even before the welfare state, it certainly helped to transfer wealth from taxpayers to railway builders during the opening of the west, for example, from taxpayers to munitions manufacturers during time of war, and from taxpayers to civil servants and politicians in every era. There is a point, however, past which it ceases to be the exception, requiring strenuous justification and causing moral anxiety, and becomes the common coin of everyday life. Ultimately everyone asks for such special dispensations, to get what they want by having the state take it from someone else.
PUPPETRY’s Legacy
Let’s tie this back to the earlier discussion about how Canada and the United States have diverged over the past few decades. In 1960, Canada and the United States spent very similar shares of their national wealth on government (Canada spent 28.6 per cent of GDP on government, the United States, 28.4 per cent) and had very similar standards of living (a gap of about 8 per cent in favour of the United States). Over the ensuing forty years, spending by government grew by only about 6 percentage points in the United States, but at its peak by over 20 percentage points in Canada,48 although it has since fallen back, in large part in response to the ending of the demographic dividend of the baby boom that occurred in the mid-eighties. Over those decades U.S. per capita income grew by 222 per cent, whereas in Canada it grew by only 126 per cent.49 Even at this relatively low level of size of government, the United States has clearly strayed into the borderlands between a making society and a taking one.50
Canada, by contrast, has shifted decisively to a taking state. If Marxism, feminism, Keynesianism, urbanism, and all the other -isms that so powerfully shaped the Western zeitgeist of this era were the explanation of the growth of the Canadian state in those years, we would expect similar societies to be influenced by them to roughly similar degrees. The changes in Canada over those years are so powerfully different from those in the United States, however, that we need to look elsewhere for the explanation. The rest of the first half of this book lays out in detail the mechanisms by which we have shifted from a making to a taking state.
A sad irony of this evolution toward a taking state, by the way, is that the outcomes in social equity are no better in high-spending societies than lower-spending ones and are frequently worse.51 This underlines the vacuousness of the claim that the growth of the state in Canada has made for a fairer society, a result that might have justified our relative decline in standard of living compared to our southern neighbours. What it does reliably produce, however, is a huge flow of resources through the hands of government, resources available for plundering by those adept at PUPPETRY (rent-seeking). That no doubt helps to explain why much of the spending of governments in Canada is in fact “churning”—money taken from the middle class through taxation and then returned to that same middle class in the form of various “benefits” conferred by politicians seeking to ingratiate themselves with articulate and motivated middle-class voters.52
Symmetry Casts Its Shadow Ahead
Population aging and declining fertility, however, will require us to make choices. On the one hand, we have the option of a continued expansion of the state and its allied economic underperformance. On the other hand, we might choose rolling back the size of government and unleashing the productive power of Canadians to make more through taking less. This phenomenon of population aging pressing governments to reduce their take is already observable in Europe, which is farther along the curve of demographic decline than we are. For instance Sweden, the archetypal welfare state, has been forced by demographic change to reduce the take of government from the economy.53
In fact the decline in size of government over the last decade (of which Sweden is a striking example) is led by European economies “that are experiencing the third phase of demographic transition, lower fertility rates, which are exacerbating the problem of an aging population with higher life expectancy rates. These developments are forcing government to reduce its size.”
In any case, just to maintain the current levels of public services and programs to a rapidly aging population is expensive. If we left current levels of taxation alone and current benefit entitlements unchanged, the results of aging on our federal and provincial budgets would be sobering indeed. Pierre Fortin, a Quebec economist, has looked at the cost increases (pensions, health care, etc.) of an aging population and set them against the cost savings (e.g. lower program costs for young people, such as education) in 2020. If the conditions he projects in 2020 were to have obtained in 2008, he calculates that it would have left a hole in federal and provincial budgets combined of roughly $40 billion.54
As daunting as the future fiscal affordability of our past behaviour might be, however, Canadians might nevertheless prefer to keep on the same path they have been on, even at the cost of lower growth, weaker incomes, and high cost of government with little to show for it, if they think that they are getting other important benefits. This has certainly been the message of much of the political class of the last fifty years, that Canada is one of the top countries in the world, that we are nicer, kinder, and gentler than Americans, that we have shed an uptight colonial past and have entered a brave new world of equality and freedom guaranteed by big government.
Too bad this message is self-serving twaddle.
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