Cities and the Deconstruction of the Welfare State Looking at Canada, Sweden and Denmark

1. Cities and the Deconstruction of the Welfare State Looking at Canada, Sweden and Denmark By Emmanuel Brunet-Jailly ebrunetj@uvic.ca

2. Cities and the Deconstruction of the Welfare State (this work is in progress) As economic integration in North America, and economic and political integration in Europe, impact government activities, it has become clear to scholars - yet remains understudied - that local government, and particularly municipalities, should be concerned about reforms. In particularly, is the so-called “Swedish model” of the welfare state being challenged by reforms? Is the general model of redistribution founded on the principle of equity and uniformity, and its important reliance on local authorities also challenged? This model influenced both the Danish welfare state system and the Canadian Liberals and New Democrats for the creation of national health and pension policies in the 1970s. In this paper, I argue that local government reforms have participated in the neo-liberal transformation of the welfare state; through attempts to rely on policy asymmetries to balance budgets, and gain policy efficiencies; those changes challenge both the equity and uniformity foundations of the “Swedish model” welfare state.

3. Six parts: Review of the literature: Market, territory, and government jurisdiction, structures (institutions) and functions and hypothesis Economic and political motivations: Adjusting to free trade Comparing constitutional and framework laws Institutional changes: Size, efficiency and democracy Functional changes Further research / Conclusion

4. Market Forces, Territory and Government Jurisdiction, Structure and Function: • For the last 20 years scholars have noted this transformation of the relationship between market forces and territories. • New technologies of information and communication change the global economy, and economic integration in Europe and North America change the politics of state relations in intergovernmental and international arenas: • Free trade regime pressure governments to ease regulations, and to open new markets (Keohane and Milner 1996) • Free trade enhance sub-national entities as economic players (Ohmae, 1991)

5. Traditional analysis of the relationship between market forces and territories focuses on competitive advantages and infrastructures gives way to new ideas that emphasize the social construction of a territorial economy • Today, the literature underlines this idea of social construction of a territorial economy (See for instance: Capitalism Against Capitalism (Albert 1991) Regional economies / “Industrial Districts” (Piore, Sable, 1984) • Social construction of a territorial economy suggest that modes of productions are culturally embedded and take different forms in different times and places, which also suggest that culture, structures (institutions) and individual choice make a difference in the global market place.

6. How are these changes impacting local governments? • Federal and unitary states adapt to global economic and political changes differently because their constitutional and statutory prerogatives, institutions and allocations of functions vary accordingly (Keating, 2001). • Federal systems provide mechanisms of power sharing among levels of governments that are not found in centralized states. (ibid) • Complexity and Asymmetry better describe territorial politics of federal states (ibid). • Federal systems tend to shelter less and less equally local governments from market and international pressures because functional and institutional flexibility becomes an asset for provincial and local policy effectiveness.

7. Robert Young (1999), notes for instance that increasingly market competition, capital mobility, and inter-governmental competition, as well as new political views about the role of governments seem to undermine the rationale and capacity higher levels of government have to shelter lower level governments. • Saskia Sassen (1996) argues that new legal regimes denationalize territories which also reconfigures the linkage between rights and territories and has important repercussions for distributive justice and equity. • Michael Keating (1991) also suggests that multi-national states when addressing their constitutional reforms confirm those legal asymmetries that differentiate between local and regional jurisdictions in a process that leads federal and national states to resemble each others.

8. This paper analyzes the evolution of legal frameworks, local government institutions and their functions, (local fiscal policy and intergovernmental relations) of a few states: Canada, Denmark and Sweden. • The hypothesis is that Saskia Sassen’s theoretical intuition would be verified, if, despite their social democratic traditions, those states had reformed their local government systems in the 1990s so as to increase asymmetries, the institutional fragmentation and increased the responsibilities and functions of their local governments, particularly cities. • For instance, the Canadian constitution places local governments under the authority of the province. This, shelters lower level governments from international and market forces, but then when provinces choose to increase local autonomy and decrease their own spheres of influence, they also implicitly increase national, international economic and political pressures on local communities; the smaller the greater the vulnerability of those communities. • To understand this reconfiguration of legal regime this paper documents three domains where such changes may have taken place: The constitutional prerogatives of local governments, the institutional structures of local governments, the allocation of functions to local governments (fiscal and intergovernmental policies)

9. 2. Economic and Political Motivations: Adjusting to Free Trade • And to Economic and Political (European Union) integration: • Canada: • Signature of Free Trade Agreement 1988, North American Free Trade Agreement 1994 - Secure Canada’s trading relationship with USA and Mexico – Secure competitive advantages: Larger markets and labor costs (Mexico), and natural resources (Canada) • Today the Canadian economy is integrated in North America • Trade increased by over 1460% since the late 1970s • 85% of all Canadian Exports go to the USA • Frankel test Canada scores 2.(J.Frankel, 2000) Alberta 0.9 and Ontario score 1.3, British Columbia scores 3.

10. Economic and Political Motivations: Adjusting to Free Trade • And to Economic and Political (European Union) integration: • Denmark and Sweden: • Denmark joined the EU in 1973 • Sweden joined the EU in 1995 • Trade increased: Denmark trades over • 60% of all Swedish exports go to EU member states • 65% of all Danish exports go EU member states • Frankel test both Denmark and Sweden between 3.5 and 5 (J.Frankel)

11. Economic and Political Motivations: Adjusting to Free Trade • And to Economic and Political (European Union) integration: • Lessons Learned About Free Trade Adjustments: • In Canada, all provincial governments link (1) fiscal responsibility to budget and staff cuts, and (2) to local government reforms, because greater autonomy, responsibility and accountability is assumed to lead to greater efficiency. • In Denmark, during the early 1970s and again since July 2004, Liberal MPs assume that local government reforms should lead to larger and more efficient local governments • In Sweden, during the early 1990s and again since August 2004, general concerns about the sustainability of the national health system lead to questions regarding the efficiency of the local government systems and the allocation of functions within the intergovernmental network.

12. Constitutional and Statutory Changes, Institutional Reforms, and Functional re-allocations in Canada (Alberta, Ontario, and British Columbia), and in Denmark and Sweden. • In Canada: • All reforms arbitrate between various legal terminologies that modulate the amount of respect and powers given to municipalities • Provinces increase local government powers • Provinces shift from express powers to permissive powers • Alberta and Ontario gave “natural person powers” – natural person power do not increase jurisdiction but increase freedom to act within an area of jurisdiction. Organizations that possess natural person powers “can enter into contracts, purchase or sell goods and services, borrow money, provide loans and guarantees, make investments, set up company, hire employees, construct or lease buildings, set up non-profit organizations, purchase shares, enter into partnership…”

13. In Denmark and Sweden: • Denmark: Article 82 of the constitution “provides that the right of the municipalities to manage their own affairs independently under the supervision of the state shall be laid by law” • The current Danish local governments law of 1968 was reviewed up until 1996; It sets the size and functions of municipalities and counties and differentiates between large and smaller municipalities • Sweden: The 1974 Instrument of Government Act, article one, protects local and regional authorities; local and county governments are protected by the constitution. They are elected and can collect taxes. • The local government act of 1991 defines municipalities, counties, sets their jurisdictions, powers, organizations, electoral systems, financial organization and auditing procedures. Also, differentiates between rich (Skane, Stockholm) and poorer regions (Kolmar, Malland) • Current reforms do not challenge the existence of local governments but are attempting to review their size and functions; in Denmark the focus is primarily on size, in Sweden, the focus is primarily on function, and also size of the county/regional level. Current reforms increase the diversity of rights of each jurisdictions; they temper with the principle of uniformity.

14. Keating is correct when he argues that complexity and asymmetry better describe territorial politics of federal states: New municipal acts increase asymmetry: • In Canada, for instance, the new Community Charter would increase asymmetry across British Columbia by increasing local decision-making capacity, but reducing provincial regulation and increasing market regulation of local government activities. • In Denmark and in Sweden the new local government acts are attempts to either modify the size of local governments or their functions. All increase asymmetries. • Saskia Sassen is correct when she argues that new legal regimes reconfigure linkages between rights and territories; all reforms have clear implications for re-distributive justice and equity; there is no legal uniformity.

15. Institutional Changes: Size, Efficiency and Democracy • Political Spaces: the forms and functions of cities and urban regions • Since the 1900s, but particularly since the 1950s, metropolitan governance is more complex; urban regions are highly fragmented. • Cities seem to evolve from a multitude of points of convergence of large economic and social networks. And, cities make the wealth of nations (Jane Jacobs) • Yet, governmental structures and functions of cities - do not - overlap with the needs of their regional economies. There are very few cases of clear institutional frameworks governing large metropolitan regions et their regional economies (Sancton, 1997) • The literature on amalgamation and fusion shows that cities are always in the process of attempting to reforms their statutes, institutions and functional to catch up with the functional needs of regional economic growth (Sancton, 1997)

16. One argument in the literature is that amalgamations or multi-tiered systems of local government allow economies of scales, better planning and economic development, and efficient re-distribution. These mechanisms justify multi-tiered governments and strengthen the functional authority of local governments. • Their critics argue, on the contrary, that these larger governments are less democratic and responsive or accountable. Furthermore, their contention is that the functional focus or economies of scales is a matter of debate. • This scholarly controversy over forms and functions of local governments, however, neglects the debate over the issue of “community.”

17. How to define a Community? • Deutch’s “Gemeinschaft” – Attachment to a place • Tiebout’s Protecting private spaces – Includes and excludes • Malibeau’s (held in this paper) Urban regions emerge out of cultural, historical construct of social interactions and of politically set territorial boundaries • De facto – these definition correspond to a continuum of institutions – Institutional arrangements give priority to: • Fundamental requirements of local democracy and accountability: Democracy, responsiveness and accountability? and/or • Fundamental requirements of efficiency and functional delivery of services? • Hence there is a taxonomy of local institutions: Single tier, Lower tier, Upper tier, Special Purpose body.

18. Taxonomie: • (Sancton, 2001) • Single tier government: is elected and multi-functional (manages a • large number of functions) Ex: A French commune, a municipality • Lower tier government: is –also- elected and multi-functional, but it • also works/cooperates with an upper tier government. Ex: a Municipality, A District in BC • Upper tier government: is uni- or multi-functional, elected or not, and span over a number of lower tier municipalities encompassing all the constituent lower tier municipalities. • Ex: a District, a County (US, Canada) • Special purpose authority: is (in most cases) a uni-functional special • purpose body, which serve the needs of a community, disregarding • municipal boundaries. Its non-territorial logic emerges out of the level of satisfaction of the functional community it serves. Accountability is • based on service and fee for service. Ex. A District, a Police Board

19. Hence, political spaces follow a variable geometry of institutional • arrangements that evolve from a tradition of multi-functional • government to uni-functional governance: • Placing the primacy on political accountability and responsiveness anchors local governing capacities into local politics of places. • Placing the primacy on service delivery efficiency results in • servicing the needs of market forces. • All local governments struggle to establish the appropriate institutional framework to service the needs of their communities and their economic region. • This choice of institutions and allocation of function, however, also points toward broad normative views that frame and inform the policy capacity and choice of localities.

20. Comparing Institutional Changes in Canada (Alberta, Ontario and British Columbia), and Denmark and Sweden: Alberta: No more Counties. The goal is to encourage inter-municipal collective action using the creation of Regional Service Commission (RSCs) (2001: 32/ 2002/42!) British Columbia: No amalgamations: the District System may be one of the best institutional arrangements to be found in North American (Bish, 2002) Ontario: Amalgamations (825 to 615) Denmark: Amalgamates further it municipalities to reach a minimal size of 35,000 inhabitants per municipality. Currently, the smallest municipalities have 25,000 inhabitants. The current reform intend to increase their size and reduce the number of municipalities from current 275 to about 220. Sweden: Is still indecisive but is seriously considering to reduction of the number of its regions (counties) so as to amalgamate those functions, which would benefit from clear economies of scales or greater policy/investment capacities at that level of government. The current reform would not change the size of municipalities but reduce the number of counties/regions from current 21 to 8.

21. What do we learn: • In Alberta and B.C. - To limit size; to encourage Collective Action - Functional Arrangements. Those reform assume that collective action and functional specialization of local upper tier governments lead to greater efficiencies, and economies of scales. • These respect a logic of service provision that emphasizes function. • In Ontario - Larger municipalities seem to be an “accident” (Sancton, 2000) They are multifunctional governments – these are elected bodies. These local governments enhance local democracy and accountability. • In Denmark – Larger municipalities are a choice – assuming greater economies of scales and greater efficiencies of service delivery, for those services were economies of scales are clearly identified. These would be larger local multifunctional governments. • In Sweden – Smaller municipalities respect a tradition of local autonomy but the proposal to regroup counties assumes that specific services would (like in Denmark) also benefit from economies of scales when clearly identified. These would be a local upper-tier multifunctional governments. • These respect a territorial logic / emphasizes local democratic accountability.

22. Functional Changes • Functional capacity is fundamental to our discussion: What local government can do is as important as the institutional decision-making arrangements provided to them (empty shells?) • There are basically three types of policies: developmental policies that deal with the economic welfare of a local economy; policies of redistribution that benefit lower income groups; and policies of allocation that benefit the widest population (Lowi, Peterson) • This literature argues that local governments should NOT be involved in policies of redistribution and minimally in economic policies.

23. Comparing Functional Changes in Canada (Alberta, Ontario and British Columbia), and Denmark and Sweden: • Alberta: Reform of planning, Municipal Government Boards • “Role, Responsibilities and Resources” continuously studies further • downloading. More recently, policing and other emergency services. • Ontario: Mega-Week (housing, social services, administration of welfare and public transit are municipal responsibilities) • British Columbia: No down loadings? But Kimberley, and Delta-South struggle to keep their hospitals … are counter examples … • In all three cases the provincial governments are balancing their budgets, reduce their deficit and debts. Fiscal responsibility, however, serves a fiscal and ideological agenda. • Those functional reforms make it increasingly difficult for municipalities to arbitrate between policies of allocation, development and redistribution. • Diversity and Complexity make redistribution an unlikely choice; • Policies of development become a race to the bottom; policies of allocation are debatable. • The fiscal rhetoric increasingly influences intra and inter urban competition and restrain choice.

24. Comparing Functional Changes in Canada, Denmark and Sweden: • Both in Denmark and Sweden, reforms are seeking greater economies of scales and efficiencies: Health and Medical care and secondary schools are scrutinized) • Denmark - Reforms of municipal and county functions: Hospital services, mentally ill, Secondary schools, planning and economic development. • Sweden - Reforms of the health and medical care systems to gain efficiencies: Should specialized services be provided by a “national” health system? Should primary care be the responsibility of municipalities? • In both cases the Danish and Swedish states balance their budgets, reduce their deficit and debts; fiscal responsibility serves a fiscal and ideological agenda. • Those functional reforms make it increasingly difficult for municipalities to arbitrate between policies of allocation, development and redistribution. Local choice becomes central to levels of service provisions. Richer counties/municipalities can provide higher and more comprehensive services. Policy floors (minimal level of services) may be set by state regulations and implemented with help of equalization payments.

25. Further research: • Fiscal Reforms: • In Canada – Local governments currently lobby the federal level • In Sweden – Since the 1991 fiscal reform, Sweden lowered its tax rates. Local governments collect a local income tax. It averages at 31%. Income earner above SEK 185000 pay an additional 20% tax to the state. • Block grants/per capita replaced specific grants / Balance budgets. • Richer regions (Skane, Stockholm) can raise larger resources. The fiscal equalization system does not provide for strict uniformity. • Intergovernmental reforms • In Canada – Local governments do not have a seat at the intergovernmental “table” only provinces and the federal level. • In Sweden – the central state manages 450 governmental agencies. (286 municipalities, 18 counties/2 regions) • Intergovernmental relations are “frustrating” and “fragmented.”

26. Overall Conclusion: • Constitutional/legal reforms in Canada, Denmark and Sweden: Greater territorial asymmetries of rights. • Institutional reforms in Canada, Denmark and Sweden: Both greater fragmentation in Western Canada, and amalgamations in Canada, Sweden and Denmark. Amalgamations protect local/regional equity and organize territorial asymmetries – large and small, richer and poorer. • Functional reforms in Canada, Denmark and Sweden: Search for greater efficiencies – Competition and functional upper tiers in Western Canada. Economies of scales in Sweden and Denmark. • (Fiscal / Intergovernmental reforms) • Conclusion: Are these states deconstructing their welfare systems? • The new local government systems of Canada, Sweden and Denmark organize asymmetries of rights, territorial asymmetries, functional efficiencies. It is a varied and asymmetrical local government system

27. - End - Thank you for your attention ! Emmanuel Brunet-Jailly University of Victoria British Columbia Canada - ebrunetj@uvic.ca-

34. Similarly, for the last 20 years states have attempted to adapt to those technological and economic changes. For the last 20 years there are numerous examples of states decentralizing policy making capacities, refocusing on specific policy areas: France, Belgium, the United Kingdom • In Canada, the economist Courchene makes the case for • national-unity-policies, similar to 19th century railroad policies, • that would emphasize a national-social-contract that would create • un-traded interdependencies and foster a competitive advantage • in a free-trade area (1991). • The radical fiscal decentralization of the 1990s suggests a re-invention of a new social contract directly related to the formation and protection of human capital, hence re-focusing on education and health policies. (Courchene, 1991, 98)

35. 3.1 From Hegemonic Relations to Local Self-Government? • Originally, cities are managed by Justices of the Peace • 19th century, cities acquire rights to incorporate, govern local real estate issues • Baldwin Act of 1849 authorize and regulate incorporations in Ontario • British North American Act of 1867 gives full authority to Provinces • Constitution 1982 does not recognize cities as a level of government • Provinces legislate the forms and functions of local governments • Should municipalities be a level of government? This is an on-going question in Canada. … in France as well.

36. 2.2 Free Trade and Economic Dependency: Down loadings and Balanced Budgets Policies • Increased North South Trade • Increased tensions on transfer payment as inter-provincial trade weakens • 2.3 Adjusting to Free Trade in Alberta • ROC/ROW: 1.3 Trades more with the ROW • 88.9% of exports to the US • Frankel score: 0.9 • Ralph Klein, Conservative party leader in December 1992 • Campaigned on “Fiscal Responsibility” • Priorities Balance Provincial Budget/Eliminate Deficit • Passed a Deficit Elimination Act – 1993 • New Municipal Act in 1994 • Created Jobs in Health and Education since 1997

37. 2.4 Adjusting to Free Trade in Ontario • Ontario first trading region of Canada (55%) • 93% of Ontario exports to US/ 76% of imports • 45% to Michigan • ROC/ROW ratio: 3 Trades much more with ROW • Frankel test 1.2 • 1995 Harris Elected: Common Sense Revolution • Cut 375 government programs • Reduce Government Spending by 2 billion • Lay off 13,000 Provincial Civil Servants • 1997 “Mega Week” announcements • Reduced number of municipalities by 200 to 615, and number of elected official

38. 2.5 Adjusting to Free Trade in British Columbia • 63% of British Columbia exports to US • ROC/ROW ratio 1.2 Trades More with the ROW • Frankel test 3.3 • NDP government until June 2001 • New Liberal Premier Campbell • New Era Campaign: “Platform for Prosperity” • Priorities to reduce size of government: • -25% in Budget and staff across all ministries • New Community Charter white papers June 2002

39. Lessons Learned about Free Trade Adjustments: All Provincial Governments: Link fiscal responsibility to budget and staff cuts Link local government reforms: greater autonomy, responsibility, accountability i.e. Statutory Changes, Structural Reforms, and Functional re-allocations Why?