Once and a while you read a good theory that seems to make good sense but then the author uses examples that actually disprove the theory. Such is the case with the commentary today from a Canada West Foundation editorial in the TJ.
Governments in Canada routinely seek to lure economic development away from other Canadian jurisdictions by offering subsidies and tax breaks. The end result is a race to outbid one another for something that should not be bought in the first place.
See, that sounds like a good idea. But then the example:
The latest example comes courtesy of the Ontario government, which is offering subsidies to video game developers and publishers to move to Toronto, likely at the expense of the existing video-game industry in Vancouver and Montreal.
Oops. Mr. Roach forgets to mention that Vancouver and Montreal built their large video game industries on subsidies – lucrative subsidies. Ask any NB company in this biz (the few) and they will say that we can’t compete with either Vancouver or Montreal (let alone Toronto). So all Ontario was doing was leveling the playing field – something that Mr. Roach forgets to mention.
As businesses are lured from one part of the country to another, the national economy becomes less competitive and resources are wasted as governments compete against one another.
Again, another good and realistic point. But without total subsidy and tax break disarmament, why should one jursidiction let another one get ahead? What if the business being ‘lured’ was initially ‘lured’ by huge subsidies?
Ultimately this kind of stuff leads places like New Brunswick not be competitive because subsidies and tax incentives are built right into the competitiveness of a jurisdiction.
I have pointed out on many occasions that subsidies are not a critical part of attracting investment but they are a small part and if other jursidictions are way out front on tax incentives or subsidies, they will win the business and New Brunswick will lose.
Until all provinces and states stop offering tax breaks and subsidies, New Brunswick should be in the game. Unilaterally disarming will end up costing us much needed investment. We will hold are heads above the fray while we sink in the quicksand of not enough economic development.
The last point here is that agriculture is the most subsidized industry in Canada – by a wide margin and we don’t hear the Canada West Foundation talking about that.