While strictly non-partisan, AIMS understands the importance of helping political parties of all stripes to gain insight into the significant public policy challenges facing the region and the country. In recognition of the contribution that AIMS makes to policy debate, AIMS President Brian Lee Crowley was invited as a non-party commentator on a panel at the national convention of the PC Party of Canada in Edmonton.
The other members of the policy panel were
Senator Donald H. Oliver, Deputy-Chair Senate Committee on Transport and Communications
John Eckert, President, Canadian Venture Capital Association
Walter Robinson, Federal Director, Canadian Taxpayers Federation
In his remarks Crowley addressed three questions put to him by the conference organizers. He first explained that regional economic development organizations like ACOA don’t actually create new economic activity but simply substitute the government’s preferred activities for those that would have inevitably taken place if people had been left free to take their own decisions with their own money. These remarks are below:
Ladies and Gentlemen,
All other things being equal, lagging economies naturally catch up with leading economies, whether we’re talking about Ireland vis a vis Europe or Georgia vis a vis the US economy, or South Korea vis a vis Japan. When the conditions are right, each year a lagging economy should close the gap with its relevant leading economy by between 2 and 3 percent. Ireland is an example of convergence at its most dynamic.
Ireland’s turnaround cannot be attributed to government spending, transfers from the EU, or an activist “economic development policy”. But these things have actually been the mainstays of the regional development toolkit in Canada since the late 60s. Programmes ostensibly aimed at closing the prosperity gap have instead mostly created a reliance on the generosity of the federal government.
The effort has been monumental, the results pitiful. If we had invested the last 40 years worth of net transfers into Atlantic Canada in US 90 day Tbills, we would have over $1-trillion in the account today, enough to retire the entire federal debt and have $500-billion left over. Pretty soon you’re talking real money.
And for this we have achieved a convergence rate one half of what one would expect if we had done nothing at all.
But Jerry Byrne, the ACOA minister, defends ACOA’s efforts and he pooh poohs federal tax cuts as an alternative strategy. If ACOA didn’t exist, it would have to be invented, he says.
Now remember, as our Chairman, Scott Brison, said in his excellent op-ed piece in the Post the other day, that the amount that ACOA spent in Atlantic Canada is roughly equivalent to the amount that Ottawa collects in the region in corporate income taxes alone.
We know what that means: the federal government takes money from private companies that have proven themselves successful in investing money and putting people to work in sustainable jobs. It takes the money, and spends a major share of it on an expensive bureaucracy employing hundreds of highly paid civil servants. Under pressure from the Atlantic government caucus of the day, they then distribute that money. Unsurprisingly, they do so so as to maximise the political rather than the economic benefits.
So what Mr. Byrne doesn’t get is this: The value of ACOA spending cannot be judged merely by the economic activity that it creates. Money in any form whatsoever generates some economic activity.
If you took 350 barrels (not pork barrels, of course — they’d be salt cod barrels, or perhaps today oil barrels, but that’s an aside), anyway, if you take 350 non-pork barrels, put $1-million in each one and then plunked them down in towns and villages across Atlantic Canada, and let people help themselves, economic activity would be “generated”. Jobs would be “created” because people would spend the money on groceries and house repairs and new cars. Tax revenues would be generated as governments took their share of all those transactions. But the economic activity isn’t real — it only lasts as long as the barrels keep coming.
So the only way to judge the value of ACOA or FedNor or Western Diversification, then, is to look at what these agencies choose to do with our money compared to what we would do with it ourselves if we were allowed to keep it. Not only would we spend it differently, but we would avoid all the costly direct and indirect distortions that taxation imposes. Ireland chose the tax cut route.
So remember: ACOA creates no new economic activity in the region. It merely substitutes activities that Gerry Byrne and friends want to promote for their political advantage, for activities that Atlantic Canadians would choose to spend their money on if they weren’t so heavily taxed to begin with.
I don’t know about you, but I know which alternative I think will promote sustainable growth and allow Atlantic Canada to do what comes naturally:
Closing the prosperity gap with the rest of the country.