The Canadian Century: A “visionary work”, says Globe and Mail’s Neil Reynolds

Columnist Neil Reynolds has devoted his column to The Canadian Century in today’s Globe and Mail.

Finally, amid the pervasive gloom, comes an exuberant expression of optimism – nay, faith – in Canada’s future. Remarkably, it comes from three economists, practitioners of the famously dismal science. The 20th century, they say, wasn’t destined to belong to Canada, as turn-of-the-century prime minister Sir Wilfrid Laurier once asserted it would be. But Laurier, wasn’t really wrong, they say – he was merely premature. Make it the 21st century instead.

What went wrong? What caused a 100-year postponement of Canada’s manifest destiny? Laurier put everything in place for a century of stupendous advance, these economists say – but the country discarded Laurier’s precepts for decades. “We abandoned almost every tenet of Laurier’s plan,” they say, “and we paid a heavy price for it.”

But, bit by bit, Canada has tentatively restored, or begun to restore, Laurier’s lost tenets – a restoration successively accomplished by Conservative governments (notably, Brian Mulroney’s free trade agreement with the United States in the late 1980s and early 1990s), NDP governments (notably Saskatchewan premier Roy Romanow’s principled return to balanced budgets in the 1990s) and Liberal governments (notably Paul Martin’s paying down of the national debt in the late 1990s and early 2000s).

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Canadian Century celebrates the good beginning that the “redemptive decade,” with its tentative return to Laurier’s lost tenets, provided – apparently, given the great global recession, just in the nick of time. It laments the retreat from these tenets that the recession produced. Now, the economists say, is the time to finish the job – now that Canada’s opportunity has been doubled “by America’s confusion and loss of direction” – and by its own loss of the tenets that produce enduring prosperity.

Why cuts are how to balance the budget

In all the blather surrounding Red Ed Clark’s call for higher taxes, and the federal Tories response, most of the attention has been focused on either the issue of whether wealthy bankers should be volunteering other people to pay higher taxes OR whether the PM should be criticising private citizens for voicing their opinions about such matters.

Interesting as those questions are, they are not the most important matter. What really matters is whether raising taxes is the right way to fix the deficit. On this, history and human nature respond with a resounding “No”.

History first: the last time we wrestled successfully with the deficit, under Paul Martin’s stewardship at Finance, we did so chiefly by reducing the size of government. The most startling measure of our success: We went from spending a historic high of 53% of GDP on government in 1993 to roughly 40% in 2008, an unprecedented decline in our history. We were able to do so, by the way, while increasing spending on programmes AND cutting taxes because our fiscal discipline allowed us to stop spending so much on interest on our debt. And we ushered in an era of strong economic growth: we outperformed all the other G7 nations for over a decade after Paul Martin tabled the first balanced budget in the late nineties.

Remember that all other attempts to deal with the budget, including the gig tax reform that led to the creation of the GST, did not bring the budget into balance. It was *only* when we got our *spending* under control that that happened.

And that brings us to the human nature side of the equation. The fact of the matter is that politicians are human beings and subject to many pressures and incentives. When a dollar gets in their hands, it does not come with an endorsement saying “May only be used to reduce the deficit”. Instead it becomes the prize in a tug of war between various interests all wanting to get something out of government. Many and perhaps most politicians regard a dollar in the consolidated revenue fund as a reason to spend that dollar on their favourite programme.

That may be one reason why a recent poll in the US shows Americans deeply sceptical about using tax increases to bring their own public finances into balance. They told Rasmussen pollsters by a margin of 58% that politicians “are more likely to spend the money on new government programs.”

The reality is that if we want to balance the budget, the strategy that has proven itself without a doubt is to control spending. Raising taxes too often just gives politicians comfort that they can continue in the bad old habits. And it is those habits that have to be broken.

The Aboriginal Wizard of Oz

This is the first in a wonderful series of articles in The Australian by Noel Pearson, an Australian Aborigine and the Director of the Cape York Institute for Policy and Leadership. Mr Pearson is clearly part of a world-wide awakening among young Aboriginal leaders questioning whether the social service state can really solve the problems of Aboriginal peoples, as opposed to Aboriginal people rising up and taking their own fate in their hands. Every word in this series applies with equal justice to the deplorable plight of Aboriginals in Canada. As Mr Pearson writes:

What my opponents and sceptics from the Left have failed to understand is that when we talk about disempowerment being the singular and devastating feature of Aboriginal Australia, we mean that our people have had their responsibilities taken away from us. Responsibility is power. If we want our people to be empowered, then we need to take back the responsibilities that the welfare state has stripped away from us.”

Noel Pearson’s original article generated a plethora of mostly predictable commentary of the type “Non-Aboriginal Australians would love to have the kind of all encompassing tax-financed welfare services that Aboriginals enjoy.” Pearson’s rebuttal, also in The Australian a few days later, is a joy to read:…

There is no freedom of private choice and action when governments have assumed responsibilities that are normally undertaken by responsible parents and individuals. That government intervention has crowded out the responsibilities of individuals, families and communities is my point.

It is a misinterpretation of history to say that service provisioning followed a lack of responsibility. Aboriginal people never chose welfare as the basis of their inclusion in the country’s citizenship. They wanted equal wages, not welfare. They wanted a hand-up, not a handout. They wanted freedom from discrimination and racism.

But the welfare state regarded Aboriginal people as helpless and hopeless. It has never had any expectations of Aboriginal people. Or disadvantaged people generally. That is why it has stepped into their lives to such an extraordinary degree.

Fear the boom and bust: Hayek and Keynes duke it out in rap music

A hilarious video in which two rappers represent F. A. Hayek and John Maynard Keynes! as they argue about the right role for government in dealing with the boom and bust cycle and economic management more generally. Those of you who know me will be aware that I did my Ph.D. on Hayek’s social and political thought and I also did a two part series about Hayek for CBC Radio’s Ideas programme  that included a lot of material about the great rivalry that pitted Hayek against Keynes in the middle of the last century, when they were the two greatest living economists. If you’d like to hear part of those Ideas programs on the Hayek/Keynes bust-up, an audio extract is available on my media page.  Thanks to Brian Ferguson of Guelph U for bringing this video to my attention!

CanadianImmigrant.ca discovers Fearful Symmetry

CanadianImmigrant.ca posted a review of Fearful Symmetry by George Abraham that shows that *somebody* at least is paying attention to what the book has to say about immigrants, a vital part of Canada’s future.

The review, available here, draws attention to the fact that most commentators in Canada are reluctant to tell it like it is in any politically sensitive areas:

Brian Lee Crowley strikes me as an unlikely Canadian. In his just-published book, Fearful Symmetry: The Fall and Rise of Canada’s Founding Values, he not only debunks many myths about this country, but does it directly and without pulling any punches. Evidently, Crowley is not given to political correctness — that quintessential Canadian value — and does not mind offending a few people, particularly those in Quebec.

But this reviewer, unlike many others, also recognises that I am not out to single out Quebec. There are lots of people who are benefiting from the ill-advised policies of the last 50 years, policies instituted in large part to accommodate the Boomer rush into the workforce plus the rise of Quebec nationalism. On the other hand, it is not often recognised that those poor policies harm the most vulnerable in our society, including immigrants:

To sum up, in Crowley’s reckoning, immigrants who are down on their luck and have been ejected from the workforce during this recession will benefit from the looming labour shortages. But even then they will be hobbled by what the writer rightly calls a “scandal” unworthy of Canada, the non-recognition of immigrant qualifications. He calls it like it is: “Theirs is a transparent effort to protect not the interests of supposedly vulnerable and ignorant consumers but rather the interests of those already exercising these professions in Canada.”

Capitalism’s death in C2C

C2C, a feisty on-line journal, has just released its new edition focused on the downturn and prospects for recovery. They have kindly included an extract from Fearful Symmetry where I talk about why markets, the rule of law and economic freedom remain the only principles on which prosperity can be based and that therefore the reports of capitalism’s demise as a result of the recession are greatly exaggerated. To read the extract (and find out more about this fine journal), click here.