Former Ontario Premier Dalton McGuinty (pictured above) recently released his autobiography, Making a Difference. Despite its brevity, barely reaching 200 pages, the book provides valuable insights into how his government assessed the role of the private and public sectors in generating economic growth. In McGuinty’s worldview, government is the key player in economic growth. If government gets its policies right and provides the public services people need, growth will take care of itself. The actual dynamic of growth in the private sector, or how innovation occurs, is of no interest and therefore is not understood at all. The result has been more than a decade of lagging business investment and sub-par growth in jobs and incomes, which reduced Ontario to the status of a “have-not” province in Confederation. This series of blog posts provides a review of McGuinty’s new book, with a focus on what it tells us about the economic worldview of Ontario’s 24th premier. This post deals with the failure of McGuinty’s autobiography to demonstrate an understanding of how government policies impact a jurisdiction’s business climate.

Part 1: Neglect of the business sector

Dalton McGuinty attributes his election as Ontario premier in 2003 to his pledge to reverse the alleged degradation of public services under a decade of Conservative government. He never forgot this primal lesson, and his book is littered with claims of improving the delivery of public services to Ontarians. Unfortunately for Ontario, the obsession with public services is all-consuming. It is remarkable that in his reminiscence of a decade in power, the business sector barely rates a footnote.

There are several manifestations of this government-centric view of the world. Start with the index. It is composed almost exclusively of government officials McGuinty met, with a sprinkling of government conferences and legislative highlights. Only one company (Samsung) is listed, although the book does discuss General Motors and Chrysler because his government helped to rescue these companies from bankruptcy in 2009. When business firms enter the premier’s view, it is often as supplicants relying on government hand-outs.

The book demonstrates a troubling lack of awareness of how government policies harmed Ontario’s business climate in recent years. This is not only due to the endless string of deficits resulting from the priority attached to more government spending. It includes a wide range of other taxes and regulations that raise the cost of doing business; by the Ontario government’s own count it has 380,000 regulations on the books, twice as many as the next province (which is British Columbia, not Quebec). The result of these policies is evident in everything from soaring electricity costs to a doubling of the minimum wage, a new payroll tax for the Ontario pension plan and adding an extra paid day off in the middle of the 2009 recession.

The indifference to the business community goes back to well before the moment McGuinty became premier. Read the chapter covering 2001, and you find a discussion of a thinkers’ conference at Niagara-on-the-Lake organized by Gerald Butts (now Justin Trudeau’s principal secretary), but no reference to the meltdown in the high-tech sector that led to the loss of tens of thousands of jobs at Nortel and JDS Uniphase in McGuinty’s hometown of Ottawa. Not even the terrorist attacks on 9/11 that disrupted trade with the U.S. warrant a mention. Events in the real world outside of government are of little interest, probably because they insist on being so maddeningly unpredictable and disruptive to the carefully-laid plans of public policymakers.

The result of this single-minded focus on the virtues of government spending is that Ontario’s economy is increasingly organized around the delivery of public services, to the detriment of its capacity to produce other things. At the turn of the millennium, Ontario’s principal investments were being made by its manufacturing and finance industries. After a decade of slumping business investment by the private sector, the largest industries still willing to invest in Ontario are publicly-controlled entities such as utilities and transportation (notably urban transit) which respond to government orders, not market forces.

Donald Savoie warns in his new book What Is Government Good At? of the perils of an over-reliance on government. He notes government is not very good at a number of things, including estimating the resources needed to do a job, delivering the program, evaluating its performance and being accountable. Following the revolution led by Margaret Thatcher and Ronald Reagan, even left-of-centre leaders such as Tony Blair, Bill Clinton and Jean Chretien all accepted the need to downsize government and privatize the delivery of services. The blind faith of premiers McGuinty and Kathleen Wynne in public services goes against this trend in political thought.

For more of Philip Cross’ blog series review of Dalton McGuinty’s autobiography, see Part 2 and Part 3.