Nice vision, Mr. Martin, but where's the action?

Editorial

The Globe & Mail, Thursday, September 22, 2005 Page A24

It's important for political leaders to have a strong vision of the future for their country and a clear blueprint outlining the paths to get there. That's why it was good to hear Prime Minister Paul Martin breaking away from crisis-management mode to talk about some of the longer-term priorities of his government. The problem with this Prime Minister is that while he is good at spotting broad socio-economic trends, he has yet to implement policies that would best enable Canada to take advantage of them.

This was illustrated again on Tuesday, when Mr. Martin told an audience of senior public servants that there is actually a coherent strategy behind his government's past actions and its future policies on virtually every front, from health care, education and the environment to immigration, urban renewal and defence spending. The purpose is to deal with the enormous change stemming from major "new forces" that are transforming the world as we know it -- specifically Canada's aging population and the rise of China and India as global powerhouses.

"We must make it our mission to keep Canada ahead of the curve, so that 15 years from now, even with an older population, even in a world in which much larger nations are competing for political and economic power, our standard of living will continue to be among the world's highest, our quality of life will be second to none, our country and our confidence will be strong."

Those are fine words, except that Canada is already behind the curve when it comes to global competitiveness, as a new report by the C.D. Howe Institute shows. And when we lose out in the battle to attract capital, when businesses are discouraged by high taxes from investing in new technologies and processes, our productivity declines and our economic growth is threatened. Other countries have been faster to reform their tax and investment policies and they reap more of the benefits of those rich new markets that have so captured Mr. Martin's imagination.

In its survey of 36 industrialized and major developing countries, the C.D. Howe found that Canada has the second-highest effective tax rate on capital investment, behind only China. As a result, businesses are less likely to invest in new technologies and equipment that would improve productivity and lead to higher wages. While its free-trade partners, the United States and Mexico, have the respective advantages of market size and low costs, Canada has neither. This is where the Martin government, working with the provinces, could make a huge difference by reducing combined effective taxes. Businesses would thus be attracted to what the institute calls the "Canadian advantage" -- lower costs combined with access to the vast North American market.

Mr. Martin has been rightly criticized for running a government that often seems to drift and that is largely driven by events, including the sponsorship scandal, rather than by a deep sense of purpose. Mr. Martin would have us believe that his ad hoc financial deals with fractious provinces, his heavy spending to patch the tattered health-care net and his aid to cash-starved cities are more than the equivalent of pothole fixing. If he is, indeed, quietly constructing a highway to a bright new world of change, he should get on with the paving and back up his lofty pronouncements with genuine action.