Time to Dust Off an Old Book

Written by Sarah MacMaster

18th Century economist and moral philosopher Adam Smith’s monumental work, The Wealth of Nations, convincingly makes the point that the true wealth of a nation is not measured by its gold and silver, but rather, the capital generated by the production of goods and the resulting flow of goods and services. Smith knew that the most prosperous societies are those that allow their citizens to accumulate capital, because, if people have a dollar to spare and something to spend it on, they’ll spend it...and the person who gets it has the opportunity to do the same thing.

Let’s say you just sold a few lambs and there’s a hundred-dollar bill burning a hole in your pocket. And it’s high time you took your Landowner friends out for beer and wings at, oh, let’s say Local Heroes in Ottawa. After you’re all fed and watered your bill for the evening comes to $82.00 – and because of the exceptional attention provided by a certain waitress named Sarah – you decide to leave her the remaining $18.00. The proprietor of that business benefits, his employees benefit, and his suppliers and creditors benefit. He gets to keep some of that $82.00 to spend on whatever he wishes, and Sarah can use her tip for a hair-cut, and the hairdresser can use it for her car-payment, and so on – the ripple effect continues. Wealth begets wealth. And it doesn’t take a genius to figure out that all the participants in this pass-the-buck relay race will never move off their starting blocks if you didn’t have one hundred dollars to spend in the first place.

Remember that “hands-in-your-pockets” bank ad that was on TV a year or so ago; some poor groik wandering around with a banker trying to fish out his wallet? Well you can rail all you want about interest rates or service charges, but if you give your extra $100 to a bank, at least your decision was discretionary; >you did have other choices. It’s the non-discretionary spending of your assets that really hobbles your horses – the chunk that goes to Mr. Guvmint Man.

Smith (a classical liberal) never argued against the necessity of government per se, but his work was unreservedly a blueprint for the advancement of the common folk – so it should be no surprise to anyone that most politicians and bureaucrats (and corporations in favour of self-serving regulations) would forsake Smith in favour of Keynes, Galbraith or Marx, whose economic treatises were much more friendly to the idea that the steadying hand of state control is necessary to keep the commoners from getting too uppity. It boils down to two opposing schools of thought: Smith’s plans for long-term societal good, versus continually improving the lot of an expanding elite, as per Dalton McGuinty’s Ontario, where the economic shambles have hit very close to home.

I’m not talking about the considerable skill it must take to move an economic powerhouse of a province from “have” to have not” status in four short years. And I’m not talking about the fact that Ontario’s deficit per capita is triple that of flat-broke-and-busted California’s. No, I’m back to talking about that spare $100.00 that you used to have in your pocket. Still have it? No? Where did it go?

Was it McGuinty’s health ‘premium’ that ate it up? How about the increase in your MPAC assessment, did that take a chunk of it? And the HST…that new tax that took another $1000.00 from your family this year, the tax that is good for business, the tax that is going to create 50,000 more jobs. How long do we have to wait for those benefits to kick in?

We know that answer – and we’re not economists or political scientists. We know what Smith knew all along: that only the private sector can generate wealth. A government job doesn’t create wealth, it depletes it. Private sector employment on a government contract doesn’t create wealth, it consumes it. And the old argument that “government workers pay taxes too” falls apart as well, because, as Kate MacMillan replied to a civil servant who made that very claim on her Small Dead Animals blog: “No you don’t, you just hand some of mine back.”

There’s no doubt we’re in a predicament, and the problem can be stated in a simple question: What is the ratio of private sector to public sector workers that is needed to ensure that a society has a government that can provide essential services to its population without depleting the nation’s wealth? And if you need a bit of convincing that the ratio is badly skewed, feel free to browse either of the sites at the bottom of this column. Then drop a line to your MPs and MPPs and let them know your thoughts about changes you’d make to, oh let’s say, the Ontario Ministry of Culture, or, Status of Women Canada, that might help you get your hundred dollars back.

Govt. of Canada - Departments and Agencies

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