Canada’s Experiment With Socialism–Didn’t Work

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

    “Some ideas sound so plausible that they can fail nine times in a row and still be believed the tenth time. Other ideas sound so implausible that they can succeed nine times in a row and still not be believed the tenth time. Government controls in the economy are among the first kinds of ideas and the operation of a free market is among the second kind.” Thomas Sowell.

    National Post – (Latest Edition)
    Bob Plamondon Excerpted from The Truth About Trudeau by Bob Plamondon. © 2013 by Bob Plamondon. Used by permission of Great River Media Inc. All rights reserved.

Pierre Trudeau’s war on economics
Author Bob Plamondon tells how PET’s lifelong distrust of capitalism brought Canada’s economy to brink

As PM, he massively boosted public-sector wages and employment, established 114 agencies and commissions, and doubled the size of the PMO. The only thing he cut was the military

Trudeau would often shrug his shoulders at the “dismal science” and downplay his formal education in economics, yet he possessed more academic training and reflected more on the structure of the economy and society than any of his predecessors.

Those who studied with Trudeau at the London School of Economics noted his flirtations with Marxism. “I want a classless society,” wrote Trudeau, observing that “communism and Christianity were the only two [ideologies] that appeal directly to the masses.” To Trudeau, the world was evolving toward socialism and perhaps more: “The party of the people — socialism, communism — will eventually come out the winner.”

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    The London School of Keynes is where he studied. They knew so much there that actually finding knowledge was unnecessary. The “party of the people” is always run by the Elite Apparatchiks who are just more equal than the people they are “helping” and, quite naturally, have special privileges.

University students often see the world through idealistic and utopian eyes. But Trudeau asserted in his post prime ministerial memoirs that when he left the London School of Economics, his personal and political choices had been made for life, and it was these premises that he based all future political decisions.
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     Herein we see one of the flaws of Central Planning. It’s not that the theory of control is flawed. In economic terms, the fact that there is control is the flaw.

Back in Canada, he wrote that for a country with a small population like Canada there was no alternative but socialism. He neatly summed up what he had in mind with this gem: “We’re forced — whether we like it or not — to turn to the State … so that the poor have more to spend, and the rich have less to save.” Not one to worry about the national debt, Trudeau wrote that at the first sign of national economic weakness the Bank of Canada could always print some money “without any inconvenience.”

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     These are monumentally stupid assumptions, but any assumptions about central control are monumentally stupid. The evidence? Just look at the continued erosion of our standard of living. The Elite’s failure always lead to more Elite meddling.

In the 1950s, Trudeau aligned himself with the CCF (now the NDP), because, as he put it, socialism as an ideology was, “the most coherent, the most rational, perhaps also the most Christian.” He eventually joined the Liberal party, not because he moderated his views but because he said he did not want to be a missionary all his life.

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    Again, a policy is not only not needed, it’s not the policy that’s flawed, it’s the fact that there is a policy. Trudeau said, “The job of the government is to manage the economy of the country.”, exactly what the government should never do.

When Trudeau came to power in 1968 under the slogan Just Society, he found the fundamentals of the Canadian economy in solid shape. Our dollar was strong and stable, unemployment hovered around 4%, the books were balanced, the economy was booming, and the federal debt represented about one-quarter of our economy (Flaherty’s longterm target).

Trudeau‘s first significant socialist salute was the 1971 Unemployment Insurance Act. The period of qualifying work was reduced by 73%, the benefits increased by 65%, and the benefit period extended by 40%. Turning seasonal employment into year-round income, at ski hills around the country exuberant youth began sporting t-shirts pledging their affinity to the “UIC ski team.”

The number of UI claimants doubled overnight. Provinces designed short-term work programs to get people off provincially financed welfare — to make them eligible for federally financed UI. Trudeau’s folly, experts concluded, caused unemployment rates in Canada to rise by between two percentage points nationally and up to four percentage points in Atlantic Canada. Thus did Canada began to seriously underperform our major trading partners.

When Trudeau was held to a minority government in 1972, he thought it a blessing in disguise: “The minority government allowed me to put forward more advanced left-wing projects. I knew that the NDP would back me up — in fact, the NDP supported me when some of the more conservative members of my own party did not. I was thus able to institute policies that I had been dreaming about for a long time.”

It was then that Trudeau unleashed his attack on free enterprise. In a 1975 year-end interview, Trudeau justified the introduction of wage and price controls on the grounds that, “we haven’t been able to make it work, the free market system.” He said the era of big government was upon us. Indeed, over the Trudeau era federal spending increased about 15% per year on a compound basis; and from 17.1% of GDP to 24.3%. Put another way, the federal government increased its bite of the nation’s economic activity by 42%.

Trudeau massively boosted public-sector wages and employment, established 114 agencies and commissions, created seven new government departments, and doubled both the number of ministers of state and the size of the PMO. The only area in which Trudeau restrained spending was the Canadian military, which saw its portion of federal spending cut in half.

While Trudeau turned on the spending taps, he lacked the political courage and moral compass to fund his grand design for his Just Society. Instead of raising taxes — and taking the ensuing political heat — Trudeau ratcheted up the national debt. In fact, Trudeau spent more on programs than he collected in revenue, leaving not a plug nickel of taxpayer dollars to pay the interest on the debt. It was as if you stopped making your mortgage payment for 15 years, leaving it to your kids to pick up the slack.

Even if you didn’t care about the deficit, and managed to keep your job, it was hard to escape the wrath of inflation and the high interest rates that inevitably resulted from Trudeau’s spending and deficit spree. Our prime rate peaked at close to 20% — well above American levels. A $100,000 loan cost a Canadian debtor $7,000 more in interest costs during Trudeau’s time in office than what an American would have paid on a similar debt.

With a series of protectionist foreign investment policies Trudeau repelled potential employers with the Foreign Investment Review Agency. But at the top of the list of policy failures stands the much-detested National Energy Program. If Ottawa consciously wanted to design a policy to wreak havoc from an economic, environmental, and national unity perspective, the NEP was the ticket.

The bottom line was that Trudeau had little faith in the free enterprise system and pursued a range of economic policies grounded in the belief that government knew best. If we had paid attention to his views on economic management before he became prime minister, the results would not have come as such a great surprise.

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    The days of wage and price controls. Both the U.S. and Canadian governments instituted them to deal with the inflation produced by, wait for it, the federal government. Shocking.

    Inflation, which was caused by printing more money, was blamed on greed.

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies

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