ANNUALREPORT

2005

OFFICERS(on December 31, 2005)

ADRIEN D. POULIOT

Chairman of the Board

RICHARD CARTER

Vice-Chairman of the Board

DANIEL AUDET

STÉPHAN D. CRÉTIER

HÉLÈNE DESMARAIS

DANIEL DOREY

MARCEL DUTIL, C.M.MICHEL KELLY-GAGNON

DR. LÉO-PAUL LANDRY

NORMAND LEBEAU

RONALD MONET

JEAN-PIERRE OUELLET

YVES RABEAU

Board Members

THE MONTREAL ECONOMIC INSTITUTE (MEI) IS AN INDEPENDENT, NON-PROFIT,

NON-PARTISAN ECONOMIC RESEARCH AND EDUCATIONAL INSTITUTE.

THE MEI PARTICIPATES IN DEBATES ON QUEBEC AND CANADIAN PUBLIC POLICY BY

PROVIDING WEALTH-GENERATING SOLUTIONS, PRIMARILY IN AREAS OF TAXATION,

REGULATION, HEALTH AND EDUCATION REFORM.

Phone u (514) 273-0969

Fax u (514) 273-2581

E-mail u info@iedm.org

Web u www.iedm.org

Montreal Economic Institute6708 Saint-Hubert Montreal, Quebec H2S 2M6

STAFF(on December 31, 2005)

MICHEL KELLY-GAGNON

President

NATHALIE ELGRABLY

Economist

GILLES GUÉNETTE

Webmaster

JASMIN GUÉNETTE

Coordinator of events and publications

NORMA KOZHAYA

Economist

PATRICK LEBLANC

Director of Communications

MARTIN MASSE

Director of Publications

VALENTIN PETKANTCHIN

Director of Research

SUZANNE CHAREST, Executive AssistantJENI DIMITROVA, Accounting AssistantLAURETTE DUPONT, Administrative AssistantALIA NEGM, Administrative Assistant

1

Freedom of expression is a keyfoundation of free and de-mocratic societies. Withoutit, no other right or freedomcan last. Being free to

express oneself is hardly the end of thematter, however. For true debatesabout the future of society to occur,the media must allow for all opinionsto be heard and must encourage realdiversity of viewpoints.

In the last several decades, Quebechas not been short of debates on thenational question. But in other areasof public policy, the notion of“consensus” has dominated untilquite recently. A few influentialmembers of the establishment wouldproclaim the solution to a problem –typically involving a new program or anew type of government intervention –and nobody was supposed todisagree. You may recall thatchallenging the effectiveness of the“Quebec model” of governmentinterventionism was tantamount notso long ago to political suicide and toostracism from the mainstream ofsociety.

I am astonished, however, to note howmuch Quebec’s intellectual climatehas changed in recent times. Realpublic discussion, with conflictingviewpoints, actually seems to have

come into fashion in the media. Thework of the Montreal EconomicInstitute, with its continuouslygrowing media pre-sence, has clearlyplayed a role in thisphenomenon.

Television programssuch as Il va y avoir dusport (Télé-Québec)and the late-eveningnewscast on TQS relyheavily on clashingopinions to boosttheir viewers’ interest.Researchers from theMontreal EconomicInstitute are calledupon regularly.

Newspapers and magazines also seemto be providing more space fordebate, with the MEI contributingmore than 100 opinion pieces in 2005.In addition to having regular columnsin influential publications such as LeJournal de Montréal and Les Affaires, ourcollaborators are invited to take partin pro-and-con debates in magazinessuch as Affaires Plus and Protégez-vous.

CHAIRMAN’S

MESSAGE

annual repport 2005

ADRIEN POULIOT

2

Our institute is sometimes the first –or even the only body – to proposebold solutions to public policyproblems. It has contributed un-questionably to create a climate inQuebec that makes it more acceptablefor people to think along divergentlines. This is the sign of a pluralisticsociety that has undergone change.Everyone should rejoice, includingthose who are not necessarily inagreement with us.

We cannot take this advance forgranted, however. Well organizedinterest groups understand how thischange in dynamics is threateningtheir traditional position as guardiansof the Quebec version of politicalcorrectness. I do not doubt that theywill attempt to recapture control overpublic debate. Our work is juststarting, and we need your supportmore than ever in continuing tonourish healthy democratic discussionof public policy in Quebec.

In addition to much appreciatedfinancial support from a growingnumber of generous donors, anotherform of assistance is also of greatvalue to us, namely the work done bythe members of our Board ofDirectors. Generous with their ideas,their management experience andtheir networks of contacts, they areexcellent ambassadors among variousgroups for the Institute’s work. I thankthem for their devotion to the task,and I emphasize that two especiallydynamic Quebec business people,Marcel Dutil of Groupe Canam andStéphan Crétier of Garda World, haveagreed to join us and contribute to theMEI’s development. The outstandingquality of these two new boardmembers offers additional proof thatthe MEI is a serious organizationdeserving of support from anyone whoholds dear the progress of our society.

Adrien D. PouliotChairman

CHAIRMAN’S MESSAGE

annual repport 2005

It’s a refreshing breeze for the MontrealEconomic Institute to exist in Canada and

to do the kind of work it is doing. I think, itmakes a very important contribution to the

public policy in Quebec.

- Vernon L. Smith2002 Nobel Prize Laureate for Economics

“”

3

We will remember2005 as a pivotalyear in publicpolicy matters,especially in the

health care field. On June 9, theSupreme Court of Canada issued itsmuch awaited verdict in the case ofDr. Jacques Chaoulli, ruling that theQuebec government cannot prohibitprivate health insurance in the coverageof medically required services.

Reform of the health care system hasbeen a key focus of the MontrealEconomic Institute since its veryfounding. This Supreme Court decisionconfirms the relevance and theforward-looking nature of our work,with which Dr. Chaoulli has beenassociated on a number of occasions.Whatever legislative action followsfrom the court ruling, it clears away asignificant logjam in public debate onreform of the health care system.

The Montreal Economic Institutecontinued to pursue this theme in2005, publishing two EconomicNotes, one dealing with the mythssurrounding the U.S. system and theother, related to the Chaoulli case, onthe experiences of OECD countries infinancing health care through privateinsurance. Two cross-Canada opinion

polls sponsored by the MEI alsonurtured this debate: they showed astartling advance in the opennessrevealed by people in Canada, especiallyin Quebec, to the idea of allowing theprivate sector to expand in the healthcare field.

These polls, conducted byrecognized firms, comple-ment our studies in stirringinterest among the mediaand decision-makers. Inindicating that a largeproportion of the publicsupports the conclusionsof our research, they addweight to our arguments.

Substantial media coverage

As emphasized by ourboard chairman in hismessage, the media in Quebec areshowing an increasing willingness tostir debate and are less hesitant to airviews that only a few years ago seemedtoo controversial to be worthy ofattention. This opening has coincidedwith spectacular growth in the MEI’smedia visibility.

PRESIDENT’S

MESSAGE

annual repport 2005

MICHELKELLY-GAGNON

4

Following a rapid increase overpreceding years, our visibility nearlydoubled last year. Some 1,350 articlesand reports mentioned our institute in2005, compared to 757 in 2004. Thetotal value of this media coverage wasestimated at $11.8 million by publicrelations specialists, up 48% from theprevious year.

This visibility is extraordinary not onlybecause of its scope but also due to itsquality and geographic diversity. Morethan 100 opinion pieces written by ourresearchers and collaborators werepublished in newspapers andspecialized magazines. In September,the MEI made a breakthrough in LeJournal de Montréal, Quebec’s mostwidely read daily paper, where ourcollaborator Nathalie Elgrably nowhas a column each Wednesday onpublic policy issues. Very few thinktanks anywhere in the world can boastof reaching the general public asdirectly and regularly from as broad aplatform.

The MEI’s work has been a focus ofdiscussion not only in the Montrealmedia but in every region of Quebec.Some of our publications have alsostirred interest right across thecountry. We have had a regularpresence – at least once a month – onthe Opinion page of the National Post.We can state without exaggerationthat, even with its offices located inQuebec, the Montreal EconomicInstitute has become a recognized andrespected voice all across Canada.And with more than half a millionunique visitors in 2005, our bilingualWeb site is reaching an even widerpublic, not only in Canada but aroundthe world.

PRESIDENT’S MESSAGE

annual repport 2005

120

100

80

60

40

20

02000 2001 2002 2003 2004 2005

21

4157 48

60

105

Growth in the number of opinion pieces published by the MEI in newspapers and magazines

1400

1200

1000

800

600

400

200

02000 2001 2002 2003 2004 2005

183

434

616788 757

1348

Growth in the number of news stories covering MEI's work in print and broadcast media

5

Influential publications

Our director of publications has by nomeans had a restful year: the numberof publications produced by the MEIwent from 14 in 2004 to 25 in 2005!As in each of the last six years, the

Report Card on Quebec’sSecondary Schools, pro-duced with the FraserInstitute and publishedin partnership withL’actualité magazine,reached more than amillion parents, studentsand educators, alongwith an abundance of

media reactions.

Among our other publications (listedin this Annual Report and all down-loadable free of charge from our Website), two dealt with Quebec labourlaw, in particular anti-scab measuresand the effects of the high rate of

unionization. Our re-searchers also delvedinto public finance, airtransport, the supplymanagement system inagriculture, recycling ofindustrial waste, and anumber of other topics.

The publication thatunquestionably made the biggestsplash in the past year was theResearch Paper written by our re-search director, Valentin Petkantchin,on government monopoly in thedistribution and sale of alcohol in

Quebec. This study compared theperformance of the Société des alcoolsdu Québec (SAQ) with the Ontariomonopoly (LCBO) and the liberalizedmarket in Alberta, concluding that itwould be in the government’s interestto privatize the SAQ and allowcompetition in this sector.

Apart from our Report Card on SecondarySchools, this study generated thegreatest media interest in the MEI’sentire history. It led to more than 200articles and reports. As these lines arewritten, early in 2006, controversyover the suggested SAQ privatizationstill rages in the media. The quality ofmedia coverage has been extraor-dinary, not only in Quebec but also inthe rest of Canada, which accountedfor a third of all references.

Both of Canada’s national dailies, TheGlobe and Mail and the National Post, aswell as the Montreal Gazette and TheWindsor Star, ran editorials urgingOntario and Quebec politicians to acton the conclusions of our study.Columnists in La Presse, Le Journal deMontréal, Le Devoir and the weekly LesAffaires also commented on the study.They all praised its quality andpertinence. The study also led toexcellent coverage in the electronicmedia. For instance, Mr. Petkantchintook part in a televised debate withformer Quebec Premier BernardLandry.

annual repport 2005

“Valentin Petkantchin,Research Director of the

Montreal EconomicInstitute, a private think-

tank, issued a solid paper […]. There is nocompelling reason for

governments to remain in the

liquor business.”- The Globe and Mail (Editorial),

October 6, 2005

“The study by the MontrealEconomic Institute puts

forward solid arguments infavour of [the SAQ’s]

privatization.”- Le Journal de Montréal &

Le Journal de Québec(Jean-François Pouliot),

October 10, 2005

“The Ontario government’sarguments against

privatizing the provincialliquor monopoly, already

intellectually thin, becamethinner on Tuesday with the

release of a MontrealEconomic Institute

study […].”- The National Post (Editorial),

October 6, 2005

“The study by the MontrealEconomic Institute […]

effectively and rigorouslybrushes aside any final

arguments that could bemade by proponents of

state presence in such an industry.”

- La Presse & Le Soleil (AlainDubuc), October 8, 2005

6

This experience shows strikingly thatwe can influence public debate andopinion when we rely on rigorous, wellargued research. The MEI ended theyear more than ever as anindispensable player when it comes todiscussing public policy in Quebec.

A forum for debate

The Montreal Economic Institute isnot just a publishing house producingstudies that nurture debate in themedia but is itself a place whereprestigious personalities come to crossswords in public. In 2005, weorganized two debates on contro-versial themes, namely the value ofnew medications and the impact ofthe Kyoto environmental treaty.Participants included Quebec Envi-ronment Minister Thomas Mulcair.

Speakers such as Wall Street Journalcolumnist Mary Anastasia O’Grady, aswell as Jacob Sullum of the Americanmagazine Reason, brought us theiranalyses of current topics. Mr. Sullum’stalk was given not only in Montrealbut also in Toronto the following day,marking the first public eventorganized by the MEI in the Ontariocapital. The year ended vibrantly withthe first Jean A. Pouliot Lecture, to beheld annually in honour of this pioneerof Canadian television. Prof. VernonSmith, who shared the 2002 NobelPrize in economics, spoke before morethan 150 guests at the Ritz-Carlton inMontreal.

Our staff and associate researchersalso addressed varied audiencesduring the year, among them theAssociation québécoise du transport et desroutes, the University of Montrealstudents’ federation, the Centre dessciences de Montréal and the Associationdes constructeurs de routes et de grandstravaux du Québec. This allowed us toreach thousands of people interestedin specific elements of our work.

annual repport 2005

MARY ANASTASIA O'GRADY, MEMBER

OF THE WALL STREET JOURNALEDITORIAL BOARD, VISITING THE MEI

ON MAY 13, 2005

A DEBATE ON THE VALUE OF NEW DRUGS,BETWEEN JOEL LEXCHIN (RIGHT)

FROM THE UNIVERSITY OF TORONTO AND

FRANK LICHTENBERG (LEFT) FROM COLUMBIA UNIVERSITY,

APRIL 7, 2005

THE MINISTER OF SUSTAINABLE

DEVELOPMENT, THE ENVIRONMENT AND

PARKS, THOMAS MULCAIR, DURING A

DEBATE ON THE KYOTO ACCORD,NOVEMBER 29, 2005

THE MEI’S FIRST PUBLIC EVENT IN TORONTO,HOSTING JACOB SULLUM, SENIOR EDITOR OF

REASON MAGAZINE, SEPTEMBER 28, 2005

PRESIDENT’S MESSAGE

7

The Montreal Economic Institute alsotook part in various public hearings, inOttawa as well as Quebec City. Wesubmitted briefs to the QuebecDepartment of Health and SocialServices during the development of itspolicy on tobacco use and to thefederal Industry Department’s taskforce on the regulatory framework fortelecommunications. Our researchdirector testified before the Committeeon Social Affairs of the QuebecNational Assembly as part of itshearings into policy regarding medica-tions. These actions enable us totransmit our message directly todecision-makers.

A major contribution

Attentive minds may have noticed thenew logo appearing on the cover ofthis Annual Report. While maintainingessentially the same image, we wantedto freshen it a little, also adding ournew slogan. We noticed over the yearsthat, because of our name, somepeople thought our studies dealt onlywith the economy of the Montrealarea. In fact, we are concerned withpublic policy affecting Quebec orCanada in their entirety.

In drawing up a record of ourachievements in 2005, in particularthe spectacular growth in our mediavisibility, I can see that the dynamismof our small 12-person team is secondto none. But without the help fromour supporters and donors, as well asfrom everyone who has assisted us in

one way or another, our own contribu-tion to the progress of Quebec andCanadian society would not be what itis. We would have no impact withoutthem.

Again this year, they proved to be verygenerous, enabling us to maintain anexcellent financial situation. Ourfundraising and other income(subscriptions and sales of publica-tions, registration fees for lectures,etc.) rose 18,5% in 2005, reaching$1,408,273. Our spending was up29%, standing at $1,400,393. Wethank them sincerely and urge them torenew their support in 2006, helpingmake our achievements even moreimpressive next year!

annual repport 2005

$1 600 000

1 400 000

1 200 000

1 000 000

800 000

600 000

400 000

200 000

0

1999 2000 2001 2002 2003 2004 2005

RevenuesExpenditures

Growth of MEI's revenues and expenditures

202

920

603

500

429

813

573

818

466

907 75

495

1

825

198

587

911

751

307

118

836

81

084

599

140

827

31

400

393

278

839

8

January – The perverse effects ofanti-scab measuresEconomic Note on the economicimpact of anti-scab measures

February – Dairy production: thecosts of supply management inCanadaEconomic Note on the economicimpact of supply management

March – The economic costs of thecapital taxEconomic Note on the negativeconsequences of taxes on capital

March – La valeur de la sécuritéd’emploiLe Point de l'IEDM on the value ofjob security

April – Should cigarettes be bannedin public places?Economic Note on the economicaspects of this ban in Quebec

April – L’effet bénéfique desnouveaux médicaments sur lalongévité et la capacité de travaillerLe Point de l’IEDM on the impact ofnew patented drugs on quality oflife and the economy

April – A Canada Strong and FreeDiscussion paper written by MikeHarris and Preston Manning onfederal government policies

April – Les contorsions comptablesdes gouvernements du QuébecLe Point de l’IEDM on the Quebecgovernment’s accounting twists andturns

April – Reconciling profits andsustainable development: Industrialwaste recycling in marketeconomiesEconomic Note on industrial wasterecycling in a market economy

April – Concilier profits etenvironnement: le recyclage desdéchets industriels dans uneéconomie de marchéResearch paper (in French withbilingual executive summary) onindustrial waste recycling in amarket economy

May – Towards open skies forairlines in CanadaEconomic Note on liberalizing airtransport markets

June – Two myths about the U.S.health care systemEconomic Note on some of themyths about the American healthsystem

July – Should we be protectedagainst foreign outsourcing?Economic Note on the phenomenonof foreign outsourcing

August – Entretien ménager dansles écoles: les avantages de la sous-traitanceLe Point de l'IEDM on the advantagesof subcontracting school cleaningservices

August – The consequences of astrong union presence in QuebecEconomic Note on the economicconsequences of the high rate ofunionization in Quebec

September – Conflit de travaildans les Centres de la petiteenfance: les ratés de la réformeLe Point de l'IEDM on childcarefunding in Quebec

October – Is government controlof the liquor trade still justified?Research paper on the justificationsand economic consequences of agovernment monopoly on liquorsales

October – Caring for Canadians in a Canada Strong and FreeSecond part of a discussion paperby Mike Harris and PrestonManning on federal governmentpolicies

October – Report Card onQuebec’s Secondary Schools, 2005 EditionAnnual evaluation of the performanceof Quebec’s high schools

November – Les impacts positifsde la concurrence entre les écolesLe Point de l’IEDM on the impact ofcompetition among schools

November – Using privateinsurance to finance health careEconomic Note on private healthcare funding

November – Should cigarettes bebanned in public places?Economic Note on the economicaspects on such a ban in France

December – Obstacles toentrepreneurship in QuebecEconomic Note on the impact of aheavy regulatory and tax burden onnew business start-ups

December – Les recettes et lesdépenses du gouvernement fédéralLe Point de l’IEDM on the federal go-vernment’s revenue and expenditures

annual repport 2005

MEI PUBLICATIONS IN 2005

9annual repport 2005

January 19 – Public-PrivatePartnerships and Their Impact onCivil Engineering and RoadConstructionPresentation by Paul DanielMuller, MEI Associate Researcher,at the annual congress of theAssociation des constructeurs deroutes et de grands travaux duQuébec held in La Malbaie,Quebec

January 20 – More EfficientPublic Services Through Public-Private PartnershipsPresentation by Paul Daniel Muller,MEI Associate Researcher, at a symposium on public-privatepartnerships held at the Universitédu Québec à Chicoutimi

February 1 – The EconomicBenefits of Reducing IncomeTaxesMEI luncheon speech with NormaKozhaya, MEI Economist

February 12 – Annual MEI /Fraser Institute Student SeminarSeminar on public policy organizedfor CEGEP and university students

March 17 – Mises Institute2005 Austrian ScholarsConferencePresentations by Martin Masse,MEI Director of Publications, andValentin Petkantchin, MEI ResearchDirector, at this conference held inAuburn, Alabama

April 7 – The Overall Impact ofNew DrugsMEI public debate on the impactof new, patented drugs betweenFrank Lichtenberg (ColumbiaUniversity) and Joel Lexchin(University of Toronto)

April 11 – Competitive Tenderingfor Quebec’s Public TransitSystemsPresentation by Valentin Petkantchin,MEI Research Director, at theannual congress of the Associationquébécoise du transport et desroutes held in Laval, Quebec

May 13 – Aerospace Industry &the Role of GovernmentsMEI luncheon speech with MaryO’Grady, member of the Wall StreetJournal’s editorial committee

May 19 – Austrian Approach tothe Third Duty of the Sovereign inthe Wealth of NationsPresentation by Valentin Petkantchin,MEI Research Director, at theUniversité d’Aix-Marseille

May 19 – A Different Approachto InvestmentMEI luncheon speech with ChrisLeithner, Managing Director atLeithner & Co. Pty. Ltd.

May 23 – The Environment in2005: Is it Utopian to Try toReconcile Economic Development,Respect for the Environment andthe Fight Against Poverty?Participation of Pierre Desrochers,MEI Associate Researcher, in adebate organized by SociétéRadio-Canada at the Muséenational des beaux-arts duQuébec, in Quebec City

September 27 – Tobacco Today,Fast Food Tomorrow? TheTyranny of Public HealthMEI luncheon speech with JacobSullum, Senior Editor of Reasonmagazine in Montreal

September 28 – Tobacco Today,Fast Food Tomorrow? TheTyranny of Public HealthMEI luncheon speech with JacobSullum, Senior Editor of Reasonmagazine in Toronto

September 29 – Would TuitionFee Hikes Reduce Accessibility toUniversity Studies?Round table discussion held by theFédération des étudiants et étu-diantes du campus de l’Universitéde Montréal with Norma Kozhaya,MEI Economist

October 26 – Adapting toSurvive: An Airline IndustryOverviewPresentation by Pierre J. Jeanniot,OC, CQ, former President andCEO of the International AirTransport Association and MEIAssociate Researcher, at the 14th

Cannes Airline Forum

November 17 – The Role ofPrivate Health Insurance in theWake of the Chaoulli Decision:Towards a Parallel System? Round table discussion held at theUniversité de Montréal withValentin Petkantchin, MEI ResearchDirector

November 19 – Categories ofPrivate Health Insurance inOECD CountriesPresentation by Valentin Petkantchin,MEI Research Director, to the 15th

general council of the Actiondémocratique du Québec (ADQ),at Boucherville, Quebec

MEI CONFERENCES AND ACTIVITIES IN 2005

10

annual repport 2005

November 22 – Eliminating PovertyHere and AbroadParticipation of Norma Kozhaya, MEIEconomist, in a debate held at the CEGEPde Lanaudière in Joliette

November 23 – Youth Forum onClimate ChangeParticipation of Pierre Desrochers, MEIAssociate Researcher, in a debate on theKyoto Protocol held at the Centre dessciences de Montréal

November 29 – Is Kyoto necessary?MEI public debate between Professor IanClark (University of Ottawa) and theQuebec Minister of Sustainable Develop-ment, the Environment and Parks,Thomas Mulcair

December 8 – First Jean A. PouliotLectureDinner speech with Dr. Vernon L. Smith,2002 Nobel Prize Laureate in Economics

PUBLIC CONSULTATIONS 2005

February 15 – Development of QuebecAnti-Smoking LegislationMEI brief submitted to Quebec’s Ministerof Health and Social Services

May 3 – Price Control and Value of NewDrugs in QuebecPresentation of a brief by ValentinPetkantchin, MEI Research Director, tothe National Assembly’s Social AffairsCommittee during the consultation onQuebec’s drug policy

August 15 – Regulatory Framework forFuture Telephone Technology MEI brief submitted to the federal Tele-communications Policy Review Panel

2005 OPINION POLLS

APRIL u Canadians’ opinion on access to private health care

JUNE u Quebecers’ opinion on tobacco use in bars and restaurants

JUNE u Quebecers’ opinion on the Supreme Court of Canada ruling on theprohibition to pay for health care covered by Medicare

OCTOBER u Quebecers’ opinion on the privatization of the retail trade of alcohol

DECEMBER u Canadians’ opinion on access to private health care

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