01-03 Public Policy

It was the early days of World War Two and I was with my father heading home after a day of taking orders from officers at Camp Borden. Father had taken close to ten orders and he showed me the credit slips he had received from the officers that were worth $200 each.
He was giving me a basic lesson in economics and how governments can influence economic growth. I was seven years of age. Those credit slips came from the government and allowed officers to buy uniforms anywhere they pleased.
In later years, he explained that he could not get a bank loan because he did hot have any collateral. But the credit slips he received from the officers to pay for their uniforms were as good as cash. He gave the credit slips to the bank and they transferred the funds into his bank account.
Most of us have a basic idea of how governments influence economic growth through investments in things like education, infrastructure, basic research and health care. And we live in a society that seems to make smart public investments.
I am luckily a product of our educational system and remember with affection my years at the University of Toronto, as an undergraduate engineer and later as a graduate student working towards a Masters Degree in Business. The photo is of the beautiful University College.
Over the years I followed the careers of my university colleagues and they all made a powerful contribution to the growth of the economy.
And during my active years at the Canadian Federation of Independent Business I was very sensitive to the impact government policy can have on the incentives to work and save, especially tax policy.
But my first great insight into the role of the state in promoting growth came from a friendship with Professor Alfred Gutterson of the University of St. Gallen in Switzerland.
He made a powerful argument that public policy to support the growth of small and medium sized enterprises should never be a political issue. Public policy instead should be developed to offset the natural weaknesses of small scale enterprises, which are universal in nature.
These are challenges such as the cost of providing debt and equity in small quantities, the complexities of dealing with the modern state, and the challenges of competing with governments and large corporations for resources.
The powerful benefit of a public health system, I remember him explaining, was that it enabled small firms to compete with large firms in attracting employees.
During the 1970s and 1980s CFIB was successful in securing the capital gains tax exemption for the sale of shares in small companies, and an Allowable Business Investment Loss Provision. So, if you invest $100K and lose it all your loss is only $50K. And there is no need to explain the lack of tax on any capital gain when you sell your shares.
These successful initiatives are all about attracting equity capital in small amounts and go back to the teachings of Alfred Gutterson.
Further proof that small scale development is non-political can be found from studying small business in different cultures. For example, studies show that small business development and job creation is actually more powerful in “leftish” Europe than in “rightish” America. Hmmm.
It was also interesting watching my father as he aged and had achieved his many personal goals. Things like providing security for his family, educating his children and bringing his brothers over from Ireland. His interest in the further growth of his business came to a halt. So, there is obviously a limit to the role of the state in promoting growth.
But there are other lessons in his history that relate to economic growth. He was a young immigrant with ambition. And his staff were almost all immigrants and brought skills to Canada that Canadians did not possess. The collective impact of new Canadians is massive.
And I am proud to say that most Canadians rightly believe that of all the public policies that support economic growth an open immigration policy is one of them.
That’s the way I see it anyways.