Comment 55864

By A Smith (anonymous) | Posted January 12, 2011 at 00:59:10

goin'downtown >> I would love to see a slew of niche, state-of-the-art (state-of-the-art including environmentally responsible) manufacturers here. How do we reach out to them?

From 2000 to 2009, total government spending in Ontario, including fixed infrastructure (buildings, machinery, etc), went from 18.68% of GDP to 25.31%. In other words, the government sector, the part of our economy that does NOT try to make profits, has taken a 35% bigger role in our economy over the last decade. The result of this spending by politics, rather than by "can this make me money", has resulted in less "can this make me money" types of businesses/jobs.

If Hamilton wants more creative and world leading businesses that create wealth, we need to base our economy on just that, private sector businesses, not government funded industries like health and education.

For example, if we had fixed government spending levels as a percent of the economy at 2005 levels, provincial spending in 2009 would have been $120.5B, rather than the $146.4 it actually was. That works out to a savings of $1,992 for every citizen of Ontario.

In fact, from 2005-09, government spending in Ontario increased by an average of 6.9% every year. If inflation was around 2%, real government spending grew by almost 5% from 2005-09. With all of this spending dedicated to producing free stuff for the people of Ontario, how did the private sector respond?

From 2005-09, the non government part of the economy, the part dedicated to rewarding innovation by allowing people to make profits, it only grew 1.5%. After inflation, that works out to -6.5%, or -1.63% per year from 2005-09. The crowding out of the private sector by fast spending by the government meant less business competition, less innovation and slower private sector job growth.

To get back to 2005 levels of government spending as a percent of GDP, 20.84% of GDP, Ontario's economy needs to grow by 21.4% from 2009 levels (assuming government spending levels of 2009, which are likely even higher today). That's how much our private sector has shrank in influence due to the crowding out effect of government spending on free stuff. In this case, free is the stagnation of Ontario's private sector for 4, 5, or even 6 years. There is no free lunch.

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