A joke economics geeks tell about Microsoft billionaire Bill Gates goes a long way toward explaining why Toronto faces a budgetary crisis that may well result in ripping up our social fabric.
Gates was crossing a border point when a customs officer pointed to his suitcase and asked if he had anything to declare, the joke goes. Gates said no.
The punchline is all about an obsolete system that fails to recognize an economic paradigm shift. Value no longer resides in solid items shipped as baggage, but in ideas, talents and assets that travel inside our heads.
It’s not just customs officers who didn’t get the memo. Accountants and statisticians weren’t in the loop either. As a result, an enormous ledger error is responsible for much of the city’s financial mayhem.
Former budget chief Shelley Carroll thinks today’s budgetary woes come from the number-crunching being driven by an accountant’s rather than an economist’s mindset.
Carroll is best known for identifying Toronto’s chronic crisis as a revenue problem, not a spending problem. Other cities have many sources of revenue aside from property taxes, she tells me. Some impose a payroll tax on non-residents who work in and for the city some add a hotel tax. And, of course, cities that aren’t made to suffer for anti-urban resentments receive ample funding from provincial and federal programs.
Yes, I say, thinking aloud, but don’t we also have a problem caused by the failure to recognize health, social and enviro programs as infrastructure investments rather than expenditures?
“Exactly,” Carroll says.
The point is that if some social programs can be defined as infrastructure, they can be classed as part of the capital budget instead of yearly operating expenses, and can be funded by city bonds (the Spadina subway was funded this way), including perhaps even RRSP-eligible bonds sheltered from taxes.
Carroll blames the Ontario Municipal Act, with its definitions of infrastructure based on a long-gone economy and locked into pipes, roads and bridges.
It’s time for a definition overhaul. Without blaming Carroll for my flights of fancy, I’d say it’s time to stop privileging technology and construction when we talk about infrastructure. Why should steam-shovel projects dominate the public imagination when it comes to facilities that confer long-term benefits on societal functioning?
If the Humber bridge is considered infrastructure, so are tree-planting and green roof programs that suck up carbon and protect the infrastructure of our weather system.
On another level, municipal and agency community programs are among the few remaining institutional bases to nourish social cohesion. Call this “soft infrastructure”: it creates stakeholders by building positive relations and increasing the city’s human assets.
If some of the proposed cuts proceed, Toronto, the world’s leading experiment in multicultural living, will soon be a laboratory demonstration of whether a city can function without nourishing its instruments of social capital. The whole world saw what happened during riots throughout southern England this summer.
My infrastructure includes social and economic integration. It also takes in community food centres, either alongside or on par with neighbourhood schools and libraries, to build long-term food security and skills. And cycling lanes. And a museum of immigrant history. And childcare. And city-funded hubs for Toronto’s 300,000 small and micro-businesses.
As is the case with all effective capital works programs, all these would generate savings, jobs and wealth that repay investment many times over, year after year.
The theoretical case for identifying such things as infrastructure is supported by U.S. economist Michael Hudson, who shows how well-funded social, educational, transportation and environmental programs underlay the spectacular creation of wealth in the U.S. before 1950, just as their disappearance there signalled the growing public squalor since.
The case for this re-accounting is so compelling that city council should postpone this frenzy of cuts made necessary by faulty accounting and urge all political parties to commit to redefining infrastructure in the Ontario Municipal Act. If only.
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