BY SHONDELL SABAD, SENIOR STRATEGIC ADVISOR AT THE ALBERTA ENTERPRISE GROUP

As Alberta looks toward its future, we must ask: What role should government play in the economy? While public services are essential, the size of government, specifically how much it consumes of GDP, can determine economic growth and productivity.  Studies suggest that the optimal size of government is between 24% and 32% of GDP.  Beyond this, government intervention can inhibit growth, stifle innovation, reduce private sector efficiency and more importantly reduce living standards for its citizens.

In Canada, government spending has exceeded the 30% mark, and we are already seeing the consequences, shrinking GDP per capita and lagging productivity growth.  The OECD and World Bank have consistently found that when government spending surpasses 30% of GDP, economic growth slows and individual prosperity declines.  Alberta’s spending is now approaching 30%, still the lowest in Canda but growing at a faster rate than the economy. 

At Alberta Enterprise Group (AEG), we believe that reducing red tape, cutting unnecessary regulations, and empowering the private sector will lead to sustainable economic growth. The symptoms are clear: shrinking GDP per capita and sluggish productivity.  We need a more efficient, balanced approach that encourages business growth while maintaining essential public services.

Let’s ensure Alberta’s economy remains competitive by focusing on policies that allow businesses to innovate and thrive.  It is time for Canada to recognize the importance of smaller, more efficient government that promotes private sector growth, innovation, and productivity.

For more insights, check out these reports:

• Fraser Institute on Government Size
• OECD Economic Studies
• World Bank on Government Spending