I enjoyed being part of the recent Turning Point Webinar series. It was primarily a series of discussions about the New Brunswick economy including the link between economic growth, government finances and the quality and sustainability of public services (the Saillant thesis). We also talked about entrepreneurship as a key part of a strong economy. We talked about demography and the labour market and how ensuring we have a strong talent pipeline is fundamental to a strong economy. We talked about industries with growth potential and the social economy and the vital role its participants play in our society.
But, as is normally the case in New Brunswick, many folks want to change the channel to social issues and challenges. We also heard a lot about income inequality, systemic racism, people who struggle to attach to the labour market, environmental concerns, etc.
A key part of the Saillant thesis is that ensuring at least a modest level of private sector growth (and the resulting tax revenues) is needed to provide the funding to work on social, environmental and community challenges.
According to Statistics Canada, provincial government own-source revenue relative to total GDP has risen by 26% between 2000 and 2016. Basically, relative to the size of the economy the provincial government is extracting more taxes out of the economy now than it was back in 2000. Remember this is just GNB taxes and other fees. Add in federal government taxes and municipal taxes and the total tax burden relative to GDP is in the range of 35%.
So, how do we square the sides? How do we encourage policy makers and the public to get interested in and support policies that lead to solid economic growth? By linking economic growth and social objectives more directly.
I suggest we frame this conversation in terms of sharing the dividends of growth moving forward. I was going to use UNB professor Dan Doiron’s term, the ‘spoils of growth’ but that sounds a little too mercenary.
The global narrative has been that the dividends of growth over the past 30+ years have gone to too few.
I think this narrative is too simplistic but on the other hand we certainly can and should be more deliberate about linking economic growth to social and community goals.
If we get back to a solid rate of economic growth (pre-2008 levels), if we attract and develop enough talent to ensure this level of growth, if we collectively work on growth opportunities, if we encourage and support the entrepreneurially-minded, if we work on competitiveness so that New Brunswick attracts private investment, then we can talk about sharing the dividends of growth:
-Entrepreneurs and those deploying capital should make a decent return on their investment.
–Workers should get their share of the dividends in the form of wage growth.
-Communities should get more tax revenue to ensure they can remain great places to live.
-The provincial government should get its share of the dividends to sustainably fund public services and invest in infrastructure.
-We should use some of the proceeds of growth to ensure New Brunswick can meet its environmental commitments.
-We should work to protect the most vulnerable and innovate our social support systems.
-We should invest properly to ensure newcomers can settle and thrive in our communities.
If we get this right, we we can have our cake and eat it, too.