The rise of populism in the developed world is the result of a “new, normal”, which is characterized by slow economic growth and sluggish investment, wrote the President of the Investment Industry Association of Canada (IIAC), Ian Russell, in a letter to the industry published this week.
This global economic stagnation leads to high unemployment, declining living standards, rising income disparities, and a growing disconnect between political elites and the people. This “new normal” has created anger and widespread fear, leading to the rise of populism in the Trump presidency in the U.S. and Brexit in the U.K., he says.
Private sector financing models
Russell proposes ways to counter this global tendency in Canada. His first remark concerns the federal government’s infrastructure spending and how it is unlikely this will have a positive impact on growth in the near term. He suggests to instead turn to private sector financing models.
He also says high taxes and high costs hinder business investment and need to be addressed by governments. The U.K. Enterprise Investment Scheme has proven to be successful and should be adopted by the Canadian government, Russell adds.
Protect NAFTA and expand free trade
He says that NAFTA is key to the success of Canadian businesses and now that it is under threat with the Trump administration, it is important to defend it. He also says Canada should look to expand free trade even more.
Canadians’ personal tax burden, combined with GST, carbon taxes and real estate taxes, is much too high. “If the government is going to run large deficits, it should use the money to reduce punishingly high marginal tax rates,” Russell argues.
If government cuts in spending to eliminate spending, they will have the flexibility to respond to changing circumstances, he adds.