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More government interventions hamper capitalism

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From the Fraser Institute

By Philip Cross

In his fourth book, What Went Wrong With Capitalism, investor and author Ruchir Sharma eloquently details how advanced market economies for decades have increasingly strayed from the basic principles of market-based competition and pricing, resulting in persistently slow growth which causes many to question whether capitalism works anymore. However, what is often attributed to market failure is often a failure of government.

Collectivists have successfully installed the narrative that the Reagan and Thatcher era in the 1980s ushered in an era of neoliberalism and government austerity. Nothing could be further from the truth. Keynesian counter-cyclical government spending was supposed to support the economy during a recession; instead, it is used to support the economy at every point of the business cycle. At most, the Reagan and Thatcher regimes only slowed the rate of increase of government spending. Combined with a growing public resistance to paying higher taxes, this created permanent budget deficits. Policymakers remain stuck on the stimulus treadmill: former European Central Bank head Mario Draghi recently recommended the EU spend an inconceivable US$900 billion a year to revive its flagging economy.

Moreover, the slowdown in the growth of government spending did little to stop a tidal wave of government rules and regulations, many of which favour entrenched interests and firms. Sharma’s observation that being “pro-business is not the same as pro-capitalism, and the distinction continues to elude us” is especially true for Canada. He documents the increasing use of government subsidies and bail-outs, which helps fuel the growth of so-called zombie firms—unprofitable companies that stay in business thanks to support from governments or lending institutions (who know problems caused by bad loans will be bailed out by government), which prevent labour and capital from moving to areas with better long-term growth potential. Most recently, we have seen governments embrace higher tariffs and industrial policy, notably for green energy projects in Canada and the United States.

Increased government meddling in the marketplace reduces competition and slows the process of creative destruction that is the lifeblood of capitalism by allowing “new firms to rise up and destroy the complacent ones, making the economy ever more productive over time,” according to Sharma. This was most evident during the pandemic, when business failures declined as government hand-outs outweighed the impact of unprecedented shutdown of large parts of the economy. But the decline in business startups and failures has persisted for decades.

Steadily rising government intervention in the economy results in lower productivity and slower growth. This pushes policymakers to resort to higher fiscal deficits and easy money policies in a forlorn attempt to boost long-term potential growth.

It is often said that the recent slowdown of productivity reflects a lack of business investment. That is certainly part of the problem outside of the U.S., especially for Canada over the past decade. However, Sharma notes it is the efficiency and not just the level of investment that is the problem. Pervasive government interventions in the economy distort prices and the allocation of capital, resulting in what the libertarian economist Friedrich Hayek called “malinvestments.” This is especially true for Canada, which for over a decade has shunned clearly profitable investment opportunities in the resource sector while pouring tens of billions into expensive public transit systems, which nevertheless failed to persuade commuters to leave their vehicles at home.

One theme Sharma does not develop is that this growing inability of governments to efficiently deliver results is not due to a lack of resources. Governments have expanded their workforce, their spending, and their regulatory power. Nevertheless, government programs falter because of bad management, chronic political meddling for short-term electoral gains, and a workforce which increasingly serves its own interests and not public’s.

Sharma concludes on both an optimistic and pessimistic note. He examines the ability of capitalism to thrive in countries such as Switzerland and Taiwan by balancing “a business-friendly environment alongside social equality.” Nevertheless, he’s concerned with the “supreme irony: modern voters, particularly the young, now demand that leaders show respect for the fragility of natural ecosystems… [but] at the same time, leaders are riding a popular wave when they propose to intervene in the economy—the global ecosystem in which 8 billion people do business.”

As disillusionment with capitalism spreads due to slow growth, the temptation is to increase government interventions, which only worse the economic outcome.

Business

Out-Trumping Trump: A Mission Without a Win

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From the Frontier Centre for Public Policy

By Marco Navarro-Genie

Diplomacy is often a world of planned whispers and subtle signals to communicate complex messages. So, even sleepy folks noticed when the PM made a much-publicized bold (and seemingly impromptu) move and flew to Florida to play Trump-Whisperer. What was the PM hoping to get from that appearance? The best way to evaluate such diplomatic moves is to measure results against expectations.

From start to finish, the trip read like Trump’s move, when the president flew in a similarly bold and unanticipated fashion to pacify the leader of North Korea, Kim Jong-un –the “Little Rocketman.” Trudeau’s trip to see Trump was modelled on Trump’s Korean trip; it was an attempt to out-Trump Trump. That was the expectation.

Amid talk of nuclear weapons deployment, Trump surprised the world in 2017 by going to North Korea to meet with the leader of the most insular country on the planet, a man the traditional media painted as an irrational lunatic. That is not unlike the image of Donald Trump that CBC and the MSM chorus in Canada present.

Similarly, Prime Minister Justin Trudeau surprised his followers and detractors, by flying to Mar-a-Lago, the capital of Trump’s world. The purpose was not to avoid a thermonuclear war but a trade war between the two countries. Such a trade war would hurt both countries but could devastate the “vibecessing” Canadian economy, which the Trudeau government is desperately trying to perk up expecting a general election in months.

The news was leaked once the Prime Minister was in the air heading south. A flood of commentators, who pretended to have no authority to speak on the subject, began to discuss what the trip meant and how brave and bold, silly or foolish, the Prime Minister was for undertaking it. This was like the attention surrounding Trump’s journey to North Korea.

The most surprising aspect of the announcement was that Trump had previously mocked and ridiculed the North Korean leader. While we don’t have direct insight into what the North Koreans called Trump at the other end, it was probably far from flattering. Consequently, it was hard to imagine how their interactions would play out. Many argued that the two men had nothing in common, often expressing this with professorial certainty.

There is no evidence that Prime Minister Trudeau has ever called Trump any nasty names in public, but Trump has not been as careful. After the G7 meeting in 2018, Trump referred to Trudeau as being “weak and dishonest.” However, we do know that Justin’s favourite boogeyman is the American “extreme-right,” of which progressive Canadians think Trump is the godfather. Whatever Trudeau and prominent government ministers think of Trump conservatives, they also think of Trump. There are many examples of how government members weaponized the concept. In October 2024, Deputy Prime Minister Chrystia Freeland addressed criticisms from Conservative MPs by stating she wasn’t intimidated by “juvenile playground insults from the wannabe MAGA maple syrup Conservatives.” Similarly, amid discussions about Prime Minister Trudeau’s leadership in October 2024, some government members referred to Conservative Leader Pierre Poilievre as “Maple MAGA” or “Canada’s Donald Trump,” expressing platitudes about threats to democracy. Readers might also recall how every lieutenant in the Trudeau legions pretended MAGA Trumpeteers and Trump himself had crushed Roe v. Wade and then claimed Canada’s Conservatives would do the same.

The PM, too, indulged in the same kind of attack during a July 2023 visit to the Baitun Nur Mosque in Calgary. During the event, Trudeau addressed concerns among the Muslim community regarding his support for the Transexual agenda and the claims of inclusive education in schools. He quickly invoked the anti-American narrative, shaming the man who posed the question for accepting what Trudeau labelled as radical right-wing American propaganda. Trudeau suggested that misinformation about Canada’s sexual education curriculum was being propagated by “the American right-wing,” which he argued was causing unnecessary division and fear among Canadians.

Many people were surprised to see Trump attempting what others had never tried in North Korea. That reaction was akin to that of Canadians who knew what Trudeau and his cabinet had said about Donald Trump and the American right. For Prime Minister Trudeau it was a victory to show pictures of his foray into Trumpian Mordor, giving him the chance to appoint himself the hero who will stop the detonation of a 20 percent tariffs trade bomb.

Immediately following the US election, the Trudeau cabinet quickly backtracked on the Trump insults. They suddenly forgot how they were presenting Trump as the figure behind Pierre Poilievre and his “extreme right-wing politics.” This was done with the same enthusiasm that Trudeau’s critics summon when joking about his supposed genetic connection to Fidel Castro.

Trump’s visit to North Korea reduced some of the heated rhetoric between the two countries; however, the North Korean Stalinist regime remains intact, along with its nuclear capabilities. Trump and Kim Jong-un did not sign any treaty to regulate nuclear weapons or establish lasting peace between their nations. Similarly, Prime Minister Trudeau returned from Florida without any significant outcomes.

There was no joint statement or announcement of an agreement. There were promises to continue discussions, which does not constitute a victory. All Trudeau can claim is a public relations victory like the one Trump touted after his return from North Korea, and that is not insignificant. But showing that Trump was not mean to him is hardly a diplomatic victory.

Trump provided Trudeau with opportunities for photo sessions without conceding anything or making any promises. He maintained his firm demand that Canada strengthen its border security to prevent drugs and potential terrorists from crossing freely. Trump takes satisfaction in the fact that a man he despises travelled to plead with him for leniency regarding his tariff threats. He is fully aware of this dynamic.

Prime Minister Trudeau may portray himself as someone who understands Trump well, but Trump holds the upper hand. He knows Trudeau is “weak” and desperately desires to maintain himself in power, despite his low popularity. Furthermore, Trump understands that Trudeau is willing to make significant political sacrifices to achieve a seemingly favourable resolution to the border issues. Trudeau badly needs a win, and Trump knows that Trudeau is willing to jeopardize his country’s economy to win. Consequently, Trump will likely capitalize on Trudeau’s vulnerabilities for all they are worth.

Trump understands that Trudeau is the ideal Canadian leader to engage with him, which should make Trudeau the least suitable person to negotiate with Trump if Canada’s interests are to be protected.

From that perspective, Trudeau’s trip to Florida is unlike Trump’s trip to North Korea. While both leaders sought to leverage their trips for political and public relations gains, the outcomes reveal the limitations of symbolic diplomacy and Trudeau’s inability to turn the trip into a long-term win. The latter is as much a function of the PM’s lack of skill as it is of the perception among voters that he is veritably done, no matter what.

Prime Minister Trudeau believes he is the only one who can deal with Trump from a position of strength, which is incorrect. His government has gimmicks but no strength left. That is why the prime minister pleads for a Team Canada approach to Trump and quickly condemns skepticism of his abilities as a national betrayal.

Trump will take advantage of that weakness –and if he can nail a man he despises as weak and woke, he will enjoy it the more.  Out-Trumping Trump for domestic advantage was a fool’s errand.

Marco Navarro-Genie is VP Policy and Research at the Frontier Centre for Public Policy. He is co-author, with Barry Cooper, of COVID-19: The Politics of a Pandemic Moral Panic (2020).

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EXCLUSIVE: Former Biden Climate Czar Apparently Pushed Homeland Security To Ease Up On Chinese Company Linked To Slave Labor

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From the Daily Caller News Foundation

By Nick Pope

Then-national climate adviser Gina McCarthy appears to have met directly with Department of Homeland Security (DHS) Secretary Alejandro Mayorkas in 2021 to urge him to ease up on a Chinese solar company linked to slave labor, according to documents obtained by Protect the Public’s Trust, a government watchdog group.

pre-meeting primer prepared for Mayorkas by staff to get him ready to meet with McCarthy in June 2021 states that McCarthy would “likely discuss the concerns the solar industry has regarding the Department’s enforcement posture on solar products, particularly with regard to Hoshine Silicon Products Company.” The meeting, which McCarthy requested, was scheduled to take place several days after DHS issued a “Withhold Release Order” (WRO) to customs officials to begin seizing shipments of Hoshine solar products because of its connections to slave labor in China’s Xinjiang region, an area known as ground zero for the Chinese government’s genocidal repression of Uyghur Muslims.

DHS still lists Hoshine Silicon Industry and its subsidiaries as entities manufacturing products that use slave labor in violation of the Uyghur Forced Labor Prevention Act.

“The impacts of the Hoshine Withold (sic) Release Order (WRO) include the detention of goods and their effect on consumer and investor confidence in solar products, projects, and the industry; concern is growing that this will affect the industry’s ability to meet the nation’s clean energy goals,” the primer for Mayorkas reads.

PPT Documents – Hoshine + DHS by Nick Pope

“Industry indicates that the Hoshine WRO limits their ability to meet demand for solar panels without liability,” the memo continues. “Industry expressed that the WRO’s impact on consumer and investor confidence has resulted in cancelled orders and investments and has put jobs at risk.”

Chinese companies dominate the global supply chains for green energy products including solar panels, and a large share of the world’s polysilicon — a key ingredient for the production of solar panels — comes from the Xinjiang region specifically, The New York Times reported in June 2021 following the announcement of the Hoshine WRO. The Hoshine WRO illustrates a wider problem for the Biden administration whereby it works to cut China and Chinese slave labor-tied companies out of the U.S. solar supply chain without going too far and suffocating American solar companies that rely on Chinese component parts at the expense of the government’s lofty long-term green energy goals.

For example, about one year after the scheduled Mayorkas-McCarthy meeting, the Biden administration opted to waive tariffs on Chinese solar products in June 2022 amid concerns that the levies could crush the American solar industry before reinstating the duties in June 2024. Some American solar firms and executives said that Chinese companies managed to undercut U.S. solar production during the period of time when the tariffs were not being enforced.

Mayorkas stated publicly that “the United States will not tolerate modern-day slavery in our supply chains” on the day DHS announced the WRO against Hoshine.

The memo briefed Mayorkas on several options that McCarthy was likely to bring up at the meeting, including possible proposals to phase in enforcement to reassure the spooked market, increase transparency for the public with respect to DHS’ Hoshine restrictions or to create a “de minimis” threshold for the amount of slave labor-linked polysilicon in a given imported product. Mayorkas’ staff also laid out detailed “pros” and “cons” for each of the suggestions they expected McCarthy to make in the meeting.

“DHS made a rational and moral judgement about products from a company and a nation that uses the forced labor of Uyghurs and other ethnic and political prisoners,” Michael Chamberlain, executive director of Protect the Public’s Trust, told the Daily Caller News Foundation. “But it seems human rights are a secondary consideration for the people charged with implementing the Biden administration’s green agenda and their counterparts in the clean energy industry. It’s hard to see what’s ‘clean’ about solar panels made with slave labor.”

McCarthy, who was the head of the Environmental Protection Agency (EPA) for the Obama administration, served as the Biden administration’s national climate adviser before leaving the government in 2022. In between her stints in the Obama and Biden administrations, McCarthy worked as the president of the Natural Resources Defense Council (NRDC), a major environmental activist group that has a presence in China and is registered with or supervised by Chinese government institutions like the Beijing Municipal Public Security Bureau and the State Forestry and Grassland Administration, according to NRDC’s Chinese language website.

Notably, the documents obtained by Protect the Public’s Trust also include a similar briefing memo meant to prepare him for an October 2021 meeting with the American Clean Power Association about DHS’ enforcement actions against slave labor-linked solar products. That particular document spells out how representatives for the green energy trade group were likely to push for answers about the administration’s conflicting goals of rooting out slave labor from solar supply chains and quickly standing up a robust domestic solar industry.

DHS and McCarthy’s spokesperson did not respond to multiple requests for comment from the DCNF.

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