned about the potentially stifling effects of the proposed legislation on our economy, and on our ability to innovate and to create the technologies of the future.

Thank you for your time,

Jonathan Fritz, BSc.

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The Problem with Bill C-32

June 6th, 2010

This past week, the Honourable James Moore, Conservative Minister of Heritage & Official Languages and the Honourable Tony Clement, Conservative Minister of Industry introduced Bill C-32, “Copyright Modernization Act“ at the Electronic Arts studios in Montreal, Quebec. As its title suggests, the aim of the bill is to modernize copyright law in Canada, an admirable goal considering that our copyright laws haven’t been reviewed since 1997. In Internet time, that’s nearly an eternity, and a lot has changed since then. With respect to its stated goal, Bill C-32 is a reasonably good proposal of law. It contains some much needed legislation that will indeed clarify and modernize our copyright code.

For example, the Network Services section provides a safe harbour clause for Internet service providers and other network operators. In particular, the section provides legal protection for hosting service operators whose customers may have uploaded copyrighted works to their servers. Likewise, the Copyright Infringement section sets maximum monetary awards for copyright owners who successfully charge an individual with infringement of works for personal or commercial use. Given the astronomical awards granted by American courts in both the Capitol vs. Thomas and RIAA vs. Tenenbaum cases, this is an extremely important clause.

Unfortunately, these positive aspects of the proposed law are counteracted in the Technological Protection Measures and Rights Management Information section of the bill. In this section, the proposed law explicitly bans the use, manufacture, import, distribution, sale, or rental of any technology or device capable of circumventing any technological protection measures (also called digital rights management, or DRM) schemes that have been placed on the digital content by its distributor. Under the proposed law, any use of the aforementioned technologies constitutes an immediate infringement of copyright, and makes the responsible party liable to all damages outlined therein. The problem with this section is that it effectively removes all of the rights granted in earlier sections of the bill, including Non-commercial User-generated Content and Reproduction for Private Purposes, the two sections that the government is using to desperately peddle this bill as consumer-positive, when in fact it is nothing of the sort. In particular, the latter section proposes that it be made legal to create personal reproductions of copyrighted material so long as a number of conditions are met, one of which is that “the individual, in order to make the reproduction, did not circumvent, as defined in section 41, a technological protection measure, as defined in that section, or cause one to be circumvented.”

And just like that, with a single sentence, all of the ‘rights’ that the government is waving around as they insist that their approach to copyright reform is not bought and paid for by foreign media conglomerates are struck from the record. You see, with an anti-circumvention clause built into our copyright law, the ability to use legitimately purchased digital media in a fair and open manner (generally called fair use in the USA or fair dealing here in Canada) ceases to exist. The reason for this is because an excruciatingly small minority of the digital media that is for sale today is unencumbered by some form of digital rights management. DVDs? Encrypted. Your player contains software that allows them to be read. BluRay discs? Same deal. Video Games? Absolutely. Why do you think the government introduced the law at Electronic Arts’ Montreal studios? Cable television, Netflix digital downloads, eBooks, computer software of all sorts, online television from Hulu and other major providers, and an uncountable number of other consumer media products are all protected by some form of DRM. About the only type of digital media that you can actually buy that doesn’t come coated in some form of protection measure is music, but millions of people who purchased music from the iTunes store prior to January of 2009 still have affected tracks in their music collections. Under the proposed law, none of this digital content can be backed up, moved to a different device, transcoded to a different format, or otherwise tampered with, because to do so would require that its owner break the DRM that has been placed on it, thus making that person a criminal in the eyes of Canadian courts.

Perhaps the most interesting thing about laws of this sort is that they are known to be ineffective at stopping internet piracy. Way back in 1996, before Napster, KaZaa, Limewire, or BitTorrent were invented, a group of countries got together and signed the World Intellectual Property Organization Treaty, a document that required that signatory countries enact laws prohibiting the circumvention of digital rights management schemes. The United States did so in its 1998 Digital Millennium Copyright Act, and 12 years later, the Canadian government is seeking to ratify the treaty under pressure from the United States and the European Union by following suit. Unfortunately for the government, a lot has happened since the turn of the century, and many consumers are now aware of the problems that rights management schemes can cause them while trying to use their legitimately purchased media in seemingly acceptable ways. In those same 12 years, the piracy situation has yet to stabalize, and the various media industries still attribute billions of dollars per year in losses to digital piracy. So what’s going on? If anti-circumvention laws were truly effective, wouldn’t the rate of piracy drop in countries where they are introduced?

Allow me to explain with a quote from one of my previous posts, An Open Letter to the Conservative Government of Canada:

Anti-circumvention laws styled after those of the United States’ 1998 Digital Millenium Copyright Act serve only to reduce consumer choice while failing to prevent digital piracy in any capacity whatsoever. Lawmakers would do well to understand that digital rights management (DRM) schemes are no more than the digital counterparts of real-world mechanical locks. There has never been, and will never be, a lock that cannot be broken by any determined party with time, knowledge, and resources on their side. In the digital case, a single defeat of the DRM system designed to protect digital media often results in the widespread availability of that media to any and all interested parties by way of the internet. Therein lies the biggest problem with DRM schemes: One does not have to be a determined hacker to access the media that a DRM scheme is intended to protect; one simply requires access to the internet, and knowledge of a website that distributes media that has been helpfully unlocked by other, more capable parties. The global nature of the internet ensures that the parties most interested in defeating digital rights management schemes need not operate in countries unfriendly to their cause. As such, a government mandate that protects the sanctity of digital locks will not have the desired effect of preventing widespread domestic piracy. Instead, such a ruling will serve only to impact the ability of consumers to utilize their rightfully purchased digital media in a fair and open manner.

Since anti-circumvention legislation has not reduced piracy rates in countries where it has been introduced, and since the digital rights management schemes that it aims to sanctify often do little to stop widespread piracy, but do inconvenience legitimate customers on a wide scale, it is a simple matter to conclude that this type of legislation is not, and never will be, in the best interests of the consumer, who also happens to be the voter responsible for electing the officers of government that attempt to introduce it into law. So why are your elected representatives being complacent in protecting your interests? Perhaps you should ask them about it.

Those readers with an interest in copyright law, internet piracy, and the effects of anti-circumvention legislation are encouraged to read Ripped by Greg Kot and Moral Panics and the Copyright Wars by William Patry, as well as to check out Professor Michael Geist’s excellent Blog.

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Light Rail Transit?

April 3rd, 2010

Earlier this week, I stumbled across the third episode of a new podcast called The 100 that was all about issues local to Waterloo Region, politics included. One of the primary issues that was discussed in the episode was the state of public transit here in Waterloo Region, which naturally led into a discussion about the proposed Light Rail Transit system (LRT). Listening to the piece, I realized just how uninformed I am about the proposal. Since the LRT has been a divisive issue since its introduction, and since there are so many misconceptions surrounding the project, I decided to try and learn as much about it as I could. In the process, I will try to dispel some of the myths surrounding the proposal.

A little bit of background

A map of the proposed route for the Waterloo Region Light Rail Transit system

The proposed route of the LRT (Click to Enlarge)

According to the Region of Waterloo’s Rapid Transit website, the LRT will be a system of public transportation that forms a backbone for attractive, inexpensive public transit that runs through our city centre. It will be constructed in two phases: in the first, a light rail system will be built between Conestoga Mall in Waterloo and the Fairview Park Mall in Kitchener, with a bus route running from Fairview Park mall to the Ainslie Street terminal in Cambridge. In the second phase, the bus line to Cambridge will be replaced with a continuation of the light rail transit line.

The entire project will cost the region an estimated $790 million to build, with an additional $1 million per year set aside to help build transit ridership in Cambridge for the first ten years of the project. The operating cost overhead added to our existing public transit system will result in a property tax increase of about $40 per year per household. The region is currently seeking funding for the project from the federal and provincial governments, who have promised up to 2/3 of the required monies in past budgets and announcements. Construction of the first phase of the LRT is expected to begin in 2012, with the line slated to open in late 2014.

Why the focus on the city centre?
When many people hear about the plans for the LRT, their first reaction is that we shouldn’t pour such a massive amount of money into a transit system that will ‘really only benefit those who live or work near the city centre.’ The planned line runs north to south along King Street for the majority of its distance, and many see it as a system that will benefit only a minority of our population. So why the focus on the city centre?

Basically, the region is landlocked. According to the regulations of the province of Ontario’s Places to Grow initiative, by 2015, at least 40% of all annual residential development within the urban areas of Waterloo Region must take place in the urban centres of our existing cities. The regulations further stipulate that we must intensify these core areas so that our cities demonstrate a minimum of 200 people and jobs per hectare of land. This means an end to the sprawling suburbs that we’ve been building to accommodate our expanding population for the past 50 years. The new focus is on building upward instead of outward.

The Region estimates that when our census data is combined with these new provincial stipulations, we can expect an influx of around 100,000 people to our city centre over the course of the next two decades; likely more once the LRT and other urban renewal projects are completed. This growth will exacerbate the traffic problem that is already present in the area, and we will need to come up with some way to relieve that congestion, lest the city grind to a halt.

So what about building more roads or increasing the number of buses?
Unfortunately, due to the less than ideal urban planning of years past, there really isn’t any more room for roads in the downtown areas of Kitchener and Waterloo, unless we demolish existing commercial and residential buildings in order to accommodate road widening. While this alone is an undesirable solution, wider roads also tend to reduce the desirability of a neighbourhood, as they increase noise and traffic, and present a physical barrier to pedestrian travel. Since the overall goal of this project is to increase the density of our downtown core, more or wider roads are not the answer. Another consideration is parking availability. Many people currently avoid our downtown areas because parking is at a premium. A fast, cost-effective transit system would allow both consumers and employees to reach downtown shops and workplaces without having to bring their cars with them.

A Grand River Transit bus

A GRT Bus

All right, so we need public transit for the downtown core. How about buses? According to Grand River Transit, bus service alone cannot continue to provide enough capacity for the projected increases in regional population and transit ridership. The existing iXpress system runs a route very similar to that of the proposed LRT system, and is already running at near capacity. Simply increasing the number of buses on the road will lead only to further congestion of our busy roadways, as buses share a lane with other traffic, and are constantly stopping and starting. Traffic congestion already makes our bus system unreliable, and thus undesirable to the vast majority of our population. A transit system like the LRT that travels within a dedicated lane can avoid this problem.

Finally, unlike widened lanes or increased bus frequency, a permanent LRT installation is a quiet, efficient, and attractive public transit solution that tends to increase property values and standard of living along its route. Should this claim seem incredulous, I urge you to read about an example case study from the City of Portland, Oregon.

Will this thing actually be used?
According to the Region, transit models developed in association with the Universities of Waterloo and Toronto show that ridership throughout the downtown core can be expected to nearly triple with an LRT system in place. The same model predicted a ridership of 27,000 passengers per day on opening (about three times as many as the iXpress route currently services), with an expected increase to 56,000 passengers per day by 2031. Although the estimated growth in ridership may seem large, one must keep in mind the estimated population influx of over 100,000 residents to the area over the same period of time.

Those who live outside of the area directly surrounding the installation will also be able to use it. The region has proposed three park and ride facilities, and a number of cross-city bus routes similar to the current iXpress system that will run east to west, ferrying passengers to and from the LRT backbone. Ideally, the combination of high speed bus service and the high speed LRT installation will create exactly the kind of desirable public transit system that solves the congestion problems that we face while urging the inner city growth that is required by provincial law.

However, some people aren’t happy with the plan…

The Taxpayers for Sensible Transit

The T4ST is a group opposed to the plan

As is to be expected on any large infrastructure project, some members of our community are unhappy with the proposed plan. Unfortunately, many of the fears on which they are basing their assessment of the plan are simply unfounded, and the dissidents show a lack of willing to educate themselves on the issues at hand before commenting. For instance, a petition organized by the Taxpayers for Sensible Transit (T4ST) claims that

“The LRT will turn King Street and other streets into rail corridors. For much of the route, King will be reduced to one lane of car traffic each way. There will be no parallel parking, and left-turns will be impossible. This will reduce accessibility and have a negative impact on many businesses.”

In point of fact, the vast majority of King Street is already one lane of car traffic in each direction, a situation that will not change. While it is true that parallel parking is likely to be removed along much of the route, larger parking structures like the one built across from The Shops at Waterloo Town Square can easily handle the displaced vehicles, and many people will use the LRT to get downtown instead of bringing their cars at all. Left turns will be no harder to make than they are now, as LRT trains will always be given the right of way at intersections, allowing them to move through quickly without disrupting traffic. While the construction process may temporarily reduce accessibility to many businesses along the route, the Region feels that its effects will be more than offset by the increased levels of pedestrian traffic that the LRT system will bring to the downtown core, and the increased population density that the project will encourage along its route.

Although the wording of their petition may be a little bit off base, the Technical Studies page of the T4ST’s website is a little bit better written, and is also worth addressing. In particular, it points out that the estimates of initial ridership and eventual rider growth increased wildly between two studies commissioned by the Region, one from 2005, and the other from 2009. Unfortunately, the claim of the T4ST does not take into account the actual conclusions of the 2005 study (*.pdf), as expressed in the following excerpt:

As points of comparison, the Edmonton LRT system, which is similar in size to the proposed Region of Waterloo system, reports 36,000 daily boardings (track length 12.5 km and 10 stations) with a transit service population of 660,000. By 2041, the Regional transit system and service population assumptions would be similar to Edmonton today. The Portland LRT system (serving a much larger 1.25 M. population) reports 80,000 daily boardings or 1,300 boards per km and 1,500 boards per station. For the Region of Waterloo LRT line, boards per km are estimated at between 900 and 1,900 (2011 to 2041), while boards per station are estimated at between 1,300 and 2,800 (2011 to 2041).

This paragraph rather clearly shows that even with the lower estimates of the 2005 study, the projected ridership of the proposed system was still found to eventually be comparable to similar systems in both Edmonton, Alberta and Portland, Oregon. On the same page, the T4ST also points out that the 2005 study showed that an expanded bus system would cost far less than a light rail system, and thus made much more economic sense for the Region. However, the group discounts the additional benefits of the LRT that the study also revealed. Quoting again from the 2005 study:

The TransDec model is typically used to evaluate traditional transportation projects and is not well suited to evaluate a complex initiative such as the Region’s [rapid  public transit] initiative… The results indicate that although costs of LRT are higher than [bus rapid transit systems] BRT, the benefits associated with LRT are also much greater than BRT and that LRT is much more likely to achieve the benefits associated with the Regional Growth Management Strategy than BRT.

Unfortunately, careful reading of both the T4ST’s website and the studies in question reveal the formers’ tendency towards misinformation. Because the Region’s 2005 study addresses most of the concerns raised by the T4ST, those who agree with their concerns are urged to read it for themselves. The Tri-Cities Transit Action Group (triTAG) also runs an excellent page dedicated to dispelling the myths around the proposed light rail system.

Well, I’m Convinced
Everything that I’ve been able to find about the proposed system makes it seem like a great idea, and one that will finally make our public transportation system attractive to the vast majority of our citizens. It’s no secret that urban sprawl of the kind that we’ve witnessed throughout south-western Ontario increases living costs, raises health concerns, and leads to more time spent commuting than with family. It’s also no secret that while Grand River Transit tries its best to provide timely and reliable bus service, it falls short at times. By avoiding congestion and helping to construct dense communities centred around the service, the light rail transit line will allow us to conform to the demands of the province’s Places to Grow initiative, and will ultimately result in a community that is more attractive and easier to navigate for all of our citizens.

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School’s out for… No Good Reason Whatsoever

January 14th, 2010

Lately, the big political news in Canada has been Prime Minister Stephen Harper’s third prorogation of parliament in as many years. The opposition parties were quick to accuse him of using the move to delay inquiry into the Afghan detainee abuse scandal, while various Canadian pundits have spent the last week putting in their two cents regarding the issue. Those who read into the situation will find many opinions; very few of them are in favour of the Prime Minister, and many of them call his use of prorogation abusive, using his response to last year’s coalition dispute as evidence. For those who need a refresher, The Globe and Mail’s Rex Murphy paints an excellent picture of the effect of that catastrophe on the make-up of Canadian Parliament in this piece.

Personally, I am of the opinion that the leaders of all four major parties are clowns, and that we ought to consider starting over again. Perhaps if we try really hard, we might be able to elect some people who work for more than just sound bites and care about the future of our country beyond the next four years. Since that’s unlikely to happen, I console myself with the writings of comedian Rick Mercer and musician Matthew Good. Together, they pretty much sum up my thoughts on the matter. It is funny though, that while the Liberal Party’s website sports several videos and press releases commenting on the closure of Parliament, the Conservative Party’s site is just the opposite. There isn’t a comment to be found on the matter. Perhaps it’s better that Harper just keep his mouth shut on the issue. He’s already got everything exactly the way that he wants it.

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Food for Thought on the Auto Bailout

December 12th, 2008

It’s no secret that the Detroit Big Three auto manufacturers are in serious trouble. GM and Chrysler in particular have admitted to being in danger of running out of liquidity within the next few months. Now I’m no economist, nor do I have a business degree, and frankly, I’m not really qualified to talk on the issue at all. However, while researching the issue for myself, I found a few interesting points that I think need considering before anybody forms an opinion about the proposed loans.

When the bailout bill failed to pass a vote in the United States Congress yesterday evening, a lot of people blamed the failure on the refusal of the Democrats to mandate a salary cut for UAW workers as a condition of the bailout. Republicans were particularily insistent on this condtion, and news outlets ran a story comparing an alleged $71 hourly wage for big three workers to the $49 hourly wage of Japanese auto workers. The true breakdown of the $71/hour figure can be seen in this chart from the New York Times:

NY Times Breakdown of Auto Manufacturers Wages

NY Times Breakdown of Auto Manufacturers Wages

As we can see from the ‘Legacy Costs’ section of the chart, supporting an aging retiree base accounts for much of the difference between domestic and foreign auto manufacturer wages. This is essentially a fixed cost that isn’t going away unless the Big Three forfeit on their pension promises to retired workers and their spouses.

This article by author Malcolm Gladwell explains the concept of the ‘dependence ratio;’ that is, the number of dependent members of a set of people to the number of active and working members of that same set. The concept is generally applied to countries as a function of birth rate: Simply put, when a country experiences a massive downturn in birthrate, everybody benefits in the short term because the same number of people in the work force have to support fewer dependents with their tax dollars. It works in the other way as well – right now in Canada, we have an aging baby boomer workforce that will soon retire to be replaced by my generation. When that happens, we will have a massive number of dependents in a system with far fewer workers, raising our dependence ratio and by and large, making my generation far less liquid than my parents.

The concept of a dependence ratio explains a lot in economies and societies, but can also be applied to large companies in a pension crunch like the Big Three auto makers. Basically, the pensions for all of the domestic auto maker’s retirees are a linear function. More retirees means more in yearly pension payments, and these companies have a lot of retirees because they’ve been around for a long time. Foreign auto makers have far fewer retirees to support by a long shot, which explains the ‘Legacy Costs’ section of the above chart. Take that out, and domestic auto workers cost about the same as foreign ones do.

But that isn’t the end of the problem. Free market economics state that to stay competitive, and thus profitable, a company must continually increase the quality of the product that it produces while decreasing the cost of production in order to raise profit margins. Manufacturing companies decrease the cost of production by automating processes so that it takes fewer man hours to assemble the same product. The domestic auto makers have done a great job of this, and now employ far fewer people than they used to, and have increased the profit margins on their vehicles significantly since ye olden days.

However, when a company is responsible for the pensions of all of its retirees, this process of improvement actually works against the company – they decrease the number of employees, whose working hours have to pay for the pensions of all of the retirees, thus increasing their dependence ratio by a massive amount. If a company sells cars, it can express the profit made on a sale in terms of the number of man hours that went into creating that car. If fewer man hours went into making that car each year by improving the process, but more retirees had to be paid from those man hours, the ‘wage’ of every worker is artificially increased every year by the overhead of pensions, even though the worker never sees an extra dime.

The only way to offset this artificial wage inflation is to increase the profit margin of your cars proportionally to the rising dependence ratio. Enter the credit crisis: A catastrophe in no way the fault of the auto makers has decreased public demand for new cars. Sales are at their lowest point across the board since the early 80′s. Yes, even Toyota and Honda and all of those other car companies are experiencing decreased sales – however, they’re more prepared to handle it, because they don’t support a fleet of retirees nearly the size of the domestic manufacturers. While the market share of the Big Three is lower than ever (47% this year), I would argue that this number has been falling for some time now, and that these companies have been taking steps to deal with that fact. Only the rise of this credit crisis has been able to push the numbers so far south that there is no recovering from the implications.

So the question arises: even if we do bail these companies out, can they turn things around and become profitable again, or will we be throwing money at a hopeless situation? The market share situation certainly doesn’t look promising:

Big Three Market Share

Big Three Market Share

If nobody wants to buy the product that Detroit is making, then how can they ever overcome their liquidity problems? In all liklihood, without a massive restructuring program that cuts costs by billions a year, they cannot. Remember that even if employee wages stay the same (and they don’t in the real world), the cost of supporting all of those retirees is linear – it will only go up barring some ridiculous epidemic that kills off all of those retired auto workers and their spouses. Even with an immediate cash injection, there would have to be a massive program in place to immediately cut costs before the companies simply burn through the provided money.

Unlike most of the ‘blogosphere,’ I don’t pretend to have the answers. Sure, we could let them sink, but then we’d have thousands out of jobs, and the effect on the economies of both Canada and the USA would be disasterous. On the other hand, if these bailout packages go through, are we just pissing away hard-earned taxpayer money? What I do know is this: When corporations are made responsible for the well being of their employees post-retirement, they reach a point at which they can no longer be competitive in the free marketplace. This is what governments are for, and why a social safety net should be in place that provides health care and pensions to every worker from an account that every company in the country pays into yearly as a part of their corporate taxes. That kind of nationalised pension system would remove the pressure on successful companies to support their retired workforce and let them get on with the business of being profitable, the core purpose of every corporation ever established.

Oh, and by the way: If you were hoping to cash in on a pension from one of the Big Three in the next 10 years, I hope you have a savings account, ’cause you’re gonna need it.

Cheers,

Jon

Edit: Fixed images so that they didn’t ruin my tables. Unfortunately, now my text alignment is disgusting. Whatever.

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Mansbridge vs. Harper

December 10th, 2008

For those who might have missed the action last night on CBC’s The National with Peter Mansbridge, our dear Prime Minister Mr. Stephen Harper dropped by to have a one on one with Mansbridge about the current economic and political crisis in Canada. You can catch the video at the CBC website. In it, Mansbridge gives Harper the beat down as only a bleeding heart liberal journalist can. The fact that he can say what he did to the PM’s face and still have a job the next day makes me proud to be a Canadian.

Of course, that feeling is largely offset by the shame that the majority of Canadians probably didn’t even know or care that the Prime Minister was speaking on national television last night, and didn’t bother to tune in and see what he had to say.

What a joke.

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Democracy? Think Again

November 3rd, 2008

This evening, a friend linked me to a post on Jason Hanley’s excellent blog. A graduate of both the University of Waterloo and of Wilfrid Laurier University, Hanley wrote this post regarding the results of the Canadian federal election a couple of weeks ago.

As Ontario voters will know, during the last provincial election, we held a referendum to decide whether or not to replace the existing first past the post voting system that exists in Ontario. Unfortunately, the process was poorly advertised, the question was horribly worded, the conditions for the referendum to pass were too strict, and at the time of the election, most people didn’t understand the issues enough to affect a change to our current system.

The following chart, taken from Hanley’s post, clearly shows the need for a new electoral system in Canada:

Canadian Federal Election Results 2008

Canadian Federal Election Results 2008

The implications of these election results are clearly summarized into a number of alarming points:

  • Only 58% of Canadians actually voted
  • The number of seats received by each party versus the number of seats deserved by each party according to a proportional (fair) voting system is wildly skewed
  • In particular, the Green party received no seats at all, while the Bloc Quebecois received a ridiculously disproportionate 16% of all seats.

It seems clear to me that our system is beyond broken. Of all the democratic countries in the world, only Britain, the United States, and Ourselves continue to use this outdated electorate model. Besides the non-proportional results that our system gives, its other problems can be easily summarized:

  • In order to get elected, parties have to maintain not only a strong support base, but one with a small geographic distribution. This means that parties like the Greens, who received 21% of popular support cannot get a single seat, because they don’t have enough voters in any single riding to win.
  • In theory, the system is designed for a election with only two parties, as in the United States. In that case, the winner of each riding needs 50% +1 popular votes to win, and a clear majority results in every election. However, with 4 parties in a riding, the number to win drops to 25% +1, meaning that the vast number of votes are essentially unrecognized, and minority governments are common.
  • Because of their clustered geographic support, the Bloc Quebecois (a separatist party running in a federal election with no representatives outside of the province of Quebec) regularily win the majority of seats in Quebec, and hold a strong presence in the house due to the high population density in that province. This is nothing short of an absurdity, as they do not represent the wishes of any Canadian not born and raised within Quebec.
  • Although there are no studies (that I’ve seen) to support this conjecture, I would hazard a guess that the vast number of Canadians didn’t bother to vote because they saw no clear leader in any of the election preceedings. The entire thing was marginally successful power grab by Stephen Harpers’ government, at a time when the Liberal party was perceived to be too weak to prevent an easy majority win by the Conservatives.

Ladies and Gentlemen, this ‘democracy’ that we live in is merely a sham. If you prefer not to look behind the curtain, continue as you were and allow your ‘government’ to dictate to you how they will run your country. But if you’d rather to wag the tail, head over to fairvote.ca to learn more about the possibilities of electoral reform in Canada, and why it is desperately needed.

I leave you with one of the best skits that the members of the Royal Canadian Air Farce have created in many moons.

Enjoy,

Jon.

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Politics are No Place for Children

October 9th, 2008

With the Canadian Federal Election less than a week away, I figure it’s important to bring a refreshing view to the campaigns of our various candidates. This video was aired on the Rick Mercer Report a couple weeks ago, and is worth a watch:

Speaking of Elections, the latest Lispop projections (As of October 8th) are giving Stephan Harper’s Conservatives 138/308 seats in the House, which is roughly 45% – A Solid Minority Government, which is great for hippies like me.

To switch elections for just a moment, Rolling Stone Magazine published two excellent articles this month regarding John McCain, and Sarah Palin. Keep in mind that they’re a tad biased, and a definite example of the much rumoured “Liberal Media,” but fantastic reading nonetheless. Biting, entertaining, and unapologetically honest, these are articles that traditional news outlets would be afraid to run.

Cheers,

Jon

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Tina Fey, or Sarah Palin? The Difference is Negligible

September 28th, 2008

First, a couple clips for reference of Sarah Palin being interviewed by Katie Couric:

Second, Tina Fey once again lambasting Palin on Saturday Night Live:

It honestly appears as though Sarah Palin has absolutely nothing to say about any issue in this election. Her responses to questions are canned, scripted, and rehearsed, repeated back verbatim as if she is reading from a Conservative Q&A pamphlet.

Ever seen an interview with an NHL hockey player between periods? “Yeah, well we’re all giving 110%, trying real hard out there, we’re in this together, really playing as a team, doing what we have to do to win the game.” Nothing. Of. Substance.

I’ll have to side with Matt Damon on this one – I dearly hope that this woman does not get within 200 feet of the White House.

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