Strong free-market policies, coupled with fiscal prudence, provide the only framework through which truly essential government initiatives can be maintained. Photo Credit: Depositphotos.
As the 2020s reach their halfway point, it is clearer than ever that Canada’ public institutions and social programs are in a state of crisis. In the realms of health care, affordable housing, essential infrastructure and national defence, critical problems are multiplying at an alarming rate. Much of the public discourse regarding this pertinent issue has sought to blame capitalism for gutting the safety net and leaving our nation vulnerable. A careful analysis, however, would reveal that strong free-market policies, coupled with fiscal prudence, provide the only framework through which truly essential government initiatives can be funded and maintained.
From the 1930s through the 1970s, the Canadian economy, like our American neighbours, was extensively financed and regularly stimulated by the federal government. Reliable economic safeguards and a well-equipped military were essential to overcoming the Great Depression, winning World War II and persevering through the early Cold War period. However, the high taxes and regulatory policies used to sustain this economic consensus began to discourage investment, stifle economic growth and cause skyrocketing inflation.
In the 1980s, Canada followed the United States and Great Britain in trailblazing our most recent economic model, neoliberalism, which favoured a laissez-faire approach to fiscal policy, widespread free trade and limited public spending. Such principles were expanded upon in the 1990s and 2000s with the rise of globalism. These developments facilitated enormous economic growth. However, to preserve a tight fiscal ship, the federal governments that were in power around the millennium became notorious for delaying investments in public service and downloading the financial burden to lower levels of government.
The lack of foresight of this stratagem has become undeniable as essential initiatives and programs have descended into an abyss. There is now a palpable desire to forge a better path forward. The remedy of choice, to this point, however, has been to simply raise taxes on the citizens and entities deemed sufficiently wealthy to bear the burden for everyone. This prescription is inadequate at best and counterproductive at worst.
Financial resources can only be redistributed in so far as they exist. Unfortunately, the Canadian economy is suffering through a period of meagre growth, low productivity and underperformance that traces back at least five years. When individuals and enterprises are not experiencing income augmentation, public revenue also stagnates, which compels the government to increase taxes. However, tax hikes compound the problem. Consumers buy fewer goods and services when their disposable income level takes a hit. Businesses, for their part, lose their incentive to become more productive when the financial reward is offset by punitive levies.
Most governments, in their financial planning (or lack thereof), far too often overestimate the financial resources of hard-working families and businesspeople. There is simply not enough to go around. This reality poses a serious problem when the state of our institutions and social programs is fully considered.
We are contending with an unprecedented affordable housing supply crisis. Municipalities large and small are scrambling to upgrade ageing infrastructure to meet the needs of the rapidly growing population. Our healthcare system has been stretched to the brink following the pandemic years, and the Canadian Armed Forces are hastening to rearm under the most dangerous global threat environment in decades.
The humbling state of the Canadian economic picture is a direct result of past federal administrations refusing to meet their financial obligations. There has since been a futile attempt to tax our way into better times. Both approaches were fundamentally flawed and have failed miserably. However, there is another option which, if applied correctly, can lead us back to prosperity.
Canada remains a land of immeasurable opportunity because of its rich natural resources, highly skilled workforce, and proximity to American markets. For our economy to thrive, however, we need pro-growth fiscal and monetary policies. This means lowering income taxes for individuals, eliminating consumer carbon pricing and removing the layers of red tape making investors wary to enter Canadian industries. Simultaneously, the federal government must tighten its belt drastically to avoid all non-essential spending, and to maximize the number of financial resources that can be applied to the dire needs of housing, critical infrastructure, health care and national security.
As commerce increases, and the economy expands, government revenue will also grow. Unlike when taxes are raised, however, this capital will be allocated as the nation itself becomes richer, meaning that the resources will be fiscally sustainable, and taxpayers will not bear an additional burden. Moreover, if these funds are spent wisely, to rebuild the initiatives of public interest specified above, Canada will become an even more attractive investment destination, paving the way for long-term affluence.
In these turbulent times, it is nearly impossible to predict what is coming down the pike. Regardless of what eventualities our nation faces in the coming years, however, we must remember one simple truth: When our public institutions and social programs are thriving, it is not despite capitalism, but because of it.
Nick Redekop completed his Honours Bachelor of Arts Degree in Labour Studies at Brock University. He has previously served in municipal and federal politics. In his free time, Nick enjoys following sports, taking part in outdoor activities, and reading biographies. Nick resides in Niagara Falls
