Green recovery plan ignores practical limitations of government

The Trudeau government says Canada needs a “green” recovery plan, which may include big spending on green infrastructure, low-carbon subsidies and initiatives to create “clean” jobs. Unfortunately, the idea that the government can effectively reorganize the economy around green initiatives—while stimulating growth—ignores the practical limitations of government, which have been evidenced time and again.

This isn’t the first time this federal government has tried to pick winners and shape the structure of the economy. Over the last several years, Ottawa has spent billions on its innovation agenda including $950 million to five sectors of the economy, which were hand-picked to drive growth. The success of this strategy has yet to be seen. Indeed, rates of economic growth have declined over the 2015 to 2019 period, pre-recession.

Simply put, the Trudeau government continues to assume it can successfully identify and execute support for certain sectors, more effectively than the private sector, as a means to improve the economy, despite its performance since 2015.

That’s an ambitious presumption. Particularly when one considers that Ottawa has problems effectively completing even basic mundane tasks.

Consider the federal government’s ongoing problems with paying its employees. A report by the auditor general (AG) found that the federal payroll system remains plagued by problems, with payment errors in 2019 totalling $710 million, affecting more than 177,000 federal employees. In a sample of employees, the AG found that 67 per cent were paid incorrectly at least once during the fiscal year (2018-19). Think about it—the federal government, regardless of the party in power, has trouble paying its employees but believes it can redesign the entire economy.

Reports from the AG also include numerous examples of government failure for seemingly straight-forward tasks. For example, a series of reports examined the country’s social insurance numbers, which are the basis for receiving government transfers such as employment insurance and Old Age Security. At one point, the AG found there were 100 times as many SINs for people over the age of 100 as there were actual people, more than 50 per cent of SINs had no supporting documents, and there were 3.8 million more SINs for Canadians over the age of 20 than there were people.

And this kind of thing has been happening for decades. Consider the 2001 heating expense relief program, which was meant to provide payments to lower-income Canadians suffering from higher-than-normal heating costs. The AG found that 90,000 Canadians in need of assistance were excluded, less than one quarter of the $1.5 billion spent actually reached low-income Canadians, and up to 1,600 prisoners and some 7,500 deceased Canadians received payments.

To be clear, this is not about the government lacking great people with good intentions. The government simply faces different incentives and constraints than the private sector.

If a private firm misallocates capital, treats customers poorly or delivers an unwanted or unsatisfactory good or service, its owners and employees pay the price—the firm may even go out of business. Put differently, there’s an immediate and direct line of accountability for owners and employees of firms when it comes to their products and customers.

This discipline doesn’t exist for government. It’s rare for bureaucrats to lose their positions due to government failure. In many ways, when governments fail, the reaction is to double-down and spend more money, expand a department’s resources or even create a new department or initiative.

The federal government’s experience clearly shows there are practical realities and limitations in the way it operates, which affects its ability to successfully execute simple functions. The Trudeau government’s plan to restructure the entire economy around green initiatives in a way that stimulates growth and creates jobs is simply unrealistic given the reality of government.