In light of the economic recession and the provincial election, now is an important time for British Columbians to reflect on the policies that helped reverse British Columbia's dismal economic performance in the 1990s.

While many wrongly dismiss the province's economic success from 2001 to 2007 as solely a function of external factors such as strong commodity prices and a booming real estate market, the reality is that important pro-growth policy initiatives introduced by the Liberals since 2001 have contributed substantially to the turnaround.

Many British Columbians, particularly young workers and recent migrants to the province, might not be aware that the 1990s is often considered a lost decade for B.C.'s economy. From 1990 to 2000, gross domestic product (GDP) per person grew by an average of only 0.6 per cent annually, the lowest growth rate among all Canadian provinces. Further, British Columbia's average income (GDP per person) plunged from $1,017 above the national average in 1990 to $3,036 lower than the national average at the end of the decade.

In 2001, following this bleak decade marked by the interventionist economic policies enacted by successive NDP governments, a Liberal government was elected which enacted policies aimed at creating an economic environment that encouraged individuals and businesses to flourish.

The B.C. Liberals decreased the size of government by targeting spending cuts and restraint. As a result, the share of the economy represented by provincial government spending (the most important gauge of government activity) decreased from 21.3 per cent in 2000-01 to 18.3 per cent over the next four years.

The new government also quickly enacted broad-based tax relief aimed at improving incentives to work, save, invest and engage in entrepreneurial activities. Specifically, it reduced the corporate income tax rate and eliminated the economically damaging general corporate capital tax. This substantially improved the incentives for businesses to invest and develop in the province.

The government also enacted a 25-per-cent across-the-board reduction in personal income tax rates. These reductions, particularly the middle and upper rates, improved the incentives for workers and entrepreneurs to work hard and be successful.

Not surprisingly, the influence of these personal and corporate income tax rate cuts on B.C.'s economic turnaround has been hotly debated. Many of those who opposed the tax cuts simply pointed to external factors as the sole reason for the province's economic improvement.

However, a recent study by one of Canada's leading economists, University of Alberta Prof. Bev Dahlby, assessed the economic effects of the 2001 tax cuts and determined they had a profound impact on economic growth and will continue to do so in the future.

Dahlby found that B.C.'s corporate income tax rate reductions will increase gross domestic product per person by 18 per cent above the level that would have resulted without the tax cut. Likewise, the personal income tax rate reductions will increase GDP per person by 7.6 per cent above that which would have prevailed in the absence of the cuts.

Along with tax relief, the provincial government also recognized the importance and cost of government red tape. As a result, it initiated a historic review of regulations and successfully reduced them by one-third.

It also began a process of regulatory harmonization with Alberta, which culminated in the Trade, Investment, and Labour Mobility Agreement, TILMA, which allows for goods, services, workers and investment to move more freely across provincial borders, benefiting both individuals and businesses.

One of the more contentious areas of reform was in the area of labour market regulation.

The province had been stymied by unbalanced and biased labour laws. But in 2001, the government undertook a number of steps to improve labour market regulations including the reinstatement of secret ballot voting requirements for union certification.

As a result of these positive policy developments, the province witnessed a marked improvement in its investment climate. In 2001, B.C. ranked dead last among the Canadian provinces in terms of its attractiveness to investors, according to pension and investment fund managers.

Less than one year after the implementation of the dramatic tax cuts and other policies by the Liberal government, the province catapulted into third position behind Ontario and Alberta. In 2008, B.C. (in a virtual tie with Saskatchewan) ranked behind only Alberta in terms of fostering a positive investment climate.

The effects of an improved investment climate have been nothing short of remarkable as the province experienced a dramatic reversal of economic fortunes. B.C. went from having the lowest per person GDP growth among the provinces between 1990 and 2000 to being one of the fastest-growing economies in the country from 2001 and 2007.

Unfortunately, the government has taken some backwards steps recently -- increasing in the size of government, introducing the economically damaging carbon tax, increasing government debt, and contemplating a cap-and-trade system as part of the Western Climate Initiative.

With external factors such as the global financial crisis and declining commodity prices now negatively affecting the economy, it is more critical than ever for B.C. to refocus on pro-economic growth policies. The next government should continue to strengthen B.C.'s investment climate through spending control, program reform (especially health care), additional incentive-based tax cuts, more balanced labour laws and regulatory reform. Doing so will ensure a brighter future for all British Columbians.