Quotulatiousness

January 26, 2021

The brief and inglorious life of Penn Central

Filed under: Books, Economics, History, Railways, USA — Tags: , , , , , — Nicholas @ 04:00

In City Journal, Nicole Gelinas recounts the tale of the fateful merger of two great American railroad systems that lasted just long enough to support massive financial chicanery before descending into inevitable bankruptcy:

More than 50 years on now, the spectacular collapse of the Penn Central railroad in 1970 is little remembered today, but its legacy is still with us — not so much as a warning, but as a prelude: to New York City’s own near-bankruptcy in the 1970s; to four decades of financial engineering, beginning in the 1980s; to the 2001 Enron downfall; to the 2008 financial crisis and its “too big to fail” bailouts — and yes, even to the public discontent that elected President Donald Trump.

As America emerged from World War II, most people would have laughed at the idea of the nation’s two premier freight and passenger railroads, the Pennsylvania and the New York Central, going broke in a quarter-century’s time. By design, the Pennsy and the Central were not fierce competitors but complementary “frenemies” that had long agreed not to undercut one another’s monopoly profits. From Massachusetts to Missouri, the two railroads dominated freight and passenger travel in the northeast quarter of the United States, with nearly 21,000 miles of track between them.

Yet even as America built its powerhouse postwar economy, the railroads struggled. As Joseph R. Daughen and Peter Binzen write in The Wreck of the Penn Central, their cult-classic chronicle of the Penn Central’s demise, during the war the then-separate railroads had been running their equipment 24 hours a day to transport troops and supplies, leaving them with “worn-out” equipment.

In the fifties and sixties, moreover, new competitive pressures prevented them from catching their breath. Trucks competed with the railroads for freight hauling via the new, free highways the nation was building. Commuter-rail passengers moved to the highways as well, while long-haul rail passengers took to the skies. The railroads’ decline accelerated in the sixties, partly because of the collapse of northeast manufacturing.

In 1962, the two companies decided to merge. But railroading was one of the most heavily regulated industries in the United States, so the merger took six years, as it wound its way through multiple levels of public approval for the creation of the 100,000-worker, 100,000-shareholder, 100,000-creditor behemoth. Meantime, government-set rates already fell short of the railroads’ long-term costs.

The combined entity that would become the Penn Central made significant concessions to win political support for the merger, including no-layoff pledges that would hamper its ability to cut spending and a promise to take on the independent (and chronically insolvent) New York, New Haven, and Hartford passenger railroad.

After the merger, the railroads discovered that they had incompatible computer systems, which threw railyards into chaos and angered customers. The Penn Central’s three top officials, too, were incompatible. They “scarcely spoke to one another,” write Daughen and Binzen. Stuart Saunders, the board chairman, was a political guy. Alfred Perlman, the president, was a trains guy. These different outlooks could have complemented each other, but personalities got in the way. Rounding out this dysfunctional triumvirate was Penn vet David Bevan, the top financial official, perpetually “angry and humiliated” at not being picked for the top job.

Penn Central route map from us.leforum.eu
http://us.leforum.eu/t1355-Photos-du-Penn-Central-PC.htm

H/T to Ed Driscoll at Instapundit, who also posted this video the combined entity put together to celebrate the merger:

January 7, 2021

Fallen Flag — the New York Central System

Filed under: History, Railways, USA — Tags: , , , , , , , — Nicholas @ 03:00

This month’s Classic Trains fallen flag feature is the first part of the history of the New York Central System by George Drury. The New York Central was one of the biggest and most economically powerful American railways for over a century before the postwar boom turned into the economic disaster of the 1960s and 70s, as passengers switched from rail to road and plane and the decline of northeastern heavy industry and mining hit the established eastern railroads very hard:

The New York Central was a large railroad, and it had several subsidiaries whose identity remained strong, not so much in cars and locomotives carrying the old name but in local loyalties: If you lived in Detroit, you rode to Chicago on the Michigan Central, not the New York Central; through the Conrail era and even now, the line across Massachusetts is still known as “the Boston & Albany.”

The streamlined steam locomotive New York Central Hudson No.5344 “Commodore Vanderbilt”, leaving Chicago’s LaSalle Street station pulling the NYC’s premier passenger traing, the 20th Century Limited, 22 February 1935.
Photo originally copyrighted International News Photos (copyright not renewed) via Wikimedia Commons

The system’s history is easier to digest in small pieces: first New York Central followed by its two major leased lines, Boston & Albany and Toledo & Ohio Central; then Michigan Central and Big Four (Cleveland, Cincinnati, Chicago & St. Louis). By the mid-1960s NYC owned 99.8 percent of the stock of Michigan Central and more than 97 percent of the stock of the Big Four. NYC leased both on Feb. 1, 1930, but they remained separate companies to avoid the complexities of merger.

In broad geographic terms, the NYC proper was everything east of Buffalo plus a line from Buffalo through Cleveland and Toledo to Chicago (the former Lake Shore & Michigan Southern). NYC included the Ohio Central Lines (Toledo through Columbus to and beyond Charleston, W.Va.) and the Boston & Albany (neatly defined by its name). The Michigan Central was a Buffalo–Detroit–Chicago line and everything in Michigan north of that. The Big Four was everything south of NYC’s Cleveland–Toledo–Chicago line other than the Ohio Central.

The New York Central System included several controlled railroads that did not accompany NYC into the Penn Central merger. The most important of these were (with the proportion of NYC ownership in the mid-1960s):

  • Pittsburgh & Lake Erie (80 percent)
  • Indiana Harbor Belt (NYC, 30 percent; Michigan Central, 30 percent; Chicago & North Western, 20 percent; and Milwaukee Road, 20 percent)
  • Toronto, Hamilton & Buffalo (NYC, 37 percent; MC, 22 percent; Canada Southern, 14 percent; and Canadian Pacific, 27 percent).

[…]

The New York & Harlem Railroad was incorporated in 1831 to build a line in Manhattan from 23rd Street north to 129th Street between Third and Eighth avenues (the railroad chose to follow Fourth Avenue). At first the railroad was primarily a horsecar system, but in 1840 the road’s charter was amended to allow it to build north toward Albany. In 1844 the rails reached White Plains and in January 1852 the New York & Harlem made connection with the Western Railroad (later Boston & Albany) at Chatham, N.Y., creating a New York–Albany rail route.

The towns along the Hudson River felt no need of a railroad, except during the winter when ice prevented navigation. Poughkeepsie interests organized the Hudson River Railroad in 1847. The railroad opened from a terminal on Manhattan’s west side all the way to East Albany. By then the road had leased the Troy & Greenbush, gaining access to a bridge over the Hudson at Troy. (A bridge at Albany was completed in 1866.)

By 1863 Cornelius Vanderbilt controlled the New York & Harlem and had a substantial interest in the Hudson River Railroad. In 1867 he obtained control of the New York Central, consolidating it with the Hudson River in 1869 to form the New York Central & Hudson River Railroad.

Vanderbilt wanted to build a magnificent terminal for the NYC&HR in New York. He chose as its site the corner of 42nd Street and Fourth Avenue on the New York & Harlem, the southerly limit of steam locomotive operation in Manhattan. Construction of Grand Central Depot began in 1869. The new depot was actually three separate stations serving the NYC&HR, the New York & Harlem, and the New Haven. Trains of the Hudson River line reached the New York & Harlem by means of a connecting track completed in 1871 along Spuyten Duyvil Creek and the Harlem River (they have since become a single waterway). That was the first of three Grand Centrals.

The Wikipedia page on the New York Central includes a good overview of the decline of the railway:

The New York Central, like many U.S. railroads, declined after the Second World War. Problems resurfaced that had plagued the railroad industry before the war, such as over-regulation by the Interstate Commerce Commission (ICC), which severely regulated the rates charged by the railroad, along with continuing competition from automobiles. These problems were coupled with even more formidable forms of competition, such as airline service in the 1950s that began to deprive NYC of its long-distance passenger trade. The Interstate Highway Act of 1956 helped create a network of efficient roads for motor vehicle travel through the country, enticing more people to travel by car, as well as haul freight by truck. The 1959 opening of the Saint Lawrence Seaway adversely affected NYC freight business. Container shipments could now be directly shipped to ports along the Great Lakes, eliminating the railroads’ freight hauls between the east and the Midwest.

The NYC also carried a substantial tax burden from governments that saw rail infrastructure as a source of property tax revenues – taxes that were not imposed upon interstate highways. To make matters worse, most railroads, including the NYC, were saddled with a World War II-era tax of 15% on passenger fares, which remained until 1962, 17 years after the end of the war.

Robert R. Young: 1954–1958
In June 1954, management of the New York Central System lost a proxy fight in 1954 to Robert Ralph Young and the Alleghany Corporation he led.

Alleghany Corporation was a real estate and railroad empire built by the Van Sweringen brothers of Cleveland in the 1920s that had controlled the Chesapeake and Ohio Railway (C&O) and the Nickel Plate Road. It fell under the control of Young and financier Allan Price Kirby during the Great Depression.

R.R. Young was considered a railroad visionary, but found the New York Central in worse shape than he had imagined. Unable to keep his promises, Young was forced to suspend dividend payments in January 1958. He committed suicide later that month.

Alfred E. Perlman: 1958–1968
After Young’s suicide, his role in NYC management was assumed by Alfred E. Perlman, who had been working with the NYC under Young since 1954. Despite the dismal financial condition of the railroad, Perlman was able to streamline operations and save the company money. Starting in 1959, Perlman was able to reduce operating deficits by $7.7 million, which nominally raised NYC stock to $1.29 per share, producing dividends of an amount not seen since the end of the war. By 1964 he was able to reduce the NYC long-term debt by nearly $100 million, while reducing passenger deficits from $42 to $24.6 million.

Perlman also enacted several modernization projects throughout the railroad. Notable was the use of Centralized Traffic Control (CTC) systems on many of the NYC lines, which reduced the four-track mainline to two tracks. He oversaw construction and/or modernization of many hump or classification yards, notably the $20-million Selkirk Yard which opened outside of Albany in 1966. Perlman also experimented with jet trains, creating a Budd RDC car (the M-497 Black Beetle) powered by two J47 jet engines stripped from a B-36 Peacemaker bomber as a solution to increasing car and airplane competition. The project did not leave the prototype stage.

Perlman’s cuts resulted in the curtailing of many of the railroad’s services; commuter lines around New York were particularly affected. In 1958–1959, service was suspended on the NYC’s Putnam Division in Westchester and Putnam counties, and the NYC abandoned its ferry service across the Hudson to Weehawken Terminal. This negatively impacted the railroad’s West Shore Line, which ran along the west bank of the Hudson River from Jersey City to Albany, which saw long-distance service to Albany discontinued in 1958 and commuter service between Jersey City and West Haverstraw, New York terminated in 1959. Ridding itself of most of its commuter service proved impossible due to the heavy use of these lines around metro New York, which government mandated the railroad still operate.

Many long-distance and regional-haul passenger trains were either discontinued or downgraded in service, with coaches replacing Pullman, parlor, and sleeping cars on routes in Michigan, Illinois, Indiana, and Ohio. The Empire Corridor between Albany and Buffalo saw service greatly reduced with service beyond Buffalo to Niagara Falls discontinued in 1961. On December 3, 1967, most of the great long-distance trains ended, including the famed Twentieth Century Limited. The railroad’s branch line service off the Empire Corridor in upstate New York was also gradually discontinued, the last being its Utica Branch between Utica and Lake Placid, in 1965. Many of the railroad’s great train stations in Rochester, Schenectady, and Albany were demolished or abandoned. Despite the savings these cuts created, it was apparent that if the railroad was to become solvent again, a more permanent solution was needed.

December 2, 2020

Bill C-10, An Act to amend the Broadcasting Act hijack the internet

Filed under: Bureaucracy, Cancon, Media, Technology — Tags: , , , , — Nicholas @ 03:00

At The Line, Josh Dehass outlines the benign-sounding claimed intent of Bill C-10 and the malign reality if it is implemented as written:

Bill C-10 would expand the term “broadcasters” to include online content creators. This means that after decades of a mostly regulation-free Internet, the CRTC will soon have a say in what content you can and can’t see on services like Netflix, Amazon Video and Spotify. The bill says these “broadcasters” will be required to “serve the needs and interests of all Canadians — including Canadians from racialized communities and Canadians of diverse ethnocultural backgrounds, socio-economic statuses, abilities and disabilities, sexual orientations, gender identities and expressions, and ages — and reflect their circumstances and aspirations, including equal rights, the linguistic duality and multicultural and multiracial nature of Canadian society and the special place of Indigenous peoples within that society.”

In the Globe and Mail Guilbeault helpfully translated from Newspeak: broadcasters now must create “Indigenous programming,” and possibly other forms of mandatory content by and for minority groups. Guilbeault said that the mandatory Indigenous programs are necessary to correct the “historical mistake” that Canada made when it denied Indigenous people their cultural expression. That historical mistake apparently cannot corrected solely by forcing Canadians to fund APTN and non-stop Indigenous content at CBC. Only when every private company is co-opted in the mission will the mistake be corrected.

It’s bad enough that this new law will require Canadians to pay for shows and podcasts that they’re unlikely watch. What’s really disturbing is that this new law means any large company that wants to produce artistic and cultural content online in Canada will no longer be permitted to devote their time and money exclusively to expressing the ideas that they wish [to] express. Instead, they will be forced to also express the ideas the government wishes them to express. This is compelled speech, which is the term lawyers use when the government forces you to mouth its message. This is contrary the spirit of free expression rights that the Charter of Rights and Freedoms guarantees.

The new policy might strike you as old-fashioned broadcast regulation. It isn’t. The theory behind the original Broadcast Act was that the airwaves were a finite resource, requiring the government to act as referee. Otherwise, we could end up consuming nothing but low-brow American cultural products rather than high-brow CanCon like Family Feud Canada and Hedley. This was an elitist argument, since it assumed that individual consumers weren’t capable of determining what content is in their own interests, but at least it made a little sense, because it was theoretically possible for important programming like news to get completely crowded out. The Internet, on the other hand, is effectively infinite. There’s room for everyone’s content in the online marketplace of ideas. So far, it’s worked wonderfully. Virtual nobodies can find huge audiences without big money to get started. There’s really no reason for the government to interfere.

November 26, 2020

“… the Liberals’ oft-stated commitment to listen to the experts and the frontline workers fizzles when said experts and workers disagree with a preferred policy”

Filed under: Cancon, Government, Law, Weapons — Tags: , , , , , , , — Nicholas @ 05:00

In The Line, Matt Gurney explains why the Liberals are so in love with a set of proposed rule changes that will do almost nothing to reduce gun crime in Canada and might even end up creating criminals of previously law-abiding Canadians … but it polls well in Liberal ridings:

Restricted and prohibited weapons seized by Toronto police in a 2012 operation. None of the people from whom these weapons were taken was legally allowed to possess them.
Screen capture from a CTV News report.

Talking about gun policy in Canada is tricky, because the debate is highly technical. The regulation of firearms in this country, at least in theory, depends on the specifications of the firearm in question. Mode-of-operation, magazine capacity, ammunition calibre or barrel-bore width, barrel length, muzzle energy — these are all the criteria upon which a firearm is classified into one of three categories under Canadian law: prohibited, restricted or non-restricted. Any Canadian who wishes to own or borrow a firearm, or purchase ammunition, must be licenced, a process which includes mandatory safety training and daily automatic background checks.

Prohibited firearms are essentially banned in Canada; a relatively small number are held by private citizens who already possessed them when the current regulatory regime was brought in in the 1990s. The government of the day didn’t want to get into the thorny issue of confiscation, so it let existing owners keep them under strict conditions. The vast majority of guns in Canada, and all new guns sold for decades, therefore fall into the other two categories. Restricted guns are generally pistols and revolvers, but also some rifles and shotguns. Non-restricted guns are run-of-the-mill hunting rifles and shotguns, though some sports-shooting rifles (used for target practice) are also included.

The above is all somewhat theoretical, as the regulations are twisted and pulled in a variety of ways to suit political ends, leaving a system that’s tortured and confusing even for those of us who study it. But it gives you at least an idea of how the system is designed. If you know guns, of course, you knew all this already. If you don’t, I wouldn’t blame you if your eyes glazed over a bit while reading the above. Without a basic working familiarity with all the terminology and technical specs and regulations, it’s damn hard to follow the debates over gun control. This is why I have to ask you non-aficionados to take my word for it: the Liberal proposal is really bad.

Well, actually, you don’t have to take just my word for it. You can read the NPF’s position paper, which makes at least some of the case. It notes, correctly, that “military style assault weapons” aren’t actually a thing that’s defined under Canadian law; it can therefore mean whatever the government of the day wants it to mean. True military style battle weapons — fully automatic weapons with high-capacity magazines and full-sized ammunition — are already effectively banned in Canada and have been for decades. Further, the NPF notes, firearms are used in a minority of homicides in Canada, a majority of those homicides are committed with handguns, and a majority of those killings are directly linked to organized crime or gang activity.

You’re probably starting to see the problem: Going after the guns that aren’t being used in the crimes, and taking them from the people who aren’t committing them, isn’t a public-safety policy. It’s a political gift to the Liberals’ urban base, where the proposal is popular and gun literacy low (those two latter points are not unrelated).

While the ban is almost entirely a political sop, it’s probably a good political sop, alas. I’m sure the proposal will be very well received in ridings the Liberals would like to hold or flip. But it’s still a stupid policy, even if it’s popular. The Liberals are proposing to spend tons of money on this. They estimate hundreds of millions, but recall that the long-gun registry came in about 1,500 times overbudget. And all to “ban” some of the rifles used by a segment of the population — licenced and screened gun owners — that’s been found to be the several times less likely to commit murder than those without licences.

November 21, 2020

About that “Canadian content crisis” the feds are trying to “fix” with Bill C-10

Filed under: Cancon, Government, Law, Media — Tags: , , , , , — Nicholas @ 03:00

Michael Geist begins a series of posts on the ongoing blunder that is the federal government’s “get money from the web giants” proposed legislation:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapure from CPAC video.

Canadian Heritage Minister Steven Guilbeault rose in the House of Commons yesterday for the second reading of Bill C-10, his Internet regulation bill that reforms the Broadcasting Act. Guilbeault told the House that the bill would level the playing field, that it would establish a high revenue threshold before applying to Internet streamers, would not impact consumer choice, or raise consumer costs. He argued that even if you don’t believe in cultural sovereignty, you should still support his bill for the economic benefits it will bring, warning that Canadian producers will miss out on a billion dollars by 2023 if the legislation isn’t enacted. He painted a picture of Internet companies (invariably called “web giants”) that have millions of Canadian subscribers but do not contribute to the Canadian economy.

Guilbeault is wrong. He is wrong in his description of the bill (it does not contain thresholds), wrong about its impact on consumers (it is virtually certain to both decrease choice and increase costs), wrong about the contributions of Internet streamers (who have been described as the biggest contributor to Canadian production), wrong about level playing field claims (incumbent broadcasters enjoy a host of regulatory benefits not enjoyed by streamers), wrong about the economic impact of the bill (it is likely to decrease investment in the short term), and wrong about cultural sovereignty (it surrenders cultural sovereignty rather than protect it).

With the bill starting its Parliamentary review, this is the first in a new series of posts on why a careful examination of the data and the bill itself reveals multiple blunders. There are good arguments for addressing the sector, including tax reform, privacy upgrades, and competition law enforcement. There are also benefits to updating the Broadcasting Act, but in an effort to cater to a handful of vocal lobby groups over the interests of the broader Canadian public, Guilbeault’s bill will cause more harm than good. The series will run each weekday for the next month, first addressing the weak policy foundation that underlies Bill C-10, then a series a posts on the uncertainty the bill creates, a review of the trade threats it invites, and an assessment of its likely impact on consumers and the broader public.

The series begins with a post on the fictional Canadian content “crisis.” Canadians can be forgiven for thinking that the shift to digital and Internet streaming services has created a crisis on creating Canadian content. Canadian cultural lobby groups regularly claim that there is one (Artisti, CDCE) and Guilbeault tells the House of Commons that billions of dollars for the sector is at risk. Yet the reality is that spending on film and television production in Canada is at record highs. This includes both certified Canadian content and so-called foreign location and service production in which the production takes place in Canada (thereby facilitating significant economic benefits) but does not meet the narrow criteria to qualify as “Canadian.” I have written before about the need to revisit the Canadian content qualification rules which enable productions with little connection to Canada to receive certification and some that directly meet the goal of “telling Canadian stories” that fail to do so.

November 18, 2020

The Consumer Privacy Protection Act

Filed under: Business, Cancon, Government, Law, Technology — Tags: , , , — Nicholas @ 05:00

Michael Geist looks at Bill C-11, which was introduced by Navdeep Bains on Tuesday:

Parliament Hill in Ottawa.
Photo by S Nameirakpam via Wikimedia Commons.

Canada’s privacy sector privacy law was born in the late 1990s at a time when e-commerce was largely a curiosity and companies such as Facebook did not exist. For years, the privacy community has argued that Canada’s law was no longer fit for purpose and that a major overhaul was needed. The pace of reform has been frustrating slow, but today Innovation, Science and Industry Minister Navdeep Bains introduced the Consumer Privacy Protection Act (technically Bill C-11, the Digital Charter Implementation Act), which represents a dramatic change in how Canada will enforce privacy law. The bill repeals the privacy provisions of the current Personal Information Protection and Electronic Documents Act (PIPEDA) and will require considerable study to fully understand the implications of the new rules.

This post covers six of the biggest issues in the bill: the new privacy law structure, stronger enforcement, new privacy rights on data portability, de-identification, and algorithmic transparency, standards of consent, bringing back PIPEDA privacy requirements, and codes of practice. These represent significant reforms that attempt to modernize Canadian law, though some issues addressed elsewhere such as the right to be forgotten are left for another day. Given the changes – particularly on new enforcement and rights – there will undoubtedly be considerable lobbying on the bill with efforts to water down some of the provisions. Moreover, some of the new rules require accompanying regulations, which, if the battle over anti-spam laws are a model, could take years to finalize after lengthy consultations and (more) lobbying.

Trudeau’s internet policy — cash grab or power grab? Embrace the healing power of “and” (TM Instapundit)

Filed under: Business, Cancon, Government, Media, Technology — Tags: , , , , , , — Nicholas @ 03:00

The Canadian government is taking advantage of the ongoing economic and social disruption of the Wuhan Coronavirus to widen their existing regulation of both broadcasting and internet entertainment. It’s not just a bit of maple-flavoured cultural imperialism, but it’s also a blatant cash grab:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapture from CPAC video.

I see, in the Globe and Mail, that Justin Trudeau and Steven Guilbeault want to further regulate the broadcasting services in Canada. Their goals seem to be, in part, a cash grab ~ online streaming services, like Netflix, are offering Canadians, for a price, what they want, while the CBC offers Canadians, thanks to a $1+ Billion annual subsidy from taxpayers like you and me, what we, pretty clearly, do not want to watch and the Liberals want a share of that money ~ and also an appeal to those who play identity politics.

I think we need to look at the “products” of broadcasting ~ information (news and “public affairs” and documentary programmes) and entertainment, including sports, as “consumable products,” rather like food and, say, soft drinks.

We do allow, even demand that governments exercise some important regulatory functions in regard to food and soft drinks: we want to make sure that they are safe to consume and Canadians want to know what is in the food we consume.

The Canadian Radio-television and Telecommunications Commission (CRTC) was, originally, conceived to solve a fairly simple problem: allocating broadcast licences. Government engineers calculated how many radio channels could be used in any given place but they didn’t want to have to decide who should get to use them. Politicians didn’t want to do it, either, because while the successful applicant was (usually) happy the more numerous unsuccessful ones were disappointed and politicians hate to disappoint people. Thus they created an arms length agency to make the tough decisions for them. Licence allocation is still an important job for the CRTC. But the CRTC’s mandate was expanded with the birth of cable TV. Companies, like Rogers, built cable systems ~ and they received both direct and indirect government support to reach more and more Canadians ~ and then “sold” access to consumers. In the normal course of events one might have thought that the government would attach some business conditions to its loans, grants and tax deductions, but there was an ever-growing demand, from the Canadian cultural community ~ based almost entirely in Montreal and Toronto ~ to regulate the fledgling cable and “pay TV” market to ensure that Canadian programmes were not shut out but, in fact, could have privileged positions in the cable lineup, which led to the government, in the 1960s, telling the CRTC to regulate how companies like Famous Players, Maclean Hunter and Rogers configured the private product they sold to individual consumers.

The initial government argument was “we regulate all kinds of things for the common good: that’s why we all drive on the right, for example, and the delivery of broadcasting by cable is like that.” “No it’s not,” the cable operators replied, “you build and maintain the roads, using taxpayers’ dollars, so you’re allowed to regulate how they’re used, plus it’s a safety issue. Cable service and ‘pay TV’ are private, commercial transactions between us, the companies who built and operate the systems, and the individual consumer who wants to subscribe to what we offer. You don’t presume to regulate, beyond the laws against libel and pornography, what people can read in MacLean’s magazine or the Globe and Mail, why is ‘pay TV’ and cable different?” It’s still a good question. But the cable operators surrendered gracefully and the CRTC has been, broadly, for the last half-century, protective of the rights of incumbents in the infotainment markets. In return the cable and internet operators have agreed to “tiers” of programming which means that if you want to watch, say, BBC World Service or Deutsche Welle or Fox News, you must also pay for CBC News Network and CTV News Channel and, no matter who you are and what your individual preferences might be, when you subscribe to a cable/internet service you must also support a number of French stations/channels; it’s the law. And now Minister Guilbault wants to ensure that you pay for the output of indigenous producers, writers, actors and so on, on both indigenous networks ~ to which you must already subscribe if you have a “basic” Canadian cable or satellite TV package ~ and, it appears to me, in programmes produced by Canadians and even by Netflix.

November 16, 2020

QotD: India’s civil service

Filed under: Bureaucracy, Government, India, Quotations — Tags: , — Nicholas @ 01:00

The process was started in October last year. Here we are at the end of August 10 months later. And we’ve still managed to get no closer at all to hiring any accountants.

Now, one good thing about the Indian civil service is that it carries on the old British practice of entry being by competitive examination. This at least loosens the possibility of influence and bribery determining who gets hired. But now think of the incompetence with which the process is being carried out. We’ve at least 7 months here just to mark the exam papers!

And that is really what ails India. The snail’s pace of the bureaucracy. It would actually be far better if the place had near no government rather than the one it has. Anarchy is indeed preferable to a system which allows near nothing to happen officially. Because what happens when a bureaucracy is so slow that it strangles the ability to do anything legally is that it is all done in illegal anarchy anyway. Some 85% of the Indian economy is over in the unregistered, untaxed and informal sector. Precisely and exactly because the official sector is run by that bureaucracy that cannot even hire the occasional accountant. A bonfire of the babus would improve the place immeasurably.

Tim Worstall, “What’s Wrong In India – All 8,000 Fail Goa’s Exam To Be Government Accountants”, Continental Telegraph, 2018-08-23.

November 13, 2020

Oddly, the Canadian media evince no interest whatsoever in the Trudeau government’s malign plans for the Internet

Filed under: Business, Cancon, Government, Media — Tags: , , , , , , — Nicholas @ 03:00

In The Line, Peter Menzies shows how little the mainstream media outlets in Canada care about the power grab the feds are attempting with their proposed “get money from web giants” shakedown:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapure from CPAC video.

In order to understand where media and public attention has been the past couple of weeks, all you had to do was listen in on Monday morning’s Ottawa news conference.

Six days after Heritage Minister Steven Guilbeault had introduced ground-breaking legislation to regulate content online, Prime Minister Justin Trudeau announced more cash to bring better Internet to rural and remote communities. There were also some COVID-19 updates and something about help for agriculture.

And, of course, the questions asked by the media were about the U.S. election. What else could possibly be of interest?

Eventually there were a few inquiries about Telesat and low-Earth-orbit satellites, but you get the point: things that matter to people’s daily lives such as cable bills, data plans, Netflix, cellular service, crappy WiFi and slow Internet connections haven’t been of much interest to Canadian media lately.

So there has been a dearth of chatter about Guilbeault’s controversial plan to (my words, not his): restrict consumer choice, tax Netflix to finance certified Canadian content (Cancon) and bring to an end the greatest period of prosperity in the history of the Canadian film and television industry. Did I mention stifling innovation, increasing streaming subscription costs and scaring away investment? No? My bad. Those too.

Guilbeault has decided that the agency dedicated to defining the nation’s TV and radio diet — the Canadian Radio-television and Telecommunications Commission (CRTC) — is now going to be in charge of what you are allowed to dine on online as well. No longer will you be able to manage your preferences. No more popcorn and candy for you. Going forward, Cancon spinach and broccoli will be on your plate every evening. Breathtakingly, Guilbeault has “modernized” communications legislation by giving authority over the Internet to something called a “radio-television” commission by using something still called the “broadcasting” act.

November 10, 2020

The amazing mental gymnastics that lead to the US Supreme Court’s unanimous decision in Wickard v. Filburn in 1942

Filed under: Economics, Government, History, Law, USA — Tags: , , , — Nicholas @ 03:00

Antony Davies and James R. Harrigan explain how a farmer growing wheat on his own land to feed his own cattle somehow transmogrified into an interstate commerce activity that could be regulated by the federal government:

Panorama of the west facade of United States Supreme Court Building at dusk in Washington, D.C., 10 October, 2011.
Photo by Joe Ravi via Wikimedia Commons.

… who ended up being tasked with deciding what Article One, Section Eight actually meant? Herein lies the wrinkle that enables all manner of constitutional mischief in the United States. The institution that ended up deciding what the federal government is empowered to do is itself a branch of the federal government. And it should come as no surprise that when push comes to shove, the Supreme Court routinely finds in favor of empowering the federal government.

This sort of mischief flowered fully in the decade following ratification of the 21st Amendment. In 1942, the Supreme Court decided a case, Wickard v. Filburn, in which farmer Roscoe Filburn ran afoul of a federal law that limited how much wheat he was allowed to grow.

A careful reader might, and should, ask where the federal government’s right to legislate the wheat market is to be found — because the word “wheat” is nowhere to be found in the Constitution. Be that as it may, the federal government’s aim was clear enough. It was to keep the price of wheat high enough for farmers to remain profitable. The Agricultural Adjustment Act of 1938 put an upper limit on how much wheat farmers were allowed to grow, which would serve to keep prices high by limiting supply.

Roscoe Filburn had grown 12 more acres of wheat than the law allowed. But not only did he not sell the excess wheat outside of his home state, but he also didn’t sell it at all. He used the wheat from those 12 acres to feed his cattle. Filburn was very clearly not engaging in commerce, let alone interstate commerce, yet the Supreme Court found (unanimously) that because Congress had the authority to regulate interstate commerce, Congress also had the authority to prohibit Filburn from growing those 12 acres of wheat for his own use. The Supreme Court’s “reasoning”?

Had Filburn not fed his cattle that excess wheat, he would have been forced to purchase wheat on the open market. And even if he purchased wheat that was grown within his home state, doing so would have made less wheat available within his home state for other wheat buyers. Consequently, some wheat buyers within his home state would then have had to buy wheat from outside the state. Therefore, Filburn’s non-commercial activity was, according to the Supreme Court, interstate commerce.

The mental gymnastics that went into this ruling made just about any activity interstate commerce by definition. Since Wickard, any time Congress has wanted to exercise power not authorized by the Constitution, lawmakers have simply had to make an argument that links whatever they want to accomplish to interstate commerce. Why? Because they know they can get away with it.

November 2, 2020

Federal government to web giants: “BOHICA!”

Filed under: Bureaucracy, Business, Cancon, Government, Media — Tags: , , , , — Nicholas @ 03:00

Michael Geist provides an unauthorized backgrounder on the Canadian government’s quixotic attempt to shakedown the likes of Netflix for money to give to “struggling” Canadian media companies:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapure from CPAC video.

Canadian Heritage Minister Steven Guilbeault is set to introduce his “Get Money from Web Giants” Internet regulation bill on Monday. Based on his previous public comments, the bill is expected to grant the CRTC extensive new powers to regulate Internet-based video streaming services. In particular, expect the government to mandate payments to support Canadian content production for the streaming services and establish new “discoverability” requirements that will require online services to override user preferences by promoting Canadian content. The government is likely to issue a policy direction to the CRTC that identifies its specific priorities, but the much-discussed link licensing requirement for social media companies that Guilbeault has supported will not be part of this legislative package.

These reforms mark the culmination of a dramatic reversal in government digital policy. After then-Heritage Minister Melanie Joly unveiled her 2017 digital cancon strategy that focused on market-based solutions and emphasized exports of Canadian culture, extensive lobbying gradually let to a major policy flip flop. The CRTC reversed its prior position on Internet streaming regulation in 2018 with a regulate-everything approach, the deeply flawed Yale report released earlier this year provided the blueprint for CRTC-led regulation, and Guilbeault jumped on board with a declaration that his top legislative priority was to “get money from web giants.”

On Monday, the government will undoubtedly line up the lobby groups that supported the reform to provide positive quotes, suggest reforms will lead to billions in new revenues, and claim the bill ensures regulatory fairness by requiring that everyone contribute. Yet much of the policy is based on fictions: that this levels the playing field, that there is a Cancon crisis, that discoverability requirements respond to a serious concern, that this will result in quick payments to the industry, that this is consistent with net neutrality, or that consumers will not bear the costs of reform.

None of this is true. But beyond those issues – each discussed in further detail below – this most notably represents a significant new source of speech regulation. We do not require government authorization to publish newspapers, blog posts, or to simply voice our views in a public forum. That we require governmental authorization in the form of licensing for broadcasters was largely justified in furtherance of cultural policies on the grounds of limited access to scarce spectrum. That justification simply does not apply to the Internet, no matter how many times Guilbeault refers to the inclusion of Internet companies within the “broadcast system.” This is not a matter of Internet exceptionalism. Laws and regulations such as taxation, competition, privacy, and consumer protection are all among the rules that apply regardless of whether the service is offline or online. But speech regulation by the CRTC should require a far better justification than the lure of “free money” from Internet companies.

October 22, 2020

Carbon taxes may be the most efficient way to address GHG emissions, but no government has implemented them properly

Filed under: Business, Economics, Environment, Government — Tags: , , , , , , — Nicholas @ 03:00

I was persuaded by the economic arguments in favour of a carbon tax to address the externaly of greenhouse gas emissions, but I’ve long been skeptical that governments would actually implement them in a way to minimize economic distortion. A report from the Fraser Institute this week shows I was right to be doubtful, as none of the 31 OECD countries in the study have managed to introduce some form of carbon pricing without political “tinkering” … rather than replacing inefficient regulations, taxes and mandates with the carbon tax, they’ve generally just added carbon pricing on top of existing rules, making the carbon pricing scheme merely another tax grab that fails to achieve the stated goals:

Most economists consider human-made greenhouse gas (GHG) emissions an unintended negative externality of production and consumption. A negative externality occurs when the effects of producing or consuming goods and services impose costs on a third party which are not reflected in the prices charged for said goods and services. In the context of GHG emissions, this negative externality is calculated using the “social cost of carbon,” which is the future damage to society (adjusted to present value) of one additional tonne of carbon emitted to the atmosphere today.

Governments have a wide variety of policy alternatives to address the negative externality of emissions depending on the degree and depth of the policy intervention. They can either mandate individuals and firms to change their behaviour through com­mand-and-control regulations, grant subsidies and tax credits to foster cleaner energy sources, or use market-based mechanisms to correct the misalignment of incentives. It is widely acknowledged that carbon pricing, one of these market tools, is the most cost-effective policy to reduce emissions, as it relies on price signals and trade to provide flex­ibility to economic agents as to where and how emissions mitigation occurs.

[…]

This report includes thirty-one high-income OECD countries, where each country has either implemented a carbon tax, an ETS [emissions trading system], or a combination of both pricing mechan­isms. Carbon taxes are being implemented in 14 of them whereas 25 of these countries have their emissions covered by an ETS. Our analysis finds that, on average, 74 percent of carbon tax revenues in high-income OECD countries go directly into their general budget with no earmarking for any specific expenditure, while 12 percent are ring-fenced for environmental spending, and only 14 percent for revenue-recycling measures. This means that most governments are using carbon taxes as a revenue-raising tool rather than a mechanism to internalize the negative externalities of emissions in a cost-effective man­ner. Additionally, the vast majority of ETS revenues are being used to artificially acceler­ate the use of renewable energy sources, infrastructure, and technology.

The study also finds that no high-income OECD country has used carbon pricing to repeal emission-related regulations, but instead have introduced new ones following the adoption of the carbon tax or the ETS. Emissions caps, mandated fuel standards, technology-based standards, and renewable power mandates are just some examples of these regulations that undermine the cost-effectiveness of carbon pricing mechanisms. The majority of high-income OECD countries have a combination of support schemes for renewable energy sources, carbon pricing tools, and command-and-control regulations.

Overall, no high-income OECD country is following the textbook model of an optimal carbon pricing system, undermining their theoretical efficiency by design and implementation.

October 1, 2020

Far from being in trouble, Canadian film and TV investment has nearly doubled in the last 10 years

Filed under: Business, Cancon, Government, Media — Tags: , , , , , , , — Nicholas @ 03:00

The Canadian government — particularly Canadian Heritage minister Steven Guilbeault — is eager to pass legislation to “get money from the web giants” and their primary justification is the claim that Canadian TV and movie funding has been shrinking. As Michael Geist explains, that’s a pants-on-fire lie:

CMPA Profile – Financing, Sources: CMPA Profile 2019, 2016, 2013

Canadian Heritage Minister Steven Guilbeault has said that his top legislative priority is to “get money from web giants.” While much of the attention has focused on his ill-advised plan to require Facebook to obtain licences for linking to news articles, his first legislative step is likely to target Internet streamers such as Netflix, Amazon and Disney with new requirements to fund Canadian content and to increase its “discoverability” by making it more prominent for subscribers. Based on his comments at several town halls, Guilbeault is likely to also create new incentives for supporting indigenous and persons of colour in the sector with a bonus for those investments (potentially treating $1 of investment as $1.50 for the purposes of meeting Cancon spending requirements). Much of the actual implementation will fall to the CRTC, which will be granted significant new regulatory powers and targeted with a policy direction.

Guilbeault’s case for establishing new mandated payments is premised on the claim that support for the film and television sector is declining due to the emergence of Internet streaming services, which have resulted in decreased revenues for the conventional broadcast sector and therefore lower contributions to Cancon creation. In fact, Guilbeault recently told Le Devoir that without taking action there would be a billion dollar deficit in support in the next three years. He says that his objective is to actually generate a few hundred million more per year in local production by the Internet streamers. In other words, he’s expecting roughly $2 billion in new investment over three years in Cancon from U.S. entities due to his planned regulations (moving from a billion dollar deficit to a billion dollars in extra spending).

While Guilbeault frames these regulatory requirements as a matter of fairness and “rebalancing”, industry data over the past decade tell a much different story. Indeed, there has been record setting film and television production in recent years, much of it supported by companies such as Netflix. CRTC chair Ian Scott last year said that Netflix is “probably the biggest single contributor to the [Canadian] production sector today.” While that is not entirely true – the data suggests that Canadian taxpayers are the biggest contributor with federal and provincial tax credits consistently the largest source of financing – the claim that there is a billion dollar deficit coming or that foreign streamers do not contribute to film and television production in Canada without a regulatory requirement is simply false.

September 23, 2020

Federal minister admits the Libranos’ plan is a shakedown to “get money from web giants”

Filed under: Cancon, Government, Media, Politics, Technology — Tags: , , , , — Nicholas @ 03:00

Michael Geist on a rare moment of honesty from Canadian Heritage Minister Steven Guilbeault on the federal government’s atrocity of an internet regulation plan:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapture from CPAC video.

As Canadian Heritage Minister Steven Guilbeault prepares an Internet regulation plan that features the prospect of licences for linking, undermining net neutrality, and trade sanctions, he has typically argued that “it’s about fairness”, suggesting that foreign companies unfairly benefit from the Canadian market at the expense of domestic companies. Yet when Guilbeault appeared at a production sector town hall last week, he was far more candid. Guilbeault told the sector that in a minority government situation, his department had to choose between a massive bill changing “everything under the sun” or to slice it up into smaller pieces. Having chosen the piecemeal approach, Guilbeault pointed to his top priority: get money from the foreign Internet companies (his exact words at 47:58 were “the most pressing thing we needed to do was to get oxygen into the system, which is money. And go and get that money where that money is. Which is web giants.”)

In certain respects, the acknowledgement that this amounts to little more than a shakedown makes sense. CRTC Chair Ian Scott has said that Netflix is now probably the largest contributor to film and television production in Canada and the sector enjoyed record production numbers pre-COVID-19, so the data simply does not support claims that the streamers are hurting the industry. As for the news sector, the Minister has failed to deliver millions in promised tax credits and seemingly now wants an alternative that involves creating a licensing regime for linking to content.

Yet if the goal is simply a matter of wanting more money from Internet companies that can be used to support Canadian cultural policies, it is not clear why this is a matter for the Heritage Minister. Everyone wants more money from the Internet companies and countries around the world have a credible argument that the huge global Internet revenues should be more equitably apportioned among them. In other words, the way to “get money from web giants” is for Finance Minister Chrystia Freeland to tax them on their revenues. Those tax revenues would go into general tax revenues and can be spent in an transparent manner without the need for specialized subsidy programs. This isn’t easy. The U.S. unsurprisingly objects to a potential reduction in its tax revenues, which means that Canada must find allies with other countries in seeking global solutions on tax. Further, Guilbeault candidly recently told a publisher town hall that changes to the tax code is far more difficult than direct program spending.

The problem with Guilbeault’s preference for direct program spending subsidized by Internet companies is that it raises a host of complications and negative effects. For example, mandated Canadian content spending for companies such as Netflix could require the companies to pay into a fund that supports Canadian content production. However, the current rules make it challenging for those same companies to access those funds for their own productions. That leads to either a trade challenge (and the possibility of tariffs against key Canadian sectors such as dairy and steel) for being forced to pay into a system that is inaccessible to foreign providers or a reform to the system that would open things up to foreign providers and in the process undermine the competitiveness of domestic producers and broadcasters who are more reliant on tax credits and funding programs.

September 13, 2020

QotD: Price controls versus reality

Filed under: Economics, Government, Quotations — Tags: , , , , — Nicholas @ 01:00

Economic reality is not optional. Government-imposed price ceilings and price floors — although believed by those who view prices as arbitrary results of bargaining or of “power” relationships as merely changing the distribution of economic gain or pain — distort people’s view of economic reality. Price controls prevent people as consumers (including as employers of workers) and as producers (including as workers) from seeing economic reality as clearly as possible. Blinded by minimum-wage commands and other price controls, people act in ways that are the opposite of the ways that those who support the price controls ostensibly want people to act. Rent control, for example, prompts landlords and potential landlords to offer fewer rental units on the market. Minimum-wage commands lead employers to employ fewer low-skilled workers.

Non- (and poor) economists, seeing only that which is in front of their noses, observe the government-controlled prices and conclude that the results of these controls must be just what the government publicly proclaims it wishes these results to be. “Look! Rents are lower with rent controls! Wages are higher with minimum wages! We have helped the poor!”

Those who fall for such superficial appearances, of course, do not grasp the nature of market forces and the role of prices. But the naiveté of such people runs much deeper: they are the sort of people who believe that if the messenger is forced to lie, the underlying reality changes, with the lie thereby converted into truth. Such people, in other words, believe in miracles. They believe that state officials performing incantations can miraculously change economic reality.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2018-05-16.

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