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The Progressive Economics Forum

Would an NDP win mean the end of Canada?

Louis-Philippe Rochon
Associate professor of Economics – Laurentian University
Founding co-Editor – Review of Keynesian Economics

Follow him on Twitter – @Lprochon

This story from the CBC on August 14, 2015.  See story here.

 

With the NDP riding high in a number of national polls at the moment, there is an increasingly real possibility the New Democrats will form the next federal government. Some are predicting, however, an NDP win would be catastrophic for Canada and would spell economic doom for the country.

After decades in third-party obscurity, an NDP win would certainly be one for the history books, and mark either the beginning of the end for the Liberal Party or quite possibly the beginning of a healthy three-party system.

Democratic issues aside, some pundits have begun the fear-mongering, warning of catastrophic events if the NDP would indeed form the government. In many ways, this is not surprising.

Fear-mongering is a normal, albeit unfortunate, part of all elections. We saw it in Greece recently, with powerful financial interests during the recent referendum warning against rejecting the austerity plan. Before that, it was of course a staple during the referendum campaigns in Quebec on sovereignty.

Irrespective of the specific events, the refrain is usually the same and goes something like this: if voters choose to elect a party that appears to go contrary to the interests of the private sector or the banking system, then we should expect markets to react and punish the citizens of that country. Money and finance will move out, and it will be the beginning of the Balkanization of the Canadian economy.

Sound familiar?

Such rhetoric of course is just poppycock. That’s not how markets react, and not how financiers behave. Sure, they may prefer one political party over another, but for them, life goes on.

History is full of events that were far more catastrophic than a possible NDP win, and markets, although maybe shaken for a few days or longer, eventually bounced back. That’s what markets do; they adapt. That is part of their resilience.

Take for instance 9/11 or the 2007 financial crisis. Surely these events would register as more catastrophic than the prospects of the NDP forming the next federal elections.

Yet, markets did not fall apart. They were bruised and battered, but they bounced back.

‘Considerable financial uncertainty’

In a recent column in the Globe and Mail, Gordon Pape declared that an NDP win would bring “considerable financial uncertainty.” He predicts dire consequences for our dollar and a frosty relationship with Washington — as if it could be any frostier than it is now.

Yet, Mr. Pape nowhere mentions what would cause this uncertainty. Which policies, specifically? He is silent on that question. He just claims that the loonie would fall even further.

Well, that’s not exactly a bad thing. The Bank of Canada has been trying to push the loonie down anyways. Plus, the loonie is already low due to the oil shock and various other factors.

And why would that be a bad thing? It may contribute to increasing our exports and lead to higher growth. So far, nothing wrong with that. Sure, it would cost us more to travel to the U.S., but then more Canadians would vacation in Canada, and that’s not a bad thing either.

He warns of a sell-off on the TSX. And why would companies do that? Markets are interested in one thing only: Profits.

After all, the policies offered by both the Liberals and the NDP are quite market-friendly and growth-oriented. They seek to put an end to the Conservatives’ policies favouring the rich and famous, and instead aim at reducing inequality and to spend more on infrastructure. Both are growth-oriented policies that could help us out of this recession and unto a better path than the last eight years of an underperforming economy of mediocre growth.

Canadians need not fear an NDP win.

Personally, I have always voted Liberal, but an NDP win is not the end of the world. Thomas Mulcair’s policies are not scary and are, in some respect, quite friendly to the private sector. Market players will have a chance to consider these policies as the campaign develops, and they will factor in a possible and eventual NDP win. Oct. 20 will be business as usual on the TSX.

Fear-mongering is unfortunate and it preys on the fears of voters in a most undemocratic way. But it also does reveal one thing: the shear fear shared by those who support the Conservative Party and the level to which they will go to sow the seeds of despair.

They must indeed be seeing orange, and they are pulling out the stops and going at it from every angle possible.

 

Enjoy and share:

Comments

Comment from Left Dog
Time: August 15, 2015, 12:43 am

The Saskatchewan NDP were elected in 1991 after 9 disastrous years of PC rule under Grant Devine. Devine did not balance one of his 9 budget and left the province of 1 million citizens in debt totaling $14 Billion. The incoming Romanow NDP government had a deficit in its first year … the NDP balanced the NEXT 15 PROVINCIAL BUDGETS.
Don’t let Conservative and Liberal lies dissuade you. Look at the record .. look at the facts.

Comment from Anonymous
Time: August 15, 2015, 7:43 pm

Why would continued depreciation of the loonie be a bad thing? If you haven’t noticed, core CPI has been above 2% for nearly a year straight now. Other than homes and a few grocery items, most of what Canadians consume is imported. And the CPI doesn’t account for home prices, a bubble continuously being inflated at a remarkable rate. Part of that is foreign investment (and not just China) in Canadian real estate at least in part fueled by the plummeting loonie.

But all you so-called progressives keep droning on about is how great the low-for-long mess is, how it’s continuing to stimulate a recovery that, spikes in real estate and commodities aside, really never happened from the last recession.

The only people benefiting from this nonsense are the so-called ‘one percent’, who have the equity to take out significant loans and continue to pump them into real estate and equity, further fueling the next asset bubble.

Dear so-called ‘progressives’, get a clue.

Comment from Larry Kazdan
Time: August 15, 2015, 11:03 pm

Yes, business as usual. Both opposition parties want to run balanced budgets.

The demise of social democratic parties – they are all neo-liberals now
http://bilbo.economicoutlook.net/blog/?p=21091

“The social democratic political tradition is fading because the parties have become indistinguishable from the conservatives in economic policy. They are all neo-liberals now and that is an ugly option for those with a progressive bent who have traditionally supported the social democratic parties.”

Comment from Arby
Time: August 16, 2015, 8:31 am

I am appalled at Louis-Philippe Rochon’s assessment of the Liberal and NDP parties. They are not benign. Certainly not to victims of neoliberal capitalism/austerity, here and abroad, certainly not to victims of Canadian mining companies run amok (Nigel Wright was a star with Onex and is a friend of Peter Munk into whose family he’s married), nor to Gazans who undergo regular slaughter at the hands of Nazi Israelis who call it “mowing the lawn.”

Just great! This is the state of the Left?!

Comment from Brandon L
Time: August 16, 2015, 10:35 pm

Rising prices too me the problem. A lof of people who want new governance are stuck unable to anything but support rising prices from using low rates of interest (including negative rates), to bailing out companies that have a lot workers, to regulations, to government spending all in the end to support higher prices, and as long as prices are prevented from falling by conservatives, liberals, new democrats, it will be the status quo that prevails. The rich love inflation, love increasing prices for goods they sell, love increasing asset prices, they love watching their millions grow into trillions, they only price they hate rising is labor. This all thanks to leaving the Bretton-Woods system, for floating & fixed fiat currencies.

It would be great if we redistribute the money and give every Canadian more then million a year in direct transfers, or government jobs digging ditches, or bridge. Frankly I want (5K-10k) to 30k people never need to worry about inflation going forward 50 odd years, maybe longer

Comment from Brandon L
Time: August 16, 2015, 10:41 pm

The gold standard would be better then our current system. The Bretton-Woods system was better then our current system. Income inequality has exploded. Inflation has raised nominal incomes for a very few, while the purchasing power disappears for the poor & middle class.

Comment from Plain canuck
Time: August 19, 2015, 12:37 pm

The NDP would be no danger to Canada, were itnot Jack Layton’s and Thomas Mulcair’s Version of the party. It is no accident that Mulcair removed all mention of socialism from the party’s Constitution, as he is a fan of Maggie Thatcher! he is a carbon copy of Brian Mulroney — a right-wing, QC lawyer, who believes in asymmetric federalism, and thus is against national social and economic programs. Mulcair would be the end of Canada because he depends for all his electoral success on separatist support, and is willing to sacrifice even basic democratic principles, such as those ensrined in the Clarity Act, to achieve his personal ambitions. Canada needs less blarney, and more progressive thought, and that leaves ONLY Justin Trudeau as a viable option. http://www.huffingtonpost.ca/2015/08/18/thomas-mulcair-margaret-thatcher-2001_n_8006990.html

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