The challenge of making an ultra-low-cost airline work in Canada

We haven’t seen a rush of potential new entrants into the Canadian airline market like this in 15 years.

Winnipeg-based NewLeaf Travel started operations just over a year ago as a “virtual airline”, selling low-priced tickets to places like Edmonton and Hamilton on chartered Boeing 737s. In recent months, Flair Air, NewLeaf’s primary chartered-aircraft provider, purchased NewLeaf’s assets and started operating the service under the Flair brand.

More recently, WestJet announced plans to start an ultra-low-cost “airline within an airline” to compete on price-sensitive routes. Jetlines, a completely new startup, announced a Summer 2018 proposed launch date; and Enerjet, a small Calgary-based charter operator, also hopes to get a proposed ultra-low-cost airline called FlyToo into the air.

All hope to avoid the fate of the low-cost startups of the late ‘90s and early ‘00s. These included Greyhound Air (Greyhound quit the industry in 1997, aircraft operator Kelowna Flightcraft survived), JetsGo (bankrupt, 2005), CanJet (changed from a scheduled operator to charter operator, 2006; suspended operations, 2015) and Harmony Airways (suspended operations, 2007).

If Europe’s Ryanair can take you from London to Portugal for fares as low as £101 round-trip ($166 Cdn.), and Australia’s JetStar can offer a Sydney-Adelaide round-trip for as little as $224 (same in Canadian dollars), why has it been so difficult to make low-fares work in Canada.*

Quite often, high taxes and fees have been blamed. For example, a Sept. 6-13 round-trip between Winnipeg and Montreal on Air Canada can be booked for $391.57 if you’re willing to fly on the less heavily booked flights. Of this, $89.57 — or 23 percent — is made up of taxes, fees and charges.

The other challenge is in convincing enough passengers to part with enough money to make the venture profitable.

Let’s take Ryanair, one of the industry’s fiercest penny-pinchers, as an example. This is the airline alleged to have pressured flight attendants to meet sales targets, spread families and couples randomly throughout the cabin for not paying extra for seat selection, and which mused about charging passengers to use the toilet.

Ryanair’s costs are impressively low, averaging out to just 3.63 U.S. cents (4.6 cents Cdn.) per seat per kilometre in recent times. Only a few airlines, such as Air Asia, have been able to wrestle their costs any lower. One way Ryanair does this is by packing more seats into each aircraft: one of their Boeing 737-800s can carry 189 passengers; WestJet only fits 168 seats into the same space.

What if a Canadian operator, hypothetically called JetManitoba, started flying Boeing 737-800s around North America, and matched Ryanair’s low costs through a combination of low wages, no overnight crew stops, high-density seating and a stringent nobody-gets-anything-for-free pricing model?

JetManitoba Flight 1, our hometown low-fare leader, starts out early in the morning with a round-trip to Vancouver and back. In the afternoon, it does another round-trip to somewhere else.

At a rock-bottom cost of 4.6 cents per seat-kilometre, JetManitoba’s 189-seat Boeing 737 needs sales of $32,516 (before taxes, fees and charges) to make each Winnipeg-Vancouver round-trip nominally break even.

No problem, you might think. $32,516 divided by 189 seats is a very reasonable $172 per seat round-trip. Add the taxes, fees and charges to that, and you can still offer a no-frills round-trip to Vancouver for less than $300. Just make the profit off of charging people $25 per checked bag or roll-aboard, $15 per person each way for seat selection (at risk of being assigned a random seat if you don’t pay up), and $15 per person for a drink and a sandwich (because JetManitoba has a monopoly on food sales at 36,000 feet).

Now, imagine it’s early February. The Canadian tourism industry is largely in hibernation. Winnipeg is under a Wind Chill Warning because it’s -24°C at midday, with the wind blowing from the northwest at 30 gusting to 50 kilometres per hour. In Vancouver, it’s raining as usual and no one has actually seen the sun in more than a week. Hardly anyone wants to be on holiday in either city.

Then what? The business travellers, who have no choice but to travel, tend to prefer Air Canada and WestJet over JetManitoba because of the better schedules. That leaves you largely with a tiny pool of would-be passengers that you somehow need to get at least $32,516 from to make each Winnipeg-Vancouver round-trip break even.

It doesn’t matter if you convince 189 people to part with $172 (plus taxes, etc.) each or 50 people to part with $650 each. It’s raising enough to cover that average of $32,516 in bills per round-trip that counts.

You could have a sale, offering 25 seats you know you will never sell for $172 for $99 or even $59 just to get a bit of cash flow to help you get through the low season, even if the flights are unprofitable.

Or cancel your Winnipeg-Vancouver service until the summer and fly to places that people actually want to fly to in February, such as southern resorts, competing directly with other airlines already serving these destinations. Again, for each round trip, you need to find a way of separating enough people in the community from enough money to keep your bills from falling into arrears. Not easy if there are more seats available than people capable of filling them.

Or just park the plane and lay people off until the tourism business starts to pick up again in the summer. You’ll still need to pay for the plane, if you can’t rent it out for the season, but at least your payroll and fuel costs will come way down.

Those are the challenges of running an ultra-low-cost airline in Canada. It is very difficult to make it work in a country where domestic leisure tourism all but shuts down for two-thirds of the year, the less price-sensitive business travel market is already well-served, and the seasonal international leisure routes are also well served by existing operators.

The ultra-low-cost-carrier business might start out with four contestants. Don’t bet on it carrying on like that.

 

* – Seat-only prices. Baggage, seat selection, food, beverages, etc. all extra.

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The stinginess goes on and on and on

“Big changes considered for Ontario workplaces,” said one headline on the CBC News Toronto web site this past February, after it had been revealed that, among other things, Ontario’s provincial government was considering raising the minimum annual holiday required by the province’s Employment Standards legislation from two weeks to three.

As far as annual holidays goes, however, what was ultimately proposed by Ontario premier Kathleen Wynne’s government at the end of May certainly could not be described as “big”. Even to describe the proposed changes as “modest” could be considered an exaggeration.

The Ontario government is indeed proposing to raise minimum annual holidays from two weeks to three weeks. Here’s the catch, however: it only applies to those who have worked for the same employer continuously for at least five years. Anyone with less than five years’ service could still legally be offered only two weeks per year under the proposed change.

“We have fallen behind,” Wynne said as the proposed change was revealed.

“And we don’t really feel like catching up,” she might as well have added.

Even by Canadian standards, Ontario’s “two weeks for the first five years, then three weeks” plan represents an insignificant change. Alberta, B.C., Manitoba and Quebec have all had the same conditions in their employment laws for years, while most other provinces and the federal Labour Code offer a third week after longer periods of service, ranging from three weeks after six years at the federal level to three weeks after 15 years in Newfoundland and Labrador.

Ontario and P.E.I. remain the only provinces without a third-week provision.

Saskatchewan is the only province to have broken the two-week baseline. Their laws provide for three weeks annual holiday to start, rising to four weeks after 10 years.

By international standards, Ontario’s not-so-big change looks even less impressive. In 1970, signatories to the International Labour Organization’s (ILO) Holidays with Pay Convention each pledged to provide for annual holidays that would be “in no case . . . less than three working weeks for one year of service.” Canada, however, was never among the signatories.

The list of advanced economies offering less than three weeks (or 15 working days) per year is small, and has been shrinking in recent years. The United States provides no legal minimum. Hong Kong, Singapore and Taiwan each provide for seven days off. Japan and Israel are more or less on par with Canada at 10 to 12 working days. Then, that’s about it, except for a gaggle of smaller or less thoroughly developed economies.

Now, compare that to Australia. Australians first won the right to two weeks annual holiday with the Annual Holidays Act in 1945. This was raised to a three-week minimum — still unheard of in Canada outside of Saskatchewan — in 1963. That country further increased the legal minimum to four weeks in 1974.

Across the Tasman Sea, New Zealand — a country which dislikes being compared to Australia, but I’ll do it here anyway — was a little more restrained. They won two weeks annual leave in 1944, threw in a third week 30 years later, and finally raised their legal minimum to four weeks per year in 2007.

Surely to God a modest boost from two weeks to three weeks annual holiday per year, merely meeting the ILO’s recommended rock-bottom minimum and matching what New Zealanders had from 1974 to 2007, would not make a dent in any province’s economy. It might even provide a very mild stimulus as people used the time to spend money on things that they don’t normally spend money on during the typical work day or weekend. It would be an easy and fairly equitable crowd-pleaser, too.

It was a risk that Kathleen Wynne’s nearly 14-year-old (i.e., geriatric, in political terms) Liberal government could have afforded to take. Instead, they reinforced a penurious status quo, only a little bit more generous than Japan’s legendarily limited allowances — although even Japan has slowly started to come around to the idea of taking holidays in the face of a persistent economic and quality-of-life malaise.

Meanwhile in Canada, the stinginess on annual holiday provisions goes on and on and on.

2007 U.S. passport requirement sent Canadians out into the world

Difficult as it might be to imagine today, at one time Canadians did not even require passports to visit the United States. Then came the terrible events of Sept. 11, 2001, and it was soon clear that those days of going through little more than a casual inspection to cross the international border were coming to an end.

In 2004, the National Commission on Terrorist Attacks Upon the United States — better known as the 9/11 Commission — released its report on the Sept. 11 attacks, and recommended that Canadians, Mexicans and Bermudans be required to show passports or other secure documents proving their identity to enter the United States. The same rule would apply to Americans returning from those countries.

Prior to this, many Canadians had never owned a passport. It wasn’t necessary to have one if you were travelling to the United States — which offered a range of destinations from big cities to mountains to coastal resorts — so few bothered to apply for one.

In any case, obtaining a Canadian passport came with its own archaic rules which seemed to assume that most Canadians still lived in small towns, as we had a century earlier. For example, you were required to have a guarantor from among a limited list of professions deemed trustworthy by the federal government. If you didn’t personally know a professional engineer, local mayor, ordained minister or postmaster for at least two years, you could always ask your dentist or doctor for the favour.

But the Canadian government quickly realized a big change was coming, and began to simplify the process of applying for a passport.

The official announcement came on Nov. 22, 2006, in a U.S. State Department news release: “The requirement for citizens of the United States, Canada, Mexico, and Bermuda to present a passport to enter the United States when arriving by air from any part of the Western Hemisphere will begin on January 23, 2007.” It was expected that the passport requirement for land or sea crossings would take effect by Jan. 1, 2008.

In just a few years, Canadian passport ownership rates rose significantly. In 1999-2000, the Canadian government had issued a little over 1.5 million passports to a population of 30 million. In 2005-06, it issued more than 3.1 million passports.

Ten years after the U.S. passport requirement went into effect, Statistics Canada data shows that those new passports gave Canadians a case of wanderlust that still hasn’t subsided.

The red squares on the graph below show the number of Canadians returning from countries other than the United States annually between 1972 and 2015.

The green circles represent the growth trend line based on the period from 1987 (when airline deregulation allowed lower international fares to be offered) to 2001 (when the 9/11 attacks shattered the status quo).

The green circles suggest that the 1987 deregulation did not give Canadians a newfound urge to go out and explore the outside world. Even if you had no idea how many Canadians came home from abroad each year in the ’70s and ’80s, merely extending the 1987-2001 trend line back to 1972 would have given you a decent estimate. After 1987, the number of Canadians coming home from abroad each year continued growing until 2003 on a trajectory not much different from the 1972-1987 trajectory.

us-2007-passport-requirement-effects

In 2004, something changed. That year, the number of Canadians coming home from countries other than the U.S. was 13 percent higher than the year before — the first time since 1987 that year-over-year growth had exceeded 10 percent. In fact, during the preceding 10 years, five percent year-over-year growth had been more typical.

Thereafter, growth charged ahead at eight to nine percent per year until 2008, and then slowed to more anemic levels usually under five percent between 2009 and 2013. In 2014 and 2015, growth surged again at about 10 percent in both years.

By this time, the 1987-2001 trend line had clearly been departed from, and a new trend line had taken its place. Had nothing changed, the number of Canadians coming home from abroad should have risen from a little over five million in 2004 to about seven million in 2015.

Instead, it took only three years to hit seven million, and another year to hit eight million — a figure it otherwise should not have reached until about 2018 had nothing changed.

In reality, in 2015 alone, more than 11.5 million Canadians had come home from countries other than the U.S. Year-over-year growth in the first 10 months of 2016 was relatively weak — about three to four percent overall — so the final number for 2016 should be around 12 million once that information is available.

The 2007 U.S. passport requirement was a rule change that many Canadians weren’t fond of at first. But its introduction unleashed a desire among Canadians to go out and see the world beyond North America, hopefully coming home not just rested and relaxed, but with a bit of fresh thinking as well.

That’s cause enough to wish America’s passport requirement a happy 10th birthday indeed. Now if only we could do something about that stingy two weeks’ annual holiday thing we’ve got in our labour laws.

The economist who says Canada is headed for a credit crisis

Professor Steve Keen, of Kingston University in Greater London’s western suburbs, has made a name for himself as one of economics’ leading contrarian voices. He has criticized the idea that no one could have seen the 2008 global financial crisis coming as “balderdash“. He was one of the relatively few economists to favour Britain leaving the European Union; and perhaps less controversially, he sees the common European currency as “destroying Europe” and as something which “should never have started in the first place.

But Keen foresees problems in more places than just Europe. In an interview broadcast in late September on RT, the Russian government’s foray into 24-hour cable TV news, Keen discussed the rising risk of a debt crisis in China caused by the over-construction of new housing and office space. As he sees it, private debt and demand for credit has reached hazardous levels:

“The potential trigger is simply the level of private debt. Anything above 1.5 times GDP is enough to put you in the range where changes in credit have a large impact on your demand. Secondly, if your credit demand exceeds 10 percent of GDP, you’re in danger territory again, because, simply, stabilization of that rate of growth of credit, so that it grows at the same rate of GDP, will mean a fall in total demand in those economies.”

The more disturbing part of the interview comes when Keen sets his sights firmly on Canada:

“The most vulnerable economy apart from China on that front appears to be, of all things, Ireland — again! They’ve got themselves back in the situation; but that may involve their dodgy accounting and their dodgy tax records. But certainly Canada. Canada is the western developed economy that I think is most exposed to a credit crisis, and indeed using a different metric, that’s the country that the BIS [the Bank for International Settlements; a Swiss-based banking institution for the world’s central banks] identifies as the most likely one to face a credit crunch.”

Indeed, news watchers might have noticed that just this past week the Canada Mortgage and Housing Corporation (CMHC) issued its first-ever “red warning” for the Canadian housing market, noting that “high levels of indebtedness coupled with elevated house prices are often followed by economic contractions . . . The conditions we now observe in Canada concern us.”

One glimmer of hope that Keen sees for Canada is that the federal government’s deficit spending might turn out to be a good thing, by diluting the impact of any shock that comes along. Yet he also sees some risk from the possibility that those deficits might come under attack for political reasons:

“What worries me of course is when that credit crunch occurs, the political opponents to Trudeau will blame it on his deficit spending. But his deficit spending is one thing that’s attenuating how bad that shock is going to be. So, Canada definitely, Australia, Sweden, Norway, possibly Switzerland, there’s about 17 countries . . . but those are the major ones [facing a problem].”

Why 100% foreign ownership of the major airlines is on hold (even if it’s a good idea)

It costs a lot of money to be in the airline business. In 2015, it cost Air Canada more than $12.3 billion (or $236 per seat-trip) to keep the airline flying. The smaller WestJet cost a little over $3.4 billion to run, or approximately $213 per seat-trip. Even if half the passengers vanished overnight, most of those multi-billion-dollar costs would still need to be paid as overhead.

When fleets need to be renewed or IT systems need to be modernized, it can be helpful if the airline can turn to investors. But Canada’s major airlines are limited in who they can turn to by something that might seem rather petty in this day and age: where those investors live.

That’s because Canadian law requires that “at least 75 percent of the voting interests, meaning voting securities and the votes assigned to those securities, need to be both owned and controlled by Canadians.” In other words, foreigners are collectively limited to a 25-percent stake.

For years, this cap on foreign ownership has been seen as being of dubious value. Both Australia and New Zealand have allowed up to 49 percent foreign ownership of their international airlines, and 100 percent foreign ownership of strictly domestic airlines, since at least 2002 with no adverse effects. A working paper presented at the International Civil Aviation Organization’s 2013 Montreal conference painted the industry as being still subject to “a framework of restrictions developed in the first half of the 20th century at the end of an age of colonial empires” that are “no longer fit for purpose.” And an International Air Transport Association (IATA) report noted in 2007 that “removing ownership restrictions can also lead to increased investment in the sector . . . and a lower cost of capital as firms have access to wider and more efficient sources of finance.”

At last, momentum is building in Canada to allow foreigners a little more freedom to invest in Canadian airlines. A review of the Canada Transportation Act that concluded this past February recommended allowing up to 49 percent foreign ownership of Canada’s passenger airlines and complete foreign ownership of its cargo airlines.

The idea was met with mixed views in the industry. WestJet is said to favour raising the foreign ownership limit to 49 percent only for countries that allow Canadian investors the same privileges. Porter and Jetlines were said to be all for it, while Air Canada carefully maintained a poker face.

But why stop at 49 percent? Why not raise the passenger airline foreign ownership limit to 100 percent?

A big part of the problem can be found in those restrictions that limit international air traffic. When they fly between countries, airlines need to abide by rules set out by international treaties negotiated between Canada and foreign governments.

Most of those treaties, some of which are decades old, would bar any majority-foreign-owned Canadian airlines from serving foreign cities. For instance:

  • Canada’s agreement with Mexico says that either country has the right “to revoke, suspend or impose conditions” on an airline’s right to fly between the two countries if “they are not satisfied that substantial ownership and effective control of the airline are vested in [the country’s government] or its nationals.”
  • Canada’s agreement with the European Union says that a Canadian airline can only serve the E.U. if “effective control of the airline are vested in nationals of Canada, the airline is licensed as a Canadian airline, and the airline has its principal place of business in Canada.” Similar restrictions apply to E.U. airlines flying to Canada.
  • And Canada’s agreement with China allows China to block any seemingly Canadian airline if “they are not satisfied that substantial ownership and effective control of the airline” rests with Canadian citizens. Again, Canada can apply the same requirement to China’s airlines

It is possible that the basis for those restrictions will eventually be worked around. As the IATA’s 2007 report noted, international safety standards were already taking shape when the report was being written (including an operational safety audit that was to be mandatory for all IATA member-airlines starting in 2008) that would prevent airlines from adopting the flags-of-convenience often used in the cruise ship industry; thus, safety standards are no longer a particularly compelling reason to block foreign ownership among the countries whose airlines already have excellent safety records.

And while there were approximately 3,000 international agreements regulating air travel in 2007, only 200 of them already covered 75 percent of passenger traffic, greatly simplifying the process of revising those treaties to allow full foreign ownership between countries with similarly high standards.

There’s no longer any need to fear American or German or Australian or Japanese or British ownership of Canadian airlines. Indeed, the easier it is for Canadian carriers to get investment from abroad, the more robust the Canadian system will be. Until 100-percent foreign ownership can be allowed without running afoul of decades-old international treaties, raising the foreign ownership limit from 25 percent to 49 percent would be a fine start.

 

Understanding narcissism vital to understanding politics

Former U.S. president Bill Clinton: "a self-destructive narcissist, although he's so fatally charming" in the words of the author of "The Narcissist Next Door".

Former U.S. president Bill Clinton: “a self-destructive narcissist, although he’s so fatally charming” in the words of the author of “The Narcissist Next Door”.

If civics education in high school today is anything like the way it was when I was in high school, it remains nearly useless for creating well-informed, critical-thinking voters. It could basically have been summarized as: nice, ordinary people like us elect other nice ordinary people to sit in a big room in Ottawa called the House of Commons, making the people’s laws and holding the government to account.

Their work, we were told, is reviewed by some fancier people called Senators, and if things go well, a bill becomes law with the assent of the Governor-General, who represents the Queen, a free-floating celebrity whose role even a teacher could not coherently describe.

Having taught us the basic theory of how Canadian democracy is supposed to work, the teacher’s duty was done. At no time were students encouraged to be skeptics. And the human factors that occasionally brought a politician’s downfall through scandal? Irrelevant.

Yet human factors are important. In theory, people who run for public office are concerned citizens just like us who want to make a difference. Though this is often true in practice, the reality is much more complicated.

Consider the words of Alan Greenspan, the chairman of the U.S. Federal Reserve and thus America’s top banker from 1987 to 2006. His tenure spanned the terms of four presidents, each of whom relied on him as an advisor. But Greenspan had also personally known two earlier presidents, making him one of a select few to have known a total of six U.S. presidents.

“Nixon was the extreme,” Greenspan wrote in his 2007 memoir, The Age of Turbulence, describing the 1969-74 Republican president as “an extremely smart man” but also shown by the Watergate scandal to have been “sadly paranoid, misanthropic, and cynical”. In private, Greenspan found Nixon so crude that his language “would have made Tony Soprano blush”.

“But I came to see that people who are on the top of the political heap are really different,” Greenspan continued. “Jerry Ford was as close to normal as you get in a president, but he never was elected.”

“There’s a constitutional amendment that I’ve been pushing for years without success,” he adds. “It says, ‘Anyone willing to do what is required to become president of the United States is thereby barred from taking that office.'”

“I’m only half joking.”

Greenspan had revealed a truth. Politics is a career that attracts a disproportionate number of highly narcissistic personalities: people who have a hunger for power or adulation so deeply rooted in their personalities that they are willing to make the harsh sacrifices of a political career to satisfy it — the 60-70 hour weeks, the public criticism, the invasions of privacy, the strained (and often destroyed) marriages, and everything else.

Narcissism is a normal human behaviour to at least some degree, as a scroll through a Facebook feed can attest, but is deemed by the American Psychiatric Association to be problematic when it begins to be expressed as “a pervasive pattern of grandiosity (in fantasy or behavior), need for admiration, and lack of empathy.”

Politics, with its grand ceremonies, opportunities to cross paths with the famous and powerful, and reliance on the public’s admiration for success, makes for an ideal stage.

“…[W]hat typically drives [politicians] is a lust for power, prestige, status, and authority,” U.S. psychologist Leon Seltzer wrote in a 2011 commentary on the Psychology Today web site. “As senator or congressman the whole nation has become one huge ‘narcissistic supply’ for them. That is, the ego gratifications available simply from residing in congress are truly extraordinary: such an unusually prestigious role can’t but pump up their self-esteem to levels that further confirm their bloated sense of self.”

“Bill Clinton was a self-destructive narcissist, although he’s so fatally charming, which is also one of the narcissist’s great traits — a sort of lethal charisma — that we forgave him a great deal,” said Jeffrey Kluger, the author of The Narcissist Next Door, in a 2014 video interview.

“Barack Obama certainly would score high if he were to sit down and take the Narcissistic Personality Inventory. He sought the presidency after only two years in the Senate, he clearly believed that he could achieve high office — he did achieve high office. Unlike some narcissists, he doesn’t seem terribly comfortable in the public eye, or at least terribly comfortable mingling with people.”

Yet some politicians were able to harness their own narcissism effectively.

“Ronald Reagan, I think, is a very, very good example of perhaps the most highly functional narcissist who’s ever been at least in our political system,” Kluger notes. “It was narcissism, a healthy narcissism, that pushed him into movies; it was healthy narcissism that pushed him into politics.”

Indeed, the public might have to accept that the price of having leaders in any form is to be able to live with their narcissism.

“Narcissistic leaders are often skillful orators, and this is one of the talents that makes them so charismatic,” a 2000 Harvard Business Review article (republished in 2004) by American psychoanalyst-anthropologist Michael Maccoby noted. “Indeed, anyone who has seen narcissists perform can attest to their personal magnetism and their ability to stir enthusiasm among audiences.”

“Although it is not always obvious, narcissistic leaders are quite dependent on their followers—they need affirmation, and preferably adulation,” Maccoby continues, noting that this can give leaders the confidence to pursue their goals — or set them on the path to disaster:

“But the very adulation that the narcissist demands can have a corrosive effect. As he expands, he listens even less to words of caution and advice. After all, he has been right before, when others had their doubts. Rather than try to persuade those who disagree with him, he feels justified in ignoring them—creating further isolation. The result is sometimes flagrant risk taking that can lead to catastrophe.”

This could be used to justify changes to Canada’s parliamentary system at both the federal and provincial level that would strengthen independent oversight of the executives’ actions, from requiring that party leaders hold the confidence of caucus and not just the infrequently engaged party membership at all times, to formally protecting the independence of even governing-party legislators from prime ministerial and cabinet interference, as the Swedish parliamentary system does.

Either change would give legislators more latitude to rein in an over-the-top narcissist who happens to be installed in the top job.

Helpful too would be better public understanding of narcissism’s inevitable role in public life, especially as we enter the final weeks of Canada’s three-way, too-close-to-call federal election race.

In addition to carefully evaluating each party’s offerings, the voting public would be doing itself a favour by assessing everyone from the party leaders down to their local candidates and the talking heads each camp parades before the TV cameras, trying to discern who has a healthier form of narcissism, who has a more harmful one, and thinking through the implications for the country.

But let there be no doubt: narcissism will always be a factor in politics.

“Even our greatest and most humble people — Mahatma Gandhi, Martin Luther King — had to have had narcissistic components to their personality. They gravitated toward attention, they gravitated toward crowds,” noted Kluger.

“If we believe that they didn’t get a charge out of standing before a crowd of half a million people . . . and moving an entire nation with their words, well, we don’t really understand human nature then if that’s what we think.”

 

Related:

Jerrold Post, founding director of the CIA’s Center for the Analysis of Personality and Political Behavior, discusses his book Narcissism and Politics (YouTube, 1 hr.)

The case against knighthoods

Those who know even a little bit about Canadian history will know that the country’s first prime minister was Sir John A. Macdonald. “Sir”, of course, wasn’t his first name: the man who might otherwise have simply been known as plain old John Macdonald was made a knight of the British crown upon taking office on July 1, 1867.

The tradition of knighting prime ministers, and other Canadian dignitaries, continued for half a century. Seven of the country’s first eight prime ministers would be bestowed with the “Sir” honorific, the exception being Alexander Mackenzie, who rejected the offer of a knighthood on three occasions in a show of his egalitarian ideals.

The knighthoods largely came to an end in 1919, when the House of Commons adopted the Nickle Resolution, limiting the awarding of knighthoods and similar titles in Canada. This occurred under the government of Sir Robert Borden, who accepted a knighthood of his own but never cared much for it, and thus left instructions that his tombstone simply identify him as “Robert Laird Borden”, minus the “Sir” part.

So, aside from a brief policy reversal under Richard Bennett’s 1930-35 government, that was that for nearly a century. Even John Diefenbaker, a staunch Anglophile, left well enough alone as far as knighthoods were concerned during his 1957-63 premiership.

Who would have guessed that talk of restoring knighthoods in egalitarian Canada would resurface in the second decade of the 21st century?

The issue was first raised by an obscure guest on an equally obscure CBC Radio program in 2014, but was given a more visible platform this past Thursday when Jamie Carroll, a former national director of the Liberal Party, published an op-ed in the National Post calling for the restoration of Canadian knighthoods.

Carroll writes:

Yet in 2009 New Zealand restored knighthoods and damehoods after a nine-year hiatus, allowing recipients of the country’s top honours under the New Zealand Order of Merit to convert these into titles. Last year, Australia’s Prime Minister, Tony Abbott, moved to do the same, enduring a significant attack on his leadership in the process. He survived, and recipients of the senior rank of the Order of Australia are now also entitled to the prenominal Sir or Dame.

Abbott’s survival should be a cautionary tale, however. By awarding an Australian knighthood to Prince Philip without consulting his cabinet or caucus — a move described as a “captain’s call” — he offended many Australians’ egalitarian and, in some quarters, anti-monarchist sentiments.

A little more than a month later, he emerged from his party’s caucus room not so much a triumphant victor as a man rescued from the gallows at the last minute, as his fellow caucus members defeated a motion to dismiss him as party leader and prime minister by a 61-to-39 vote. The message was clear: you’re forgiven this time — but don’t confuse ‘forgiveness’ with ‘getting away with it’.

Across the Tasman Sea, New Zealand prime minister John Key had tread more carefully on the matter of knighthoods and royalty. Yet a 2014 study by Konrad Raff of the Norwegian School of Economics and Linus Siming of Italy’s Bocconi University found that knighthoods have had mixed economic effects in New Zealand, benefitting some but weakening the economy for others.

Knighthoods, of course, tend to benefit those who are already socially connected to those who decide who gets one of these illustrious prizes. Chief executives of large organizations enjoy particularly favourable odds of getting a knighthood in those countries that still hand them out. Thus, Raff and Siming decided to test how the withdrawal, and then restoration, of this perk affected CEO behaviour in New Zealand.

They found that taking away the knighthood perk in 2000 had both a negative effect and a positive effect. CEOs who had suddenly lost their shot at a knighthood became more like those CEOs who never had a shot at a knighthood in the first place: they became more likely to reduce staff, a negative outcome, but improved the profitability and productivity of New Zealand businesses, a positive outcome.

When the knighthoods were restored in 2009, New Zealand chief executives who stood favourable odds of a knighthood once again showed a change in behaviour, hiring more staff (a good thing for those who happen to get those jobs) but more willing to let productivity and profits drop (a bad thing for job-creation in the rest of the economy); while CEOs not in line for a knighthood continued more or less as before.

Another discussion paper by Andrew Mell, Simon Radford and Seth Alexander Thévoz of the economics department at Britain’s Oxford University discusses the perception that British honours are not necessarily given out on the basis of merit but, much like Senate appointments here in Canada, are a patronage tool to reward prolific party fundraisers and others with outstanding political IOUs.

Britain had been the home of a “cash for honours” scandal in 2006, when the revelation that “100% of all Labour party donors of over £1 million since 1997 had been offered either a knighthood or a peerage” forced a police investigation of the then-Labour administration. The investigation found insufficient evidence to prosecute, but the damage was done.

The Oxford group set out to mathematically test the presumption that 27 of 779 major party donors nominated for British peerages between 2004 and 2015 could simply have been politically active people who had the good luck of being chosen for an honour without anyone taking into consideration how much money they brought in.

Their findings, in classic British understatement:

As is frequently claimed by all parties accused of selling peerages, it is of course perfectly possible that it is pure coincidence that “big donors” are disproportionately likely to be nominated for peerages. However, the odds of it being pure coincidence are roughly the same as those of entering Britain’s National Lottery five consecutive times, and winning the jackpot on each occasion. Whilst coincidence is theoretically possible, this explanation does stretch the limits of credulity.

Restated later:

As stated, we have no proof that any of the parties indulge in the sale of peerages, but the odds are overwhelmingly likely that such donors would stand an astronomically disproportionate chance of eventually being nominated for a peerage.

If knighthoods are ever reintroduced in Canada, don’t count on them being handed out purely on the basis of merit. Naturally, our elected representatives will be all too happy to nominate a loveable public figure from time to time, whose being bestowed with a knighthood generates a bit of favourable publicity for the government.

But more often than not, you could count on these honours being handed out much like Senate appointments: as incentives and thank-yous for party fundraising, and as consolation prizes for those whose political careers have come to an untimely end. As the Oxford findings show, you can literally bet on it.