Equalization Is A Myth

And really, it doesn't take a genius to know why. Equalization is another way of saying "redistribution of wealth." Which is basically taking from one more productive side and giving to a less productive side. It makes us feel good inside to do it, but in reality it's useless and wasteful.

If there were no payments, people would go to where the wealth is. They do this in the U.S. Humans always did this.

From Le Quebecois Libre:

"...Our view, based on economic theory and empirical evidence, suggests instead that interregional adjustments in the Canadian integrated economy take the form of people mobility rather than price or per capita income changes. People move to high growth regions and abandon lagging regions..."

"...Borrowing from a study by the Frontier Institute, MacKinnon (2010) argues similarly that citizens of provinces that are major contributors to federal equalization programs have less access to more vital public services than citizens of the provinces that have been historically the recipients of these payments..."

"...Our view, based on economic theory and empirical evidence, suggests that interregional adjustments in the Canadian integrated economy take the form of people mobility rather than price or per capita income changes. Growth in the economy and the population is capitalized in the price of land, the main resource in fixed supply.(1) Land is bid up in the more prosperous regions, and bid down in provinces that experience low population increase. This adjustment process continues until real incomes have equalized across regions. Over time, lagging regions advantages in lower land prices compensate for their lower nominal incomes...."

"...Between 1920 and 2000, per capita income variations across the U.S. have significantly declined despite wide movements in populations. The share of population in the West has almost tripled, while significant declines occurred in the Northeast and the Midwest. Mobility has been considerable. Yet the distribution of per capita income has narrowed over the century. Using urban price indices, Mitchener and McLean (1999) have produced estimates of average regional real incomes between 1880 and 1980. At the end of the period, real income dispersion per worker between the four big regions remained extremely low. With a national average equal to 100, interregional variations in 1980 ranged from 96 to 105. We conclude that over time, regional adjustments to varying growth rates took the form, not of price and income dispersion, but of quantity adjustments...."

"...The Government of Quebec in particular has traditionally defended the level of equalization payments it receives on the basis of its supposedly lower GDP per capita relative to that of Ontario and to the average of all provinces combined. This is precisely the question that we address in this paper: Does the level of per capita income effectively vary across provinces? In national, integrated economies, overall GDP and per capita income move in the same direction.

Because of this association, observers often assume that the same relation holds at the regional levels. Actually, adjustments to interregional growth differentials are realized by product and factor mobility, not by prices, with the exception of the price of land and of non-tradable local services like hairdressing salons. Quantities, not prices or incomes, adjust. Slow-growing regions should therefore have as high per capita real income as fast growing ones, even though they grow at a lower rate. Growth differentials are capitalized in the price of land and of local services, the only prices that vary across the economy. > Land price differentials across the country thus provide an immediate and easy-to-observe measure of interregional growth. The significance of the analysis for equalization is obvious. Since there is no significant gap in real per capita income between slow-growth regions and the rest of Canada, the level of equalization payments received by each province should be similar, most likely zero for each."

"...One widely accepted critique of the equalization program holds that it has magnified regional income disparities by preventing workers from moving to their most productive location outside slow growth regions. It is true that productivity is negatively impacted by equalization.

Equalization does reduce the mobility of resources, of human capital in particular. Fewer people have moved from Quebec and from the Atlantic Provinces to more prosperous regions of Canada. But observed real income convergence invalidates the conclusion that interregional income disparities are increased.

What equalization does is make explicit the transfer of the burden of lagging provinces to other regions of Canada. Absent equalization, higher growth, higher land rents and higher wages would have ensued in Alberta, Ontario and B.C., thanks to lower taxation and higher immigration. Their growth is negatively impacted. High-growth provinces are the first victims of fiscal equalization. Yet lagging provinces have gained nothing. They have lost in less depressed land prices and lower nominal wages what they have gained in subsidies. They also share in the reduced per capita income across the country. Equalization is self-defeating, a pure waste. Furthermore, provincial politicians are induced by equalization to be less responsible and to enact measures that limit economic freedom...."

And this is why, in part, Quebecers have less disposable income. We don't know how to make money here. We're just good at playing social engineering.

Il nord lavoro, il sudo mangia is the old Northern nationalist saying in Italy.

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The PQ are notorious for leveraging equalization into their favor and using it as a political weapon. While they busy themselves taking down the Canadian flag in the National Assembly, they are quick to demand cash from Ottawa.

It's what I call the mindset of losers.