Replay of Greenland Welfare Traps in Canada


This month, the Greenland elections received an extraordinary amount of international attention. This is a vast country with a population of only 56,000.

Every year Denmark remits $ 740 million To support funding the government. This is a huge amount, equivalent to about 25% of GDP or 46% of government spending. Surprisingly, government spending represents 60 percent of the economy. The money received from Denmark was important for Greenland to be brought into the modern world in terms of living standards, education, health care, housing and life expectancy.

Elections have become important globally as an international mining consortium wants to develop rare earth mines domestically. This is opposed by some of the locals. The Inuit people make up 90 percent of the local population. Election results indicate the overthrow of the ruling party, with 37% of the votes directed to the winning anti-mining party, which will undoubtedly stop developing the mine.

The Danish government wanted the development of the mine to reduce ongoing financial subsidies to Greenland. But the people of Greenland decided to oppose it. They expect Denmark to continue to submit bills for almost half of government spending.

If the people of Greenland are subsidized by 25% of the total economy, what is the need to be self-sufficient and engage in environmentally challenging projects? All Greenland families have seen $ 50,000 sent to them by the Danish government. Why do they want to change that: develop a mine, and see the risks associated with major projects?

It’s much easier to keep accepting $ 740 million each year. This is the classic welfare trap for steroids. If the Danish government decides to end the payment of this large remittance and the government’s services are reduced by 46%, Greenlander will reconsider its support for the mine and pay for the coveted service. It’s more likely.

Unfortunately, we can see that the same perverse incentives are working across Canada. You can see the remittance to the state. This is useful because it contains complex formulas for natural resources. Omit hydropower— This ensures that Quebec remains a permanent beneficiary of large remittances (a significant portion of the budget is received as leveling payments from other parts of the country).

Like other leveled states, Quebec operates a costly state government, especially compared to its neighboring state, Ontario, and the artificially inflated costs of the services it provides. You don’t have to face the challenge of actually paying. There is no evidence that the payment of these remittances provided better service than in other states. In most cases, leveled states lag behind the national average in education and health care outcomes.

In Primorsky Krai, you can see not only high leveling payments, but also EI payments that you effectively pay to stay home after 6 weeks of fishing. Why do you get another job when you can collect “pogies” for 44 weeks of the year? Despite the high local unemployment rate, businesses have been unable to find workers, which has hindered the region’s economic development for generations.

In the Canadian countryside, we’ve seen hundreds of small towns end and move to places where locals can get better economic and lifestyle opportunities. Today, 60% of indigenous peoples live outside the reserve, and the number continues to grow each year. Most reserves are not economically viable and the number of indigenous peoples living outside the reserve is increasing, but none of the more than 630 indigenous peoples have been merged or dissolved.

About two-thirds of indigenous settlements have less than 500 people. For 300 indigenous peoples living in remote areas, financial opportunities, medical care and education are not possible and can only be accessed by air or winter roads. No matter how well-meaning or money the government provides, it is impossible for such communities to meet health, education and employment tolerances in modern situations. As long as the government funds these Satraps, chiefs, and councils, there is no changing economic impetus.

Canada is a rich country and most of its investment is directed towards resource development. If we continue to subsidize non-economic areas, our standard of living will continue to decline. We always hear from the new generation of Canada that they are the first generation in Canada and their income is less than their parents.

A new generation of Canadians if we cannot make difficult decisions about resource development and direct funding to permanent welfare traps caused by uneconomical programs and government systems. Living standards will continue to decline.

Peter Holle is the director of the Frontier Center for Public Policy.

The views expressed in this article are those of the author and do not necessarily reflect the views of The Epoch Times.