When I was chairman of Magna International Inc., I could always tell how competitive one of our factories was the moment I set foot in the front door. All I had to do was look at how many people were working upstairs in the administrative and executive offices.
When you run a factory, it doesn’t matter how productive the workers on the factory floor are if there are too many people working in administration. If overhead isn’t kept trimmed to the bone, the business will simply not be competitive. This same principle applies to countries as well as companies.
One of the great dangers any democratic society faces is the enormous buildup of bureaucracy over time as government grows and extends its reach into all aspects of our lives.
The more regulations we adopt, the more bureaucrats the government needs to administer them. Bureaucracy just keeps mushrooming. All of the new regulations that come along with more government become a hidden cost of doing business that ultimately chokes productivity and makes businesses less competitive.
Canada’s various levels of government all continue to grow year over year, adding countless new programs and departments while expanding the size of existing programs. You would think that three levels of government — municipal, provincial and federal — would be more than enough. But a number of Canada’s biggest provinces, such as Ontario, Alberta, B.C. and Quebec, also have regional governments, a fourth layer of administration. It’s bureaucracy on top of bureaucracy on top of bureaucracy. And it’s gotten totally out of hand.
Last month, I suggested that Canada needed a new national movement of concerned citizens who would endorse seven core principles to revitalize our economy and improve the living standards of all Canadians. One of those core principles was to cut government overhead by reducing spending by five per cent per year over a ten-year period. This reduction needs to happen at every level of government.
Although it’s sometimes tempting to make huge wholesale changes overnight, I believe this slow but gradual approach to cutting government spending would be the most prudent way to finally start bringing down the cost of government. The reduction in government spending could be done without jeopardizing safety, the environment, education, or health.
By implementing these targeted annual reductions, we would be able to cut government overhead in half by 2033, a decade from now, returning it closer to levels that existed 50 to 60 years ago when economic growth in this country was at an all-time high and living standards for the majority of Canadians were much higher.
In our personal lives and in business, we always have to sort out what our priorities are when it comes to spending. But that’s never the case with government because there’s never any limit on what they can spend.
But by introducing a requirement to cut spending each year by five per cent, government will be forced to begin prioritizing and concentrating spending on the most critical services and programs, while also cutting out waste and duplication to spend our tax dollars more efficiently. At the same time, we can easily reduce the mountain of government rules and regulations that have been created over the years — regulations that sap productivity and hobble economic growth.
Ultimately, lower government overhead will allow us to begin lowering taxes for individuals and businesses. For workers, that means more money in their pockets to spend or invest. And for companies, lower government overhead will make them more competitive at a time when the global economic arena is increasingly cutthroat.
If we incrementally reined in government spending and gradually started reducing the bureaucracy, we would begin to create the framework for long-term economic recovery and growth, lower taxes, less red tape, less government interference, and more individual freedom.
The global economy is spinning faster and faster with each passing year, and countries in the West — especially Canada — need to find new and better ways to remain globally competitive.
Jobs are the most precious commodity in the world, and in an effort to raise the living standards of their people, countries everywhere will fight tooth and nail to lure those jobs to their shores. But it’s the leanest and shrewdest countries, the ones with the lowest overhead and the lowest taxes, that will win the lion’s share of new jobs and investment dollars.
If Canada wants to be one of those countries, we need to start reducing our bloated overhead.