Governments should be cutting red tape and making things easier for businesses to operate, not putting road blocks in their way

Philip Cross: ‘Business unfriendly’ is the new normal for Ontario and Ottawa

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It is an article of faith among left-wing academics, analysts and pundits that the business community controls the agenda of politicians, who sit by their phones waiting for instructions from The Captains of Industry. If only that was true in Ontario, where senior government leaders plan new policy initiatives oblivious to their impact on business.

How the Ontario government works was summarized in former Ontario Premier Dalton McGuinty’s recent autobiography, Making a Difference, in which the business sector barely rates a mention. There is no discussion of the high-tech meltdown in 2001 that devastated McGuinty’s own stomping-grounds in Ottawa when Nortel and JDS Uniphase collapsed. To McGuinty, the 2008–09 recession was notable because GM and Chrysler came begging for bail-outs, an apt summary of his paternalistic view of the relationship between government and business. Instead, sheltered inside their protective public sector bubble, McGuinty and his associates energetically attended meetings and conferences on formulating and measuring public sector services.

The detachment of the McGuinty and Wynne governments from the reality of business conditions is reflected in the creation of an anti-business climate more by design than by accident. Deficits have soared to be the second-highest per capita in Canada. By its own admission, Ontario has 380,000 regulations on the books, many of which fundamentally distort the relationship between business and its customers. Electricity rates are the highest in North America. The minimum wage has doubled since 2003, with further increases now automatically indexed to inflation no matter what the reality of unemployment in a particular year. Raising business costs by adopting a new (albeit inconsistently applied) holiday in the middle of a recession exemplifies how tone-deaf the Liberal government is to business concerns. Government hand-outs and favouritism to specific firms must be added to the list of policies that foster an unhealthy business climate of dependence on government subsidies instead of true innovation for growth.

The government’s indifference to how its own policies create uncertainty is reflected in how it announced the roll-out of an Ontario Retirement Pension Plan in 2015, then suspended the plan after the federal election, followed by warnings that firms would have to start setting aside contributions in 2017, before cancelling the plan altogether after Ottawa announced its own changes to the national pension plan. However, this pales by comparison with the government’s latest idea of a complete takeover of energy production and consumption, at substantially higher prices, as part of its Climate Change Action Plan that was concocted without input from key players such as the auto industry.

The result will be a national economy that underperforms, just as Ontario’s has

What is truly scary for all Canadians is that this fixation on public sector outputs and negligence of creating a positive business climate is now being imported wholesale into the federal government. A steady stream of mandarins has packed up and moved from Toronto to Ottawa, led by McGuinty’s former chief advisor Gerald Butts, now principal secretary to Justin Trudeau. Janice Charette was sacked as head of the federal civil service because she was reportedly unenthusiastic about Matthew Mendelsohn (a former Ontario deputy minister, who then became head whiner at the Mowat Centre) being brought in to oversee the government’s new emphasis on what it mystically calls “deliverology.”

The relentless focus of deliverology on narrowly defined outputs while ignoring inputs implies that high productivity in handling taxpayer’s dollars is no longer even a consideration for public policy. The proportionality between outputs and inputs is always the real test of management effectiveness; any dunce can just throw endless resources at a problem until it is solved. Good management achieves results with the least possible usurpation of taxpayer resources. It is the private sector’s relentless focus on productivity that helps explain its undeniable superiority to the public sector.

Trudeau evidently thinks that mouthing the words that business people are “the job creators” to a roomful of executives at the Washington Chamber of Commerce early this year was enough to create a healthy business climate. However, enunciating a cliché, spoken with the cadence of an elementary school teacher addressing a roomful of 10 year olds, will do nothing but provoke contempt or offense. No wonder polling shows that 59 per cent of business executives think the Trudeau government is negative for business in Canada.

Business leaders have learned to trust government actions and not words. So far, the Trudeau government’s actions towards business include reneging on a tax cut for small business, banning tanker traffic off B.C.’s northern coast, endless foot-dragging on building pipelines, expanding the Canada Pension Plan, co-ordinating a nationwide tax on carbon and running large deficits to finance what it calls a “transformative” expansion of social programs. The result will be a national economy that underperforms, just as Ontario’s has for over a decade. However, deliverology metrics will miss that outcome when the government evaluates its programs, because it ignores how policies interact with each other in creating the overall business climate.

Philip Cross is the former chief economic analyst at Statistics Canada.

Financial Post July 4th 2016

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