Socialist capitalists

There are very few guarantees in life.

Tom Peters, probably the most successful management guru of the 1980s, once said that American businessmen were true capitalists – until they walk through the front door of their businesses each day. Then they spend their time trying to wring tax breaks, grants, monopolies and other non-market benefits out of government.

Normally, this is under the umbrella “everyone is doing it so we have to be in the game”. You know what I mean. If my competitor is getting a tax break or government forced positive market conditions, it is only fair that I do as well. And I am sensitive to that argument. Governments shouldn’t change the conditions on the playing field to favour one over the other because if they do, it forces this kind of incentive war of attrition.

The interesting thing is that New Brunswick is actually one of the least offenders in this area. The think tank Fraser Institute periodically publishes a report on the amount of government subsidies to industry by province and New Brunswick, adjusted for the size of its economy, routinely ranks among the lowest users of subsidy to industry.

If we are going to use incentives, I favour government using tax breaks and other incentives where there is a clear return on the investment of taxpayer money on that investment. I do not recommend utilateral disarmament.

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One Response to Socialist capitalists

  1. John says:

    The proper term is “corporatism”, the idea that the economic environment revolves around “corporations” being given protections by government programs.

    Simply by having the monopoly on regulation means that the governments are providing protection to corporations against additional competition. Corporation A vs Corporation B fighting for who gets the most tax breaks is really just front. In the end, they don’t care all that much. Tell them that regulations will be lowered, however, and watch them scream at the prospect of new competition in their market.

    Here’s an example. If you let restaurants choose either government inspection, or to go with a private inspection agency, you’ll see tons of new inspectors pop up. They’ll be offering their services are competitive rates. They will also be incredibly concerned with their own reputation, so they’ll want to make sure they’re in good standing with the BBB.

    From there, people will feel more comfortable seeing the sticker saying “Inspected by David’s Food Safety, a BBB Trusted Company”, rather than “Inspected by NB Department of Health”. Fewer inspectors will be needed by the province, leading to lower cost to run the program, and lower taxes for everyone.

    So, short version: shrink government programs so everyone gets lower taxes, instead of giving “tax breaks” and “incentives”.

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