Let's reduce public spending to raise Quebecers' standard of living

MONTREAL, Feb. 13, 2019 /CNW Telbec/ - While Quebec Premier François Legault wants to attract private investment into the province, a publication launched today by the MEI shows that an essential precondition for this and for increasing Quebecers' standard of living is to increase the province's productivity by reducing public spending.

"Quebec registered one of the weakest growth rates in living standards among industrialized countries since the 1980s, and is ranked near the bottom of the pack compared to other countries and provinces in terms of living standards. But we can get out of this slump, notably by raising our productivity," explains Germain Belzile, Senior Associate Researcher at the MEI and co-author of the publication.

How? By reducing government spending, which will in turn allow taxes to be lowered and will lead to increased investments, both foreign and domestic.

For example, the Quebec government spends a lot more than the Ontario government, and more than the average of Canadian provinces. "Studies, including OECD studies, show that countries whose governments intervene and spend the most also have the least dynamic economies, which is to say the lowest growth rates," points out Maher Gordah, Economist at the MEI and co-author of the publication.

In Canada as a whole, government represents around 41% of GDP, while for Quebec, this ratio is 52%. Government thus takes up 27% more space in the province's economy, compared to the Canadian average. Such a level of spending and intervention in the economy undermines the potential productivity gains that are necessary for raising living standards.

"This reminds us once again that opting for a big-spending government ends up decreasing the standard of living of Quebecers. Reducing public spending could reverse this trend and make Quebecers richer," says Germain Belzile. "The data from the past thirty-five years and the comparison with similar economies is unequivocal: If the government really wants to encourage private investment?and there's no reason to doubt that it does?it must make the reduction of spending a priority, and intervene less in the economy more generally. That's the only way the potential prosperity of Quebecers will be fully achieved."

The Viewpoint entitled "More Prosperity through Smaller Government" was prepared by Maher Gordah, Economist at the MEI, and Germain Belzile, Senior Associate Researcher at the MEI. This publication is available on our website.

The MEI is an independent public policy think tank. Through its publications and media appearances, the MEI stimulates debate on public policies in Quebec and across Canada by proposing reforms based on market principles and entrepreneurship.

SOURCE Montreal Economic Institute