From the Fraser Institute

By Jason Clemens and Niels Veldhuis

A number of pundits and commentators have observed the self-confidence and near-unilateralist approach of our prime minister, Mark Carney. The seemingly boundless self-assurance of the prime minister in his own abilities to do the right thing has produced legislation that sets the foundation for corruption.

Consider the Carney government’s signature legislation, known as the Building Canada Act (Bill C-5), which among other things established the Major Projects Office (MPO). The stated purpose of the MPO and the act is to create a process whereby the government—in practical terms, the prime minister and his cabinet—identify projects in the “national interest” and fast-track their approval by overriding existing laws and regulations.

Put differently, a small group of politicians are now able to circumvent the laws and regulations that apply to every other entrepreneur, businessowner and investor to expedite projects they deem will benefit the country. According to several reports, senators openly referred to the bill as the “trust me” act because it lacked details and guardrails, which meant “trusting” that the prime minister and cabinet would use these new powers reasonably and responsibly.

Rather than fix the actual policies causing problems, which include a litany of laws and regulations from the Trudeau era such as Bill C-69 (which added vague criteria to the approval process for large infrastructure projects including pipelines) and Bill C-48 (which bans oil tankers from docking in British Columbia ports), the Carney government chose to create a new bureaucracy and political process to get around these rules.

And that’s the problem. By granting itself power to get around rules that everyone else has to play by, the government created the opportunity for corruption. Entrepreneurs, businessowners and investors interested in infrastructure projects, particularly energy projects, now need to consider how to convince a handful of politicians of the merits of their project. This lays the groundwork for potentially corrosive and damaging corruption now and into the future. While this prime minister may have an infinite amount of confidence in his abilities to do the right thing, what about the next prime minister, or the next one? These rules will outlive Prime Minister Carney and his government.

And it’s not just the Carney government’s signature Build Canada Act. The more recent Bill C-15, which implements certain aspects of the federal budget, contains provisions similar to the Build Canada Act that would also allow cabinet ministers to circumvent existing laws and regulations. A number of commentators have raised red flags about how the legislation would empower any minister to exempt any entity (i.e. person or firm) from any law or regulation—except the Criminal Code—under the minister’s responsibility for up to six years in order to foster innovation. The underlying rationale is that we have laws and regulations on the books that impede experimentation and innovation.

Again, rather than undertake the difficult work of updating and modernizing existing laws and regulations to empower entrepreneurs, businessowners, workers, and investors, and ensure they all play by the same rules, the Carney government instead wants to create a new mechanism for a select few to be able to sidestep existing laws and regulations.

A different way to think about both legislative initiatives is that the prime minister and his ministers are now able to provide specific companies with enormous advantages over their competitors through the political system. Those advantages have enormous value, and that value creates the opportunity for corruption now and in the future.

The Carney government recognizes that our regulatory system is badly broken, otherwise it wouldn’t create these work-around laws. It should do the hard work, which it was elected to do, and actually fix the laws and regulations that impede economic development and progress for all entrepreneurs, businessowners and investors. Otherwise, we risk a future littered with stories of advantage and corruption for political insiders.

Jason Clemens

Executive Vice President, Fraser Institute

Niels Veldhuis

President, Fraser Institute

From the Fraser Institute

By Matthew D. Mitchell

A report published by the Fraser Institute reaffirms just how much more economically free some states are compared with others. These are places where citizens are allowed to make more of their economic choices. Their taxes are lighter, and their regulatory burdens are easier. The benefits for workers, consumers and businesses have been clear for a long time.

There’s another group of states to watch: “movers” that have become much freer in recent decades. These are states that may not be the freest, but they have been cutting taxes and red tape enough to make a big difference.

How do they fare?

I recently explored this question using 22 years of data from the same Economic Freedom of North America index. The index uses 10 variables encompassing government spending, taxation and labour regulation to assess the degree of economic freedom in each of the 50 states.

Some states, such as New Hampshire, have long topped the list. It’s been in the top five for three decades. With little room to grow, the Granite State’s level of economic freedom hasn’t budged much lately. Others, such as Alaska, have significantly improved economic freedom over the last two decades. Because it started so low, it remains relatively unfree at 43rd out of 50.

Three states—North Carolina, North Dakota and Idaho—have managed to markedly increase and rank highly on economic freedom.

In 2000, North Carolina was the 19th most economically free state in the union. Though its labour market was relatively unhindered by the state’s government, its top marginal income tax rate was America’s ninth-highest, and it spent more money than most states.

From 2013 to 2022, North Carolina reduced its top marginal income tax rate from 7.75 per cent to 4.99 per cent, reduced government employment and allowed the minimum wage to fall relative to per-capita income. By 2022, it had the second-freest labour market in the country and was ninth in overall economic freedom.

North Dakota took a similar path, reducing its 5.54 per cent top income tax rate to 2.9 per cent, scaling back government employment, and lowering its minimum wage to better reflect local incomes. It went from the 27th most economically free state in the union in 2000 to the 10th freest by 2022.

Idaho saw the most significant improvement. The Gem State has steadily improved spending, taxing and labour market freedom, allowing it to rise from the 28th most economically free state in 2000 to the eighth freest in 2022.

We can contrast these three states with a group that has achieved equal and opposite distinction: California, Delaware, New Jersey and Maryland have managed to decrease economic freedom and end up among the least free overall.

What was the result?

The economies of the three liberating states have enjoyed almost twice as much economic growth. Controlling for inflation, North Carolina, North Dakota and Idaho grew an average of 41 per cent since 2010. The four repressors grew by just 24 per cent.

Among liberators, statewide personal income grew 47 per cent from 2010 to 2022. Among repressors, it grew just 26 per cent.

In fact, when it comes to income growth per person, increases in economic freedom seem to matter even more than a state’s overall, long-term level of freedom. Meanwhile, when it comes to population growth, placing highly over longer periods of time matters more.

The liberators are not unique. There’s now a large body of international evidence documenting the freedom-prosperity connection. At the state level, high and growing levels of economic freedom go hand-in-hand with higher levels of income, entrepreneurship, in-migration and income mobility. In economically free states, incomes tend to grow faster at the top and bottom of the income ladder.

These states suffer less poverty, homelessness and food insecurity and may even have marginally happier, more philanthropic and more tolerant populations.

In short, liberation works. Repression doesn’t.