Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

Work continues at the crash site of the train derailment and fire on July 16, 2013 in Lac-Mégantic, Que., that killed scores of people. (Ryan Remiorz/The Canadian Press)
Work continues at the crash site of the train derailment and fire on July 16, 2013 in Lac-Mégantic, Que., that killed scores of people. (Ryan Remiorz/The Canadian Press)

Public safety must trump red-tape cutting Add to ...

When it comes to food, drug and consumer-product safety, the storage and transportation of hazardous goods, and the control of pollutants that threaten human health and the environment, Canadians would almost universally agree that governments should regulate business to ensure that public health and safety always comes first. This is particularly true in the aftermath of preventable human tragedies such as that at Lac-Mégantic.

More Related to this Story

The causes of the derailment and explosion of the 72-car train of hazardous goods operated by the Montreal, Maine & Atlantic Railway are still being investigated and are likely to be complex. However, the tragedy once again underlined the need to apply the precautionary principle in government regulation.

That principle means that governments have a duty to prevent harm when there are reasonable grounds for concern, even if all of the evidence is not yet in.

On July 23, at the urging of the Transportation Safety Board, Transport Canada issued an emergency directive that requires rail operators shipping hazardous goods to make sure two qualified persons are on board, and to not leave trains unattended on a main line. Braking requirements were also tightened.

“The disaster brought to light several industry practices which have caused some concerns,” Gerard McDonald, assistant deputy minister at Transport Canada, told a teleconference, as reported in The Globe and Mail. “Given that and with an abundance of precaution, we thought it would be prudent to implement these measures now.”

While the federal government should be congratulated for acting quickly in this specific case, it should also be noted that the dominant approach has been to place much greater weight on narrow economic cost-benefit analyses of proposed regulations.

The Harper government, in particular, views regulation mainly as costly “red tape” that unnecessarily raises business costs. Indeed, a major component of Canada’s Economic Action Plan, as announced in 2012 and now in force, is a “Red Tape Reduction Plan.”

While paying passing attention to public health and safety, the major feature of the new plan is a “one for one” rule. This means that the administrative burden of any new regulation approved by a government minister must be offset by scrapping cost burdens imposed elsewhere in the regulatory regime.

This rule means that the well-merited attention now being paid to the operating safety of railways through the new measures will have to be matched by cost-cutting changes in other rules. Perhaps we will make sure that there are larger train crews, but have less reporting by railways on the speed at which they travel through communities?

The new plan also requires the application of a “small business lens” which calls on federal regulators to “consider flexible regulatory options that reduce costs to small business.” There is a caveat with respect to health and safety, but does this mean that the new hazardous goods shipping regulations may, in the future, be less rigorously applied to short line rail operators?

Many economists have called on governments to reduce costs through so-called “light touch” regulation, emphasizing flexibility and corporate self-responsibility. For example, McGill University economist William Watson challenges the assumption that companies will “skimp on safety unless forced by governments to spend more” and argues that “disasters are bad news for business too” because of their impact on profits and corporate reputations as well as on lives.

While no one argues that corporations are indifferent to public safety, a more subtle perspective on the politics and economics of regulation has been provided by York University political science professor Leo Panitch. He reasons that regulation bites into business profits and ratchets up the pressure on politicians to back off when highly competitive markets place regulated companies at a cost disadvantage compared with non- or lightly-regulated companies.

The key lesson here is that regulation must be equally applied to all companies in an industry so that socially responsible firms are not pressured to cut corners or to subcontract to firms covered by a different set of rules. The issue is not so much the total cost of regulation as its impact upon relative competitiveness.

It can be argued that regulation is costly and increases prices. However, the human costs of disasters such as that at Lac-Mégantic are incalculable, and the economic costs are massive. The precautionary principle means that we should put public safety first, even if the odds of such an accident happening again may be relatively low.

Moreover, the train that smashed into the community of Lac-Mégantic was carrying some 50,000 barrels of crude oil. It is hard to believe that the cost of an additional crew member and parking overnight on a siding rather than on the main line would have more than a trivial impact on the total cost per barrel of oil shipped from Cushing in the United States to the Irving refinery in Saint John, or on any other route.

An obvious lesson to be learned from Lac-Mégantic is that we need precautionary regulation of companies to ensure public health and safety. The Harper government bias to cutting red tape through a rigid “one for one rule” will get in the way of making needed regulatory changes.

We also need to ensure that regulations are effectively applied to all firms in the same industry, large and small, so that companies that adhere to adequate safety standards are not placed at a competitive disadvantage.

Andrew Jackson is the Packer Professor of Social Justice at York University and Senior Policy Adviser to the Broadbent Institute.

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories