“Big Government”

Watching Ontario’s political debate was painful. I’m annoyed that each candidate felt personally obliged to thank people for their questions. Oh, thank you so much, Sanjay, for that question that I will now proceed to ignore. The name-calling was excessive. With all due respect Mr. McGuinty, your energy plan shows that you’re a loser and your adam’s apple is WAY too big for your neck. They each blatantly plug “selling points” instead of answering questions. Hi Ontario, I’m going to fix everything using only five bullet points!

What’s truly agonizing is watching them spit out numbers without any context. Numbers always have assumptions behind them; without knowing those assumptions, they are meaningless. For example, you might raise corporate tax rates but still have lower average taxes because of deductions. So on the one hand you have raised taxes, on the other hand corporations weren’t taxed enough. In the end, we are left with zero information and a horrifying impression of the candidates as human beings.

Part of the problem is that the debate format no longer lends itself to the issues being discussed. A good debate topic has no practical answer and touches on some moral or ideological issue. They’re debating economic policy and the moderator has no way to check for validity. So they all accuse each other of lying and Steve Paikin patiently waits for time to expire in order to move on to the next question. Nobody checks facts. This could be alleviated if they were all provided some “official” or neutral set of numbers to use. At least this way they would start on the same page.

In order to debate something technical in nature without being technical, you might talk about higher-level ideas. And with economics, every debate has its roots in an expired battle between Capitalism and Socialism, which has been kept alive by the media because of its polarizing qualities. For every specific issue, each politician uses rhetoric from one school of thought or the other to make his or her case. Since the conservatives have had the most success recently, I want to dispel the myth behind classically conservative economic rhetoric: low taxes, smaller government and free markets.

Alberta has voted conservative for over forty years. Yet, its largest employer is a division of the government (Alberta Health Services). Their big government might pay lip service to free markets, but they have profited from oil and gas through extremely protectionist policies, usually something associated with socialism. They have always cared about protecting jobs in Alberta and allowing foreign companies to come in only if they were going to help the local situation. There’s nothing free about Alberta’s market.

Alberta’s personal and corporate taxes are among the lowest in Canada and they have only a 5% sales tax. But they can get away with this because they earn money from a royalty system where the government takes a direct cut from oil extracted from the ground. Despite imposing very moderate economic policies, their politicians continue to preach capitalistic rhetoric that seems to be the perfect condiment to the crap they feed Albertans during campaign time.

When Rob Ford won the mayoral race for the largest city in Canada, he really only made one promise: stop the gravy train. It was a classic conservative argument about smaller government, which has very real economic foundations.

Take garbage collection for example. We all need our garbage disposed of regularly. If private companies compete for this business, it will cost us less to pay out of our own pockets than the alternative, which is to have the government do it for us with our tax money. Government is too bureaucratic to be efficient. As the theory goes, it costs less when the government doesn’t do it. Because of that, when you get your tax money back and you pay your private garbage bill, there’s still money left over.

But let’s not forget that the government had to create a market for garbage collection. As populations grew, companies weren’t rushing to pick up garbage – people were simply dumping it wherever they could. First, governments had to create laws against dumping. Then it had to provide the service for disposal.

Governments play a critical role in developing new markets in the first place. When there aren’t enough private companies to service the market, privatization can backfire. For example, if you sell the Toronto zoo to someone, that person has a monopoly. We can expect prices to rise drastically. I’m imagining a lot less school field trips.

If the government uses tax money to sub-contract private garbage collection, even though this makes government smaller, it may still cost taxpayers the same. Private corporations only have to pretend to be competitive when bidding for the contract. Once awarded, they will do their best to raise prices and lower service levels to maximize their profits. Without competition, they have no incentive to be competitive. We end up paying as much as we did before, but the money goes to private corporations instead of a government division.

In that case, we might be better off keeping the operations within the government because governments are far more likely to hire more people at lower pay (ie. more jobs), whereas private companies have a much more skewed idea of how to share wealth within an organization. As Rob Ford is learning right now, many of the services that the city of Toronto provides don’t have obvious market alternatives.

The hottest topic in Ontario, and quite possibly North America, is job creation. Everyone wants small businesses to grow and create jobs, but nobody wants to acknowledge that for a lone business man who is just starting up, the hardest thing to do is to hire that very first employee. He can’t afford to give that first employee a competitive salary or benefits. The free market would have this guy stuck as a sole proprietor. This is why Ontario provides a ridiculous number of grants to support that early stage of business development.

Future economies will depend on governments to create new markets and finance new ideas. The idea of opposing “big governments” is completely out of touch with reality. No matter what ideology our politicians preach to solicit our votes, we can only hope they don’t actually believe the crap they’re spewing.