SNC-Lavalin reminds us that big government invites big scandals

If we want fewer scandals, we must scale back government to limit the temptation to indulge in scandalous behaviour

Reading Time: 3 minutes

Vincent GelosoThe SNC-Lavalin scandal, which continues to dominate headlines across Canada, has many moving parts. It’s hard to disentangle everything so as to assign blame. But the situation provides an important lesson that seemingly many have forgot: big government invites big scandals.

Political power can be misused for personal gain. It can be wielded in ways that favour a party’s electoral prospects or personally enrich government officials. The greater the powers, the scale and the scope of governments, the greater the temptation to misuse power.

In that regard, there’s a rich economic and political literature that ties size and scope to corruption and political opportunism. Most of it relies on the Fraser Institute’s Economic Freedom of the World index, which captures the two main mechanisms that allow for the misuse of power.

TRUDEAU SCANDALS
(Partial list only)
Something changed for the Liberals the night of ‘elbowgate’
By Warren Kinsella
 
Liberals’ moving expenses apology bogus
By Michael Taube
 
Trudeau genuflects to a tyrant
By Pat Murphy
 
My Canada does not include Alberta – Trudeau
By Michael Taube
 
Khadr settlement defies due process, insults Canadians
By Maddie Di Muccio
 
Trudeau’s Asian trip a diplomatic and trade disaster
By Maddie Di Muccio
 
A #MeToo cloud hangs over Justin Trudeau
By Michael Taube
 
Jody Wilson-Raybould’s deeply Canadian courage
By Peter Stockland
 
Trudeau tries to weasel his way out of SNC scandal
By Alec Bruce
 
Liberals swept Norman under the rug well before election
By Brian Giesbrecht
 
Racist photos confirm Trudeau is a bare-faced charlatan
By Doug Firby
 
For a complete list of Trudeau’s Scandals, click here

The first mechanism hinges on the fact that government restricts economic activity via regulation. When this happens, there’s an incentive for corrupt officials to ‘grease the wheels.’ The idea is that, because of regulations, firm owners will pay to speed up the process (permit approvals, for example). The index can test the relationship between corruption and regulation. One paper, using a large international sample, found that some regulations tend to increase corruption – especially those related to restrictions on property rights. Other studies have confirmed this idea, noting corruption involving restrictions against importing foreign goods.

The second mechanism relies on government spending. Political actors can direct spending towards privileged parties that have corrupted them. For example, government contracts going to party friends or favoured firms. For this, there’s some empirical evidence.

However, scandals from this mechanism, unlike regulatory mechanisms, are found in electoral machinations. As governments can decide where to allocate spending and to whom, political actors have an incentive to use that power in ways that favour their re-election (or even their personal wealth). Here, the economic history literature is rife with examples.

For example, during the Great Depression in the United States, the poorest states hit the hardest by the crisis received very little of the public spending meant to alleviate the crisis. These states, largely in the south, were already solidly in the column of states that would vote for the president’s re-election. As a result, dollars spent there would yield little electoral rewards. Most of the spending went to electorally important states. Another study, using the same historical episodes, noted that the same thing happened at the congressional level, whereby those with political clout were able to redirect spending their way.

Finally, there’s a recent Canadian example to corroborate this point. When the last federal government enacted a stimulus package, a disproportionate share of the spending went to electoral districts crucial to the acquisition of a majority position in Parliament.

This wide body of research suggests that if we want fewer scandals, we ought to find ways to scale back government to limit the temptation to indulge in scandalous behaviour.

If anything positive comes out of the SNC-Lavalin scandal, perhaps it will be a reminder of this important fact.

Vincent Geloso is a senior fellow at the Fraser Institute and visiting professor of economics at Bates College who earned his PhD from the London School of Economics.


scandal snc lavalin

The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.