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Quebec Premier Pauline Marois releases the new economic policy in Montreal October 7, 2013. (CHRISTINNE MUSCHI/REUTERS)
Quebec Premier Pauline Marois releases the new economic policy in Montreal October 7, 2013. (CHRISTINNE MUSCHI/REUTERS)

Quebec’s $2-billion economic plan is a micro-management fantasy Add to ...

Quebec’s $2-billion extravaganza to rejuvenate a stalled economy is either fantasy or belief in a miracle. I suppose many leaders hope they have the power to move the world in a path no one fears to tread. They are either omniscient or foolish.

Premier Pauline Marois’s latest gambit follows a long line of past Quebec leaders who believe that they can micro-manage an economy to spur economic growth and job creation. Quebec budgets, replete with targeted incentives, are often fun to read, since the most unusual public policies are pursued. One of my favourites was tax support for pig-manure farming. I wasn’t quite sure if this was a regional or agriculture incentive, but I am sure more pigs were employed.

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Yet, despite years of micro-economic management, Quebec has not been able to generate booming growth. Its real per capita GDP growth has matched Canada in the past decade, but not kept pace with the West. Its population share, now 23 per cent, is well below that of 1975, making Quebec the third-largest region in Canada. Quebec’s private-sector investment has dropped to 16 per cent of the Canadian total, punching well below its weight.

With the highest tax and provincial debt levels nationally and public policies such as the immigration-discouraging Charter of Values, it is hard to see how this binge in new spending by the province will right its wrong direction in economic policy.

So will Quebec’s economic plan create the 43,000 jobs by 2017 that it believes it will? This Christmas tree approach to economic policy is a grab bag of incentives, including subsidized surplus electricity for targeted businesses in manufacturing, natural resources, green technology and some others, relaxation of tax holiday incentives to encourage smaller projects, $60-million for Quebec-made electric cars, and a $10,000 tax credit for home renovations. Some other initiatives make more sense, such as infrastructure spending.

Some of these policies might generate jobs, some may not. For example, tax holidays have been very costly incentives that encourage companies to shift profits into holiday operations to avoid taxes, without generating the durable investment climate needed by a strong economy. It would be surprising if building a home-made electric car industry works – remember New Brunswick's failed Bricklin automobile? More likely, these are dollars destined for the waste bin.

So too are other offerings provided by Quebec’s targeted incentive menu. Such incentives might generate more jobs among those who use the incentive, but they don’t necessarily create jobs for the economy. Instead, they draw a significant share of resources from less government-favoured but usually more productive industries, killing jobs elsewhere. Or labour or capital goods prices are bid up, which does little to help industries receiving the incentive.

And of course, someone has to pay for the various incentives. Taxes go up, spending is cut elsewhere or debt is increased. There is no free lunch here.

If Quebec is going to generate growth in the future, it needs a much better economic plan that spurs growth. Growth-oriented governments invest in productivity-enhancing investments such as education and infrastructure, and encourage work effort, risk-taking and investment with efficient social and tax policies. And they reduce bureaucracy that often accompanies governments that essentially engage in fantasy policies to micro-manage the economy.

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

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