Two effectively bankrupt provinces—Ontario with its out-of-control debt and BC, home to 1-in-every-4 jobs permanently lost in Canada over the last 18 months—are chasing each other’s tails to increase subsidies to big business. They are competing to see who can back-door the largest subsidies for multi-nationals into the home-owners’ utility bills.  

The multi-national business lobby could not be happier.

In the meantime, the most cost-effective green policies are working out well in Nova Scotia. Big business—as opposed to small companies, which ironically are Canada’s leading job creators, and who are big losers in this play—does not want anyone to notice that. And so far, big business, mainly multi-nationals who pay little tax in Canada, is getting everything it wants out of the Ontario and BC leaders.

Please take note of the key lesson to be learned from the European experience.

When we directly or indirectly pack new industrial subsidies into utility and fuel bills, we shift the overall tax burden from the private sector to households and public institutions (hospitals, schools, universities, social service agencies, not-for-profits) who are not exempt from energy taxation and utility rate increases.

For example, between 1990 and 2007, aggregate real retail energy prices increased only 5% in Sweden, in spite of large published increases in energy taxes—due to the plethora of corporate energy tax exemptions. But mandatory health care premiums increased 35% and payroll taxes increased roughly 1% per annum. At the same time, real unemployment in Sweden—after we shift Swedes on permanent "sick leave" from the "employed" classification to "unemployed"—hovered between 15% and 20% in the pre-global fiscal crisis 2006.

Sweden is not an isolated case. Every European nation that has implemented the measures that have been introduced and are being contemplated in BC and Ontario, payroll taxes and mandatory health care premiums have increased at 3 to 5 times the rate of the direct and indirect energy taxes. This increase was necessary to cover the new public sector energy tax liabilities.  

The net result is that in Denmark, Sweden, etc., government spending has exceeded 45% of GDP for over a decade. This is part of the reason Europe’s fiscal crisis is so much more extreme than Canada’s. That is not to say Canada has done everything right—far from it. Over the last 10 years government spending (all levels) has grown from roughly 22% of GDP to over 35% (pre-recession and stimulus spending).

We appear to be desperate to dig ourselves into the European hole.

Please remember that the Scandinavian nations (Denmark, Norway, Finland, Sweden, with side effects for Iceland and Germany) suffered a full financial system collapse in 1990. Note that Germany had zero-net GDP growth from 1999 through 2005.  Unfortunately, the reforms those nations implemented did not insulate them (with the possible exception of Finland) from the 2008/9 global financial crisis. So, at this time, the BC and Ontario governments are adopting the policies that have been "proved" dominantly by nations who have imposed on themselves two major financial crises in less than 20 years.

Why does this appear to be a good plan to our leaders?