Social Policy in Ontario

Harper’s aversion to government intervention in the economy is both political and personal

Posted on September 2, 2015 in Debates

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NationalPost.com – News/Canadian Politics
September 1, 2015

The debate over whether Canada is in a real, or merely technical, recession provided a master class in political leadership from Stephen Harper.

If a true leader has the clarity to see the right thing, the confidence to admit publicly he was wrong and the courage to do the right thing, then a political leader is someone who changes course while maintaining he has been completely consistent all along.

As the GDP numbers for the second quarter rolled in, confirming two quarters of negative growth, Harper brushed off talk of a recession and pronounced the Canadian economy is “back on track” because the growth numbers for June were positive. “It is good news,” he pronounced. “Thank God we didn’t use this data to go out and commit to three years of deficit spending and tax hikes, like the other guys.”

What he did do was announce that a $100-million advanced manufacturing hub would be built in Burlington, Ont., if the Conservatives are re-elected. The concept is based on the German Fraunhofer model, where small, perhaps risk-averse manufacturing businesses can use technology at a central hub to test and develop products.

It is a fine idea — and it is one Harper rejected about four years ago.

The Conservative leader also announced a new investment and trade promotion office in Toronto to attract new manufacturing facilities. It’s another idea he has turned down in the past.

The complaint from many critics is that Harper has reduced taxes to create the general conditions favourable to businesses, but he has pursued a laissez faire approach, leaving the economy, at best, becalmed.

This, it seems to me, is partly political and partly personal.

The Conservative government has reduced corporate taxes from 22 per cent to 15 per cent federally; has cut small business taxes; eliminated tariffs on manufacturing equipment; and, concluded a series of trade agreements.

[  See Chart “Canadian GDP Sinks…”:   < fp0902_canadian_gdp_shrinks_620_ab >  ]

To Harper, that should be the role for government. It should not pick winners or partner with businesses to give them a leg up. He is, of course, willing to deviate from this course if political expediency demands, as he did in 2009 with the investments in the auto sector, and as he did Tuesday.

But his broader aversion to partnerships is personal. He simply does not want to be part of anything he does not control. John Ibbitson’s masterful new biography details a man who “can’t stand having anyone tell me what to do,” a man with an absolute conviction he is right and others are wrong (subject to quiet revision if he changes his mind).

When it comes to cutting taxes, he is master of his own domain. But in Harper’s world, compromise is an agreement by two people to do what neither believes to be right.

Harper called the protection of provincial liquor monopolies from competition as “ridiculous” when asked Monday. But he has been in office for nearly 10 years and has done little to strike down interprovincial barriers to trade through negotiation with the provinces, or even by using the federal government’s trade and commerce power.

[  See Chart “But Economy Grows…”: < fp0902_canadian_gdp_grows_620_ab > ]

The two commitments made Tuesday are unlikely to signal a hard shift toward more federal government intervention in the economy. They served their purpose — plucked from the cutting-room floor to deflect attention from the bad news.

We will see another round of GDP numbers — this time for July — before election day. If June’s faint promise is improved upon, Harper will consider himself vindicated. The strategy he has clung to is perfectly defensible, as long as it works.

But if this is stagnation, rather than the dying headwinds of the last recession, he will look like a cork bobbing in a stream and Justin Trudeau’s deficit spending plan will seem timely.

As one of Harper’s own intellectual guiding lights, Milton Friedman once said, policies and programs should be judged by their results, not their intentions.

< http://news.nationalpost.com/news/canada/canadian-politics/harpers-aversion-to-government-intervention-in-the-economy-is-both-political-and-personal >

Tags: economy, globalization, ideology, standard of living, tax

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