Nine out of 10 economists...

Mr. Flaherty believes Ontario is failing to adapt to a changing world because its business taxes are the highest in Canada. In a speech in Toronto yesterday, he offered as evidence Ontario's declining share of national GDP; its weaker than average economic growth; and, an unemployment rate higher than the national average. He said the federal government has cut corporate income tax rates from to 15% from 22.1%, while Ontario's rate is only half a percentage point lower than in 2000, "with no plans in place for further reductions."

Mr. McGuinty's response is that tax cuts are not enough on their own and that governments have to make targeted investments in troubled industries to stimulate growth.

Let's see:The manufacturing sector is not doing too well in Ontario, although the rest of the country seems to be doing okay.But isn't the auto sector the problem? Well, if we strip out transportation equipment, which includes autos....

Hey, look at that: Ontario still lags.

Doug Porter, deputy chief economist at BMO Capital Markets, says, nine out of 10 economists would side with Mr. Flaherty and advocate creating as favourable an economic environment as possible and then allowing the market to pick the winners and losers.

What does he know? Ontario's "targeted investments" are working out so well.


Update: Flaherty takes another kick at McGuinty in a speech yesterday:

In fact, a combination of the strong Canadian dollar, a slowing U.S. economy, higher energy prices and increased competition from emerging markets has left several sectors struggling. Here in the manufacturing heartland of Canada the impact has been acute. But the economic impact is in direct contrast to national economic trends generally.

For instance, we are experiencing the second-longest period of economic expansion in Canadian history. Yet Ontario's share of the national nominal GDP has gone from 41.4% in 2002 to 38.6% in 2006.

Ontarians are seeing a lack of leadership, a lack of vision and a lack of economic stewardship.

Ontario manufacturing underperforms

Ontario's economy has been lagging the rest of the country for some time. The "economic engine" of Canada is clearly sputtering.

The easy explanation is that the Ontario economy is weak because of the province's greater dependence on the manufacturing sector. This weakness reflects the struggle by Ontario manufacturers to adapt to the sharp run up in the Canadian dollar, higher energy prices and intense competition from China.

However, manufacturers elsewhere in the country also face these pressures. And they seem to be doing a better job of coping. While manufacturing shipments from Ontario dropped 1.2% in 2007, shipments rose 1.7% elsewhere in the country. Moreover, out of a total of 21 subsectors, the rest of Canada outperformed Ontario in 15.

Click on chart for larger image.

Maybe Dalton McGuinty needs to consider what his government is doing wrong before asking the feds for help. Any suggestions?

Not enough MBAs

Yeah right.

This is what's known as talking your book:

Canada is experiencing a serious gap in management talent that is a major contributing factor in its lagging prosperity compared with the United States, says a new study co-written by one of the country's leading business school deans.

The study, produced by Ontario's Institute for Competitiveness & Prosperity and co-written by University of Toronto management dean Roger Martin, says Canada is placing undue emphasis on science and technology talent, while neglecting management skills that are in short supply.

[...]

One shortfall is the lack of MBAs at the top of major Canadian companies, the report says. Figures for 2004 show that 37 per cent of CEOs for the 100 largest U.S. companies had MBAs, compared with 24 per cent of CEOs for the 100 largest Canadian companies.

To that, all I can ask is what if Bill Gates got an MBA instead of starting Microsoft?