Final comments

We noted at the outset of this assessment that the degree to which a society is capable of increasing its standard of living is largely dependent on the extent to which its citizens enjoy economic freedom. A growing body of evidence indicates that nations that enjoy high levels of economic freedom also experience the highest levels of economic growth. Conversely, those nations with low levels of economic freedom experience the lower levels of economic growth (Gwartney and Lawson 1997). Hence, if governments are serious about creating jobs and economic wealth, they must give their citizens greater economic freedom.

Greater economic freedom is achieved by lowering taxes, balancing budgets and eliminating public debts, reducing government red-tape, implementing a flexible labour code, and privatizing government services. Unfortunately, the NDP government has opted to pursue a very different strategy. This strategy has gradually curtailed the economic freedom of British Columbians. According to the Fraser Institute's Index of Provincial Economic Freedom, British Columbia now ranks eighth among Canadian provinces in terms of the economic freedom enjoyed by its citizens. This poor ranking is quite remarkable given that only seven-and-one-half years ago British Columbia ranked third in Canada (Arman, Samida and Walker forthcoming).

These figures, however, are only a further reflection of the effect of the policies that the NDP government has pursued since coming to power in 1991. For instance, the government has continued to increase expenditures, has permitted the public debt to rise dramatically, continues to maintain one of the highest tax rates in the country, has increased the regulatory burden on firms, and has introduced inflexible labour policies. These policy choices have led to a dramatic decline in economic growth, decreased employment levels in the province, and continued to diminish the disposable income of the average British Columbian. According to many observers, prospects for an economic recovery in the interim look bleak.

Dominion Bond Rating Service

Recently, the Dominion Bond Rating Service downgraded British Columbia's (economic) trend outlook from stable to negative. The agency reported that the downgrade reflects the province's inability to contain government expenditures and its failure (again) to balance the provincial budget (Province 1998a).

Toronto Dominion Bank

In its quarterly outlook (July 1998), the Toronto Dominion Bank projected that in most provinces economic growth will average between 2 and 5 percent this year while in British Columbia economic growth will remain flat (zero growth). Moreover, Toronto Dominion added that it is likely that British Columbia's economy will actually contract this year (Thomas 1998).

Fletcher Challenge / Spectrum Signal Processing

Hurt by high taxes and an uncompetitive labour market, firms in British Columbia are increasingly shifting their operations outside of the province. Fletcher Challenge Canada Ltd., for instance, recently sold off its assets in British Columbia and is now seeking new investment opportunities in other jurisdictions. The company announced that, unless there is a more competitive labour market, it has no plans to invest in British Columbia in the future. Barry Jinks, President and CEO of Spectrum Signal Processing Inc., recently stated that the poor business climate in British Columbia is contributing to Canada's brain drain of technical talent. Mr. Jinks said that it took his firm two years to find a marketing manager, and only after boosting the salary for the position in line with his own (Carlisle 1998).

Dun and Bradstreet

A recent survey conducted by Dun and Bradstreet Canada for The Globe and Mail, found that business optimism is at a 10-year high across Canada, except in British Columbia. While employers in other parts of Canada plan to hire more workers in the coming months, the survey found that employers in British Columbia are far less optimistic about hiring more workers in the near future. The survey also found that most companies expect to see their sales and profits plummet in the coming months, leaving British Columbia with the worst rating in the country in this category (MacKinnon 1998).

BC Stats

A study recently published by British Columbia's statistics agency, BC Stats, concluded that the "rate of population growth [in BC] is set for a long, slow decline to some of the lowest levels in a century" (BC Stats 1998: A1) and the agency is predicting that growth will decline from 2 percent this year, to 1.6 percent by the year 2000 and to 1.1 percent by the year 2026. The weak provincial economy and strong and improving economies in both Alberta and Ontario will reduce interprovincial migration to the British Columbia. Hence, British Columbia's economy in relations to the economies of most other provinces in Canada, will remain weak for the next two years at least (MacQueen 1998).

Conference Board of Canada

The Conference Board of Canada recently issued a report giving the economic outlook for eight major Canadian cities. The Board predicted strong economic growth in 1998 for all of the cities except Victoria and Vancouver, British Columbia. Moreover, the report pointed to a poll of 125 residential-property developers in British Columbia, who reported that sales have dropped by almost 60 percent since 1997. The survey also found that almost two-thirds of the developers indicated that they plan to expand their operations outside British Columbia (Matas, Sankar, and Robertson 1998).

We also noted at the beginning of this report that, in spite of the provincial government's claim that the downturn in the British Columbian economy can be attributed to the economic malaise in Asia, there is no basis to support this claim. Nevertheless, Premier Clark and his government continue to insist that Asia is to blame for British Columbia's economic downturn. In fact, most recently the Premier made the following statement on the weak British Columbia economy: "The Asian problems are kicking the stuffing out of our resource sector. Lumber prices, pulp prices . . . all those commodities are nearing record lows, and it's having a huge impact on our economy" (Matas, Sankar and Robertson 1998: A1-A4).

In spite of this belief, the fact is that British Columbia's resource sector ran into economic trouble long before the Asian crises developed. As figure 25 shows, real output from the province's forest industry has been steadily declining since 1995. Moreover, figure 25 also shows that, in spite of rising lumber prices, in the past few years growth in the forest industry has remained weak. Given that the Canadian dollar is at an all-time low and that the United States, which imports most of British Columbia's forestry products currently has a booming housing market, British Columbia's forest industry should not be doing as poorly as it is (Schreiner 1998). Hence, if we set aside political rhetoric, it is clear that British Columbia's economic troubles are the result of a home-grown virus, not a foreign one.

It is not our intention simply to criticize the government for its policies but rather to offer a dispassionate and objective analysis of the effect that their policy choices have had on the people and economy of British Columbia. Moreover, our intentions were to show, through economic theory and empirical evidence, how and where free markets could do a better job at providing for the well-being of British Columbians. Overall, we find that the performance of the government of British Columbia has been unsatisfactory. Government regulations, high taxes, inflexible labour laws, failure to balance the budget and to reduce the size of the state have all contributed to the rapid decline in British Columbia's competitive standing in Canada and around the world. If the provincial government is truly committed to "opening up the province" to job creation and investment, it must do more than offer modest policy corrections. Rather, the government should implement substantial tax cuts, repeal restrictive labour laws, eliminate government regulations, reduce spending and, most importantly, allow the free market to play a bigger role in providing for the welfare of the citizens of British Columbia. Until these changes are implemented, British Columbia's economic troubles will continue. Therefore, for failing to reduce the size of the state, and for continuing to curtail the economic freedom of British Columbian's, the government of British Columbia deserves an F for its performance.

1.   Ramsay and Walker 1998.

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