Which Will Be Better: ‘Real’ Conservativism or Incrementalism?

Gerry Nicholls, in his National Post article yesterday, took issue with incrementalism, something repeatedly described by Tom Flanagan in his Globe & Mail pieces. The question is: what would be better for Canada?

Many Canadians self-describe as “liberal” (in the small-”L” sense) or “progressive”. What is often meant by this is that they have a concern for fairness, for a high degree of social freedom, and for government to act to “improve” things. During the Harper Government’s first term, a generally incrementalist programme was unfolded: many small initiatives to inch toward some of the items Canadians of one or another conservative (in the small-”C” sense) stripe would like to see, while maintaining enough behaviour that is recognisable as “centrist” in the sense of small-L liberalism. Hence the spending sprees alongside the minor tax credits and GST reductions, the child care allowance, and the like.

It is probably true that this self-defined culture amongst Canadians requires a slow, steady approach to change. There is, after all, nothing inherently “right wing” about making choices about which programmes to have and how much funding should be applied to those that are kept/initiated, just as there is nothing inherently “left wing” about wanting every need to be met. (It is how it tends to line up in this country: south of the border, of course, it has been the “right” that has championed the greatest expansion in entitlements, bailouts and deficit financing to avoid making choices in the history of the United States. This is one of the reasons I find the equation belovèd of some Liberals, NDPers, Blocquistes and Greens that “Harper = Bush” so risible. Never let a lack of respect for the evidence get in the way of a convenient catch-phrase!, eh?)

What Gerry Nichols argued for yesterday was a turn to ‘real’ conservativism: fiscal discipline, tax cuts, programme elimination. I also argued for this yesterday: in particular, we will need the fiscal capacity — both in the hands of (here comes that phrase so loved by New Democrats!) ordinary Canadians and to have the ability to make choices for the future. In other words, if we do not clear out the dross, we cannot find the space to do a good job on what the future will require.

Note, in passing, how both Premiers that spoke up yesterday on their province’s economic situation reflect the small-L “I don’t have to make choices” attitude. For the McGuinty Government in Ontario, there are no decisions to restrain spending needed, as deficit financing is deemed acceptable rather than having to make choices either for today or tomorrow. In British Columbia, the Campbell Government promises minor tax cuts and savings and no deficit, although no sense of either what the future might require nor anything meaningful emerged from the semi-snarling lips of the Premier forced to recall the Legislature against his will.

Canadians elect governments to govern. In that sense, if fiscal conservativism is a part of the Conservative Party’s credo, it ought to be implemented. (I certainly stand with Nicolls that, in this regard, incrementalism does not achieve the objective.) Further, as I posted yesterday in my piece on tax cuts, large bites should be taken (not these penny-ante moves of Gordon Campbell: $140.00 reduction on a $70,000 income? Really? Anyone going to even notice that?) forcing a thorough house-cleaning of dead programmes (and dead thinking) so as to move forward without barnacles and boat anchors from the past tied to the ability to move into the future.

Now, I know Gerry Nicholls is also the type of conservative who holds as well with a socially libertarian outlook: in this realm, the government that governs best governs least. Where we may disagree is with the what to do next with the fiscal capacity that is created: I would hold that our current global economic situation is in large measure a result of a sea change in the availability of cheap (to produce) energy, and that the downward movement in the price of oil is a blip in a long term upward trend. As a result, Canada needs a 21st century infrastructure suited for a country with a surplus of geography, and an ever-restricting set of options for transportation and linkages to hold it together. So I (Red Tory that I am) would invest appropriately; Nicholls might well be satisfied with the simple return of tax monies to their originators.

What that means is that the house-cleaning must go deeper than the tax cuts — and that the tax cuts must be deep enough to not only make a difference by creating new non-bank capital for use but also to trigger a redefinition of the choices we make as Canadians. This implies angering just about every interest group, every Premier, every vested interest in the country. But the era of expecting a hand-out rather than solving problems locally must end, for, in the near future, it will be unaffordable. The economic crisis is intensified by bad policy decisions, but its causes are fundamental: in short, unbridled expansion is no longer an option. The tide may hold steady or it may fall, but it will not routinely rise to allow every new idea for something or other to be entertained without simultaneously saying “so what do we stop to pay for this”?

Would the Government survive? It may well not: Canadians are human, and human beings are notorious for avoiding reality in favour of dream states. But some things need doing, and need to be said. Doing the right thing in the face of adversity is the mark of leadership.

It is time to stop rearranging the deck chairs on the Canadian “Titanic” and start dealing with Iceberg Alley, for we are in the thick of it, and the weather is from the North tonight.

Creating a Global Giant

There really isn’t very much that’s required to turn Canada into a world power, a country filled with jobs (and good ones) galore that attracts the best and the brightest from around the planet. It’s simply to remove the dead hand of government from the economy.

Dead hand? What other name would you have for $220,600,000,000 of spending by Ottawa? All that money, after all, didn’t come from nowhere: it came from you and me. That’s just a tall latté and a slice of lemon poppy-seed loaf at Starbucks (or a lunch special at Tim Horton’s) away from $6,900.00 from each and every Canadian: new-born babe, school child, university student, adult worker and retiree. This year, next year, every year. That sixty-nine hundred dollars doesn’t count the take by your province, or your municipality, but it does cover every tax the Federal Government assesses: the GST, the gas tax, the air conditioning levy, the tire levy and the like.

Then there’s the cost of administration. With 400,000+ Federal civil servants, even assuming a low $80,000 each for salary, benefits, office space, etc. we’d have 15% of that two hundred twenty billion simply going to pay for all the people whose hands touch this money through their work. Don’t forget all the money that goes to pay for contractors and consultants to augment the federal headcount, provide for skills that don’t fit within the current pay bands due to their demand, and the usual second opinions in the endless game of “my ass is covered”. It’s probably not at all unreasonable to figure that a good 20% of every tax dollar goes into “administration” in this way.

That’s $1,380.00 a head, Canada. And what did we get for it?

Well, ostensibly we got programmes and services. Great chunks of the spending, of course, are simply transfers: take the money from here and send it to there, collect money from this and pour it into that. Papa knows best, and all that. Personally, I’m of the opinion that if some provinces are wealthier than others (i.e. pay more into this transfer agency that skims 20% off the top just for existing than they see back in “goodies”) that’s just a fact of life. At the time of Confederation the economic powerhouse of Canada was Nova Scotia, with New Brunswick close behind. Much of the twentieth century saw Ontario and Québec as the place to be. Early 2008, the money’s being made in Alberta, British Columbia, now Saskatchewan. In other words, the more productive corners of this large country keep shifting. It would no doubt be desirable if we could just keep the strength of each region and others grew up, but that’s not what happens in the real world. Power and population, economic models, etc. shift and change. Accept it.

Capital, in fact, goes where it receives the most respect (i.e. isn’t nibbled away endlessly either by erosion of the value of the currency or ever-changing fees, rules and taxes). Investment comes when a region has lots of opportunities to choose amongst, and where inflows to the region are sustained and sustainable: the timeframe here is not “to the next election” but measured in decades (and sometimes, centuries). Capital is not just financial: it is educational, human, dynamic. It can receive more respect with the right policies: the argument for a single payer health care environment (regardless of who delivers the care) is found in low cost and universality (I can take a risk as my care is not tied to my employer); the argument for low cost education with many options (no mandated curriculum) is the allowance for developing even more human capital. There are, in other words, some investments worth making to prime the pump. Others may facilitate sustainability: the infrastructure of urban areas, for instance. But if the total package isn’t right, or the take to do these things is too high, the capital will go elsewhere.

It shows how badly off we are when you realise that Dubai — a place with a beastly climate, close to one or more potential wars that could spill over and engulf it, little food-producing capability, etc. — is attracting the mounds of capital it is. But that capital isn’t going to multiply much: it’s being sunk into buildings. No real import substitution (as Jane Jacobs, in her works The Economies of Cities and Cities and the Wealth of Nations showed, this is the true engine of economic prosperity that lasts) will take place. If that is the best use of capital, it shows how much we have impoverished our own prospects.

So: get out of the redistribution game, the picking favourites game, the national champions game, the innovation agenda game, etc. Stop agonising and studying (even unto death) the locations of things. Allow — as the Finance Minister has hinted — province to compete with province for the shape of the future. Leave the bloody money in the hands of citizens to start with by lowering tax rates and eliminating whole taxes outright. Starve the beast. Remember, each dollar denied to Ottawa is actually $1.20 saved, thanks to the overheads of running the place.

As for the Canadian economy, the other thing that’s required is a strong and stable currency. A dollar saved — I care not whether in an ordinary account or term deposit, in an RRSP, an RESP or a TFSA — should still be worth a dollar in terms of its purchasing power years later. Inflating the currency, in other words, is destructive of wealth. Lowering our interest rates, as was done this month by our new Governor of the Bank of Canada, and promising to keep doing it “to keep matching the Americans” is a fool’s game, for they, foolishly, are outright destroying their economy and the US dollar. There is no need for us to follow them into the pit. Not doing so would make our corner of North America the one to invest in, to accumulate capital in, to build factories in to serve the entire NAFTA area. Why destroy our prospects and our own futures? To satisfy Garth Turner’s and Dalton McGuinty’s odes to twentieth century applied Marxist corporatism?

Ideally, of course, we would bite the bullet, take the transitional pain, and return to a backed currency. That means gold, once money and no doubt again as country after country follows Zimbabwe’s descent into wheelbarrows full of bundles of million-unit bills to buy what little there is. That is where the US is headed. So far Europe is trying to resist. Australia is resisting. We should, too — and take the power away to play games with the value of money in the process. The first country to get serious about the long-term value of their money will see a massive inflooding to boost their economic future. It should be us.

There is — just as there is with issues such as the environment — little likelihood that any of this will come to pass. Parties and party leaders positively thrive on siphoning off the future to bribe the voters today. But we can dream.

And when our children are impoverished and life is hard, we can tell them just how badly we screwed up, how we missed our chance to be great, and settled instead for a little more largesse.