Last week, Justin Trudeau put out a statement to mark Global Entrepreneurship Week. “The Government of Canada,” he said, “is working to remove barriers so that entrepreneurship can continue to thrive.” That sounds nice, except for the “continue to” part: entrepreneurship has not thrived under his government at all. Statistics Canada reports that despite significant population growth between 2015 and 2022, the number of Canadians who were self-employed and who employed other people for pay fell 11 per cent. Contrast this decline in entrepreneurs to the 18 per cent growth in public sector employment over the same period. The two statistics are connected. Adding to government employment takes away money and resources that businesses and entrepreneurs need to establish themselves and grow.
The next sentence of Trudeau’s statement underlines his misunderstanding of entrepreneurship. In it he promotes government program spending and “federal initiatives including the Black Entrepreneurship Program, the Women Entrepreneurship Strategy, the Aboriginal Entrepreneurship Program, and the 2SLGBTQI+ Entrepreneurship Program.” His view on ensuring entrepreneurship can thrive is that it all has to do with giving handouts to select government-favoured entrepreneurs, with favour based mainly on their skin colour, racial background, sex or sexual orientation. But to give handouts to some Canadians government must take from others. By redistributing capital based on politics and identity instead of allowing markets to guide it to where it is most productive, Trudeau squashes business and entrepreneurship.
It may be argued that certain segments of the population are relatively disadvantaged and so should receive government support, but then the support should be given to people because they are disadvantaged, not because of their skin colour or other irrelevant characteristics — including whether or not they happen to be entrepreneurs. Mixing social with economic objectives is a good way to accomplish neither. Just as entrepreneurship handouts to certain segments of the population in the name of equity and diversity have not succeeded in encouraging entrepreneurship, there is no good reason to suppose they improve equity and diversity, either.
When government redistributes capital, the people who receive it are rarely disadvantaged to begin with. If they were, they would not have the political strength to bring about programs giving them privileged access to public funds. Government redistribution of capital overwhelmingly benefits those who can secure control of government machinery — a group characterized by power and influence, not by a need for equity handouts.
Rapid increases in spending and the insertion of identity politics into economic programs are not the only means by which the Trudeau government has discouraged entrepreneurship. In 2016, it raised the top marginal income tax rate, a policy well understood to reduce entrepreneurship by diminishing the economic payoff to risk-taking. A recent Montreal Economic Institute study estimated the Liberals’ hike in the top marginal rate, combined with similar provincial tax increases, reduced the number of new businesses created in Canada by more than 12,000 over five years. Another tax policy that reduces entrepreneurship: the Liberals’ planned tax on stock buybacks, which will discourage companies with excess capital from returning it to shareholders, effectively trapping it in larger established companies where it is not accessible to smaller firms.
The harmful tax-and-spend policies of the past eight years have been compounded by aggressive and generally nonsensical regulatory initiatives. Bans on plastic bags, utensils and other products have made it more expensive for restaurants, retailers, and many other businesses to operate.Child care entrepreneurs are having their investments wiped out by the government takeover of their sector. Increases to CPP and EI costs have made it harder for businesses of all sizes to hire and retain employees. The proposed ban on replacement workers in federally regulated workplaces may not directly apply to most entrepreneurs, but nevertheless significantly hurts many of them by enabling prolonged strikes at ports and railway companies that are vital to their supply chains. And the list of bad federal policies goes on.
Entrepreneurship clearly is not thriving in Canada. Contrary to what the prime minister wants us to think, removing barriers to entrepreneurship entails removing government spending, regulation and programs, especially those that redistribute capital on the basis of skin colour, sex and other identity characteristics that should be completely irrelevant in determining where capital flows. Entrepreneurship is a market activity, not a government one, and for the last eight years the Liberal government has been doing its best to suffocate the market.
Matthew Lau is a Toronto writer.