Monday, September 27

Matthew Lau: Trudeau’s failure on economic growth is a firing offence


The numbers do not lie; over the past six years, Canada has become a worse place to do business

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Justin Trudeau wants his government upgraded from a minority to a majority. The problem is that, judging from its results, the progressive program he has enacted over the past six years is a firing offence, not grounds for promotion. From 2015-Q4, when the Liberals came to power, to 2019-Q4, the final full quarter before the coronavirus pandemic, real GDP per capita increased by only 3.3 per cent in Canada, compared to 7.5 per cent in the United States (see chart).

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The numbers are equally bad since the start of the pandemic. From 2019-Q4 to 2021-Q1 (the latest available data from Statistics Canada), real GDP per capita fell by 2.4 per cent in Canada compared to 1.3 per cent in the United States . So, under Trudeau’s progressive program, economic growth in Canada was worse than the United States before the pandemic, has been worse since the pandemic began, and, all signals indicate, will face new government-imposed obstacles in the future.

Increased economic productivity and sustainable wage growth depend on capital investment by businesses. But in real per capita terms, investment in Canada — including in non-residential structures, machinery and equipment, and intellectual property — fell by 6.3 per cent from 2015-Q4 to 2019-Q4 and by fully 18.1 per cent if the timeline is extended to 2021-Q1. The numbers do not lie; over the past six years, Canada has become a worse place to do business.

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Such are the results of having governments (plural, since most provincial politicians are in the same mould) run by people with completely wrong ideas about economic productivity, who, because they are preoccupied with imposing more equality and expressing alarm about global warming, remain oblivious to or unconcerned about unhappy economic outcomes. These wrong ideas and preoccupations are all part of the progressive ideology.

Take, for example, the Liberals’ Clean Fuel Standard, which will require producers and importers to reduce the carbon intensity of liquid fossil fuels. When Catherine McKenna, then minister for environment and climate change, first announced this policy, she called it an “ economic opportunity.” The Government of Canada website says the regulation will “create good jobs in a diversified economy.”

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Well, sure. If you impose a regulation requiring people to do something, they will have to do more work — possibly in new jobs — to accomplish it, whether the required task is reducing the carbon intensity of fossil fuels, digging holes in people’s backyards and filling them back up again, or producing hand-woven baskets. The question is whether all this effort is really an “economic opportunity” or just a colossal waste of time and resources. Memo to Ottawa: it is the latter, not the former .

Ross McKitrick of the University of Guelph writes that his macroeconomic modelling work done with colleagues at LFX Associates estimated, even using generous assumptions, that the Clean Fuel Standard “would cost the Canadian economy $6 for every $1 in environmental benefits, with net costs averaging $440 per employed person.” They also estimated a permanent net loss of 30,000 jobs across the country, and potentially billions of dollars in capital leaving the economy.

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Another example of the progressive agenda at work: the Liberals’ tax on top income-earners in 2016. A study from the CD Howe Institute found that taxpayers responded to the increase by significantly reducing their taxable incomes, so that in its first year, the tax hike yielded only $1.2 billion in revenues for the federal government, while costing provincial treasuries $1.3 billion — for a net government revenue loss. So the effect of the policy was to discourage investment and effort among the country’s most productive workers while worsening government finances.

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A third example: the Liberals are promoting the idea that corporate boards should have gender parity, saying that “inclusive leadership leads to more productive and successful companies.” In reality, unless corporate boards are to include everyone on the planet, there have to be some criteria as to whom to include or exclude. If companies want to be more productive, their boards should include those who best understand how to increase productivity and exclude others. Knowledge of the business is the relevant criteria, and companies should not, as the Liberals propose, include or exclude people based on completely irrelevant criteria.

Lack of space does not permit listing further examples, but these three are representative of the entirely mistaken foundations of the progressive program. With the Liberals promising to double-down on progressivism, those opposed to continued economic stagnation should hope Trudeau is fired next month, not promoted.

Matthew Lau is a Toronto writer.

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