Thank you, Chair Fonseca.
First, I have my disclosures. One, I do not belong or donate money to any political party at any level in Canada. Two, I have taught at Carleton University for 37 years, teaching the strategy capstone course that evaluates the competitiveness and value creation of industries and firms across the United States and Canada. Three, over the last 30 years, I've taught the EMBA over 100 times in multiple developing countries that experience very low economic growth, massive inequality, corruption and poverty at levels not seen in Canada.
As I am not here to plead on behalf of any interest group, business or NGO—after all, I'm not a lobbyist—I will deal at the level of the macroeconomic, philosophical direction of the budget implementation bill.
The fundamental problem, in my judgment, with the previous budget and the current budget is the overarching belief in the following fundamental principles. One, the top-down or centralized decision-making by politically directed non-market bureaucracy using the public funds of citizens produces superior outcomes to decentralized private decision-making by investors taking risks with their own money. Two, superior economic growth and prosperity will be realized by expanding the role and size of the public sector to direct and guide, substituting their decisions for private strategic decisions by corporations and investors. Three, fairness is defined as treating business investors or risk-takers as equal or possibly inferior to employees, requiring taxation to equalize investors with employees.
In my judgment, each of these fundamental assumptions in the budget bill is wrong, false and destructive of the greater public good in Canada. The market economy, from its origins in the late 1700s to the present—250 years of economic theory and practice—and the over 50 Nobel prizes in economics have taught us that a decentralized economy of private investors and decision-makers making private decisions concerning capital investment, research and development, production, pricing, distribution and innovation produces the incredible standard of living of the high-income OECD countries, documented by the World Bank.
The “hockey stick of human prosperity” was named and documented by growth scholar Professor McCloskey of the University of Chicago and the University of Illinois in over 250 peer-reviewed research articles. I urge you to read her article called “How Growth Happens”. However, it was Joseph Schumpeter, the brilliant economist at the University of Vienna, then Harvard, who taught us the why and the how.
Competition causes firms to endlessly, ceaselessly innovate in order to differentiate their product offerings and achieve a sustainable, competitive advantage—the holy grail of any private firm. This process creates “gales of creative destruction”, the famous phrase of Schumpeter. It is not profit maximization, as claimed by critics unschooled in growth theory and economic philosophy. Schumpeter taught us that there are five types of innovation: product innovation, process innovation, business model innovation, source of supply innovation, and mergers and divestments, which I would call “corporate strategy innovation”.
The budget unwittingly undermines every type of Schumpeterian innovation by attempting to displace and replace private producer or investor strategic decision-making concerning these types of innovations. This replaces private investors with the very worst kind of economic policy decision-making and political decision-making and has false assumptions concerning the superiority of knowledge, understanding and decision-making in private markets.
In any large economy, there are literally trillions of economic decisions that occur daily. Many are as trivial as the decision to go to Tim Hortons for a coffee. It's an economic decision. However, the trillions of microeconomic individual decisions aggregate to macroeconomic trends and macroconsumer behavioural trends—the domain of strategy and value creation.
It is a conceit that people at the top of the non-market sector possess knowledge superior to the wisdom of crowds and to the outcomes of thousands of markets reflecting the decisions of millions of consumers and investors. There is no factual basis to this conceit. There is no supercomputer in the world fast enough or powerful enough, nor any AI algorithm or great leader smart enough, to process, aggregate and understand the meaning of the trillions of economic decisions in real time and then respond with the appropriate strategies and policies.
This explains the failure of every centrally managed economy everywhere, and we don't even have to look to the famous U.S.S.R. We can look at the failures of Argentina. We can look at the failures of Turkey and the failures of Venezuela.
What must be done—because I'm running out of time—