Canada’s General Election: A view from the outside

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Despite my previous lack of awareness in Canadian politics prior to my arrival in Canada just 2 months ago, I acknowledged the impact and stature of the 2015 general election and decided to embark upon the task of laying out the noteworthy characteristics. As long as I have been politically aware, the only name that sprung to mind when somebody mentioned the words “Canadian politics” was Stephen Harper, not surprising, given he spent more than nine consecutive years in power since 2006. In this same manner, many Canadians may associate the name of David Cameron with British politics, and I forgive you in doing so.

During Harper’s tenure, Canada has arguably overcome a few stumbling blocks. The now former prime minister’s hand was forced to reopen the Quebec sovereignty debate, one he dealt with fairly efficiently and this resulted in a more “united” Canada. Harper also led Canada to a stellar fiscal reputation with Canada’s debt-to-GDP ratio being among the lowest in the G7 economies, all this at a time when the world was hit by the 2008 recession. We cannot disregard the fact that during this time, Mark Carney was governor of the Bank of Canada, the same astute mind that is now leading Britain’s economic recovery as governor of the Bank of England. Carney’s foresight leading up to the 2008 financial crisis was pivotal to controlling the severity of such a crisis on the Canadian economy – effectively no major banking crisis, unlike the UK, US and continental Europe. His biggest call was the lowering of the overnight rate on March 2008, the same year that the European central bank increased such rate. This meant that Canada had already set the foundations for recovery in advance of the crisis coming to a fore. Despite this, Canada’s shrewd fiscal reputation was also partly accredited to Stephen Harper’s government and its policies.

Having lived through the May 2015 general election in Britain, this fiscally prudent approach worked the charm for David Cameron and the Conservatives as they won a majority in Parliament. Cameron’s “long term economic plan” was the best weapon in his armoury, so I’ve experienced at first-hand just how potent a record of economic competence can be. Leading up to the election, many Canadian’s that I spoke to seemed to be discontent with the Harper administration for one reason or another. It was still understood that Harper’s government stood a reasonable chance of being re-elected. As far as polls suggest the Liberal Party was the least popular party of the top 3 parties in Canada, with the New Democratic Party coming in second and the Conservatives holding the majority of the seats coming into the October 2015 election. With this in mind, it’s justifiable to argue that Justin Trudeau’s Liberal Party started off as the underdogs going into this general election. I personally, am not too informed on Trudeau’s background bar the fact that his father Pierre Trudeau was also Canadian prime minister, but many locals in Montreal have described him as being down to earth and more in touch with the middle classes. His echoing of the Conservatives being a government addressing the needs of a minority and it being time for “real change,” is something comparable to that campaign that Tony Blair and the Labour party run prior to the 1997 election in Britain, at least in the way that they had to appeal to the whole of the country, aligning the views of the electorate in the process. This “people’s party” rhetoric was enough to take down the Conservative party in Britain at the time and it seems to have done the trick now for the Liberal Party of Canada.

It is also easy to see how Trudeau’s ideologies lie in a more liberal realm as he has hinted at the legalisation and subsequent regulation of cannabis as well as economic liberalism in the form of higher government spending and increased welfare at a time when most G7 economies are cutting costs and cutting welfare in order to balance the budget. His prospective policy on cannabis was displayed as almost revolutionary by some of the sensationalist mainstream media. Another policy which was somewhat controversial was the ceasing of Canadian airstrikes on ISIS in the Middle East. Perhaps this is to designate funds for more pressing domestic matters such as his renowned spending on infrastructure and education. However, this somewhat inactive foreign policy with regards to the war on terror may leave Canada with less respect than it previously had among NATO members such as the UK and US. Despite this, the lack of Canadian airstrikes in Syria has been well received in most parts of Canada, and especially the middle classes.

His personal crusade on Canada’s middle classes seems to have definitely bore fruit. Promises of cutting taxes for the middle class and topping up the child benefit ($2500 more per year) and other welfare schemes for middle class individuals have possibly been instrumental to the Liberal Party achieving its mandate. I cannot speak for the mathematics behind the figures promised by the Liberal Party, but what I can say is that even if the summation is intact, nevertheless, it is certainly a bold and risky move to increase government spending in this particular economic climate the world finds itself in. We cannot hide the fact that this has been the longest recessionary period since the Great Depression of the 1930s. The Japanese have taken perhaps somewhat of a more extreme route with government spending, but their government is finding the economic tight rope slightly difficult to tread on, as their long-term fiscal consolidation plan remains unclear. I know that Justin Trudeau has highlighted and laid out time and time again his party’s plans of running deficits of about $10 billion over the next 3 years in which they look to kick start the economy in order to “generate jobs,” but this very Keynesian approach of increasing government spending with the aim of increasing consumption doesn’t always work out, especially when the income streams in order to fund this extra spending may not materialize as they promise. Also, it depends on what the Canadian public think of this proposed increase in government spending; will taxpayers be “fooled” about the economic reality or will they anticipate higher taxes being implemented in the future? Not many individuals will take into consideration the tax rates of 7 years from now, but interest rates are destined to increase at some stage in the next 5 years (during Trudeau’s first tenure) especially with increased government spending and a possible increase in the price of oil as that will create inflationary pressures. This will definitely have an impact on spending and consumption decisions facing Canadians, as the appeal of borrowing money lessens. This could result in a larger government deficit with a negligible effect on investment and consumption, not the best of recipes.

Oil will be a massive factor in deciding the health of the Canadian economy in years to come. Stephen Harper was fortunate enough to be leading one of the world’s top oil suppliers at a time where the oil price was favourable on the most part. Only recently have we seen the oil price plummet, which has resulted in near 0% inflation levels and delays to the hike in interest rates by the Federal Reserve in the US and the Bank of England in the UK. Harper was extremely friendly to the oil industry by not controlling carbon emissions or implementing caps, both of which Justin Trudeau has suggested will happen under his stewardship. This will make it even more challenging for the oil industry to be profitable and perhaps dethrone it as Canada’s most valuable source of income. Just as Britain was understood to have transformed its economy after the Winter of Discontent in 1979, Canada may face the prospect of doing likewise in the next few years, as extracting oil is dubiously profitable for at least the immediate future, irrespective of the high level of fiscal spending.

The high of level of fiscal spending proposed by the Liberal Party is somewhat of an unorthodox move, but that is perhaps what is required for Canada as the electorate have agreed with such an approach. Liberal ideas have been successful in the past, namely, examples like John Maynard Keynes and Milton Friedman are the pioneers of modern economic thought. Whether Justin Trudeau’s liberal policies will leave such a mark, be it economically, socially or politically, remains to be seen. What is a certainty is that the Liberal Party victory will have a huge influence in shaping the economic future of Canadian citizens in the short term and perhaps in the longer term. Also, the value of the Canadian dollar will increase as soon as the higher level of government spending is implemented at least in the short to medium term, but as the years go by, it will be most intriguing to find out if Canada is still searching for signals on what to do next, or if it has a definite plan right up to the balancing of the budget at some point in the future.

Written By: Jonathan Jurado

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