The Rightful Role of Government


Danielle Smith says government should do less

How much should the government be involved in our lives? As little as possible.

My views on the role of government have been shaped by Friedrich Hayek, Adam Smith, John Locke, Ayn Rand and the US Constitution. Hayek, because he explained how spontaneous order is preferable to central planning. Smith, because he understood how the invisible hand results in benefits for society from individuals pursuing their own self-interest. Locke, because he was the first to express the view that the government’s job was to serve the people by protecting the life, liberty and property of its citizens. Rand, because she believed the only legitimate role of government was to defend individual rights from foreign and internal marauders through a robust national defence, police service and law courts. The US Constitution, because it properly conceived of a person’s rights generating from the individual, limited the state from intruding in their affairs and developed a framework to think about the division of powers between different levels of government.

We will never know whether such a limited view of government could work, because government has become so centralized, large, invasive, costly and unwieldy it is impossible to scale it back. I realized the fruitlessness of trying to argue for limited government and free enterprise capitalism in an exchange with one of my listeners over the catastrophe of the Hugo Chavez–Nicolas Maduro era in Venezuela. I had thought the failure of the Venezuelan central planning experiment was obvious: hyperinflation collapsed the value of the currency; there were lineups for food; clashes with authorities led to deaths. The government even nationalized bakeries.

I should have known the regime would still have its champions. The listener wrote me to say that I’d missed the point of why Maduro “had to” confiscate the bakeries. He told me the government wanted to provide the people with cheap bread, so it was subsidizing the raw materials, “but the infamous and lovely ‘invisible hand’ of greed [caused] bakers to produce other products with a higher price. The subsidy was provided for a specific end and yet it was being used for something else, to make a greater profit. They thought their only hope was to nationalize those bakeries.” So the government set out to get cheap bread and ended up with no bread. That was a failure of government policy, not a failure of the market.

Families, non-profits and small businesses do a good job of meeting the needs of most people.

The way the invisible hand actually works was described well by National Post columnist Marni Soupcoff in “A cruise ship full of vacationers does more to help Haitians than billions in aid.” Years after the 2010 earthquake and billions of dollars in foreign aid, roughly one hundred thousand people remain in tent camps, Port-au-Prince still lacks good roads, electricity and safe drinking water, official unemployment is at 40 per cent, and actual unemployment is more like 80 per cent.

Meanwhile, Soupcoff writes, “…Royal Caribbean and its gauche, cash-grabbing operation have been successfully employing hundreds of Haitians and injecting money directly into the Haitian economy, for decades.” Surrounding villagers enjoy the benefits of the water and electricity infrastructure the cruise line has built. She asks: “Does it matter that the company’s motivation was to power a roller coaster and serve tourists piña coladas?” The cruise line started out to serve piña coladas and the people ended up with bread. That is the miracle of the invisible hand.

There are lessons in this closer to home. Canadians spend more than 40 per cent of their annual income on government. The Fraser Institute’s Tax Freedom Day calculates that Canadians work until June 8—nearly half the year—to pay their combined federal, provincial and local taxes before they start working for themselves. We are constantly told to fear market failure, and yet government failure is rampant.

We have a federal government whose defence procurement process is so broken that all segments of our armed forces are in a shambles, First Nations communities remain largely impoverished and in despair, and we’ve learned the Phoenix pay system was implemented so incompetently that some employees haven’t received proper pay or severance for nearly two years.

At the provincial level, the public trust has been shaken by deaths of children in care, patients waiting months or years in pain for health treatment and students taught by way of discovery learning not knowing how to do basic math.

Yet at the local level of government, I have few complaints. Why can private businesses and municipalities get essentials such as electricity and safe drinking water to people, but federal and provincial governments can’t do much of anything right? The answer comes down to competition and choice.

As in the private sector, local governments have to compete, whereas provincial and federal governments don’t. Competition forces municipalities to provide the best service at the best price, otherwise people will leave. If you don’t like the way your local government taxes and spends your money, you can move to the next town. Choice allows citizens the option of living in a high-spending, high-service district, or a low-spending, low-service district. It’s much harder to switch provinces or countries, which is why those levels of government are much less innovative and responsive. They don’t strive for excellence because they don’t have to.

If we were to rebuild Canadian government from the ground up, we would start by recognizing that government doesn’t need to do everything. Families, non-profits and small businesses do a good job of meeting the needs of most people in most communities most of the time. If the private sector or the non-profit sector can do something better, the government should stay out of the way.

The government’s role is mainly to identify and fill in the gaps in essential services. The more decentralized and local the government solution, the better. Government doesn’t need to keep growing and doing more. In fact, government should be actively looking for ways to shrink and do less.

Alvin Finkel says government should do more

The question I posed to myself as a teenager, living in an immigrant Jewish home where I was named for an uncle who was a Holocaust victim, was this: What could governments have done to have prevented the Holocaust? My Uncle Avrom was a committed socialist cadre in the shtetl where his large family lived in a mud hut with almost no food, but were nonetheless viewed by local peasants as hoarders of gold. Though completely unschooled, my dad recognized that peasant scapegoating of Jews resulted less from innate racism than from a campaign of elites, secular and religious, to cover up their exploitation of the peasantry by shifting blame to “the Other.” It was the Polish state, a military dictatorship, that was the enemy of both the Jews and the peasants.

To create peace within and among nations, governments must implement policies that create a large degree of economic equality, as well as economic stability and predictability for all citizens. Anne Frank said poignantly in her Diary: “…in spite of everything I still believe that people are really good at heart. I simply can’t build up my hopes on a foundation consisting of confusion, misery and death.” But with so much of human history being the story of confusion, misery and death, I do not believe that people are innately good. The good news is that they are capable, when circumstances are favourable, of behaving well. The role of the state is to create conditions that will produce that good behaviour.

So, for example, there is no goodness in feticide, infanticide and newborn-girl abandonment in China and India. In 2001 that translated into a demographic ratio of only 861 females for every 1,000 males in India’s Haryana state. But in Kerala there were 1,058 females to 1,000 males. That remarkable difference occurs because Kerala parents count on the state to provide them with pensions and food rations, while parents in Haryana, which has no welfare, look to male heirs to keep them alive in old age. In Kerala a Communist-led Left Front has governed over half the time since 1957, causing the mainstream Congress Party to also push leftward. Kerala has emphasized equality over economic growth. Not a wealthy state, its 34.5 million people nevertheless live seven years longer than Indians on average and have the lowest infant mortality, second-lowest poverty and highest rate of literacy in the country. Kerala has the country’s lowest homicide rate, and communal flare-ups are rare. The state in Kerala provides social insurance, affordable housing, protection for trade unions, and aid for small entrepreneurs. Women’s political involvement has produced policies favouring preventive health and women-run microenterprises.

The role of the state is to create conditions that will produce good behaviour.

The same can be said for the Scandinavian welfare states, which began their journeys towards social equality with social democratic governments during the Depression. The statistical evidence in Richard Wilkinson and Kate Pickett’s The Spirit Level: Why Equality is Better for Everyone demonstrates that the more egalitarian the distribution of wealth, the more healthy people you find per square inch. Crime rates, mental health problems, obesity and reported unhappiness are all lower in more equal countries. Tellingly, the poorest fifth of Norwegians are happier, fitter and less likely to be victims of crime than the richest fifth of Americans.

Universal access to daycare is a key contribution of Scandinavian governments to a better quality of life for citizens. All mothers can seek paid work. That, along with generous social programs, has reduced poverty for all households with children. Half of single-mother households in the US live in poverty compared to fewer than one in ten in Sweden. In Third World countries, lack of daycare risks children’s lives. A survey of 50,000 Third World families by McGill doctor and health policy researcher Jody Heymann found that 33 per cent of single parents had left children home alone, as had 22 per cent of parents living with a partner, while others took children to work.

Life is worse in many capitalist successor states to Communist dictatorships because social programs have been eliminated. In Russia, life expectancy dropped by five years between 1987 and 1994 as communism collapsed. Bulgarian women increasingly give their children to orphanages.

The evidence is clear that interventionist jurisdictions are safer, saner places to live. That generally means they also pay higher taxes. But countries can end up with quite high taxes without being welfare states. In the US, spending on the military-industrial and prison-industrial complexes leaves citizens with weak social protections but high taxes. Only the wealthy pay much less tax than citizens in European welfare states. Costa Rica, a relatively low-tax country that has large disparities of wealth, provides its citizens with better social protections than the US does. Costa Rica got rid of its military in 1948. Developing countries in 1999 on average spent 12 to 14 per cent of their national budgets on social services and 14.5 per cent on the military. Spending enough on people’s basic needs requires a willingness both to tax appropriately and to put compassion at the top of a government’s agenda.

Sometimes this means combatting popular prejudices. In the 1980s, Canadian universities offered degree programs in prisons. The recidivism rate for all prisoners was 64 per cent; for degree graduates, 12 per cent. But Brian Mulroney ended the program because some voters resented that prisoners received a free education.

Why not simply provide everyone with free postsecondary education? When the state guarantees our human needs and strives to give everyone some measure of dignity and social participation, people feel valued and few look to hate others because of their ethnicity, religion, sex or sexual orientation. When people are abandoned to the vagaries of the market, they turn beastlike when times are bad and embrace dictatorial figures offering simple but misleading solutions.

Finkel responds to Smith:

I’m surprised by Danielle Smith’s claim that no efforts have been made to reduce government interventions. Margaret Thatcher cut social services and denationalized energy and transportation. The result has been acceleration of income gaps and poverty levels in the UK, a housing crisis, poorer health for most of the population, and a reduction in libraries and parks. Costs for electricity and train travel have escalated and many smaller towns and villages are now without public transportation. A decline in government regulation of business practices has produced nightmares like the Grenfell Tower fire.

Ronald Reagan’s experiment in implementing minimal government created the prison-industrial complex. Social assistance and education cuts were followed by increased policing and jailing: there were 380,000 imprisoned Americans in 1975 and 2,266,600 in early 2003, with 4,748,000 people on parole and probation. The US imprisonment rate per capita that year was 12 times greater than Finland’s. Governments saved no money from this social experiment, since the costs of maintaining the US prison population outstripped monies saved from welfare and education cuts.

The International Monetary Fund has forced countries requiring its assistance to drastically cut social spending and end restrictions on international investors. The results are forced migration of small farmers as resource companies take over their lands, and precarious life in cities where dependence on private employers translates into poor wages and working conditions and often unemployment and homelessness.

Governments can operate an oil industry to their citizens’ advantage, as Norway did by investing profits in a rainy-day fund now worth a trillion dollars, dwarfing Alberta’s Heritage Savings Trust Fund. Venezuela, under the Chávez government, squandered its oil resources and failed to diversify the economy. But that government, while now a failure, did, according to the CIA’s World Factbook, reduce poverty from 52 per cent in 1998 to 31.5 per cent in 2008 and extreme poverty from 20.1 per cent to 9.5 per cent. Haiti was improving under the left-wing government of Jean-Baptiste Aristide before the Americans financed a military coup to install a government friendlier to foreign investors.

Yes, let’s give more authority to municipal governments. But let’s not forget that, as in Britain, they depend on grants from senior governments to build their transportation networks and fund other services. The schools and hospitals that senior governments fund would disappear from most smaller municipalities without central funding that takes into account local needs.

Smith responds to Finkel:

Defenders of communism seem to believe that their ideology is basically sound—it just hasn’t been implemented correctly yet. I see it very differently. As an ideology, communism is responsible for nothing but human misery. You can’t ask the question “What could governments have done to prevent the Holocaust?” without acknowledging that it was the government that mass-murdered millions of innocents. In fact, it is always government that commits genocide, whether it was 65 million killed by the People’s Republic of China, 20 million in the Soviet Union, two million in Cambodia, two million in North Korea or six million others in the communist regimes of Ethiopia, Afghanistan, Eastern Bloc dictatorships, Vietnam or Latin America.

There is no example of capitalism being responsible for mass murder, and there never will be. A corporation operates under a discipline that a genocidal dictator does not: If you kill your customers, or you kill your employees, or you kill your investors, you will not be in business for very long. The root of all evil is a deranged politician with the full power of the state at his disposal, not a rich CEO with billions in his bank account.

Economic equality is not nearly as important as economic opportunity. Princeton economist Angus Deaton and psychologist Daniel Kahneman proved this when they discovered that the level of income for optimal happiness is $75,000. You can earn measurably more than that and have no measurable improvement in your satisfaction with life. If you make enough money to take care of your own basic needs and many of your wants, you don’t begrudge the billionaire his McMansion and private yacht.

Scandinavian countries may offer a better example of the benefits of a redistributive state, but the reason they are wealthy and happy is they continue to have a robust private sector economy underpinning their success. In order for governments to have wealth to distribute, the private sector must first create it so the state can tax it. Successful interventionist jurisdictions can only succeed if they allow capitalism to thrive.

Humans are hardwired to do productive work. Just ask any child what they want to be when they grow up. They dream about what job they will do; they don’t dream about what government program they will be entitled to. Government policies should aim to remove barriers so citizens have plenty of opportunities to earn a decent income over their lives. Demonizing the wealthy, who also happen to be the entrepreneurs and job creators, is counterproductive.

Danielle Smith, the former leader of the Wildrose, now radio host on NewsTalk 770, says government should do less. Alvin Finkel, the author and professor emeritus of history at Athabasca University says government should do more.

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