December 2000 Fraser Forum:
Bad Canadians? No.
Bad System
When Jean Chretien likened the Canadian Alliance to a sect of evildoers he muddled the analogy. Our system of taxes and government spending forces all of us, even those whose record of public service would make Florence Nightingale blush, to act selfishly.
Nineteenth century French philosopher Frederic Bastiat put the problem this way: "The oppressor no longer acts directly by his own force on the oppressed. No, our conscience has become too fastidious for that. There are still, to be sure, the oppressor and his victim, but between them is placed an intermediary, the state. What is better fitted to silence our scruples and to overcome all resistance?" Our scruples are in hibernation in Canada because we do not pay directly for most government services as we consume them. Eighty percent of our taxes go into a central pot from which our leaders dispense "free" services such a health care and education like Caesar tossing coins from his chariot.
This method of serving up government services puts us in the situation of ten strangers gathered around a restaurant table invited to dine on a common tab. If I indulge in the lobster thermidor I pay only one tenth of the cost. If I hold back I save one tenth. Everyone at the table reasons the same way, and the result is an unwanted feast.
In their 1944 treatise, Theory of Games and Economic Behaviour, mathematicians John Von Neuman and Oskar Morgenstern identified the dilemma that forces interest groups to despoil the open commons of the treasury to everyone’s detriment. Farmers in Saskatchewan who do not demand subsidized crop insurance leave Ottawa’s resources available to East Coast businesses demanding subsidized loans for regional development projects. In the end, both groups pay for their subsidies through higher taxes and both would be better off if they could sign a peace treaty that ended handouts and let each focus on doing business.
Our system of "free"government services has bred in our politicians a bizarre mix of dirigisme and abdication. Free services need to be rationed. Without user fees that would allow individuals to judge whether their needs are in proportion to the costs of providing those services (and that would allow health and education industries to tailor those services to particular needs), politicians must act like nannies who judge how much and when the children must be fed. As adults we would laugh at a business that offered to take over the major decisions of our lives so that we could live like Oblomov, the character in the Russian novel by Goncharov, who realized that by middle age he had never yet put on his socks by himself. We seem to take for granted government responsibility for spending nearly half of what we earn. When decisions about who gets what get too hot to handle, politicians hand responsibility to the super-nannies of the Supreme Court.
Allowing someone higher up to decide what sort of health and education we consume stifles individuality. A few seers in government cannot know what each of us needs, and so they must make one-size-fits-all decisions about government services. Canadians, who pride themselves on their diversity and the eccentricity that has made them among the leading humorists of the English world, settle for uniform government services the way millions of Chinese were once forced to walk about in Mao-Zhe-Dong jackets.
Diversity, restraint, and a measure between our wants and the costs of those wants can be restored with the help of user fees. Once we invite "two-tier" up from the Hades of forbidden phrases and encourage people to pay directly for what they consume, we will give our politicians a rest and realize that there are no bad Canadians, but rather a bad system of Canadian government financing that we would do well to reform.
Filip Palda is Professor at l’École Nationale d’Administration Publique in Montreal, and Senior Fellow of The Fraser Institute. He received his Ph.D. in Economics from the University of Chicago.
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