Ontario must spend more to drive prosperity and growth

Posted on March 23, 2021 in Debates

Source: — Authors:

TheStar.com – Opinion/Contributors

Government budget-making in a time of pandemic and economic hardship is no easy task. While Ontario is planning for a period of recovery, in truth, we entered the pandemic in a challenged position.

On March 24, recently minted Ontario Finance Minister Peter Bethlenfalvy will present the Ford government’s vision for how our province will begin to dig its way out of these troubles, while also setting up a foundation for re-election 15 months from now.

In order to emerge ready for growth, we need to rethink our approach to deficits, separating the unsustainable from those investments that create pro-growth structural reforms. Like Nixon going to China, conservatives must spend to engage the economy and steer it toward a new era of dynamism and private sector growth for Ontario.

Since the start of the pandemic, Premier Ford has spoken about the “Ontario spirit.” As we look beyond the pandemic, now is the moment to move from the retail politics which have enabled his success, and embark upon the society-building projects that will foster growth, improve living standards and build him a legacy.

It’s time for an Ontario that breaks away from complacency. The pre-pandemic Ontario was shaped by slow growth, low business investment, and aging demographics. Continuing on this path will not bring enhanced prosperity, let alone pay down the massive amounts of accumulated debt or allow continued investments in health care and education. GDP has grown at about two per cent a year since the early 2000s, and much of that growth is due to immigration and activities that speak to low productivity like flipping real estate, rather than ingenuity and innovation.

Meanwhile, the Bank of Canada has warned that without deliberate action, we will exit the pandemic with a lower profile for production. In that vein, every aspect of Minister Bethlenfalvy’s budget should be dedicated to raising growth and driving productivity.

The pandemic has been notable for the failure of many businesses, while others suffer long-term damage and lost savings for investment. This compounds what has been a historic problem of Ontario companies, which are quite conservative in making large-scale capital investments and taking a chance on themselves.

This must change. Government must invest at levels not seen previously and be prepared to accept that there will be some losses. Such a program must aim for a culture change in terms of taking risk, and accelerating automation and digitization. Government must also lay down the broadband infrastructure, transit and highway trade corridors that will be fundamental to business expansion. Such critical infrastructure is expensive, but fundamental if we are to succeed. The good news is that if properly done it will pay itself back in multiples.

At the same time, the pandemic has created new challenges that come with new opportunities. With global supply chains becoming more regionalized whether we like it or not, helping businesses to reorganize production, integrate robot technology and utilize artificial intelligence will create jobs of the future.

The debate about access to vaccines has also ushered forward an important conversation about our ability to encourage R&D, especially in the life sciences. With the announcement of a new Invest Ontario agency to be the province’s central pivot for economic development, they must take seriously their mandate to foster this innovation, and the budget must give it the fiscal firepower to do so.

Bolstering the capacity for capital investment and driving productivity are vital, but the third pillar of post-pandemic growth will be supporting our workforce. Growth has to be inclusive, meaning recognizing that women, new Canadians and others will get the support they need to participate fully in the economy. The Ford government would be wise to demonstrate full support for a universal child care model that marries social and economic goals, and further increases women’s participation in the labour force. Distance education and telemedicine will also be vital to bring shared opportunity to our remote communities.

Ontario must dedicate itself to a pragmatic and sophisticated recovery that recognizes a thriving private sector necessitates an expanded public sector. Coupled with vision, investment and ambition, Premier Ford’s view of the “Ontario Spirit” reflects the confidence we must have in one another, but also the chance we must now take on ourselves as we build up a province that is ready for the future.

Karl Baldauf is vice president of the McMillan Vantage Policy Group. He previously served as chief of staff to Minister Peter Bethlenfalvy, and as vice president of policy and government relations at the Ontario Chamber of Commerce.

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