Some
economists justify government intervention by citing “market
failure”—that is, the failure of the free market and price system to
allocate resources efficiently. In other words, under certain
conditions, the market is unable to capture the true value of
transactions and therefore too little or too much of a good is provided.
So these economists want the government to “correct” the market failure
with taxes, subsidies and/or regulation.
However, there can also
be government failure. That is, government decisions can also result in
inefficiencies or mistakes that have real effects. With the COVID
pandemic, we’ve seen government failures across Canada.
For example, in the years before the pandemic, the federal government seemingly (and quietly)
deactivated its pandemic early warning system, failed to
maintain stockpiles of personal protective equipment (e.g. masks), and once the pandemic began
often moved slowly
to deal with its impact. While there was a massive fiscal response,
producing a projected $343 billion federal budget deficit, this is
really a fiscal atonement for the sin of being caught with your pants
down. And remember, the “government” doesn’t pay for it, taxpayers do.
Then
there’s the provinces who—given that health care is a provincial
responsibility—allowed their long-term care sectors to become fertile
fields of death for so many seniors.
Of course, we don’t need a
pandemic to witness government failure. Our municipalities frequently
make decisions or choose spending priorities that ultimately lead to
deterioration of roads, sewers and other municipal infrastructure.
Sometimes, municipalities make decisions to solve one problem on the
cheap while creating bigger problems down the road. For example, in
Thunder Bay (where I teach economics), the municipal government put
sodium hydroxide in the city’s water to reduce lead levels for a minority of households, which generated a rampant citywide
pinhole leak problem that eventually led to
a policy reversal.
Again,
when markets fail, the stock solution is government involvement. But
what to do when government fails? Given that government decisions are
made via a political and bureaucratic process, one expects that ultimate
redress is through political accountability in parliaments,
legislatures and municipal councils. Yet we have witnessed the erosion
of political accountability in Canada over the years, with the pandemic
providing the opportunity for further erosion.
Rather than debates
in parliaments and legislatures, we now have one-hour daily briefings
and pronouncements from the mount at all levels. As the pandemic
continues, those pesky constituents can be avoided because meeting with
them is “not safe.” You can email or phone your MP, MPP or municipal
councillor but they are often “overwhelmed” and responses are invariably
slow. Indeed, COVID precautions have reduced the direct accountability
of politicians and policymakers, and increased their ability to be more
selective in dealing with their constituents. In some cases, this
isolationism has reinforced a sense of entitlement for those in
government and fuelled their belief that rules are for the masses but
not for them (see federal Health Minister Patty Hajdu’s flights during
Easter and the Victoria Day long weekend while she warned against
“non-essential” travel during the
lockdown).
When
decentralized markets fail, governments are quick to intervene.
However, when governments fail, there’s an even bigger problem—the
people who failed are in charge. For accountability’s sake, governments
should understand this problem and act accordingly. We seem to have a
ways to go on that one.
