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Direct government investment hurts people

Author: David Maclean 2005/10/03
Did the bitterly-contested 2003 election end the debate about the role of crowns and direct government investment into the economy If you listen to the NDP or the political pundits in Saskatchewan it did.

However, if you ask Saskatchewanians about specific examples, you find a willingness to pursue a different path.

For example, when the Canadian Taxpayers Federation (CTF) put together a report recommending privatization of liquor stores, we commissioned a poll by reputable research firm Sigma Analytics. They asked 693 Saskatchewan residents whether they felt the government should own and operate liquor stores. The survey found, within a margin of error of 3.7 per cent, that 72 per cent of Saskatchewan residents felt the government should have no role whatsoever in the liquor business or that role should be limited to wholesaling.

Just one year after the monumental provincial election a vast majority of Saskatchewan residents effectively said "sell off the liquor stores!"

Not exactly what one would expect from a province so enthralled with its government's practice of slithering into every damp crevice in the Saskatchewan economy. The reality is that voters consider a wide variety of things when choosing a government - things like competence, leadership and personality.

The problem with government investment in the economy is that it's bad for business in the long term.

Take a look at Securtek as an example. Does the government have a mandate to establish aggressive businesses to squeeze out existing tax-paying businesses Securtek was formed by Sasktel in 1999 as a new entry into the home and business security market. Operating a security company piggy-backed on existing Sasktel phone lines and internet connectivity was a slam dunk for the government. Sounds like a great idea, unless you are an established security company facing a new competitor with bottomless pockets.

Since Securtek was established taxpayers have lost more than $4 million while investing $35 million into the operation. Securtek bought up some of the existing players in the market, and viciously undercut the remaining players. In recent years they have made razor-thin profits while gobbling up an ever-larger market share. Imagine the horror for an established dealer seeing a government-owned business pursuing your clientele.

Think of what the smaller operators are competing against. Securtek pays no taxes. Securtek has unlimited access to Sasktel phone lines, and use their monopoly to offer special rates for "bundling." It's an unfair advantage that private operators find impossible to match.

The big question that still dogs Saskatchewan is why, with all our natural wealth, we are still losing population to the rest of Canada. The practice of government meddling in the economy is a big reason why. It sends a message to the business community that if you come to Saskatchewan, you might wind up paying taxes so the government can subsidize your competition or, worse yet, directly compete for your customers.

The accepted wisdom, as the government would have it, is that voters love this stuff. If popular support for privatizing liquor stores is any indication of general attitudes toward government intrusion into the economy, we think that's wishful thinking.


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Franco Terrazzano
Federal Director at
Canadian Taxpayers
Federation

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