William Watson, in a recent commentary, argues that Canada's economic reform efforts are stymied by an excessive number of veto points. He draws a parallel to the Bell Centre, the home arena of the Montreal Canadiens, to illustrate the difficulty of rallying widespread support for change.
The Bell Centre Analogy
Watson notes that seating Canada's entire population at once would require nearly 2,000 Bell Centres. In contrast, many influential interest groups that block reforms could not fill even one such venue. This disparity highlights how a minority can obstruct progress.
Study on Reform Success
Watson references a study titled "How Reform Happens" by Simeon Djankov, Edward L. Glaeser, and Andrei Shleifer. The study examined 3,590 reforms proposed in 189 countries between 2005 and 2022, focusing on areas like contract enforcement, labour, insolvency, minority shareholder rights, tax collection, and business entry. Overall, 71% of reforms succeeded, with executive-initiated reforms failing 27% of the time, compared to 39% for legislative initiatives.
Veto Points and Compensation
The study concludes that rich countries are more likely to reform than poor ones, supporting economist Ronald Coase's idea that winners can compensate losers. However, the number of veto points is crucial: fewer entities that can say no makes reform easier. Watson laments that Canada has dozens or even hundreds of such entities that block change.
Watson's article underscores the challenge of overcoming entrenched interests in Canada's political system, where even a small group can halt progress. He calls for a reduction in veto points to facilitate necessary economic reforms.
