For the past two weeks, I’ve been doing a mandate for Technology PEI for which I booked meetings at GDC 2009. Technology PEI, a provincial government agency devoted to IT business development, launched GamePlan in 2003, a co-ordinated strategy for the development and growth of the video game industry in Prince Edward Island, Canada.

As part of that plan, Prince Edwards Island offers agressive incentives to attract developpers to relocate or branch out on their territory. In a LinkedIn Group related to game development, I had a discussion with an executive from San Francisco who was not too kean on government intervention.

Now, since we may not all share the same views on that topic, here’s the discussion I had with this fine gentleman:

So, Prince Edward Island joins the list of localities where the government thinks they can make another silicon valley by tossing taxpayers’ money at anyone who promises to locate there?

I think any Canadian taxpayer should be highly offended at this. That 52% rebate you’re offering is taken from people who earned it, so that you can give it to people that you think are better than they are. Want to encourage new business? Then think about how you can get your government out of the way, and let Canadians keep the money they earn.

Here’s my answer:

Thanks for your comment John, I’m sure that you’re not the only person to question our financing methods. The following is my own personnal reaction to your comment and does’nt necessarely represent the views of my client.

Although I’m based in Montreal and have worked here all my life and the past 12 years in game dev, I was happy to help out this agency with their strategy for the development and growth of the video game industry in Prince Edward Island because I strongly believe that tax incentives are one of the keys of success in creating a strong IT cluster.

From my Montrealer perspective, as a Canadian tax payer and as a province of Quebec’s tax payer, I’m not at all offended by the fact that governments use my hard-earned money to foster growth and help companies create jobs and business opportunities for me and my fellow citizens. Most of these tax credits apply to native companies as well don’t forget. Quebec’s tax credits incentives have been a key factor in the phenomenal growth of our ITC cluster which is now ranked globally in the top 5. Partly dued to this generous government help to our industry, we now have 6500 people (all living in the province, consumming and paying taxes too) working in the digital entertainment business. Since the arrival of Ubisoft in Montreal and the introduction of this tax credit program, countless companies were founded by ex-employees.

In a given region where there is little senior know-how and expertise in game dev, this practice encourages foreign companies to locate there and hire people that in turn will gain experience, knowledge and maybe decide to open up their own company. So the strategy is not to distribute our tax money to foreign companies; it has more to do with creating an echo-system – artificially, I agree with you on that – that will foster growth.

As a consultant and like most companies servicing this florishing industry of content creators, I don’t have access to these incentives but it really does’nt matter to me because the companies that do, may become my clients.

I work with a lot of SME that had their first product developed and published because of hard word, dedication and a little help from various government initiatives. I’m proud to be part of a society that helped them bring their passions to market. In my vews, creating wealth can be a solo entrepreneurial thing or it could be a social responsability from which we can collectively benefit.

He’s still not digging my response so ads, quoting me:
“governments use my hard-earned money to foster growth and help companies create jobs “

This is simply incorrect. Government handouts don’t create jobs, they only move them around, and waste a good bit of money along the way.

There is a perfectly good mechanism for fostering innovation, entrepreneurship, and economic growth: it’s called the market. The legitimate role of government is to enforce the rule of law, not to pick and choose who should get favors at the taxpayers’ expense by playing political games.

Using taxes as an instrument of policy does at least as much damage to the economy as the taxes themselves, because it introduces distortions into the decisions that businesses make.

And again, after I pointed out the fact that their free market religion has brought on them the Wrath of the Financial God :

” the market, left alone can do a lot of damage, as your homeland spectacular financial crisis tends to demonstrate” That’s mine.

What’s your next guess? Banking is one of the most regulated industries in the USA, right after medicine and operating nuclear power plants. Our current financial mess demonstrates that central planning is a recipe for disaster; the Federal Reserve is no better at choosing interest rates than the Soviets were at setting prices for consumer goods. We were regulated into this crisis. The Federal Reserve is not a free market institution.

I’m certain this discussion could go on and on, and on, and on… Everybody has it’s own take on the appropriate level of government intervention in business. Especially when you’re competing against government aided environments. I don’t think I have all the answers but I can understand his views. I found the exercice interesting.

What do you think about government intervention in our business sector?