Just because something is popular doesn't mean it's good policy
Governments need to base policy on evidence, not on the wishes of big business, writes Lori Lee Oates
On Feb. 3, the Newfoundland and Labrador Employers' Council released a survey that they felt demonstrated that a majority of people in this province support cuts to public services. They maintain this is sufficient evidence that cuts should happen.
Running a government based on what is popular is essentially populism — a political approach that pits "the people" against "the elites."
Populists usually define "the elites" as academics or educated liberals who are out of touch with the realities of running a government. This has become a common talking point for politicians and business leaders who do not want to deal with where the evidence is pointing on public policy.
There is an abundance of independent research that indicates we should increase the minimum wage, move away from austerity and neo-liberal approaches, transition off fossil fuels, and end subsidies for fossil fuels and factory farming.
But these are policy directions that upset big business and the donor class, so governments take an anti-intellectual approach. They disdain the evidence and paint those who collect it as the elites.
Never mind that hundreds of billions has been cut from universities and research in recent decades. Tenure track jobs are increasingly a thing of the past. About $40 million has been cut from Memorial University alone since 2012 — the same year Muskrat Falls was approved.
Ignoring such research also has huge implications for women and minorities. The status quo is better for white men, who dominate the ruling class. New directions in public policy often point the way toward greater equality.
Raising the minimum wage is good for women and minorities. Austerity is bad for women and minorities. Cuts to public service jobs often disproportionately affect women. Men do well in fossil fuel and farming sectors, which receive huge government subsidies. Men do well when governments spend on traditional infrastructure projects.
What do the business lobbyists want?
When you take stock of what the business associations have been asking for in Newfoundland and Labrador it is, in fact, very draconian. Disdain for working-class citizens is on full display.
They do not want to pay a living wage even though research points to this being good policy. Inflation is the frequently cited excuse. Yet Canadian housing prices are rising, probably driven by the growing wealth of high-income earners. Not a word of complaint from the business community or politicians on that inflation.
Our leaders care about inflation only when the working class is benefiting from it.
The often-cited reason against tax parity is "tax flight," or high-income earners leaving the province. This is a common right wing talking point, but the concept is virtually unsupported in macro-economic literature.
Increasingly, the consensus is that tax flight is overestimated and there is little to no research to support that it occurs in Newfoundland and Labrador.
Clearly, business associations want cuts to public services, and they do not seem terribly troubled by increasing unemployment in a province that already has the highest unemployment rate of any province in the country.
In Newfoundland and Labrador, people who lose their jobs often leave for jurisdictions with higher employment rates. They take with them their spending, taxes, and transfers based on population. Our biggest crisis is a demographic one, and austerity is a push factor for outmigration.
The fact that austerity does not work is well documented by political economists. Indeed, we have had a lot of it in the province, dating back to Clyde Wells, and it has not worked yet.
Business associations, however, do want the government to pay for bailouts for oil and gas companies. They also want support for business. No austerity necessary there.
They frequently want the government to invest in megaprojects. It was largely business leaders who championed Muskrat Falls, which now makes up $13 billion of our $30-billion provincial gross debt.
We continued on this path of creating jobs in constructions sectors last year with the residential construction rebate. The provincial government provided $30 million in tax rebates for home construction projects, while it clawed back social assistance supports for Canada emergency response benefit recipients. This saved the province less than $4 million.
This tax rebate for people with disposable income also drove up lumber and housing prices, which hurt the working class.
Notably, incomes have grown for the richest during the pandemic. The world's most famous economist, Thomas Piketty, has been calling for a tax on wealth since at least 2014. The New Democratic Party has asked for a wealth tax. Liberals, Conservatives, and the Bloc all voted against it, despite the policy having widespread support within the Canadian voting public.
Status quo is not the way forward
Clearly, we have a problem with effective policy making in this province. There has been way too much "that's a good idea" economics.
If government and business leaders want to dismiss the evidence, they should at least come with an informed critique of the sources, methodology, and data.
They should engage with the research before dismissing it as too academic. That is too easy an out for the only research that is independent of government and business.
Universities exist in part to provide another perspective, one that painstakingly collects and analyzes information over extended periods of time and survives rigorous peer review processes.
If our leaders were serious about "evidence-based decision-making" there would be a research division in every government department, with responsibility for monitoring emerging research and tracking policy outcomes. Good public policy more than pays for itself.
If our politicians and businesspeople accept the evidence, it will result in better policy outcomes for everyone.