Were he still alive, Milton Friedman would have celebrated his 107th birthday on July 31. An intellectual giant, his ideas played a significant role in making the world a freer and more prosperous place. Those ideas remain vital.
From driving the elimination of military conscription in the United States to influencing the economic transformations that made Chile and Estonia into the relatively prosperous nations they are now, Friedman left an indelible mark.
His ideas are no less powerful today, and Canada’s federal and provincial governments would be wise to heed his words on a wide range of issues, from taxes and government spending to education and health-care policy.
On fiscal policy, Friedman frequently observed that “nobody spends somebody else’s money as carefully as he spends his own.” It’s a statement that just about everyone accepts as true, yet politicians and much of the general public contradictorily believe that high levels of government spending improve economic growth.
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The Liberal government of Prime Minister Justin Trudeau deliberately turned a budget surplus into apparently endless deficits, claiming that their “investments” in the economy would increase growth.
This isn’t an exclusively Liberal malady, however, as Conservative governments are also culpable. For example, Ontario’s corporate welfare gravy train continues unabated despite earlier promises to end these wasteful handouts.
Total government spending in Canada is 47 per cent of gross domestic product. That’s almost half the national income spent by people other than the ones who earned it, and on people other than the ones doing the spending. That’s a recipe for wasting resources.
If Smith spends his money on himself, he will generally be careful as to both the cost and quality of what he buys. But if Smith spends Brown’s money on Jones, as is the case when government spends taxpayers’ money, Smith will be less concerned about the cost (since he is spending Brown’s money) and perhaps unconcerned about the quality of what he buys (since he’s buying it for Jones, not himself).
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Another of Friedman’s frequent observations was that competition is better for consumers than a monopoly is – and that overwhelmingly, government is the source of problematic monopoly control.
Friedman’s observation on competition and monopolies is nearly universally accepted, yet is somehow not reflected in government policy.
Two areas of problematic government monopoly are education and health care.
While some provinces allow for some school choice by partially funding independent schools, the Ontario government has an effective monopoly on schooling. Unless families pay twice – with taxes and again with tuition – their children have no choice but to attend a government-run school.
With a single-payer monopoly system, health care is similar. Canadians have no choice in care unless they’re willing to pay twice – once in taxes and again for private care elsewhere. About 276,000 Canadians do just that each year, in large part due to the waiting lists produced by the inefficient monopoly system.
The result of government monopoly in education and health care is that the most important of services rise in cost faster and improve in quality slower than in competitive markets.
In Canada today, just as in economies around the world for the past several generations, too much government control means society is less free and less prosperous than it could be.
Friedman’s ideas for reform – pushing back against government overspending and government monopolies – are as relevant and necessary as ever.
Matthew Lau is a research associate with the Frontier Centre for Public Policy.