Where is the proof of economic growth?


by James Bertram

Thanks to Steve Hammond for his letter of last week in which he refers to municipal spending ostensibly directed toward the support of local business. I would like to add a few words to his brief commentary.

To begin, I would like to know how much of the relatively large sums spent actually result in a net positive economic impact for local business and the local economy. Of course, it is obvious from the start that there is benefit for someone. For example those businesses that produce studies proposing marketing programmes certainly benefit. Their advice doesn’t come cheap. And the ever-expanding municipal economic development bureau waxes ever larger and more expensive. Thank you, oh infinitely patient taxpayers of North Grenville. But how much real measured economic development locally has been proven to take place by analysis of all the municipal spending towards that goal?

As I asked when I was on Council, what IS the objective of the municipal economic development office which represents significant expenditure of municipal tax funds? Is it there to accomplish real additional “economic growth? Or is it just there to make Council look good through a seemingly effective programme of “virtue-signalling”? Is it there to provide a nice bonus to companies which provide auxiliary services in the area of surveys and studies?

Of course, the answer I have always gotten has been some version of: “Well, of course there is benefit. We DO have some economic growth after all.” And my follow-up question has been and is: “How does one KNOW that the growth they refer to had anything to do with municipal expenditures toward economic growth ?” And when I asked in the past for a cost-benefit analysis and the application of some quantitative and qualitative techniques to give concrete answers to my questions, all I have succeeded in getting is a long list of projects of unknown effect which the municipality has undertaken, projects which have been assumed to produce economic growth. I mean , how could they not? Right. Well, I actually don’t know, and neither do those who offer these assumptions.

So, it seems to me that if we are to spend tax money towards local economic development and growth, we should be able to demand high-level qualitative and quantitative demonstration of a benefit. And that benefit SHOULD BE in excess of that which could be had if the taxpayers’ money had not been spent in such copious amounts over the years. So far, such concrete information using available econometric techniques has not been provided.

A connected issue is, where do the development funds expended come from? Pre-Covid tax rates have, so far, been stable. So, does the more recent expenditure come from re-allocated reserves previously set aside by the preceding Council for future needs, like maintenance of important infrastructure? (eg: municipal wastewater treatment system, etc) If so, let’s have our municipal government spell out exactly where the money comes from in the municipal budget. All the while, let’s remember who pays in the end.

In the final analysis, if large amounts are being spent just to show that the Mayor and Council are “doing something”, it would be improper if the amounts spent were ineffectual in having a demonstrable net positive impact on local economic growth. Bear in mind that taxes paid for ineffective municipal government programmes represents money removed from taxpayers pockets, money which cannot be spent by taxpayers in the local economy. In effect, it represents a diminution in consumer demand in the local economy. And consumer demand is acknowledged to be the major driver of economic growth in the Canadian economy.

Briefly then, how does economic development “machinery” used by the municipality be said to create growth when it has not incontrovertibly been demonstrated that it does so? Taxation toward that purpose represents a diminution in consumer demand in the local economy. How does THAT help economic growth? A serious measure of positive net growth must be empirically and objectively determined, or spending in the economic growth domain must be reined in. No proven growth, no funds from taxpayer pockets.

Please think about these things when articles are presented by your local government. Is the spending programme effective? Many are. Some are not and are tax money wasters. Do spending programmes give provable benefit in core areas of the municipal mandate of responsibilities? Do funds spent come from reserves so as to keep tax rates down, avoid taxpayer ire, and ultimately negatively affect the municipality’s position relative to future needs? Will current spending necessitate a sudden, sharp future tax raise to compensate for weakened reserves when a future emergency presents itself?

Right now, it is true that Covid 19 poses challenges. So, potentially, does ineffectual and thoughtless spending. LET’s solve real problems, not just those of a political nature.


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