The Munk Debates Podcast - Friday Focus: Govt Strikes – Stephen Kotkin

Episode Date: April 21, 2023

Friday Focus provides listeners with a focused, half-hour masterclass on the big issues, events and trends driving the news and current events. The show features Janice Gross Stein, the founding director of the Munk School of Global Affairs and bestselling author, in conversation with Rudyard Griffiths, Chair and moderator of the Munk Debates.  The following is a sample of the Munk Debates’ weekly current affairs podcast, Friday Focus. On this week’s edition of the Friday Focus podcast, Janice and Rudyard start the show with a discussion of Canada’s massive federal public service strike. What could this mean for the growing challenges the federal government is experiencing when it comes to delivering public services? Friday Focus warps up with a discussion of a recent talk Janice and Rudyard were involved with featuring U.S. historian of Russia and international affairs expert Stephen Kotkin (bonus Kotkin Q&A episode is available for Munk donors). From the future of the war in Ukraine to the state of China-US relations, Professor Kotkin lifts the veil on the difficult issues that are being discussed privately among policymakers in America. To access full-length editions of the Friday Focus podcast, consider becoming a donor to the Munk Debates for as little as $25 annually, or $.50 per episode. Canadian donors receive a charitable tax receipt. This podcast is a project of the Munk Debates, a Canadian charitable organization dedicated to fostering civil and substantive public dialogue. More information at www.munkdebates.com.Become a Munk Donor ($50 annually) to get 72-hour advanced access to the full length editions of Friday Focus and Munk Dialogues. Go to www.munkdebates.com to sign up. Hosted on Acast. See acast.com/privacy for more information.

The following is a complimentary excerpt of this week's edition of the Friday Focus podcast by the Monk Debates. To access full-length editions of each and every episode, along with all kinds of great additional benefits and perks, become a donor to the Monk debates. You can do that for as little as $25 a year, and you'll receive each and every year 50 Friday Focus episodes at full length. It's all available right now on our website. in just a few simple clicks. Triple W. The Monk Debates.com. Look for the Friday Focus option in our navigation bar, the top right of the website. Make your donation, and we will send you each and every Friday a link to listen to the full-length

edition of this program. Thanks in advance for your generous contribution. Hello, Monk listeners. Rudyard Griffiths here, the executive director of the Monk Debates. Welcome to this, our regular Friday Focus podcast. with Janice Gross Stein, founding director of the Monk School of Global Affairs, internationally renowned scholar and author. Janice were talking together on the evening of Thursday the 20th,

so we're taping the show a little bit early just to make do with a hectic Friday that's landing on all of our schedules, but no shortage of topics to digest as of late Thursday night. And I want to start with the labor unrest in Canada because there are mirrors, parallels, analogies, pick your metaphor to what's going on in other advanced economies and democracies around the world, a surge in strikes, in workers demanding new benefits, pay accommodations to what we're doing right now, which is zooming together and recording a podcast remotely. What's your sense about this, Janice? It all has

to me, I was maybe a little too young to remember it all, but it has a kind of 70s feel to it of, of, you know, the risk here of price wage spiral. You know, it's maybe taken 24 months to kind of kick in, but boy, it seems like it's doing that right now. It certainly does have a whiff of the 70s, rugged, and it is important to say this is not a uniquely Canadian phenomenon. We see a version of this in the United Kingdom. Parasians took to the streets over pensions. So let's unpack this and pay attention to two factors. Actually, I think one of them is legitimate. You're not surprised by it. It is, in fact, the demand for a significant increase in the context of inflation. And that's the wage price spiral. So and PSEC, the Public Services Association

of Canada, is asking for 13% over three years. The government's offering nine. It's not a huge gap. But if you look at where inflation has been over the last two years, over year, over year, it's 13% for sure. And it's not down to four. But that looks like it's gone a couple of years to run yet. So three percent a year, over three years is not outrageous. I think that's fair to say. What is, you know, creating a lot of comment is, I think, the bigger issue here, which is the clerk of the Privy Council, Jan Sherrod,

ordered people to come back to their office to do. days a week, two to three. And people are not, there is a chunk of the public service that is not willing to go back to the office. And we hear reasons like, I'm much more productive at home. I don't have to waste time in traffic. And it's good for our greenhouse gas emissions. Don't drive to work. And you heard me laugh there. I mean, that really strains redulity. But this is a post-COVID, a fact that few foresaw, really. During COVID, everybody couldn't get away to get back to the office and see their friends and have coffee and do all the other things.

Well, it turns out that's not how it's played out. People want to work from home because it's more convenient and they can multitask. I don't think that's a winning card, frankly. I don't think it's so many card with the public. Talk to me if you're a law-bloss worker. You have to work five days a week all through COVID. It doesn't have the luxury of working at home any days a week. And I tell them that people are on strike because I have to go back to work two days a week.

They're not going to have a lot of sympathy. Yeah, I believe part of what the union is asking for here in a sense is the right to work at home. They want this as one of the key bargaining concessions from the government. And I guess my concern here, Janice, is that there already are pretty increasingly sharp distinctions between public and private sector workers. So you have private sector workers, you know, historically trading off ideas around compensation and, you know, the potential for greater lifetime earnings over the course of their career for job safety, for pensions index to inflation.

But what we're seeing now in the statistics over the last decade is private public sector workers are now outpacing private sector workers in terms of the thing that actually really matters to people, which is their annual income. And they're doing that across all kinds of different services and functions. And if you add into that, something like the right to work from home, the right to multitask. And I agree with you. I think there may be certain very specific jobs, which could be solved for that way, effectively and efficiently, but the vast majority probably require people to come into the office at least a couple days a week, possibly more. And if you lose

this distinction between public and private, you're sucking labor out of the private sector into the public sector because it's just a much becomes such a much more desirable place to be employed and what that means we have to understand is that it it creates a less dynamic economy because government isn't really about productivity. I mean it tries to do things efficiently in some cases it doesn't. But the private sector is really where we get our productivity gains and our productivity gains matter because that's where you create wealth and not just the wealth of individuals, but the wealth of nations. It's what allows you to have, you know, marginal tax rates that subsidize a social safety net,

a health care system, all the good things that we want. And I just think we're fooling ourselves, Janice, if we, this kind of having our cake and eating it to attitude that we've added a third to the entire payroll of the Federal Civil Service over the last seven years of this government. and yet, are services a third better? I think many Canadians would say the services could be a third worse if you, you know, just ask them ad hoc, their experience, their feeling of a passport office, of having to interact with government in different ways.

So, boy, Janice, this is coming at a dicey moment for Canada. And I worry that there's a potential here to make some bad choices that maybe have to happen in the moment out of next. necessity, a government that's politically very weak at this time. And what does that all mean for the future of the economy, for prosperity, for productivity, for all the things that really we should matter? Look, let me put it a little bit differently. Where we are in the world today requires not a good public service. It requires a great public service. Sure.

The public service of the next decade has to think about things like how do you regulate artificial intelligence. That's not a small issue. You need really highly trained, smart people. The public service of the next day it has to execute in real time, which, as you just pointed out, it's having a lot of difficulty doing. So we really need first-rate people. But there's a historic trade-off, as you put it. And I am in the broader public service. I work for a university, which is publicly funded.

And the tradeoff is this. You trade much greater job security for, in the past, less money, but less volatility. That was the trade. And so you did well in periods of great volatility when people were losing their jobs in recessions. seemed well over time, but that was the trade. Well, that trade would flip, not on the price, not on the wage increase, but on the working conditions if this went through. And it would, as you say, distort, number one, and suck some dynamism out of the private economy. But more importantly, I don't think you get a great public service.

if the majority of public servants are working from home, there's a steep learning curve ahead for everybody. So yes, there's an operational part of the public service. And you can imagine some people, but the vast majority of people and young people have to come into an office where they're mentored, where they understand about risk, where they're exposed to ideas that they disagree with,

where you learn from watching people, you can't do that on Zoom. So my bigger concern is we're actually going to degrade the federal public service if people can work from home. And that is the last thing this country needs over the next 10 years. I think Janice worries me is I think it's already degraded. And I don't blame this necessarily on the people working in the public service. I blame it on, you know,

series of factors. We've talked about it before, this incessant culture of so-called transparency and accountability, which just takes all risk-taking out of the public sector that takes creative managers and drives them away from the idea of having a career as a public servant. There's all kinds of things that we've done over the last decade, including hiring at the federal level, again, fully a third increase, tens of thousands of. of new people. And demonstrably, whether it's a payroll system,

whether it's the procurement of military equipment, whether it's passport offices, whether it's apps to arrive at airports, whether it's all these McKinsey, these different firms that, you know, there's no fault of their own, but the government effectively is contracting the workout to implement programs to, you know,

third-party private vendors because I guess they feel they don't have the competency or the capacity. to do it themselves. You put that all together, Janice, and what I worry about is something called state capacity, the ability for, you know, Canadian federal government to deliver on the functions of a federal state. And if we understand that that capacity, and we agree that was under threat and was being denuded, then this strike is about, you know, is a higher stakes moment. It's about more than just wages, but more than just working at home or working in the office. It's really about state capacity

and will the Canadian nation state represented in the Federal Public Service be able to do the things that Canada needs it to do, as you say, in a volatile, tumultuous, fast-changing moment of history that we talk about on this show every week. I think that's the challenge in a nutshell, and that's why I think this is much bigger than the issues that are on the table. And let's talk politics for just one minute. This is a minority government of power that depends for its support on the NDP. There is no way you and I both know that the NDP would, it would take a lot. This will take a long time before the NDP could imaginably support back-to-work legislation.

So this is a fraught moment with a government that is depending on another political party, it does not have the capacity to legislate the public service back to work. And so the damage to the economy, the staying power of the union under these circumstances, is greater than usual at a time where the challenges for the federal public service are greater than usual. And we could, as you said earlier, make a decision now, which has implications way down the road and weakens not only the public service, but weakens this country's capacity to respond to an environment in which government is playing a much larger role in every developed country in the world, with that exception.

And understand that the precedent set in these negotiations will not, and in Ottawa, that it will be picked up by private and public sector unions across Canada at the provincial level in universities, hospitals with a so-called near-state. So not only is there the danger of the wage price spiral where, and Revenue Canada employees, I believe, are asking for 23% increase over three years because they're seeing all kinds of demand for their types of services from accounting firms in the private sector. So you've got this feedback loop going on of higher prices, higher compensation. And that could cascade down from Ottawa into the provinces. And I just, wow, you just think of a suboptimal outcome, work at home,

high compensation. What the heck do you say to the entrepreneur? What the heck do you say to the person who, I don't know, is mortgaging their house to start a small business because in their mind, they're thinking, okay, I'm going to trade security for flexibility. This is one of the things, you know, I've dabbled in entrepreneurship through the course of my career. That's kind of the bargain you make. You don't have a lot of certainty about income, about a pension, about, I don't know, a severance package.

You have none of that. But what you have is flexibility. You're rewarded in many ways because you can be more efficient in terms of how you choose to utilize and allocate your time. But if you say to me as an entrepreneur, well, that whole benefit is now going to be extended in perpetuity to a whole bunch of people who get guaranteed pensions, who now get wages that are competitive with the private sector, who have job security and generous severance package. and all these kinds of things, I don't know, Janice, what the heck does the entrepreneur do?

I mean, it becomes economically irrational. Yeah. Well, that's exactly what we mean when we talk about distorting the balance between the private and the public sector. Canada has a decent-sized public sector as a share of its total economy. and I think that is something to worry about. I'm also worried, Roger, because I see what happens when people work from home.

I see how young people are missing out. Yes. All right. I see it in my own professional life, the mentoring they're missing out on. The gap for the generation that is COVID post-COVID that has never really worked in a professional environment in the same way as their colleagues do. The skills deficit they have across a whole range of issues which require learning the skills to navigate. When you disagree with people, learning how to build a coalition, it's supportive something you want.

None of that happens on Zoom. And yet these are really critical skills. So yes, we may have a public service that today says, I won't. want to work from home. But where's the investment in younger people? Where's the investment in bringing in great talent, mentoring it, developing and nurturing it for the future was a big part of the responsibility of the public service? So I'm critical. I am critical of a demand, of a refusal not to come back five days a week. That's not what's being asked here. Two to three days a week. So you spend some consistent time with your colleagues, right? Yeah. Yeah, well,

tell us one of our big telecommunications companies back five days a week. Um, the, you know, the private sector is moving forward. Again, and, you know, the sharper the divisions get, the more skill, talent, and labor, you're sucking out of the, the more productive parts of the economy into a less productive part. And it's not, that's to be critical of government. Its role is not to be an engine for productivity in Canada. It's to do other things that are necessary that the private sector isn't going to do, ideally. I mean, I think it's encroached into a lot of other areas, but that's a conversation for another day. But boy, Janus, let's see how this falls out. I mean, my sense, I don't know what your bet is, but I think this striking Canada is over by next week. I think this

government is in a politically weak position because of the Chinese election interference scandals, the other scandals that I won't bother mentioning, but we all know what they are on and on and on. It's not an ideal time for a government to have to stand up to what are aggressive demands, aggressive demands. If we take your predictions seriously, there's only two ways this strike can be over by next week. One way, would be for the public service to be legislated back to work. It won't happen. Won't happen.

We both agree on that. So the only other way is to meet the demand and to frankly pay on the two days a week. And tens, yeah, and tens of billions of dollars of additional costs to government, which will have to be financed through even more. more deficit spending. So it's just... You know, let me make a final comment, Reggie on this one.

It's as I've been working on, recently spending some time on this issue that puffed up all over the press, the requests by really the founders of the AI artificial intelligence. They sent a letter. Two weeks ago, 600 of them in which they said, a pause, a pause.

A.I. is running ahead of us. There's huge risk here. We need government to step in and regulate because they don't put a regulatory framework on this. The risk to all of us are just huge. You know, Joshua Benzzi from Montreal said it could be much worse than nuclear weapons, frankly. Now, you turn around and you say, where's the capacity in government to understand these issues at scale and to move at speed to meet that demand? That's what I'm talking about.

and AI is powering all the productivity over the next decade, or AI and associated technologies, right? That's where productivity is going to come from. But they need a partner that is highly sophisticated, highly trained, has some really great people who understand these issues and can move at speed. If we allow the public sector to be degraded, and it's not their fault, you're absolutely right,

but it is the result. And work from home, we're not going to have the talent inside to meet the challenge for the next generation productivity generators. That is a big issue. Yeah. Well, let's continue with all this. And we'll touch on some other countries that are similarly going through labor unrest on subsequent shows.

It is that 70s show coming back, replay at a movie theater, or a Zoom screen near you. Back after this break with a fascinating conversation for our monk donors about a really interesting talk that Janice and I were part of in the last week to 10 days, we're going to put a bonus episode into our feed for our monk donors to get a taste of this talk and this big thinker, some controversial ideas on Ukraine, China, and the kind of fight for geopolitical supremacy in the 21st century. So back with that conversation right after this break. Thanks for listening to this excerpt of the Friday Focus podcast to get full-length editions of each

and every episode of this program. Simply go to our website, triple-w, the monk debates.com. Click on the Friday Focus tab in our navigation on the top right of the site. Make a donation as little as $25 a year or $50. sense an episode and we'll send you not only the full-length editions of each and every Friday Focus podcast, but all kinds of special offers, perks, access to events, and additional content. Again, you can do that right now by becoming a donor to the Monk Debates at Triple W Monk Debates, MUNK, DebateswithanS.com.