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Daniel Dufort: Pourquoi le libéralisme économique demeure important

Commentary

The following is the first in a series of French-language articles presented in collaboration with the Montreal Economic Institute. The English translation is included below.


Ce qui a existé, c’est ce qui existera,
et ce qui s’est fait, c’est ce qui se fera.
Il n’y a rien de nouveau sous le soleil.
Ecclésiaste 1:9

Certains se demandent si le libéralisme économique est encore pertinent de nos jours. Le monde n’a-t-il pas considérablement changé depuis l’époque d’Adam Smith, et même depuis celle de F. A. Hayek et de Milton Friedman? Qu’est-ce que cette école de pensée d’un passé révolu peut bien avoir à nous apprendre ici et maintenant, alors que pratiquement le quart du XXIe siècle est entamé?

La réponse courte est que, malgré toutes les nouvelles technologies que nul n’aurait pu imaginer il y a quelques siècles, voire quelques décennies, et malgré notre monde plus riche, plus compliqué et plus peuplé, il n’y a rien de nouveau sous le soleil. Autrement dit, malgré tout ce qui a changé, certaines vérités restent universelles et intemporelles.

En tout lieu et en tout temps, l’énergie ne peut être ni créée ni détruite. Il s’agit là d’une loi de la physique. En tout lieu et en tout temps, le commerce est un jeu à somme positive. Plus précisément, chaque partie à un échange volontaire s’attend à voir sa situation s’améliorer, et c’est généralement le cas. Il s’agit là d’une loi économique.

Le monde a changé à bien des égards, mais quelques-uns de nos principaux enjeux, aujourd’hui comme hier, sont attribuables en grande partie à un manque de liberté économique.

Prenons l’exemple de la hausse rapide du coût de la vie. Le libéralisme économique nous enseigne que l’augmentation de la masse monétaire pour une quantité donnée de biens entraînera une inflation généralisée des prix. Les banques centrales du monde entier ont fait gonfler massivement leur monnaie au cours des dernières années, et celle du Canada ne fait surtout pas exception. Cette mesure était en partie justifiée par la nécessité de financer les mesures prises par les gouvernements en réponse à la pandémie. Quoi que l’on puisse penser de l’efficacité de ces différentes mesures, l’inflation s’est emballée comme on s’y attendait, atteignant des niveaux jamais vus depuis que Hayek et Friedman étaient encore parmi nous.

Bien qu’elle soit revenue à des niveaux moins alarmants aujourd’hui, l’inflation reste obstinément élevée. Le libéralisme économique nous enseigne que les gouvernements pourraient aider les banques centrales à stabiliser le niveau des prix plus rapidement, et donc à faire baisser les taux d’intérêt dans un délai plus court, s’ils mettaient un frein à leurs dépenses excessives financées à coup de déficits.

Voilà ce qui en est du coût de la vie en général. Mais qu’en est-il du cas particulier du logement au Canada? D’un bout à l’autre du pays, les acheteurs potentiels sont confrontés à une crise d’abordabilité. Outre les niveaux d’inflation généralement élevés, qu’est-ce qui pourrait expliquer les hausses exceptionnelles du prix des logements enregistrées ces dernières années?

Là encore, le libéralisme économique offre une réponse universelle et intemporelle : si l’on restreint artificiellement l’offre d’une catégorie de biens, ceux-ci verront leur prix augmenter, d’autant plus si la demande est en hausse.

Et effectivement, les municipalités partout au pays ont restreint l’offre de différentes façons. L’administration Plante à Montréal, par exemple, a bloqué des projets représentant près de 24 000 logements depuis son entrée en fonction en 2017. La situation est loin de s’améliorer, et ce, malgré toute l’attention dont elle fait l’objet depuis un certain temps déjà. Dans l’ensemble de la province de Québec, le nombre de mises en chantier a diminué de 35 percent au cours des onze premiers mois de 2023 par rapport à la même période l’année précédente.

La solution, vous l’aurez deviné, est une plus grande liberté économique. Les municipalités doivent réduire et éliminer les entraves bureaucratiques et laisser les promoteurs construire davantage pour permettre à l’offre de rattraper l’explosion de la demande.

Real estate signage showing a home for sale is seen on Monday, May 15, 2023 in Montreal. Christinne Muschi/The Canadian Press.

Même des questions qui semblent n’avoir aucun lien avec l’économie peuvent présenter une dimension économique importante. Par exemple, on parle beaucoup ces temps-ci de diversité, d’équité et d’inclusion des groupes sous-représentés qui ont historiquement souffert de discrimination. Si certaines mesures prises à cet égard peuvent être tout à fait ridicules, cela ne signifie pas pour autant que la discrimination n’existe pas ou que certaines personnes ne subissent pas encore les effets d’injustices passées.

En quoi cela concerne-t-il l’économie? Eh bien, il n’y a pas de meilleure façon d’exclure les groupes marginalisés que de les empêcher de joindre les deux bouts et de les exclure du marché du logement en augmentant les prix en flèche.

Le renforcement de la liberté économique, au contraire, accroît la mobilité des moins nantis, en les aidant à s’aider eux-mêmes. C’est exactement ce qui s’est passé en Alberta dans les années 1990, par exemple, lorsque des réductions importantes des dépenses publiques et du fardeau réglementaire ont mené à une mobilité du revenu beaucoup plus grande parmi le segment le plus pauvre de la population.

Pour bon nombre des problèmes qui touchent notre société, qu’il s’agisse du ralentissement de la productivité ou de la sous-performance persistante de nos systèmes de soins de santé, le problème vient, au moins en partie, d’un manque de liberté économique, et la solution passe, au moins en partie, par une plus grande dose de celle-ci.

Nos dirigeants civiques et politiques, ainsi que nos fonctionnaires, pourraient faire bien pire que de revisiter Smith, Hayek, Friedman et d’autres défenseurs du libéralisme économique pour y puiser les vérités intemporelles que ceux-ci ont découvertes et exposées.


Why economic liberalism still matters

What has been will be again,
what has been done will be done again;
there is nothing new under the sun.
Ecclesiastes 1:9

Many people are wondering if economic liberalism is still relevant in this day and age. Hasn’t the world changed tremendously since the time of Adam Smith, and even since the time of F. A. Hayek and Milton Friedman? What could this school of thought from bygone years have to teach us here and now, almost a quarter of the way through the 21st century?

The short answer is that despite all the new technologies unimagined centuries or even decades ago—despite our richer, more complicated, more populous world—in a very real sense, there’s nothing new under the sun. What I mean by this is that despite all that’s changed, certain truths are universal and timeless.

Everywhere and always, energy can neither be created nor destroyed. That’s a law of physics. Everywhere and always, trade is positive sum—or more precisely, both parties to a voluntary exchange expect to be, and generally are, made better off. That’s a law of economics.

The world has changed in many ways, but some of our main problems today, as in days of yore, are due in large part to a lack of economic freedom.

Take the rapidly rising cost of living. Economic liberalism teaches us that increasing the money supply for a given quantity of goods will lead to generalized price inflation. Central banks around the world massively inflated currencies in recent years, Canada very much included. This was partly justified as a way to fund governments’ pandemic response measures. Whatever one thinks of the effectiveness of those various efforts, as predicted, inflation took off, reaching levels not seen since Hayek and Friedman were still with us.

Although it’s come back down to less alarming levels today, inflation remains stubbornly high. Economic liberalism teaches us that governments could help central banks stabilize price levels more quickly, and so bring interest rates back down sooner if they reined in their deficit-fuelled spending sprees.

So much for the general cost of living. What about the specific case of housing in Canada? Across the country, potential buyers are facing an affordability crisis. What, beyond our generally high inflation levels, could be behind the exceptional increases in housing prices we’ve seen in recent years?

Again, economic liberalism has a universal and timeless answer: if you artificially restrict the supply of a category of goods, their prices will rise—all the more so if demand happens to be increasing.

And indeed, municipalities across the country have been restricting supply in various ways. Montreal’s Plante administration, for instance, has obstructed projects totalling nearly 24,000 units since taking office in 2017. The situation is not exactly improving, either, despite the widespread attention it has been receiving for some time now. The province of Quebec as a whole actually had 35 percent fewer housing starts in the first 11 months of 2023 than during the same period the year before.

The solution, you guessed it, is greater economic freedom. Municipalities need to reduce and remove bureaucratic restrictions and let developers build more so that supply has the chance to catch up with soaring demand.

Even seemingly unrelated issues can have an important economic component. For instance, there’s a lot of talk these days about diversity, equity, and inclusion for underrepresented groups that have historically suffered discrimination. While some steps taken to address this issue can be downright ridiculous, that doesn’t mean there’s no discrimination out there, or that people are not still suffering the effects of past injustices.

So, what’s the economic angle? Well, there are fewer better ways to exclude marginalized groups than to keep them struggling to make ends meet and price them right out of the housing market.

Augmenting economic freedom, on the other hand, increases mobility for the poor, helping them to help themselves. This is just what occurred in Alberta in the 1990s, for instance, when significant reductions in government spending and the regulatory burden led to substantially greater income mobility among the poorest segment of the population.

For many of the issues our society is facing, from lagging productivity to our perennially underperforming health-care systems, at least a part of the problem is a lack of economic freedom, and at least part of the solution is more of it.

Our civic and political leaders, and public servants, could do a lot worse than revisit Smith, Hayek, Friedman, and other advocates of economic liberalism for the timeless truths they discovered and explained.

The Weekly Wrap: Pierre Poilievre’s working-class rhetoric is more meaningful than you think

Commentary

This week‘s edition of The Hub’s Weekly Wrap reflects on some of the past week’s biggest stories, including Pierre Poilievre’s rhetoric deriding the corporate class and championing the working class, political developments around the carbon tax, and what the ongoing revelations of the ArriveCan scandal tell us about the inherent limits of government.

Poilievre’s speech signals a fundamental realignment in Canadian politics

Pierre Poilievre’s speech last Friday to the Greater Vancouver Board of Trade continued to generate a lot of discussion over the past week. It was a notable speech for various reasons, including as he himself noted, it was the first time that he’s addressed a senior business audience since he became Conservative Party leader just over 18 months ago. 

His dismissive comments about corporate lobbyists and strong support for the working class have prompted a lot of questions about what the speech might tell us about Poilievre’s politics and the positioning of a possible Poilievre-led government. For instance, Ginny Roth wrote this week for The Hub about its economic policy implications including the extent to which these populist impulses might conflict with Poilievre’s otherwise orthodox economic views. 

The speech must be understood as part of a broader trend within Canadian Conservative politics in particular and conservatism across the Anglo-American world more generally. It was an expression of a major political realignment. 

Within Canadian conservatism, it reflects a process that started under Stephen Harper’s leadership and has accelerated since his departure. The growing distance between the Conservative Party and the country’s business establishment is a marked departure from the politics of the Mulroney era. 

There are various factors behind it. One is quite practical: the elimination of corporate donations in the early 2000s has led to a decline in the voice and influence of business leaders. Second is a populist tilt in Conservative politics that manifested itself in the Reform Party and persists to the present in the modern Conservative Party. Third is a perceived leftward shift in the corporate community—particularly on issues concerning identity and sexuality—that makes it less of a natural ally to the Conservatives. 

But, as mentioned, these trends cannot be understood as a merely Canadian phenomenon. They’re part of a bigger story of a political realignment occurring across the Anglo-American world in which centre-right parties are increasingly home to working- and middle-class voters and centre-left and even progressive parties are now representative of the professional class. (We have covered the political realignment in various episodes of Hub Dialogues including with David Frum, Eric Kaufmann, Patrick Ruffini, and the late Ed Broadbent.)

Poilievre’s speech was an inherently realignment one. In particular, his message about the working class (“when I’m prime minister, my obsession—my daily obsession—will be about what is best for the working-class people of this country”) signaled that a prospective Poilievre-led government would consciously situate itself in these broader political trends. Like in Great Britain or the United States, the centre of gravity within Canadian Conservative politics is shifting from an entrepreneur to the wage earner. 

What’s interesting though about Poilievre’s realignment strategy is that it’s been part of a mostly orthodox conservatism. His overarching message is still generally about freedom and free enterprise. He hasn’t made major policy deviations from a basic conservatism framework with the exception of recently voting in favour of a legislative ban on replacement workers. 

It may be that a lot of these unconventional Conservative voters are mainly motivated by an aversion to the rise of identity politics on the Left and therefore have somewhat limited expectations from Poilievre and Conservatives on economic or social welfare policies. If so, it’s highly probable that his nods to “anti-wokeism” will remain a key part of his overall message and priorities. 

The upshot: political observers are right to characterize Poilievre’s speech as significant not merely because of what it conveys about him and his politics but also because of what it signals about bigger changes in Canadian politics. We’re going through a realignment. It will shape the next election and define our politics for the foreseeable future. 

Pierre Poilievre, leader of the Conservative Party of Canada, meets with Eliezer Fauni, a trailer mechanic, as he holds a press conference at Gardewine Transport in Winnipeg Friday, January 12, 2023. John Woods/The Canadian Press.
Trudeau’s carbon tax quandary

One of the biggest stories of the week is the growing opposition to the scheduled increase in the carbon tax from $65 to $80 per tonne on April 1. A majority of provincial premiers, including Newfoundland and Labrador’s Liberal Premier Andrew Furey, are now calling on the Trudeau government to suspend the tax hike in the face of ongoing affordability concerns. 

Prime Minister Trudeau and his government have resisted those calls (Finance Minister Chrystia Freeland called them a “net negative”) and rejected claims that their special dispensation for home heating oil late last year creates a fairness expectation for broader relief from the carbon tax. 

In light of these political developments, there’s been commentary in recent days about the causes of the carbon tax’s ongoing unpopularity, including the extent to which the government has mishandled the communications. The prime minister has also sought to make a policy argument that his government’s carbon tax (which uses price signals to influence business and consumer behaviour) is more market-based and less state-directed than the Conservative Party’s plan. 

There may be a communications challenge with the federal carbon tax but the chief problem isn’t that the government hasn’t spent adequately on advertising. It finds its origins back in 2015 when the Liberals weren’t fully transparent about their policy intentions. It may have avoided difficult questions in the election campaign but in hindsight, it laid the groundwork for the public’s disapproval nearly a decade later. 

In a major speech in Calgary in February 2015, Trudeau distanced himself from the top-down impulses of the National Energy Policy and instead committed to a bottom-up climate policy in cooperation with the provinces that could include carbon pricing (“We will set a national standard in partnership with provinces and territories, one that gives them the flexibility to design their own policies to achieve those targets, including their own carbon pricing policies”). The party’s platform used similar language. The clear implication was that a Trudeau-led government would support provinces that adopted carbon pricing but it was far from clear at the time that it would become a non-negotiable expectation. 

The consequence is that the 2015 election didn’t really litigate the Liberal Party’s carbon tax. How could it? The party’s policy, as presented during the campaign, broadly matched the Harper government’s own approach in which B.C., Quebec, and Ontario had carbon pricing and other provinces didn’t. If the Liberals had been straightforward that they intended to impose a national carbon tax with essentially no flexibility for the provinces, one cannot help but think that the 2015 election campaign would have taken on a different dynamic. 

As for the prime minister’s latest claims about the market orientation of the carbon tax, they’d represent a semi-persuasive argument, including presumably among conservatives who ought to generally favour market-based incentives rather than command-and-control regulations and subsidies, but that’s of course not what the Trudeau government has delivered. 

Carbon pricing (including both the consumer and industrial prices) represents something like 20 or 25 percent of projected emissions reductions over the coming years. Regulations and subsidies are doing most of the heavy lifting. Keep in mind that this a government that has announced billions of dollars in subsidies to essentially create an electric vehicle industry in the country and remains committed to a sectoral emissions cap for the oil and gas industry.  

The reality is that the Conservatives and Liberals broadly agree on climate policy with the major exception of the consumer carbon tax, which represents a small and declining share of emissions reductions. They’re both prepared to regulate and subsidize in order to reach the country’s emissions targets—in fact, given that the Trudeau government’s emissions targets are more ambitious than the Harper government’s, there’s a good case that it’s even more prepared to use regulations and subsidies than the Conservatives. 

One way to think about it is: the politics of federal climate policy is a version of the 80:20 rule. There’s a consensus, for better or for worse, on about 80 percent of climate policy and a disagreement about roughly 20 percent of it. 

We effectively have a bi-partisan consensus in favour of regulating and subsidizing our way to something approaching our climate targets. When we look back with hindsight, there’s a strong chance that this week’s mounting opposition to the carbon tax will be seen as having further solidified that consensus. 

Ottawa is too incompetent to be corrupt

This week’s parliamentary committee testimonies of the two principals behind GC Strategies, the company at the center of the ArriveCan scandal, focused a bit unexpectedly on the self-evidently fake testimonials on its website from government officials like the chief information officer or chief data officer of Canada. But these exchanges between Conservative MP Michael Barrett and first Kristian Firth and then Darren Anthony weren’t a digression from the main issues behind the ongoing scandal. 

They reflect the principal problem: federal procurement has become gamed by empty-shell companies—including ones specifically created to arbitrage affirmative action policies—who’ve stripped out significant margins for themselves and then passed off the work to others. 

The web testimonials convey the lack of seriousness and rigour inherent in the federal procurement process. It’s as if Firth and Anthony weren’t self-conscious at all that their rent-seeking would face much scrutiny from government officials. They knew Ottawa was an easy mark. 

Launching the company (which they admitted they named after the Government of Canada) in 2015, they pulled together some buzzwords about “visionaries” and “strategic thinking” and “value for money” and some equally banal bureaucratic job titles and that’s all they seemingly needed to do to win hundreds of millions of dollars in government contracts and be named one of Ottawa’s fastest-growing companies within just three years. 

The whole episode seems to be shockingly simple. At least for now, there doesn’t appear to be evidence of government corruption. It’s rather a case of institutional ineptness and ultimately government failure. 

The fake testimonials should be understood as a symbol of Ottawa’s broader state capacity problem. If the federal government is prepared to award major contracts to a two-person company that cannot even be bothered to make its contrived customer endorsements semi-plausible, how much confidence should Canadians reasonably have about its ability to bring an end to the internal combustion engine or national poverty or any of the other incredible goals that it has set out for itself? The answer is virtually none. 

In this sense, Firth and Anthony may be the inadvertent faces of a renewed libertarianism—a rediscovered skepticism of big government—in the country. Their extraordinary testimonies this week should remind Canadians of the inherent limits of state action and the need for clear constraints on the size and scope of government. 

If so, the $19 million or whatever they ultimately received for the ArriveCan contract, may have actually been well spent. There’s a real testimonial to add to their website.