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economy lab

B.C. Liberal leader Christy Clark waves to the crowd after she arrives on stage after winning the British Columbia provincial election in Vancouver, B.C. Tuesday, May 14, 2013.JONATHAN HAYWARD/The Canadian Press

The surprising come-from-behind victory by B.C. Liberals under Christy Clark shows that the economy is paramount in voters' minds. The Liberals consistently emphasized economic development that was sufficient to overcome a twenty-point lead by the NDP before the campaign. Now the Clark government returns, its task will be to deliver on its campaign promises.

The Liberals begin with a slow-growth economy but with good potential. B.C. is the province most exposed to Asian growth, which will be a rich market for its agriculture, forest, mining and natural gas products. It has a well educated work force, many innovative startup companies and good infrastructure, comparable to many Western economies. In principle, B.C. should be one of the bright lights of the Canadian economy.

Yet, B.C. under performs. Back in 1994, it attracted as much private capital investment as Alberta, only to fall from grace with its share of Canadian business investment dropping to less than 10 per cent in 2001. Recovering somewhat during the Gordon Campbell years, B.C. in the past two years has started to lag again with a falling share of private investment.

Attracting business investment is a challenge with B.C.'s current policy deficit. The return to the old antiquated retail sales tax not only hurts the government's treasury but has made B.C. less competitive with a hike in taxes on business costs. The Liberals have also hiked personal tax rates as well as the corporate tax rate by a point in the last budget, actions that at least are not as punitive as NDP campaign promises. But these actions will not help develop the economy.

So the task faced by the Liberals is to move the economy forward. It will need to alter its policy framework to make clear that the province is open to business and attract investment. This could be done by eventually reversing recent tax hikes and taking a hammer to ineffective regulations that hamper growth. It could even reform the retail sales tax by at least broadening the tax base and providing income tax credits to reduce sales taxes on business inputs to some extent.

The Liberals are counting on LNG markets in Asia, which will require pipeline and plant construction. But this will not be sufficient to achieve sustained growth. It will need to encourage other industries to grow by removing protective policies that undermine competition and entrepreneurship.

This is not a tall order. It is a matter of closely looking at existing regulations and tax provisions that hurt growth the most. Other jurisdictions have done so such as Australia and New Zealand that understood the advantages they have exporting to Asian markets.

Of course, environmental issues will continue to be important but actions taken to reduce environmental harms need not hurt growth. The B.C. carbon tax with a shift from personal and corporate taxes to excise taxation was good economic policy. More can be considered.

B.C. should also consider its economic role in the Canadian economy. It can encourage free trade within Canada by removing obstacles to the free movement of goods and services. As for oil pipelines and other infrastructure, B.C. stands to gain as potential broker that could enable Canada to diversify its trade as alternative to U.S. markets. Ultimately, this strengthens Canada's bargaining position relative to the United States. B.C. should help stand for Canada.

The B.C. election is a lesson that economics is a powerful force in elections. Parties that push for growth don't fail at the polls. Those that threaten it can lose.

Jack M. Mintz is the Palmer Chair, School of Public Policy, University of Calgary.

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