Friday, November 20, 2009

Lessons missed twenty years after the Wall fell

Twenty years ago this month the Cold War ended with ballyhoo and beer, not a shot was fired. The Iron Curtain was breached; the Berlin Wall became a gateway to the West instead of a barrier. The decades long sham battle between free market capitalism and centrally planned statism was all but over, or so it seemed. This most extreme form of statism or socialism we called communism was revealed to be a paper-mache fa├žade crumbling in a rainstorm. Its infrastructure rotten to the core, its ideology was as many of us suspected, a lie. By the time the final dominoes had fallen, hundreds of millions of formerly repressed people had freedoms restored that you and I take for granted every day.

The Cold War was the overriding paranoia of my generation. Soon after the Second World War, governments in Canada, the United States and Western Europe created a military alliance called NATO to defend from what everyone feared would be eventual certain attack by the communist hordes. It was soon clear the Soviet Block Iron Curtain countries we feared made prisoners of their own people, and the Berlin Wall was the physical manifestation of this. In the West governments were obliged to fan the flames of fear to keep funding their military spending over the next 30 years, especially in the United States. The fall of the Wall left a vacuum, the enemy was really a mirage and NATO was redundant, and needed new enemies. We all know now where NATO’s new enemies are. Paranoia still lives in the West, but that is another story.

Is there a lesson for us here? In 1992 it took 52% of Canada’s GDP to support government programs at all levels. Mercifully that number has fallen a bit since then, but the bloated size of our governments along with its numerous layers qualifies Canada as a statist country, albeit a kinder gentler statism, statism-lite if you will. Yes we still enjoy most of the freedoms that our cousin’s in the former East Block lacked. But our economic freedom is severely restricted by government spending and taxation. Today 45% of the income of the average Canadian family goes to some level of government for services delivered whether wanted or not. Now, you will say that we get services for that price, but are we getting value for money spent? Does government deliver essential services most efficiently, free of the corruption and cronyism that characterized our former Soviet block enemies. If statism/socialism was repudiated 20 years ago why does Canada still practice aspects of it? Do we think by tweaking it just right it will work to our benefit or are we deluding ourselves like the Eastern Block nations did before the Wall came down? In 2007, the most recent year I could find, Canada’s Federal government had 87 departments or agencies employing almost 334 000 people, including Assisted Human Reproduction Canada and the Office of the Registrar of Lobbyists, both vital to our democracy I’m sure. Remember that’s just the Federal layer of government and it keeps growing.

In his book Fearful Symmetry the fall and rise of Canada’s founding values, Brian Lee Crowley explains why he thinks government in Canada grew so large and ultimately needs to shrink. He compares Canada to the Americans; we are each others greatest trading partners, have similar lifestyles and once had a similar standard of living. According to Crowley, in 1960, Canada and the U.S.A. spent similar amounts of their GDP to support government programs at all levels (Canada 28.6%, USA 28.4%). Our standard of living was similar, differing by just 8% less for Canada. Take a snapshot 40 years later, American government spending increased by 6%, Canada’s by over 20%. Over those same 40 years American per capita income increased by 222% while in Canada just 126% over the same period. Clearly there was a cost to having a big government.

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