Prosperity takes more than subsidies

Opinion

The simplest way to raise living standards? Build a better business climate.

Manitoba is a small, open economy. That should be freeing. It should mean we focus on what we do best, and trust the market to send signals about where investment belongs. But more often, government takes the wheel.

The record on that isn’t good. Governments like to believe they can allocate capital more efficiently than markets. History says otherwise. The “winners” chosen often reflect politics more than economics.

Tariffs are the clearest example. Drop a tariff, and one industry will feel the pain of new competition. But the benefits are spread out: lower prices for consumers, lower costs for businesses, higher productivity overall. Raise a tariff, and the reverse happens.

This is why trade liberalization worked. It was messy, it was painful in moments, but it made the world richer. Canada’s prosperity — our very identity as a trading nation — was built on it.

The point isn’t about tariffs alone. Subsidies and special incentives distort the same way. They reward the business most adept at navigating government programs, rather than the one that competes hardest in the market. And once that shift happens, the behaviour becomes ingrained. Capital stops chasing productivity and starts chasing programs. Growth becomes less about competing in the market and more about competing for taxpayer-funded subsidies.

Every business I know — including my own — spends considerable time and resources chasing grants: for capital, training, business development, environmental efficiency, digitization. We do it because if we’re not getting our share, we’ll be left behind by competitors. But what is it all for? The cost to administer these programs only adds to the taxpayer burden. It would be worth far more to my business to have a truly competitive business climate that rebalances incentives with fewer distortions.

I saw this dynamic first-hand as well when I worked in Ottawa as an economist for the federal government, negotiating trade agreements in Geneva and advising on significant micro-economic policies. Too often, programs were designed to pay businesses to do what they were already doing — or should have been doing. The result was predictable: business strategy shifted from market opportunity to rent seeking.

And then we wonder why productivity lags.

That doesn’t mean government has no role. Quite the opposite: building business-enabling infrastructure is squarely in its wheelhouse. But too often, governments stretch the definition of “investment” to cover almost any program or subsidy.

The Manitoba government has unveiled its economic development strategy. After years of consultation, business will finally review what government has decided.

The real measure will be whether it changes the perception — and then the reality — of Manitoba’s business climate. Will it make people want to invest here? Because there is no other path to raising living standards.

There are a few tests worth applying. First: is there a clear market failure being addressed? Second: does the support sunset when the gap is closed? If the answer is no, then the strategy is just another distortion, an ongoing transfer of wealth. And finally: is success clearly defined? What is the return on investment?

Manitoba is too small to bend global markets. If government insists on intervening, it must do so sparingly and with discipline. We can’t subsidize every sector in a diversified economy. Nor should we want to.

The better ambition is simpler, harder, and more powerful: to be the best place in Canada to start and grow a business. That means a neutral playing field — competitive taxation, stable rules, pro-growth regulation, business-enabling infrastructure, and fewer distortions.

Prosperity can’t be willed into existence by governments picking winners. It requires investment flowing to its most productive uses, guided by market forces — and it requires businesses to earn success by competing, growing, and creating value, not by winning favour in government.

Kevin Selch is the founder of Little Brown Jug Brewing Company and chair of the Winnipeg Chamber of Commerce. Earlier in his career, he served as a senior economist with Industry Canada.