THE ECONOMIC PERFORMANCE OF QUEBEC: FACTS AND CHALLENGES

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THE ECONOMIC PERFORMANCE OF QUEBEC FACTS AND
CHALLENGES

• Marcel Boyer, Ph.D.
• President and CEO of CIRANO
• Professor of economics, University of Montreal

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I. Important FactsII. Lessons to Be
DrawnIII. Revolution and Changes a)
Analytical Bases b) Programs
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FACT 1A GROWTH RATE (REAL GDP)

• 1981-99 1990-99
• Québec 2,1 (45,2) 2,0
• ROC 2,8 (64,2) 2,6

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FACT 1BPOPULATION GROWTH

• 1981-99 1991-99
• Québec 12,2 4,0
• ROC 26,7 10,4

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FACT 2AGDP PER CAPITA

• 1981-99 1991-99
• Québec 29,5 17,7
• ROC 29,6 16,4

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FACT 2BLIVING STANDARD IN 25 YEARS

• Québec 26 213 to 43 199 / 37 522
• ROC 29 708 to 56 793 / 42 601
• Lag 13,3 to 23,9 / 13,5
• DIFF(4) 13 980 to 54 376 / 20 316

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FACT 3 JOB CREATION

• 1981-99
• Que 20.4 ROC 31.3 USA 33.0
• 1990-99
• Que 6.9 ROC 12.4 USA 12.4

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FACT 4 POPULATION vs. JOBS CREATED QUE/CAN

• 1981-90 25.7 vs. 19.6
• 1990-99 24.5 vs. 15.0

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FACT 5 JOB CREATION DEFICIT 1981-99

• 349,000 jobs
• 61.4 more than the 568,000 jobs created.

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FACT 6 FULL-TIME JOBS

• 1981-90 Que 9.2 vs. ROC 14.2
• 1990-99 Que 5.2 vs. ROC 10.5
• Que/Can share From 18.0 to 13.9

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FACT 7 EMPLOYMENT RATE 1996-99

• Quebec 55.5
• ROC 60.8
• USA 64.0
• Deficit of 465,000 jobs (14)
• Under-estimated unemployment rate

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FACT 8 EMPLOYMENT RATE 55-64 YEAR-OLD
MEN1976-1996/99

• Quebec 71.7 to 49.8 - 22 pts
• ROC 74.3 to 55.7 - 19 pts
• USA 71.2 to 65.5 - 6 pts

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FACT 9

• EMPLOYMENT INS. CLAIMANTS ROC 21,6 per
  1 000 Quebec 33,1 per 1 000
  (53,2 )
• HOUSEHOLD BANKRUPTCIES ROC
  2,15 per 1 000 Quebec 3,17
  per 1 000 (47,4 )
• COMMERCIAL BANKRUPTCIES Que/Can 37
  

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FACT 10

• AVERAGE WEEKLY EARNINGS Que/Can
• 1980-89 98.0
• in 1999 93.6

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FACT 11 INTERNATIONAL EXPORTS of GDP

• 1999 1981-83
• Quebec 35.0 17.4
• ROC 42.3 19.8

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FACT 12 TECHNOLOGICAL EXPORTS

• HT HTAHT
• Que/Can 45-50 lt 15

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EFFECTS

• Relative deterioration of services health s.s.
• Relative reduction of the quality of education
• Relative decline of infrastructures
• Relative deterioration of the environment
• Relative decline of cultural industries
• Relative decrease of the quality of recreational
  structures

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UNDERLYING CAUSES

• Generalized lack of performance and productivity
  incentives.
• Aging of public institutions/mechanisms for the
  coordination and allocation of resources.
• Inadequate performance of organizations and
  businesses in terms of
• ensuring maximum use of resources
• encouraging individuals to make a greater
  contribution to the betterment of society.

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The prosperity of society depends on the quality
of its institutions/organizations

• The prosperity of a society as well as its
  competitiveness and capacity to adapt to changes
  essentially depends
• not only on the quality of its human resources
  (education) and natural resources,
• but also on the quality of its institutions/organi
  zations.
• The main roles of institutions and organizations
  are
• to ensure cooperation and coordinate decisions
  taken by many different individual agents.
• to encourage these economic agents to
• fully contribute to the mission (values,
  objectives) of the organizations
• use their resources and information (public and
  private) in the most socially efficient way.

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A MODERN VIEW OF THE STATE?A COMPETITIVE SOCIAL
DEMOCRACY
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A MODERN VIEW OF THE STATE

• Benevolent, informed government
• Benevolent government with decentralized
  information
• Benevolent government with contractual
  limitations
• Government with private agendas

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SIGNIFICANTTRANSFORMATIONS

• Accelerated development of communication and
  information technologies
• Globalization of markets
• Internationalization of cultures

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COMPETITIVE SOCIAL DEMOCRACY (1)

• Ultimate goal Well-being of individuals/citizens
• Three main principles
• 1. Individuals capacity to make rational
  choices
• 2. Social partnership shapes the individual
• 3. Efficient means of coordination and
• incentive schemes optimal use of
• resources

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COMPETITIVE SOCIAL DEMOCRACY (2)

• Two major challenges
• Develop the capacity to experiment and use
  creativity in problem solving
• Avoid the twofold trap
• Generalized under-performance
• Growth unable to get rid of a large enough number
  of obsolete technologies and organizations

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• The traditional social democracy is based on an
  old and outmoded philosophy, discourse and social
  model.
• It is a social democracy oriented toward
• means
• the preservation of acquired rights
• the protection of rents and interests of
  organized pressure groups
• the safeguarding of sacred cows

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• The competitive social democracy is a new
• social democracy
• Modern
• Innovative
• Responsible
• Based on a new social model derived from the
  socio-economic analysis of efficient
  organizations and institutions.

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• It is a social democracy that is definitely
• Oriented toward ends and objectives.
• Open to technological and organizational changes.
• Conducive to the emergence of power, based on
  competence in all environments and all lines of
  activity.
• How can this be achieved?

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5 MAJOR REFORMS

• 1. Promotion of well-defined key competencies in
  the public and private sectors.
• 2. Promotion of competitive mechanisms.
• 3. Promotion of human capital development
• 4. Abandon paternalistic price controls and
  the maintenance of dependence.
• 5. Evaluation of public programs and policies.

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PROGRAM 1

• Promote well-defined key skills in the public and
  private sector (1)
• Role of the public sector
• Identify needs for social goods and services in
  terms of both quality and quantity.
• Make the required arbitrages.
• Manage contracts and partnerships for the
  production and distribution of social goods and
  services.

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PROGRAM 1

• Promote well-defined key skills in the public and
  private sector (2)
• Role of the private sector
• Produce and adequately distribute private, social
  and public goods and services.
• Use the best available human, material and
  technological resources.
• Proportionate dismantling of the public sector.

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PROGRAM 2

• Promote competitive mechanisms.
• Promote the creation, liberalization,
  dissemination and understanding of economic
  laws and mechanisms
• Abstain from using price controls in order to
• avoid waste
• foster the emergence of innovative approaches to
  meet problems and challenges.

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PROGRAM 3

• Promote the development of human capital.
• Encourage individuals to take charge of their
  skill base.
• Involve private and public organizations in the
  development of skills at the college and
  university levels.
• Make the financing of higher education more
  dependent on performance incentives.

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PROGRAM 4

• Abandon paternalistic price controls and the
  maintenance of dependence.
• Reduce the implicit tax rates of the unemployed
  and social assistance recipients.
• Reduce the implicit tax rates of top earners.
• Introduce integrated mechanisms for direct
  incentive-based redistribution of income.

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PROGRAM 5

• Evaluation of public programs and policies by
  rigorous, transparent, independent and credible
  evaluation methods.
• 3 examples
• Job creation
• RD support
• Training programs for employment insurance and
  social assistance recipients.

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FOR A NEW SOCIAL DEMOCRACY?FOR A NEW QUIET
REVOLUTIONThe time to act is now!