The real surprise of the WE Charity scandal is that people are surprised at all. The wider the scope of the government, the more room there is for political patronage. Unfortunately, misdirected criticism and this specific case have sullied the noble role of nonprofits in a healthy, civil society.
Let us not be naive: politicos are self-interested like the rest of us. That is public-choice economics 101. An unfortunate and sobering reality of democratic incentives is that elected officials, especially those seeking reelection, will direct taxpayer funds toward their circle of friends and campaign supporters.
If politicians did not behave this way, they would give ground to their opponents and risk losing their seats. Even former U.S. Representative Ron Paul—the staunch libertarian famously known as “Doctor No”—used to insert legislative earmarks directing funds to his home congressional district. He would vote no on such bills, but he knew they would still pass.
Canada is no exception to this patronage, although perhaps it is less severe than in most countries. Prime Minister Justin Trudeau and the Liberal Party have merely lifted it to new heights, notably with the $600 million bribe to media organizations in 2018. Now the redacted $19 million for WE Charity, coupled with the news that Trudeau’s immediate family received $300,000 in speaking fees, has brought wider attention to the problem.
Let a Crisis Go to Waste
Economist Robert Higgs documented in his 1987 classic, Crisis and Leviathan, that the nation-state is particularly inclined toward expansion and encroachment during episodes of chaos and fear. He deemed this the ratchet effect, since growth persists permanently even after crises subside.Thanks to the pandemic, we are living such an episode, both at the national and provincial levels. From heightened surveillance and exploding employment insurance payments to unlimited spending authority, this centralization and expansion of power is unprecedented in Canada. As much as we might wish for prudence from legislators, that has not occurred domestically, and the profligacy will have permanent ramifications.
If you think Canadians are already taxed at every turn, consider that an explicit wealth tax looms to cover historic and burgeoning national deficits. In fact, the federal government’s per capita spending for 2020 is set to be 51 percent higher than the peak of the Great Recession in 2009.
Charity Tangled in Government Web
A government beyond its legitimate powers becomes an economic kingmaker. As noted by the Prairies-based Frontier Centre for Public Policy and the Nova Scotia-based Atlantic Institute for Market Studies, private sectors “have become so dependent on government business … they have lost much of their independence and the business voice is correspondingly weakened.”When Ottawa is dishing out bailouts and welfare like candy—even to international students no longer in Canada—we shouldn’t be surprised that begging becomes easier than creating and producing.
With impeccable timing, WE Charity founder Craig Kielburger penned an op-ed in late May to call for even charities to get bailouts. As is near universal with such pleas, he did not mention who would pay for it and how.
Compared to the $343.2 billion projected national deficit for 2020, however, the $19 million in fees for WE Charity is a drop in the ocean and a distraction from more pressing concerns. The serious problem remains the Canada Student Service Grant, which WE Charity has now backed out of. Another wasteful plan, the CSSG aims to pay up to $5,000 to high-school graduates to volunteer at nonprofits. This diverts them from value-adding jobs and breeds dependency from the get-go. It also fails to invest in marketable skills or internships that would help graduates once the pandemic is over.
The problem here is not charities, although WE Charity’s coziness with the Trudeaus appears to go beyond shared interests. Rather, it is the seemingly endless and irrational scope of the federal government, to the detriment of provincial autonomy and a free, peaceful Canada.
The nanny state is bad business for the charity industry as it crowds out legitimate private donations. Economists have found that when the government funds charities, they receive fewer donations from donors and other nonprofits that would generate more accountability and responsiveness. Sadly, our heavy dependence on Ottawa rather than on personal generosity has led a lower percentage of Canadians to donate and with a lower share of their incomes relative to their southern neighbours.
Beggars Can’t Be Choosers
No proud nation can rise on the back of handouts. If we are to be free people avoiding corruption, we need to understand the dictum that there is no such thing as a free lunch.The government cannot and should not be all things to all people. Attempts to achieve that have brought us to this quagmire seemingly without end, squashing the genuine charitable spirit of Canadians in the process.
