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Who Will Win Monday’s Vote?Who Will Win Monday’s Vote?

Who Will Win Monday’s Vote?

Given that most election platforms amount to buying votes with other people’s money, writes Matthew Lau, it’s the rich who pay, the poor who suffer, and the middle class that scoops up the winnings.

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Who Will Win Monday’s Vote? October 16, 2019  |  By Matthew Lau
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Government programs mainly are designed to benefit the middle class at the expense of the rich and the poor, states Aaron Director’s law of public income redistribution, as described by George Stigler in The Journal of Law and Economics in 1970. It contradicts the popular myth, often told by proponents of ever-increasing government spending and other economic intervention, that expanding the size of government benefits those in poverty.

The economic plans on offer to Canadians in next week’s federal election are an excellent illustration of Director’s law in action. In their quests to appeal to the middle class, the Liberal, NDP and Green platforms have to varying degrees proposed punitive taxes on the rich; all the major parties (including the Conservatives) have presented a bag of spending goodies to target middle class voters; and none have much of a plan to improve the economic condition of the poor.

This is no surprise. Most election platforms are an exercise in buying votes with other people’s money. The rich have the deepest pockets to pay for the spending and the poor have little political power, so both groups get the short end of the stick. Meanwhile, the middle class – which supplies most of the television and radio hosts, newspaper columnists, think tank researchers, interest group activists, and others in positions of political influence – is constantly being wooed for votes.

It is telling that the “Climate Action” section of the NDP plan has 15 line items of new or increased spending totalling $12.2 billion over four years, while the “Fighting Poverty” section has only five line items totalling $2.4 billion. Climate activists are a richer source of political power than the poor are, and the NDP knows it. So, too, do the Liberals, as evidenced by Justin Trudeau marching in Montreal alongside protesters demanding drastic transition away from fossil fuel use in order to save humanity from the alleged “climate emergency” – action that would clearly be counterproductive in fighting real poverty. 

In addition to proposals for new and more expensive green policies, the fiscal platforms from the major political parties contain plans for the following: more corporate welfare programs, increases to arts and culture spending, increased university funding (the Greens even propose to abolish tuition fees), tax expenditures for children’s fitness and arts, more money for seniors, and so on. All policies are designed to benefit various middle class interest groups at the expense of the poor and the heavily taxed rich.

The Liberal, Conservative, NDP and Green platforms also uncompromisingly support Canada’s supply management system, which restricts imports of dairy, poultry and eggs to Canada. This benefits a small handful of very politically powerful middle class agricultural producers at the expense of everybody else. Poor families, who spend the largest share of their income on groceries, are the most harmed. A study in 2016 from the Montreal Economic Institute found that supply management had the effect of pushing as many as 190,000 Canadians into poverty.

The main problem with increasing government intervention in the economy is that it gives some people the legal right to spend other people’s money and to restrict other people’s economic decisions. The group doing the spending and the restricting will inevitably be the group with the most political power, while those whose money is spent and whose economic decisions are restricted are the people with the least political power – who often also have the least economic means.

The evidence from around the world is that the key to reducing poverty is not big government, but instead more economic freedom. Global poverty has been in free fall for 200 years. In 1820, the rate of extreme poverty around the world was 94 per cent, but it fell to 35 per cent by 1990, and then to 10 per cent by 2015. This is the happy result of increased productivity enabled by capitalism and free trade, not government redistribution and other interventionist policies.

In Canada, reducing poverty and increasing productivity starts with unlocking employment opportunities for the least advantaged members of the labour market. The federal government, unfortunately, has been moving in the opposite direction. Over the summer, new labour legislation barraged federally regulated employers with mandating everything from employee break periods and flexible work arrangements to minimum personal leave – all of which make workers more expensive and thus less attractive to hire.

The path for lower-income Canadians to move up is blocked by taxes, protectionism and labour restrictions that make it difficult for the poor to get productive jobs. Removing these barriers, not increasing government intervention in the economy, is how best to tackle the problem of poverty.

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