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.

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5 responses to “Creating a Global Giant

  1. Pingback: » Creating a Global Giant

  2. I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.

    Tom Humes

  3. I wish we had politicians who think like you, instead of miserable hacks who prop up the Liberal spending programs they inherited. Why aren’t you in politics anyway?

  4. 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.

    I think that this statement is correct.

    Would that someone in power would have the gumption to swim against the current(sy 😉 and do this.

  5. Pingback: Money on The Finance World For News and Information Around The World On Finance » Blog Archive » Creating a Global Giant

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