Three Million Manitobans

Commentary, Role of Government, Frontier Centre

It’s 2036 and Manitoba’s population just passed three million. The economy is booming.

Let’s imagine for a moment the history that might unfold to bring Manitoba to such a result. In 2006, lets suppose, Manitoba finally confronted its slow growth crisis by abandoning heavy government ownership of the economy, punitive tax rates and dependency on federal subsidies. By narrowing government’s role in the economy, the new direction kick-started the economy and made the province a Mecca for people and investment. In a replay of the Irish Tiger – holding public sector growth below the private sector’s Manitoba doubled its rate of economic growth. Paradoxically, a faster-growing pie produced more tax revenue for public services.

Government returned to its core tasks of funding services, setting standards and measuring performance. It opened up the education and health-care industries, empowering both employees and consumers through the magic of choice and competitive innovation. Those sectors became dynamic export industries that added value to the broader economy instead of subtracting it.

Complementing the separation of public funding from delivery, new performance and cost measurement systems made services more transparent. They began to focus on outputs rather than process, rules and red tape and posted simpler, lower administrative overheads. The separation made politician’s jobs easier by depoliticizing public services and shifting their focus back to the consumers they serve. New technology and vast service improvements followed as service providers rapidly added value to their offerings to attract and retain customers.

By ending the sluggish public monopoly and moving to a system of competing public and private providers, a transformed health-care system became the province’s largest export industry and a hotbed for research and value-added activity. Consumers used the Internet to choose the facilities with the best quality and shortest lists. This diverted demand to underused facilities in smaller centres. With payment based on the volume of service instead of last year’s budget, marginal facilities closed down or turned to other uses. Many were sold to former public employees and private companies, who converted them into specialized clinics. The Mayo Clinic and other prestige health service providers moved in with the latest technologies to service thousands of Americans, capitalizing on our currency advantage and the presence of research talent with local customers accessing them during off-peak hours at rock bottom rates charged to the public system. Waiting lists disappeared while productivity gains and innovations, absent in the old monopoly model, dramatically reduced costs.

Public education similarly changed. Instead of a politicized cost centre, it became a thriving economic driver. The Province consolidated funding by dumping property taxes, simply sending money to schools based on enrolment. Quality control was assured by widespread testing and publicizing of results. Parent-teacher councils at schools replaced school boards which removed expensive, multiple layers of administration. Individual schools and organizations negotiated their own contracts with teachers, but the profession prospered. It came to resemble the accounting or legal professions, with star or master teachers earning up to $200,000 a year; entrepreneurial teachers formed their own schools and school chains. Underused or closed facilities re-opened province-wide as the teaching industry aggressively marketed its services to thousands of foreign students.

Impressive new efficiencies in these two industries helped pay for carefully planned, but dramatic tax reductions which made Manitoba Canada’s most attractive place for investment and job creation. To maximize economic growth, the top personal income tax rate fell more than half, to a flat 8% from 17.4% over a three-year period, and corporate rates went to the same level. Capital and payroll taxes ended immediately. Harmonizing the provincial sales tax with the GST simplified administration and lowered costs for businesses by expanding input tax credits. By keeping the same rate over a larger base, it raised $100 million more in provincial revenues in 2006. One percent of the combined rate was transferred to municipal governments on a per capita basis.

Prior to disposition, Manitoba also moved to extract dividends and taxes from its crown corporations. By removing these invisible subsidies that kept electricity prices artificially low Hydro tilted “green” encouraging conservation while leveling the playing field for the emerging wind power sector. Hydro also adopted peak-load pricing to shift energy demand to low-use periods. Manitobans conserved and the saved power was exported to the Midwest U.S. Finally, the Province overcame its strange fixation with government ownership by separating the gas and electricity divisions before selling them off. This slashed interest payments by paying off debt while creating a giant new source of tax revenue. The privatized Hydro, became the dominant mid-continental power provider, expanding dramatically by buying up mid-western U.S. utilities to secure a market for power from new dams, all without risk to taxpayers.

Dozens of other reforms lifted barriers to growth throughout the economy, two of them especially important. Targeted housing supplements for low-income earners replaced rent control. This revitalized Winnipeg’s historic downtown and set off a boom that eventually created a hundred thousand new housing units. A unilateral withdrawal from supply management allowed the egg, poultry, and dairy industries to expand rapidly at the base of a diversified food processing sector, creating tens of thousands of new jobs.

Young people scratch their heads when the old-timers talk about Manitoba’s “have-not” economy….

Does this sounds too good to be true? With some vision and a lot of leadership it can happen.

Manitoba Policy Blueprint Project coming soon..