Liberals from all over the country are meeting this weekend at the Liberal Biennial Convention in Montreal. Earlier this week, the leader of the party laid out a policy vision in this seven-minute video. It is now up to the delegates of the convention to vote on a series of policy proposals that—if done correctly—will enhance the vision laid out by Mr. Trudeau. I would like to offer some unsolicited policy advice in response to delegates voting on those proposals.
My first piece of advice is to engage Canadians, particularly those that you do not agree with. You have heard criticism of the ideas in the video, with Stephen Gordon, Andrew Coyne, Alex Usher and many others taking issues with all or part of it. Do not dismiss this criticism, as there is a great deal to learn from these comments. Gerald Butts tweeted a link to Stephen Gordon’s criticism of the video, stating “Constructive criticism of our economy piece from @stephenfgordon here. Worth reading even if you disagree.” This is the right attitude to take, as there is much that can be learned from constructive critics. A set of policies that cannot withstand constructive criticism now will be of little use in a general election.
Like Stephen Gordon, I believe Mr. Trudeau’s question of:
I worry that at some point, Canadians will say: “Why should we support a growth agenda if it doesn’t help my family?”
is a compelling one and can be the sound basis for policy. I would frame the policy question as “What mix of policies can we use to ensure economic growth and the benefits of that growth are shared by all.” The latter is the novel and tricky part because, aside from a small minority in the Green Party, all political parties strive for economic growth. It is much more difficult to ensure that the benefits are widespread. However, aside from simple redistribution, there are at least two general ways that prosperity can be broad-based.
The first way is through promoting competition. Markets that lack competition will tend towards high prices and poor quality for consumers, slow productivity growth, and high profits for their owners. The Liberal Party needs to identify the market imperfections and barriers to entry that cause a lack of competition, such as foreign ownership restrictions in the oil sands and airline markets, and find ways to break down those barriers. High and uneven tariffs also restrict consumer choice and raise prices paid by consumers. Increasing competition, however, does not necessarily mean less government regulation in all instances; the Competition Bureau plays a vital role in ensuring that businesses do not engage in anti-competitive behaviour. A prosperous Canada is one where consumers are not overpaying for goods and services.
The second way is through increasing the demand for labour. Stephen Gordon is absolutely correct when he states that “the surge in income at the top has been driven by earned income, not their asset holdings.” The 1% (or 0.1%) have seen their incomes rise dramatically as the demand for their services have increased thanks to the superstar effect. Our challenge is to find ways to increase the labour demand for the rest of us. Having a strong economy is a necessary, but not sufficient condition for strong wage growth. The decoupling of income growth and middle-class wages in the United States since 1970 is a prime example where the two did not move in tandem. The most common solution given for increasing labour demand is ensuring that our graduates have the type of skills that are currently in demand by employers. This is important, but should not be the end of the discussion. Tax reform can also play an important role. There are many ways in which the tax system favours companies finding a technological solution to a problem or offshoring a process rather than hiring a worker. The tax code should be neutral between these activities, so finding and eliminating areas where it discriminates against labour can both enhance productivity and increase wages.
This weekend when Liberals are voting on policy resolutions, delegates should ask themselves a series of questions:
Does this policy promote broad-based economic growth? Will it increase productivity and lower prices, through enhanced competition or through some other means? Will it strengthen the overall economy while also increasing the demand for labour?
If they cannot answer ‘yes’ to at least one of these questions, the proposal likely does not fit into the vision articulated by the Liberal leader.
Thursday, February 20, 2014