Rightsizing government after the COVID-19 debacle

Peter Holle
Public Policy

We can reasonably expect the Covid-19 pandemic to be over sometime later next year. While Canada will have reported thousands of deaths, the dark total will be nowhere near the original projections (perhaps 10,000 instead of 350,000). And, about 80% of those sad deaths will be from seniors, particularly those with compromised immune systems who are normally at risk from seasonal influenza. 

Our politicians are faced with cleaning up an enormous fiscal and economic mess – one driven by early widely exaggerated death projections, egged on by media-led hysteria, and brought about by federal and provincial lockdowns in a hopeless attempt to “stop” a virus. The lockdown countries, including Canada and to a lesser extent Manitoba, have effectively devastated public finances – perhaps for decades to come. 

The Trudeau Government’s projected $20 billion annual deficit in 2019 has exploded into a forecasted mind-boggling $328.5 billion deficit. Likewise, Manitoba, which has made policy choices over past decades that have made the province a perennial economic weakling in confederation, will move from a small accounting-assisted surplus to a $3-billion dollar deficit for 2020-2021. Repairing federal, provincial and municipal public finances will require massive policy reforms and government spending reductions going forward. 

Paradoxically, a few countries, faced like Canada with the ravages of COVID-19, chose to avoid collapsing their economies with lockdown policies. One country stands out, it being Sweden. 

When global historians come to write of the saga of 2020’s Covid-19, one retired Swedish epidemiologist in particular will stand out as being a prescient and wise critic of what is likely history’s biggest economic policy misfire. Johan Giesecke, Sweden’s chief epidemiologist from 1995 to 2005, in a May interview* confirmed that Swedish health authorities were going to let the Covid-19 virus run its course. 

Giesecke dryly observed that most world governments were fooling themselves by thinking they could “stop” a virus with public policy – particularly by locking down their economies. These policies were foolish, Giesecke said, because they would merely delay the virus’ passage through society. And, once instituted, as we see now, politicians would find it nearly impossible to get things back to normal

Further the lockdowns would be unsustainable over the long-term, because they would engender rising civil disorder as the public revolted against the destruction of their livelihoods and civil liberties. Lockdowns would kill more people than they saved – as bankruptcies, and job losses spiked up divorces, homicides and suicides while killing patients who delayed seeking health treatments due to either their fear of catching Covid-19 (i.e. heart attack) or being shunted to the side as hospitals delayed and postponed critical treatments and diagnoses to accommodate the (wildly overestimated) projected Covid-19 wave. 

Sweden’s social democrat government’s Covid-19 no-lockdown policy has been broadly vindicated. Its biggest interventions saw a ban on gatherings larger than 50 persons. It did not close down its economy or its schools or require mandatory masking. It focused on protecting the vulnerable (especially senior citizens) and advised Swedes to protect themselves by avoiding crowds and washing hands. 

The virus has spread through much of Sweden’s population, leading it to develop widespread immunity. Covid-19 has played itself out and the country’s death rates and infection rates have collapsed (which is the normal progression of any virus). 

Sweden has survived Covid-19 without intentionally cratering its economy and finances. 

What of Canada and our lockdowns? The provinces’ lockdowns delayed the virus for a few months, but we are now seeing it come back in fits and spurt (as Giesecke has predicted). 

Remember the “gong show”? Our Canadian politicians continue to cede leadership to their narrow, siloed health bureaucracies which, unsurprisingly, are ill positioned to properly shape much more complicated, big-picture public policy. They have been oblivious to the numerous non-Covid deaths caused by all the regulatory and economic disruptions from our lockdowns. Civil disorder could spread as our economy and finances continue to slide badly. As public patience is exhausted, it will not be a good time to be a politician. 

Some will be offended by the observation that Manitoba politicians have made policy choices over the recent decades that have made Manitoba a perennial economic weakling within Confederation. But weakness going into the pandemic, followed by a virus strategy that has damaged the province’s economy, means an even rougher time when recovery is called for. 

 The main driver of the province’s economy has been its much higher levels of government spending than in other provinces. A recent Fraser Institute report, The Changing Size of Government in Canada, 2007–2018 ** summed it up best with the latest snapshot of Manitoba’s wildly-oversized public sector. Using Stats Canada numbers, Manitoba’s government spending accounted for 47.4% of its economy. This compares to a national figure of 40.3% (18% larger); 37.4% in Saskatchewan (27% larger); 29.3% in Alberta (61% larger); and 35.5% in B.C. (33.5% larger). 

Manitoba’s public sector is notoriously low-performing across the board. It is carried along by high taxes and vast federal transfers and subsidies. 

When the COVID-19 saga settles, Manitoba’s super-sized big government model will finally have to go. And getting there in a smart, transformative way that improves services while cutting costs will be the project at hand. 

Peter Holle is president of the Frontier Centre for Public Policy. 

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See the original information refereed to by Peter on the Web:

*(https://unherd.com/thepost/coming-up-epidemiologist-prof-johan-giesecke-shares-lessons-from-sweden/)

**(https://www.fraserinstitute.org/studies/changing-size-of-government-in-canada-2007-2018)

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