During one of the dizzying number of government meetings I’ve attended in the last week, someone made a mention about how it was important to jump on opportunities and be generous when bargaining with investors, because if we didn’t a business would just take their money down the road.
The situation was hypothetical, but it displays a viewpoint quite common in both business and politics — the next guy down could be offering a better deal than we are, so we’d better sweeten things up or else they will take their job-creating dollars elsewhere. You see this mentality at play at every level of government.
We would be well served to learn from the mistakes of the past. Usually when a company makes a major decision to move it requires a certain amount of disparity between the locations. Most companies are not going to pay to move their executive to another city just to save a small amount of taxes or to avoid regulation.
Case in point — Alberta’s previous government plugged the economic hole left by peak oil by increasing spending, putting more money into schools, roads and the quality of life and managed to keep growth happening in spite of a recession and a huge price differential — which resulted in part from giving companies sweet deals on royalty rates and clean-up costs so they wouldn’t take their business down the road.
Now, with its current government slashing education like it was a disease, Alberta rural municipalities have learned they’re owed $173 million in unpaid taxes from oil and gas players. These same municipalities are being expected to put up the costs of policing while their municipal funding dwindles. Meanwhile, we hear about ‘Wexit’ on a seemingly-weekly basis while tech companies call the government out for lack of support at international trade shows. Somehow I doubt investors are too interested in a few tax savings at this point. They’re probably looking for more stable sounding places to park their cash.
Meanwhile, Alberta’s polar opposite, Norway, deals with all the same international players Alberta does but rather than give them near-free royalties, Norway imposes one of the highest rates in the world. Consequentially, their Sovereign Wealth Fund is now valued in the trillions — hypothetically they could dissolve it and every Norwegian would be a millionaire.
So if someone says they’re going to take their business down the road, the obvious question you should be asking is where? Whitehorse?
Psychologically, the idea that your competition is trying just as hard — if not harder — than you is a fantastic motivator to push yourself. Both Arnold Schwarzenegger and Will Smith have spoken to its power to drive oneself to success.
But self-excellence and running public affairs are entirely different beasts and this mentality causes far more damage than it helps when applied to large groups.
It’s not as if the idea of out-competing out hypothetical rival is a bad one, but it becomes harder to do effectively when you are responsible for the well-being of others and when it comes to public policy, it’s a square peg to a round hole.