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Ken Boessenkool: The time has come for a new family agenda

Commentary

The Hub launched with a core mission of getting Canadians thinking about the future. We’ve been stuck in the doldrums, pessimistic and polarized, for too long. To lay out a roadmap for the next 30 years of Canadian life, we asked our contributors to pinpoint the most consequential issue, idea or technology for the country in 2050. This series of essays by leading thinkers will illuminate Canada’s next frontier.

What issue, idea or technology may be of most consequence in 2050? There are, of course, different ways to think about the question. Of consequences to whom, or what? The economy, society, climate, even politics?

It seems to me that the answer lies in a place where these spheres intersect. I would argue that the biggest issue, idea or technology Canada must grapple with over the next 30 years is the health of its families in a world of new and evolving workplace arrangements, social norms, family demands, and demographic pressures. In order to lay the foundation for strong Canadian families over the coming decades, Conservatives must develop and put forward a comprehensive and modern family policy agenda.

Let me start with a key underlying truism: the political definition of insanity turns the classic definition on its head. In politics, doing the same thing over and over and expecting the same result is insane.

Conservatives in the English-speaking world came to political power and intellectual influence in the 1980 and 1990s on the economic issues of balancing budgets, lowering taxes, deregulation and free trade. This was the recipe that Margaret Thatcher (1979), Ronald Reagan (1981), Brian Mulroney (1984), David Lange (1984) and John Howard (1996) mixed in their own ways to form and hold government and deliver on (most of) these priorities. It was also the correct antidote to the failed policies of the 1970s that produced the triple threat of high inflation, high unemployment and high debt.

In fact, Conservatives (and conservatives) won these economic arguments so convincingly that these priorities were adopted by our political opponents. Here in Canada, for instance, Jean Chrétien balanced the budget, Paul Martin lowered taxes and Justin Trudeau renegotiated NAFTA.

To be sure, fealty to balanced budgets, deregulation, lower taxes and free trade has since faltered among Conservatives’ opponents. Yet, to be equally sure, expecting this same economic agenda to continue to bring Conservatives (and conservatives) to power is folly. It is, in fact, insanity.

Justin Trudeau renegotiated NAFTA and Jean Chretien balanced the budget. Jonathan Hayward/The Canadian Press.

This isn’t to say the agenda should be abandoned. It is to say, however, that the principles underlying its three core assumptions — the belief in free markets, the belief in subsidiarity and the belief in comparative advantage — should be applied to a new range of challenges.

Which brings me back to the most important issue facing Canada over the coming decades: the need to strengthen Canadian families and boost the country’s fertility rate. This is where, in my view, Conservatives (and conservatives) ought to put their energy and attention.

Stephen Harper showed us how. On his watch, Canada signed a record number of new trade deals and lowered the tax burden to 1950s levels. Harper also applied the principles of free markets, subsidiarity and comparative advantage to build the largest new social program in at least a generation, if not two.

Harper did that by rejecting and dismantling a $5 billion Liberal one-size-fits all institutional child care scheme and replacing it with cash benefits paid directly to parents. In its last year in office, the Harper government delivered almost $19 billion directly to families with children.

This gave parents power over how to spend the money (free markets), allowed the lowest societal unit possible to decide how to spend the money (subsidiarity) and recognized, as Harper put it, “the experts, mom and dad” (comparative advantage). These child benefits made life much more affordable for families with children and reduced child poverty in Canada by almost a third. And as they’ve done with lower taxes and free trade, Harper’s political opponents have made further enhancements to child benefits and have continued to see child poverty drop.

In short, Harper applied conservative principles to make children more affordable, reduce child poverty and strengthen families. This helped him to win elections, but it also helped win the broader debate about childcare policy and child benefits, and win it decisively.

Conservatives today need to take this lesson and apply it to (at least) three other ways to strengthen families in Canada over the coming decades. The first two focus on assisting families with the transition out of the labour force to have children and the transition back in, if and when they are ready.

First, Canada needs a maternity/paternity infrastructure that is much more generous, flexible and paid, as much as possible, directly to parents — three social policy principles consistent with free markets, subsidiarity and comparative advantage. Except in Quebec, maternity/paternity benefits are currently run through the Employment Insurance program. These programs should be divorced from Employment Insurance, along with the payroll revenues needed to fund it, and given over to the provinces so Canada can benefit from different approaches and learn what works best.

Conservatives cannot continue to do the same thing and expect the same results. We can no longer expect electoral success with an old and tired (though true) economic agenda.

A new maternity/paternity infrastructure should be much more generous — in terms of income replacement — and flexible in terms of the amount of time off it provides. It should adapt to a shared parenting model and to today’s flexible work arrangements. Consideration should also be given to the special needs of adoptive and foster families. Families should be able to take a minimum of one year off with minimal or no reductions in net family income and should have the flexibility to spread those benefits out over as much as another year — or even start benefits before the baby is born. The system should be as indifferent as possible to which spouse provides the at-home care and should also recognize the reality of gig work. Changes to provincial labour laws will also be required to minimize career disruption.

Second, when parents are ready to return to work, Canada’s childcare infrastructure should be there to support — without overtly favouring — that decision. The current infrastructure can be broadly understood as Ottawa operating on the supply side of the childcare equation with provinces operating on the demand side. Ottawa’s main contribution to childcare is a generous (though poorly targeted predominantly to rich parents) tax deduction, while provinces regulate and fund childcare spaces.

This deduction must be converted into a refundable tax credit that is based on family income and is most generous to those who need it most. It should also be made more generous overall. Provinces should continue to regulate childcare, remaining mindful of the need to enhance flexibility while also considering ways to encourage new spaces — I favour a baby bonus voucher system (to give parents maximum choice and flexibility).

The third issue Conservatives need to think deeply about — with an eye toward developing solutions — is declining fertility rates. It is an overgeneralization (but also not wrong) to state that a good portion of our economic growth in the last half-century has come from rising female participation rates and rising female income levels. In short, the number of people working and the incomes they earn are critical components of economic growth. And both of these things are about to fall off a cliff due to retiring baby boomers and continuously declining birth rates.

If we are to maintain our long-term growth, not to mention continue to afford the government we currently enjoy, we’re going to have to produce more kids. Continuing to boost child benefits, making those benefits universal — after all, we should value kids in all families, not just some — and creating more generous and flexible maternity/paternity and childcare benefits will work on the margins to encourage families to have more children. There are also thousands of public policy decisions that discourage, or do not do enough to encourage, having children. Perhaps it’s time to add a fertility lens to the existing economic and gender lenses we use when making public policy decisions.

Conservatives will need to be both judicious and sagacious when deciding which pro-family policies to promote. They will need to be very careful with (if not outright avoid) issues and defences of policy that are overtly religious or sectarian. And they will need to avoid issues that threaten electoral success (such as banning abortion) or have already been decided (such as the definition of “family”). Religious Conservatives in particular — of which I am one — need the discipline to focus their political efforts on what is both desirable and doable, not merely on what is desirable according to their own point of view. Turning desirable issues into issues that are both desirable and doable is almost certainly best done outside the political sphere — where much good work is happening, and must continue.

Conservatives cannot continue to do the same thing and expect the same results. We can no longer expect electoral success with an old and tired (though true) economic agenda. We need a strong, vibrant and ambitious new agenda for the coming decades, one that is both social and economic. I believe that agenda should be centred around strengthening and growing Canadian families.

Geoff Costeloe: The future of finance is decentralized. Will Canada keep up?

Commentary

For better or worse, few subjects have captured the attention of the financial world like Bitcoin.

With each wild price swing, those that believe in the digital currency and those that call it a bubble spar on financial networks like CNBC. The recent massive selloff will be no exception (Bitcoin is up more than 250% since this time last year even after factoring in recent declines). Despite its increasing acceptance by traditional markets as a novel asset class, Bitcoin is remains seen as a “party trick” asset: part speculative investment, part inflationary hedge.

But those headlines have continued to miss out on the seismic changes that blockchain technology is ushering into the financial space, challenging the hegemony of traditional brick and mortar banks. This revolution isn’t just on its way — it’s here. Regulators and tax authorities in Canada and around the world need to begin to educate themselves on the rapid development and reinvention occurring on blockchains other than Bitcoin.

The media’s endless fixation on the wild swings in price are missing the forest for the trees.

The Bitcoin network and it’s blockchain are largely restricted to the ability to do little more than securely send, receive and hold bitcoin. This is intentional as the development of the Bitcoin network has been an emphasis on security and decentralization.

The second largest digital asset, Ethereum, operates in a more dynamic way. Users can launch and utilize digital contracts on the network, allowing hundreds of people to bind themselves into financial and commercial contracts, enforceable without relying on lawyers, banks, regulators or central banks. Like many cryptocurrency projects, the first generation of these decentralized applications (DApps) was as silly as they were impactful.

Bitcoin remains seen by traditional finance as a novelty asset that will fade away and by government as only a tool for money launders.

Launching in 2017 from Vancouver based Dapper Labs, CryptoKitties was a collectable game where players could buy, sell, breed and trade unique digital cats. All of these transactions occurred on the Ethereum blockchain, meaning that once launched no individual, group, or corporation was truly in control of it. Ridiculous on its face, the DApp showed the potential to create global, scalable markets out of thin air and to have them operate 24/7 with little or no outside interference.

Since 2017, the scope of DApps has expanded and matured tremendously. Today, the largest DApps are primarily focused on financial products and the size of them is enough to rival mainstream, traditional financial institutions.

One of the largest examples is Aave. Founded in 2017 out of Switzerland, Aave allows users to deposit various digital assets into smart contract as collateral for U.S. dollar pegged “stablecoin” loans. The smart contract dictates the loan/value ratio and interest owing on a per second basis. To have the original collateral released, the user must return to the smart contract the borrowed U.S. dollar stablecoin, plus (variable) interest.

Simultaneously, Aave allows users to deposit their digital assets to a separate contract and earn per second interest on those deposits. With no lock-up periods, the user can remove their deposited funds, plus interest on demand. The borrowing and lending interest rates for assets are correlated in such a way to ensure that interest paid on deposits is always equal to or less than the interest received by the lending.

All the above is done without any agents, sales, margins, or overhead 24 hours a day, seven days a week with no downtime. Crucially, the whole process is agnostic to the size of borrowed or lent amounts. There is no difference in user experience, interest, or fees if you are borrowing $100 or $10 million. The only cost to the user is a “gas fee” required by the network to access and operate the smart contract.

As of writing, Aave currently has $7.89 billion U.S. dollars worth of digital assets locked as collateral in its smart contracts. Aave is one of dozens of new financial players completely reinventing financial markets and collateralized loans.

Another major player is Uniswap. Uniswap is a fully decentralized exchange (DEX), allowing users to exchange one digital asset for another. Unlike a traditional exchange that uses an orderbook to match buyers and sellers of a specific security, Uniswap is an automated liquidity protocol. Any user can create a market by depositing a pair of assets (in equal USD amounts) into a liquidity pool. When other users want to exchange that pair of digital tokens, they complete that exchange using the pair of tokens in the liquidity pool. Users who are providing liquidity are paid a 0.3 percent fee for each exchange, which is divided proportionally amongst the liquidity providers. If the balance of a pair of assets deviates from the original 1:1 proportion, arbitrageurs are incentivized to profit from bringing the pool back to 1:1.

Just like Aave, this provides an invaluable service to digital asset traders. Those who have assets they are not using can be paid to provide liquidity to a paired pool (and withdraw whenever the want) and market gains increased efficiency between different tokens, eliminating barrier to access.

For the week ending April 20, 2021, Uniswap exchanged $10 billion USD that week. As with Aave, this market is available worldwide, 24 hours a day, 365 days a year.

The growth of the DeFi market can tracked live on DeFi Pulse, which currently shows a total locked value across all markets of $27.2 billion.

A man uses an Ethereum ATM next to a Bitcoin ATM in Hong Kong. Kin Cheung/AP Photo.

The Ethereum network is similarly decentralized to the Bitcoin network (but in some technically different ways) and with a network upgrade projected to land at the end of 2021, the Ethereum network will eliminate the use of hardware mining to reduce its environmental impact by approximately 95%.

The promise of these new Decentralized Finance (DeFi) players is a truly global, liquid, and efficient financial system, with low fees, no overhead and no barrier to access. The World Bank estimates that 1.7 billion people worldwide remain unbanked, forced to store their wealth in cash or other physical assets, making them vulnerable to theft or government confiscation.

Digital assets offer not just a way to store their wealth securely, but equal access to a global financial system including access to capital markets they can use to start businesses and grow their quality of life. Individuals living in nations like Denmark with negative interest rates can take advantage of that and instantaneously lend their ‘free’ money to farmers in India or Pakistan with no secure access to financing.

Ethereum is laying down the internet of finance, allowing anyone globally to access markets and capital. An entrepreneurial developer can build new and more efficient ways for people to come together and see their financial needs met.

So, with all this growth and promise, where are our regulators and tax authorities? Nowhere to be seen. Does any government, provincial or federal, have a serious plan to face this financial upheaval? Can we encourage our own entrepreneurs, businesses and non-profits to find ways to become leaders in this emerging ecosystem?

It would seem the answer is no. Bitcoin and cryptocurrency remains seen by traditional finance as a novelty asset that will fade away and by government as only a tool for money launders. The implications of these new technologies are either not understood by our politicians and regulators or are being ignored in the hopes that they will simply disappear.

In a way, this isn’t surprising. Traditional institutions are loath to recognize upstart challengers to their hegemony. Decentralized finance offers lower cost, more efficient, more liquid access to global markets at a speed that traditional institutions cannot match. If they don’t start to adapt to this new world, taxpayers will be left on the hook for the inevitable bailout.

We’ve seen exactly this before. In 1995, Clifford Stoll declared in Newsweek that “no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works.”

Newsweek ran its last independent print issue on December 31, 2012.