What industries should the state never subsidize?

[Machjo]

While I think the government should subsidize no industry without a very solid rationale for doing so, I think there are certain industries that the government absolutely should not subsidize on ethical, economic, or other grounds. I would include among them:

 

1. Any addictive product or service for recreational consumption (such as alcohol, tobacco, lottery tickets, etc.). I hope the reason for that is obvious.

2. Any animal product or byproduct. Research shows that a meat diet is multiple times more economically inefficient than a vegan one in terms of food production, resource consumption, land use, and overall cost. This raises both economic and ecological concerns. Excessive meat consumption can also undermine public health due to high cholesterol content and other factors. This too translates to additional health-care costs subsidized by the taxpayer. Then there are the ethical considerations concerning the treatment of the animal.

3. Resource-extraction industries. Given our finite resources, any extracted resource should be sold on the market at its true cost, just like meat and tobacco.

What other products and services would you add at the top of the list of industries to not subsidize?

[cannuck]

There is simply no justification for governments of any kind anywhere or anytime to subsidize ANY "industry".   At least that is what I feel.  The problem is when government sticks its nose into ANYTHING bureaucracy building, stupid costs, corruption and partisanship kick in and they put themselves in the place of choosing winners and losers.   The business of government should be to govern and should be constitutionally limited to regulating and enforcing.

The sad part is: no other government in the world (except for a brief time New Zealand) followed such a policy.  We have to compete in a world of governments who see it as their right and duty to dispense privilege (and attendant benefits) to their "friends".  And the biggest player is the economy that owns/dominates most of Canadian business, our biggest customer, our largest trading partner and our biggest competitor.   Thus, why I am so upset with having a government led by a PM and cabinet who are generally clueless except for being well aware that they are beholden to their masters in the party of all interfering policy and execution.

Edited October 6, 2018 by cannuck

[Queenmandy85]

If MacDonald had not subsidized the railroad, we would not have a country. If the current government had not bought the Trans Mountain pipeline, it would never be built. 

[cannuck]

those are assumptions we can never prove.   We already have a country, so we don't need to subsidize transportation any longer.   The Trans Mountain pipeline could have been built very easily - but simply giving approval to the private owners who were trying to build it.

[Wilber]

45 minutes ago, cannuck said:

those are assumptions we can never prove.   We already have a country, so we don't need to subsidize transportation any longer.   The Trans Mountain pipeline could have been built very easily - but simply giving approval to the private owners who were trying to build it.

Actually, BC joined Confederation on the condition the railway was built. 

[Queenmandy85]

48 minutes ago, cannuck said:

those are assumptions we can never prove.   We already have a country, so we don't need to subsidize transportation any longer.   The Trans Mountain pipeline could have been built very easily - but simply giving approval to the private owners who were trying to build it.

Getting approval from the BC government is the tricky part. A private owner can't over-ride the government and as long as Weaver holds the balance of power, only the Feds can push it through.

[cannuck]

and the main "fed" is a wee bit short on kahunas

[Machjo]

6 hours ago, cannuck said:

There is simply no justification for governments of any kind anywhere or anytime to subsidize ANY "industry".   At least that is what I feel.  The problem is when government sticks its nose into ANYTHING bureaucracy building, stupid costs, corruption and partisanship kick in and they put themselves in the place of choosing winners and losers.   The business of government should be to govern and should be constitutionally limited to regulating and enforcing.

The sad part is: no other government in the world (except for a brief time New Zealand) followed such a policy.  We have to compete in a world of governments who see it as their right and duty to dispense privilege (and attendant benefits) to their "friends".  And the biggest player is the economy that owns/dominates most of Canadian business, our biggest customer, our largest trading partner and our biggest competitor.   Thus, why I am so upset with having a government led by a PM and cabinet who are generally clueless except for being well aware that they are beholden to their masters in the party of all interfering policy and execution.

You forgot to mention Hong Kong. It's about as free-market as they come.

[Machjo]

49 minutes ago, Wilber said:

Actually, BC joined Confederation on the condition the railway was built. 

So what? Sometimes a smaller country is better. Hong Kong, with its limited resources and small size, was forced into a more open world market and to its benefit. Compare that to large states and organizations like the EU, the US, Canada, etc. They're the ones with high statism because they become arrogant.

 

Had BC never joined Canada, due to its small population and size, it might have come out looking like Hong Kong today with its free markets because the state of BC would just not have been big enough to maintain any protectionist policy. Sometimes small is better and a large country like Canada might make the government and the people more arrogant and so lead to lower-quality governance.

[Zeitgeist]

24 minutes ago, Machjo said:

So what? Sometimes a smaller country is better. Hong Kong, with its limited resources and small size, was forced into a more open world market and to its benefit. Compare that to large states and organizations like the EU, the US, Canada, etc. They're the ones with high statism because they become arrogant.

 

Had BC never joined Canada, due to its small population and size, it might have come out looking like Hong Kong today with its free markets because the state of BC would just not have been big enough to maintain any protectionist policy. Sometimes small is better and a large country like Canada might make the government and the people more arrogant and so lead to lower-quality governance.

I would never trade what we have in Canada for what Hong Kong has.  Apart from year-round hot weather, Canada has it all.

[Machjo]

7 minutes ago, Zeitgeist said:

I would never trade what we have in Canada for what Hong Kong has.  Apart from year-round hot weather, Canada has it all.

Of course Canada has it all including tariffs, quotas, supply-management, Canadian-content rules, official-bilingualism bureaucracy, CRTC rules, etc. etc. etc.How's your weekend, Comrade?

Edited October 6, 2018 by Machjo

[Wilber]

1 hour ago, Machjo said:

So what? Sometimes a smaller country is better. Hong Kong, with its limited resources and small size, was forced into a more open world market and to its benefit. Compare that to large states and organizations like the EU, the US, Canada, etc. They're the ones with high statism because they become arrogant.

 

Had BC never joined Canada, due to its small population and size, it might have come out looking like Hong Kong today with its free markets because the state of BC would just not have been big enough to maintain any protectionist policy. Sometimes small is better and a large country like Canada might make the government and the people more arrogant and so lead to lower-quality governance.

Hong Kong was built by the Brits to take advantage of China. It didn't exist before they arrived.

[Zeitgeist]

26 minutes ago, Wilber said:

Hong Kong was built by the Brits to take advantage of China. It didn't exist before they arrived.

Yup it’s really just a city state.  Apart from efficiencies within our largest cities, I don’t see much to draw from by way of example. 

[Machjo]

1 hour ago, Wilber said:

Hong Kong was built by the Brits to take advantage of China. It didn't exist before they arrived.

I agree. It came about through the opium wars for which even British journalists at the time admitted the UK was morally at fault in spite of its military victory against the Qing Dynasty. I'm in no way excusing Britain's behaviour in creating Hong Kong. Then again, had the Opium Wars not happened, the Qing Dynasty probably would have never fallen and instead evolved into a constitutional monarchy. But that's speculation of course.

That said, for all of Britain's wrongs, it did make up at least in small part for its shameful behaviiour by administering Hong Kong superbly well even if that same behaviour may have fed the rise of the Communist Party and so the ruination of the mainland.

[Machjo]

37 minutes ago, Zeitgeist said:

Yup it’s really just a city state.  Apart from efficiencies within our largest cities, I don’t see much to draw from by way of example. 

Not even in its trade policies? Those have nothing to do with urban development but rather with international trade.

[Zeitgeist]

Yes, but Hong Kong is a very different kind of a place.  Does it have much of an agricultural sector, high immigration, regional disparity, far-flung indigenous communities (and the need for cultural protections)?  Lowering  tariffs must be reciprocal.  Otherwise, we may have cheap goods in our marketplace, but we won't have many jobs or exports to generate the income necessary to buy much of anything.

[Machjo]

10 minutes ago, Zeitgeist said:

Yes, but Hong Kong is a very different kind of a place.  Does it have much of an agricultural sector, high immigration, regional disparity, far-flung indigenous communities (and the need for cultural protections)?  Lowering  tariffs must be reciprocal.  Otherwise, we may have cheap goods in our marketplace, but we won't have many jobs or exports to generate the income necessary to buy much of anything.

Actually, Hong Kong has quite open borders when it comes to immigration, bearing in mind that its social services are much more spartan which naturally affects the kind of immigrant that Hong Kong attracts.

 

As for lowering tariffs, Hong Kong did so unilaterally. That's not to say that Hong Kong does not engage in trade agreements to deal with more complex matters like phytosanitary rules, patent rules, packaging and labeling and language rules, etc., but at least on tariffs and quotas, it's been unilateral and highly successful.

As for agriculture, Hong Kong just imports. In that respect, there are some similarities. In Hong Kong's case, it's not the best place for agriculture due to population density. In Canada's, due to climate. In that sense, it would actually make more economic sense for Canada to copy Hong Kong's example of importing most of our food and producing other things that we could produce more efficiently instead.

 

As for cheap goods, only a fool would complain about that. Not only do Hong Kongers earn more than Canadians on average, but things cost less there too. That means that in terms of purchasing power, they're actually even wealthier than their income would suggest compared to Canadians.

So yes, Canada could learn from Hong Kong on all of these points. Hong Kong has no natural resources either.

 

And on the cultural front, Canada actually has an edge over Hong Kong. Hong Kong speaks Chinese (though Cantonese, granted) which makes far more vulnerable to the mainland's cultural influence. In Canada, most Quebecers don't know English and many in Northern Canada don't know English well either. Add to that that many in Canada's cities also know an unofficial language. This makes Canada quite resistant to US cultural influence. Even I myself know four languages, three of which are not English and two of which are not even official languages of Canada. I do read books, watch films, and listen to music in all four languages. Canadians are quite resistant to excessive US cultural influence without state Canadian-content rules.

Edited October 6, 2018 by Machjo

[Zeitgeist]

Hong Kong is vulnerable because of the lack of diversity in its economy.  Yes it's a wealthy jurisdiction.  People work hard and it has a high-tech economy (and sky-high real estate prices, impacting housing affordability).  Yet it relies heavily on trade with other jurisdictions for its food and energy supply.  If Canada ceased to trade tomorrow, we'd take a big economic hit, but we'd have enough food for the country from the BC Fraser valley alone.  We'd miss out on citrus fruit and peppers, but food wouldn't be an issue.  We have plenty of hydro power, oil, and natural gas -- far more than our population needs.  We also have enough diversity in our manufacturing that most household items would still be available domestically.  Canada's biggest challenge today is moving human resources where they need to be access our resources and really make our northern communities, especially the small, largely indigenous ones, economically viable.  Most of our other economic concerns are minor.  Our trade is in good shape, though we need to diversify away from the U.S..  We need greater efficiency moving goods and people and greater production efficiency (productivity).  We're trying to lead in every economic sphere with a small population spread across a huge land mass.  Population density helps to make communities viable, but we'd be foolish to put all our eggs in the big-city basket.  Toronto, Vancouver, Montreal, Calgary, Edmonton and Ottawa will always attract people, and those cities will build more efficient transportation, broadband, and other infrastructure.  Same goes for our many smaller cities in the south: Victoria, Kitchener-Waterloo, Quebec, Sherbrooke, Halifax, and so on.  Our farms in the south are also doing fine.  I'm interested in policy that improves the quality of life in both the cities and the small communities, especially in the North.  We need to do both. 

I don't share your anxiety about language in Canada.  Quebecers function well inside Quebec and can access services outside Quebec if they only speak French, though many do know some English, and more Anglophones speak at least some French than they did even twenty years ago.  Most northerners do know one of the official languages, but within their communities they can access local services in their native tongue.  Nevertheless, it is these communities in Canada that are most in need of economic development and cultural protection.  I'm glad that was preserved in the USMCA, even if Canada was taken advantage of overall in that deal.  U.S. steel and aluminum tariffs should be non-negotiables, however.  They should and must go before this trade deal gets ratified.  I hope Parliament draws a line in the sand on this.  Chinese and other offshore manufactured items will remain cheap in Canada because we haven't engaged in a trade war with them as the U.S. has, and we haven't pissed off other countries except the militarily aggressive ones (e.g. Russia) or the ones with bad human rights records (Saudi Arabia, Cambodia, etc.).  It may be an uphill battle, but we're still flying the flag of progress in Canada on the environment, human rights, etc.  

[Hates politicians]

13 hours ago, Queenmandy85 said:

If MacDonald had not subsidized the railroad, we would not have a country. If the current government had not bought the Trans Mountain pipeline, it would never be built. 

The pipeline still won't get built.

[Hates politicians]

Bombardier is one business who should'nt be getting corporate welfare.

[Machjo]

2 minutes ago, Hates politicians said:

Bombardier is one business who should'nt be getting corporate welfare.

I agree; but where would you rank it on the list of least deserving?

[Hates politicians]

1 minute ago, Machjo said:

I agree; but where would you rank it on the list of least deserving?

Number one

[cannuck]

We have the luxury of debating this stuff because Canada has a staggering reserve of natural resources.  Hong Kong is wealthy because they have virtually NO resources, so it only leaves adding value to imported resources for economic activity.   In other words, outside of the speculative (real estate and stock market) side, Hong Kong has an economy founded on creating wealth.

What we CAN learn from them is that wealth is created by adding value to resources.   Merely extracting resources and selling them off does NOT create wealth, it simply redistributes it from our finite reserves to our cash account - where we thoughtless just give the money to someone else who DOES add the majority of value.

Our model is sustainable only until the resources run out.

[Michael Hardner]

1 hour ago, cannuck said:

1. What we CAN learn from them is that wealth is created by adding value to resources.   Merely extracting resources and selling them off does NOT create wealth, it simply redistributes it from our finite reserves to our cash account - where we thoughtless just give the money to someone else who DOES add the majority of value.

2. Our model is sustainable only until the resources run out.

1. But Hong Kong doesn't manufacture either, their expertise is in allocation of resources for the best return.  There's no reason we can't do that.

2. Luckily that's pretty far off.

[Machjo]

1 hour ago, cannuck said:

We have the luxury of debating this stuff because Canada has a staggering reserve of natural resources.  Hong Kong is wealthy because they have virtually NO resources, so it only leaves adding value to imported resources for economic activity.   In other words, outside of the speculative (real estate and stock market) side, Hong Kong has an economy founded on creating wealth.

What we CAN learn from them is that wealth is created by adding value to resources.   Merely extracting resources and selling them off does NOT create wealth, it simply redistributes it from our finite reserves to our cash account - where we thoughtless just give the money to someone else who DOES add the majority of value.

Our model is sustainable only until the resources run out.

I agree. For this reason, I think government should charge the highest royalty the market can bear and a tax of at least one third of a resource-extraction business' net profits.

 

Of course this could impose an injustice by forcing Hong-Kongese to pay taxes to Canada for services they'll never enjoy, but Canada could compensate in one if a few ways:

1. Allow Hong-Kongese to study, work, and do business in Canada visa-free.

 

2. Earmark resource taxes to UNICEF without expecting Hong Kong to contribute in kind.

 

3. Exempt a resource-extraction company that extracts strictly for export from the tax.

My preferred option would be the first as the simplest, but other solutions can exist too of course.

Edited October 7, 2018 by Machjo