24 Hours Toronto - - News - FRED MCMA­HON

In a global rank­ing of 159 coun­tries and ter­ri­to­ries, Canada has fallen from the top 10 in eco­nomic free­dom for the first time ever—and things are get­ting worse.

Eco­nomic free­dom is the abil­ity of in­di­vid­u­als and fam­i­lies to make their own eco­nomic de­ci­sions free of gov­ern­ment in­ter­fer­ence—what to buy, whether to start a busi­ness, where to work, whom to hire, and so on. Re­search from around the world has demon­strated that more eco­nomic free­dom spurs eco­nomic growth and pros­per­ity, along with a num­ber of other pos­i­tive out­comes such as women’s progress, democ­racy and peace.

Some quick his­tory. Pierre Trudeau be­came prime min­is­ter in 1968. And the first mea­sure­ment of eco­nomic free­dom took place in 1970—Canada was third in the world (with a score of 8.0 out of 10 on the eco­nomic free­dom in­dex). Dur­ing the Trudeau years, eco­nomic free­dom in Canada de­clined, then rose in the 1980s and was above 8.0 most years from 1990 on­ward, par­tic­u­larly af­ter the “Chre­tien Con­sen­sus”—the ef­fort by Ot­tawa and sev­eral prov­inces to get spend­ing, deficits and debt un­der con­trol and in­tro­duce more com­pet­i­tive eco­nomic poli­cies.

Sub­se­quently, Canada sur­passed the United States in eco­nomic free­dom in 2009 and re­mained ahead un­til now when, ac­cord­ing to the 2017 Eco­nomic Free­dom of the World Re­port re­leased last week, we’re tied with the U.S. at 11th (with a score of 7.9 out of 10).

But cru­cially, the lat­est rank­ings are based on 2015 data (the ear­li­est avail­able global data), col­lected be­fore the Canadian pol­icy land­scape changed dra­mat­i­cally.

We now see deficit-spend­ing by Prime Min­is­ter Justin Trudeau’s gov­ern­ment— in fact, fed­eral spend­ing has grown from just over $5,500 per Canadian (in 2017 dol­lars) in the mid-1990s to more than $8,300 in the 2017 bud­get. Fed­eral debt has reached 53 per cent of GDP and grow­ing (up from 39 per cent in 2007). And higher fed­eral taxes in­clude a “car­bon floor” that es­sen­tially forces prov­inces to en­act costly car­bon-pric­ing schemes.

Among the prov­inces, On­tario is deeply in debt. Al­berta has in­creased taxes and is run­ning bud­get deficits. Bri­tish Columbia is raising taxes. The top mar­ginal per­sonal in­come tax rate is now above 50 per cent in half the prov­inces. And un­less gov­ern­ments across Canada con­trol spend­ing, more and more tax dol­lars will pay for gov­ern­ment debt in­ter­est, which raises the spec­tre of more tax hikes.

The in­creased taxes and spend­ing across Canada since 2015 have re­duced the space for free ex­change and thus re­duced eco­nomic free­dom. In fu­ture years, Canada’s level of eco­nomic free­dom will likely fall fur­ther.

Given the link be­tween eco­nomic free­dom and pros­per­ity that has been clearly es­tab­lished by eco­nomic re­search, a drop in eco­nomic free­dom will have neg­a­tive long-term ef­fects on the liv­ing stan­dards and eco­nomic op­por­tu­ni­ties for Cana­di­ans and their fam­i­lies.

Canada sat near the top of global eco­nomic free­dom rank­ings for years. But ac­cord­ing to the lat­est data on eco­nomic free­dom, Canada has fallen from the top 10 for the first time in our his­tory. Again, de­vel­op­ments in Ot­tawa and across the coun­try since 2015 sug­gest even deeper de­clines in the years ahead, which will re­duce the free­dom and pros­per­ity of Cana­di­ans and dam­age our econ­omy.

Fred McMa­hon is a Fraser In­sti­tute res­i­dent fel­low and holder of the Dr. Michael A. Walker Re­search Chair in Eco­nomic Free­dom.


Canada has fallen from the top 10 in eco­nomic free­dom for the first time ever. Pic­tured: Par­lia­ment Hill.

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