Economic freedom helps Alberta and Saskatchewan prosper

On a recent trip to Kenya, my friend and his family crashed head on into an example of why some developing countries cannot grow and prosper.

As they were about to board their flight from Nairobi, the clerk at the exit gate said there was a problem with their boarding passes. Before she returned them and before they could board the flight, they were told they must pay $800 to correct the “problem.”

When my friend refused to pay, the clerk ordered the baggage handlers to remove the luggage; rather than miss their flight, my friend paid up and tried to settle the matter later with the airline. (I wish him good luck.)

I note the problem of corruption in Kenya because corruption—or at least, perceptions of it—is something that can be measured. Transparency International does the latter and of 183 countries, the contrast with Canada was telling: Canada does well at 10th highest (best) place. Kenya is down in the 154th spot.

Canada is fortunate to rank high on such a measurement and that general lack of corruption is one reason why Canada prospers. Most people understand that corruption can be economically damaging and unproductive for society as a whole.

But corruption is only the most obvious example of something that can impair personal and societal prosperity, economic freedom in other words. But other factors, plenty of them actually, also matter to the ability of a province or country to generate jobs, decent wages and a good standard of living.

A recent report authored by several of my colleagues measured a variety of indicators that allow Canadians and Americans to compare economic freedom among the 10 Canadian provinces and 50 American states.

Economic freedom, like good health, is something many people take for granted until they don’t have it. But good economic health creates opportunities for families who need jobs and money to pay the bills, all of us in other words.

Before explaining how my colleagues arrived at their conclusions, let’s jump to the great results for Alberta and Saskatchewan: Compared to 59 other competitors, Alberta tops every other province and state when it comes to economic freedom. Saskatchewan did fabulous as well. It ranked as the third most economically free jurisdiction in North America, just behind the American state of Delaware.

Doing well here means that Alberta and Saskatchewan are (obviously) in the top fifth of all the provinces and states. To illustrate one benefit is of living in a more economically free place, consider how those provinces and states in the top fifth had an average per person GDP of $55,739 in 2010. That was far above those provinces and states in the lowest fifth, with per capita GDP of just $39,079—an almost $17,000 difference.

To understand how economically free a place might be, and thus its likelihood to prosper, one has to measure various indicators. They include: the size of government (a moderate government which allows you to be an entrepreneur and flourish is your “friend;” rapacious governments which elbow you aside by having government do too much are not).

One also has to measure the size and type of taxes. Some taxes are necessary to a civilized society but too many and of the wrong sort can kill investment and jobs, among other negative effects.

Critically, another important question to ask is how good are the courts and governments at protecting private property? Moderately-sized governments which protect people’s wallets, land, homes, RRSPs and other private property are integral to a prosperous society; overbearing governments have the opposite deleterious effect.

Not all Canadian provinces do as well as Alberta and Saskatchewan. Quebec was in 50th place, for example. However, to be clear, Canadians in every province are much better off than if they lived in Kenya, where economic freedom is, as my friend found out, rather insecure.

That noted, problems still exist in Canada. For example, as I’ve written about previously, the claims of some First Nations in BC are interfering in private property rights.

In Alberta, the province scores well on the size of government relative to the economy but not very high (only 40th spot) on labour market freedom. (That category includes a look at whether a worker can easily refuse to join a union should they so choose). Saskatchewan also scores poorly on that indicator; it also has a large public sector which means competition for the provision of goods and services is harmed by government favouritism for government-owned and government-run businesses.

Still, overall, Alberta and Saskatchewan are two of the most economically free places in North America. And every province and state in North America is preferable to the obstacles that regrettably face tourists and citizens alike in a country such as Kenya.