There is a simple economic theory developed in China, called the Cake Theory, which helps explains this situation. The traditional communists believe the focus should first be on determining how the cake should be divided before it is made. The free market reformers in China believe that the goal should be to bake the largest cake possible and then determine how it is to be divided. Both groups believe in having clear policies on the how to divide up economic growth, but only the reformers want to pursue economic growth first before the wealth is divided up.
Our current federal government, headed by our Prime Minister and Finance Minister are advocates of dividing the cake up before it is made. Their view is that our natural advantages in primary industries are large enough, and the focus should be on a redistribution of wealth, rather than growing the economy. As we all know, Trudeau has praised the Chinese Communist Party in the past, and it comes as no surprise that he favours their approach when it comes to the economic development.
This is a long-standing position that our Finance Minister, Ms. Freeland, is dedicated to, as clearly articulated in her book, “Plutocrats.” She recognizes that while free markets and capitalism brings far greater growth than communism, and it increases wealth for everyone, it does not do so with enough equality. She refers to the halcyon days after WWII, when the US Central Government had a marginal income tax rate of 77percent. This was a period when income inequality shrank, and due to a number of factors, including a baby boom and the end of the war, the US economy grew at about 3.5 percent per year. It appears that she has been able to persuade both Trudeau, who jettisoned his previous Finance Minister, Bill Morneau; an advocate for a bigger cake first. Now our PM has a Finance Minister who believes in dividing the cake up before baking it.
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