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Smarter Government Spending Key to Growth

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By: Graham Lane

Published: Winnipeg Sun, November 4, 2016

Canada haven’t recovered from the global credit crisis of 2008-09, the collapse of oil and gas prices made our situation worse. What lies ahead? What can we do to get back to growth?

Bank of Canada Governor Stephen Poloz supports the federal government’s plan to add $150 billion to Canada’s debts over five years. While ‘investing’ in infrastructure should aid future growth if done prudently, more billions owed risk a further collapse of the Loonie and higher interest rates.

Canada has seen major changes through globalization. As hundreds of thousands of manufacturing jobs were automated away or moved to lower-cost countries, challenges in resource industries exacerbated our plight. Too many stupid wasteful actions by a succession of federal, provincial and municipal governments hasn’t helped.

Check out the global economic tables included in each week’s Economist magazine: our problems are discernible. Industrial production, flat or declining. Canada’s current account (a measure of money coming into and out), negative. When oil and gas were doing well our exports were higher than our imports. Governments’ accounts are in deficit, and our unemployment rate is higher than that of the US, Mexico, the U.K. and many other countries. Job growth along with wage gains are sluggish, and our dollar relative to the American dollar is floundering.

There is an increasing divide between the rich, skilled and politically-organized and the poor, less educated, and politically unorganized.. A globalizing economy exists where borders matter less driving up the income of knowledge workers and senior management of large companies. Professionals (physicians, dentists, lawyers, CPAs, engineers) benefit from laws that restrict entry and competition with each other. Teachers, nurses, paramedics, police, firefighters, tradespersons are protected by monopolies, unions and legislated wage levels. Against this, the vast majority – the rest of the working population – struggle to make a decent living.

The average household now owes over 160% of disposable income: imagine the carnage when interest rates rise. The Bank of Canada, colluding with other central banks or simply following their lead, hold interest rates down well below what conditions suggest. Low rates have whacked savers and retirees while driving up house prices beyond the means of young people and new families.

Here in Manitoba, our economy remains dominated by the public sector. Those working outside of the public sector are affected and influenced by it. Crown corporations operate monopolies (electricity and natural gas, motor vehicle insurance, liquor and lottery distribution, workers compensation, etc.), and services from education to water, bus, healthcare through to nursing homes and childcare have been comfortably accommodated by a constantly rising stream of tax revenues and subsidies.

What needs to be done?

The public sector component of our economy needs to be re-invented. It needs to be smaller, smarter and dramatically more effective. Public sector pay, benefits and pensions need to be aligned with average private sector levels. Taxation, government fees and regulation need to be reduced as smartly as possible, to grow the private sector. The provincial and municipal governments, along with the education, healthcare and social services ‘industries’, should do more with less like the rest of us – so we can end the irresponsible borrowing we are piling on our children and grandchildren.

Graham Lane leads Manitoba Forward (

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