Uncle Gnarley was perhaps better suited to
unemployment boots, while traversing the island in search for a great fishing
pool. This evening he wore Birkenstocks
and a tie-dyed shirt while drinking an Italian coffee. After all these years, I have learned never
to be surprised by my old friend.
Uncle Gnarley was totally engrossed in his book. The firm grip of his teeth on his bottom lip
was a tell-tale sign that he was in a state of higher concentration. I went over and nudged him "I thought
you would be up the Gander River by now?"
He was clearly not pleased, slowly rotating his head
to look up. The clasped lip was quickly
replaced by the unmistakable grin.
"Nav, the water is too high on accounts of all this rain. This fine evening, I am taking my pleasure in
a cup of coffee and a book. It is called
Why Nations Fail,
written by a couple of economists from Harvard. It is simply written, but it does outline a
very thought provoking theory. You might
enjoy the simple concepts, Nav”.
With that I knew that this was not to be a quick
encounter. I took the chair which was
graciously offered.
“Nav, the basic premise is that successful countries are those which have a history of strong and inclusive political institutions. The authors argue that countries which engage the population, in governance, and the subsequent development of economic institutions, are the more successful. Of course, there are other factors such as geography, resource and population, which may also influence the economic success of a nation. But, long term wealth and success is premised upon a political and economic system, based on inclusiveness and transparency"
presenter, to the PUB and in local Blogs, on the Muskrat Falls Project. JM has written a
number of Uncle Gnarley pieces, including, Gnarley's Theory of Political Devolution, Parts I and II and The Great Revolutionary from the Shore and most recently Annus Orndatra and The Quest for McLeod's Deep Throat. His latest Paper is entitled: Muskrat Falls Revenue Stream: Fact or Fiction
“Nav, the basic premise is that successful countries are those which have a history of strong and inclusive political institutions. The authors argue that countries which engage the population, in governance, and the subsequent development of economic institutions, are the more successful. Of course, there are other factors such as geography, resource and population, which may also influence the economic success of a nation. But, long term wealth and success is premised upon a political and economic system, based on inclusiveness and transparency"
"Uncle Gnarley, I am sure this is a must read for
retired economists, but this hardly sounds like rocket science. I must ask, is it an inclusive government
that nurtures the economy, or does economic success lead to democratic
reform?"
The old man was oblivious to my question. It was clear that he was intent on completing
the monologue, despite the interruption.
"Nav, what is so interesting is how the theories
in this book can be extrapolated and applied to Newfoundland and Labrador. It does provide a plausible explanation to
the historical gap, in wealth, between Newfoundland and the other English
colonies in New England or Canada.
Although we had tremendous riches, we had a long history of what the
authors have labelled an 'extractive' government, ruled by the elites of
society. Although, as a country, we had
many challenges our economic development was stifled by governments which were
not inclusive"
"I agree Uncle Gnarley. Did you know that the residents of Labrador
did not have their franchise until the referendum elections of 1948"
"Nav, the Authors would advocate that the poverty
experienced by the people on the Labrador coast was as much due to their
isolation from the political process, as their geographical isolation.
But, Nav, it is also not just the right to vote. The economic success of a nation is also
directly attributable the level of public debate, and transparency of
government in the passage of bills and laws.
This is where it gets very interesting when one overlays these theories
onto the history of Newfoundland and Labrador.
Whether it was before or after Confederation some of our greatest
failures were the result of legislation, or policy, which did not receive
adequate public review and debate".
"Uncle Gnarley the Upper Churchill contract was a
good example. The final agreement with
Hydro Quebec received unanimous support in the House of Assembly, as Smallwood
requested that it go through with minimal debate".
"Nav... there
were many examples during Smallwood’s regime.
But, there are examples, as well, which are more timely. The expropriation of the Abitibi Assets was a
mistake which cost the Canadian taxpayer over 100 million dollars. It was rushed through the House of Assembly
without adequate debate. The Voisey's
Bay deal, with loopholes big enough to drive a Mac truck through, was not
properly debated in a non-partisan manner, in the House of Assembly. There is also the Sprung Greenhouse debacle,
where one of the major findings of the Royal Commission was that any such
government participation in a joint venture should be openly debated within the
House of Assembly. Decisions should not
be made of this magnitude within the Cabinet only. All should require a vote in the House of
Assembly, committee work, and, in some cases, more direct ways are necessary to
solicit public input.
You see, Nav, the Authors would argue that political
institutions which would allow such laws to be pushed through, represent a
fundamental weakness of our society, which limits our ability to achieve true
economic greatness".
I took a sip of my non fat latte. It was clear that Uncle Gnarley had a
point.
"Uncle Gnarley it appears as if you have a
potential topic for a PhD. However, I
believe you don't have to look any further than Muskrat Falls to see this
theory in action".
The old man took a sip of his coffee and looked at me
with a smile. "Nav, I have yet to give this any thought and I pass the
conch to you. I am intrigued?"
"Well, Uncle Gnarley, from Bill 29 to Bill 61
this government has passed legislation aimed to limit public transparency and
exclude public participation in major policy initiatives, such as Muskrat
Falls”
Gnarley then lobbed out one of his own: “but there was
a review within the Public Utilities Board”?
“Yes but this was not Government’s original plan. There was to be no regulatory review until
public protest mounted to where it could not be ignored. When the government finally agreed to
completing the PUB review, its mandate was so restricted that it was not
effective at determining if Muskrat Falls was in the best interest of the Province. It was far from an open and transparent
process.
Following the PUB review, the government finally
agreed to studying natural gas, and wind.
But even with higher costs, and a shrinking market, this government
maintained the 2010 decision to proceed with Muskrat Falls. Finally, the Project was sanctioned in December 2012, while a filibuster was unfolding in the House of
Assembly" The
largest public works project in our history was sanctioned prior to the vote by
the elected representatives in vote in the House of Assembly. A real scandal in any democracy”.
"Ah, Nav... you bring back the memories. All very interesting, but what is your
point"?
"My point is simple. The process was not transparent, not
democratic, and was fatally flawed. The
result is that the taxpayers of the Province take 100% of the risk, and get
rewarded with power that will cost 23 cents a kWh on stand alone basis, 4
times the going North American rate. We
get 50 years of some of the most expensive power in North America. It is our reward for accepting our weak
political process".
"What is worse, Uncle Gnarley, is that we have
committed over 700 million of taxpayers’ dollars, before we know if we have a
partner in Nova Scotia!"
It is as if Uncle Gnarley just realized the point I
was trying to make.
"Nav, one just needs to look at the UARB process
in Nova Scotia. Unlike the PUB they were not ring fenced. They forced Emera to provide a clear economic
summary of the project. They had a
strong Consumer Advocate in John Merrick who really challenged the
proponent. And, they had a regulator
process which seemed to protect the taxpayers of Nova Scotia.
The mature UARB process, combined with a strong
political opposition ensured that there was a high level of transparency and
debate in that Province. The result is
that they are unlikely to approve the Emera application, without some
additional conditions to the application.
Most notably they will seek some assurance about the price for Surplus
Energy”
As always, the old economist contributed to the debate. The UARB decision is due in late July, and it
is expected that their approval will be accompanied with several additional
conditions.
“Exactly Uncle Gnarley! In Nova Scotia the regulatory process was inclusive, not ring fenced, and transparent.
The result is that the UARB will likely push Nalcor into having to make
concessions to seal the deal.
Public participation, and a open process in Nova
Scotia will ensure a much better deal for Nova Scotia rate payers than what
Emera themselves ever could negotiate.
Nova Scotia will reap the reward, while the Newfoundland taxpayer will
end up taking more of risk and potentially even additional costs.
I am interested to see how Nalcor will respond to any
conditions imposed by the UARB relating to surplus power. They have certainly been backed themselves
into a corner”.
"Nav... I am amazed how many times history will
repeat itself. Ed Martin will preach
about gated management processes, cold eyes reviews, and best practices. However, for the Muskrat Falls Project,
Nalcor have proceeded on a path that was defined for them 4 years ago. They have not listened to the public. They have ignored the changing market, and
most importantly they have committed themselves without a truly committed
partner. The latter is the same mistake
made by Brinco, some 40 years ago. They
had a gated management process, by name only.
Their minds were made up 4 years ago”.
“Yes, Uncle Gnarley, it seems as if mega projects may
fail for the same reasons as Nations: exclusive leadership, which do not listen
to the views of the people. I would like to borrow your book when completed”.
**************************************
Editor's Note: This Post was written by "JM", the anonymous researcher, writer and presenter, to the PUB and in local Blogs, on the Muskrat Falls Project. JM has written a
number of Uncle Gnarley pieces, including, Gnarley's Theory of Political Devolution, Parts I and II and The Great Revolutionary from the Shore and most recently Annus Orndatra and The Quest for McLeod's Deep Throat. His latest Paper is entitled: Muskrat Falls Revenue Stream: Fact or Fiction
