In a previous article we’ve established that governmental attempts at micro-managing economies are doomed to failure, at least from the perspective of those who are not, as they say, ‘connected’ or employed in politically fashionable industries. But surely, you say, governments can do something for the economy, can’t they?
Well, yes they can. What a government can do, if it implements the right policies, is to create an environment that is optimally conducive to economic prosperity. It can create a jurisdiction where every legitimate business enterprise has an equal chance of succeeding, regardless of whether it is politically favorable or sexy or ‘systemically important’ or whatever other nonsensical criteria Progressive busybodies use to decide which industries they should subsidize (at everyone else’s expense). How to do this? Simple. Not necessarily easy to put in place, but simple nonetheless:
First, implement the least economically harmful taxation system available, one that not only allows people to keep most of what they earn, but also gives them the chance to earn it before taking a bite. This would of course mean reducing and eventually eliminating sales taxes in all their guises, and preferably property tax as well, in favor a single flat-percentage income tax (see the relevant article on this blog page). This should go for the taxation of businesses organized as corporations as well as for individuals and businesses set up as sole proprietorships and partnerships. Why in heaven’s name should the state be allowed to take a cut of every transaction up front, long before the business has had any chance to try and turn that sale into an actual profit? Taxing individuals and enterprises only on what profit they are able to make is far more sensible, and moral too.
Second — and this is, for better or for worse, something that has to be undertaken by the Federal government — maintain the purchasing power of the currency. Is there really any need to elaborate further on this? The idea that a purposely-weakened Loonie is somehow good for export industries is nonsense, seeing as nearly all raw materials, and all machinery and related parts (which must constantly be replaced or maintained) are priced in US dollars ; they might make extra money on the exchange rate arbitrage for a time, but they give it all back when it’s time to upgrade or service property and plant.
For individuals, a sound, non-depreciating currency keeps the value of their labor and ingenuity stable, and allows for far more certitude in planning their financial affairs. There is no good reason why the dollar a man earned in 1971 and saved for a rainy day should purchase twenty-nine times less than it did the day he earned it. There is no need for this thing we call inflation to exist; such devaluation of a currency (like ours) is merely a symptom of bad monetary policy, and governments who pursue such policy deserve to be punished for it at the polls.
Reducing bureaucratic interference and general regulation is another key ingredient to creating the optimal economic environment we desire. This is familiar language; pretty well every allegedly right-leaning government talks about doing it. But how many have actually achieved any progress? Very few, and it’s too bad, because excessive regulation is one of the main things holding back small and medium-sized businesses in this province (the large firms love it, since they have deeper pockets and can afford to lose a little money while their smaller competitors are run out of business by compliance costs).
Make BC known as a place where red tape really is kept to a minimum and it will help to attract these smaller firms, which are truly the engines of growth for any economy.
You may be surprised by the fourth item on my list — infrastructure. Normally a talking point of leftist politicians, I know, but I should point out here that I am not talking about the usual nonsense that gets erroneously labelled as infrastructure — things like bike lanes, or HOV lanes, or the statist-favorite known as ‘Light Rail’, passenger-only trains designed to ferry government bureaucrats from their suburban homes to their offices in the city — but genuinely and generally useful stuff, such as water and sewer and surface transport routes.
The most important matter, economically speaking, is to increase the number of non-stop routes (i.e. freeways) in the province, to reduce the costs of transporting people, raw materials and finished goods, and to enable them to be moved from source to factory to market much more quickly. Freeways also make personal travel faster and easier, and make navigation in larger cities a snap, which means that they are a win-win for everyone. The fact is, we lose business and industry (and therefore jobs) in this province because of all the stop-and-go driving — I have personally driven across Los Angeles in a shorter time than it takes to get as far as the bridge in Kelowna in the late afternoon, which is sad when you consider the huge difference in population!
Like I said at the beginning — simple, but apparently not easy, since no government has had the guts or the will to implement these necessary policies. Who will step up to the plate?