Social Policy in Ontario

The triumph of ‘hard-headed socialism’ is destroying Canadian conservatism

Posted on July 21, 2012 in Governance Debates

Source: National Post — Authors: Jonathan Kay

NationalPost.com – FullComment
Jul 17, 2012.    Jonathan Kay

The 2008 financial crisis created a massive rift in America’s conservative politics. Throughout the boom years of Bill Clinton and George W. Bush, voters had ignored the massive profits that were being siphoned off by the financial industry: What was good for Wall Street was good for everybody. But the backlash against Bush’s TARP program brought out the country’s anti-plutocratic populist spirit — which is why Mitt Romney, a former buyout king, seems like exactly the wrong presidential pick to many Republicans.

Here in Canada, the 2008 financial crisis, and its piggyback recession and foreclosure epidemic, also has created a massive upheaval in conservative politics. Before that, the real dynamo behind right-wing ideology in this country was always, at heart, wealth-envy of the United States, which we saw as a bastion of prosperous laissez-fairecapitalism. What happened in 2008 showed us that we were worshiping a false god, which shrunk, like a deflating parade float once the crowds are gone, before our eyes.

As a National Post editor, I’ve had an interesting vantage point on this ideological transformation. In the first few years of the Post‘s existence, we ran a campaign aimed at shaming Canadian governments by pointing out all the ways in which the United States was supposedly economically superior. “The Chrétien government’s blindness to the sources of economic growth, its preference for pork-barrelling over job- and wealth-creation, its willingness to let the currency … collapse to weaken the pressure on the government’s own finances — all these things together have impoverished Ontario,” wrote David Frum in a 2000 Post column. “The province’s per capita income now trails that of every American state, even Arkansas, even Mississippi.”

A section-front story by ace economics reporter Luiza Chwialkowska, contending that Canada had become a “scaled-down, smaller and cheaper” country compared to the United States, put the disparity in stark visual perspective — with big photos of two cars, side by side. “Take automobiles,” Chwialkowska wrote. “The best-selling car in the United States in 1998 was the Toyota Camry, at a manufacturer’s suggested retail price of $21,348 in Canadian dollars. In Canada, the best-selling car was the more basic Honda Civic, which sells for $15,700.” Blame for Canadian mediocrity was placed on our relatively low productivity, which itself — an endless stream of Post op-eds and editorials assured us — was a product of high-tax, low-growth Canadian policies.

But, like the sturdy Honda Civic itself, Canada’s Liberal-era fiscal policies — largely continued, with some intelligent tweaks, by Stephen Harper — have aged quite well. As for all that soaring productivity growth in the United States, much of it was a statistical mirage produced by inflated home prices and massive Wall Street profits: Real median household income in the United States is at mid-1980s levels, even as the cost of higher education and health care has soared.

“Currently, the average Canadian household is more than $40,000 richer than the average American household,” reports the Globe & Mail, citing recent Environics Analytics WealthScapes data. “The average household net worth in Canada was $363,202 in 2011; in the U.S., it was $319,970. And these are not 60-cent dollars, but Canadian dollars more or less at par with the U.S. greenback.”

These numbers should be a source of pride for Canadians. Yet they highlight awkward questions for the country’s small-c conservatives: If Canada was, relatively speaking, on the right track policy-wise all along, what exactly were we doing jumping up and down, demanding that our leaders look to the United States for their policy solutions? Does the idea of being a Canadian “fiscal conservative” even make sense anymore?

David Frum — who has, without intending it, become a voice of conscience in America’s conservative movement — also has been wrestling with these issues. A few months back, I attended his Patriots book launch in Ottawa, and heard him give a wonderful speech that warned, in diplomatically veiled terms, about the way that Obama’s presidency had driven portions of the American right to extreme policy positions and hysterical rhetoric. As he’d done a decade ago, Frum was urging that Canada take lessons from the American right — but this time, the lessons were cautionary tales, not policy models.

In recent days, Frum has strung together a fascinating set of Tweets that, taken together, would make a great platform for an alternative-universe Romney who acknowledges the need for a substantial safety net in an era when globalization so ruthlessly divides workers between winners and losers. Keep America a free-trading nation, Frum says, adding: “that hugely increased national income can then be taxed to provide benefits to all, such as for example, [Romneycare-style] universal health coverage.”

Sounds a lot like what we do in Canada, doesn’t it? Yes, a lot of our wealth comes from oil and other natural resources. But unlike the United States (which has its own natural gas boom going on, let us not forget), we’ve plowed much of the proceeds back into public spending, while avoiding Bush-style budget-busting tax breaks for the rich. Nor did we let free-market euphoria permit the creation of a sub-prime NINJA mortgage market.

The United States isn’t the only developed nation drowning in red ink, of course: Much of socialist Europe is doing even worse. Italy and Greece both have debt levels that exceed GDP, and other, larger European nations are heading in that direction. But the lesson from this isn’t that big government is an economy killer: Norway and Sweden both have roaring economies, despite being socialist welfare states with high rates of government spending. Rather, the lesson is that nations must spend within their means — something Canada has done for the most part, but the United States hasn’t.

Is there a name for a policy that combines fiscal responsibility with a thick safety net, including universal health care? It turns out Canadian writer Stephen Marche just found one: “Hardheaded socialism.”

“Since the 1990s, Canada has pursued a hardheaded (even ruthless), fiscally conservative form of socialism,” Marche writes on Bloomberg.com. “Alone among finance ministers in the Group of Eight nations, [Paul Martin] ‘resisted the siren call of deregulation,’ in his words, and insisted that the banks tighten their loan-loss and reserve requirements. He also made a courageous decision not to allow Canadian banks to merge, even though their chief executives claimed they would never be globally competitive unless they did. The stability of Canadian banks and the concomitant stability in the housing market provide the clearest explanation for why Canadians are richer than Americans today. Martin also slashed funding to social programs. He foresaw that crippling deficits imperilled Canada’s education and healthcare systems, which even his Conservative predecessor, Brian Mulroney, described as a ‘sacred trust.’ He cut corporate taxes, too. Growth is required to pay for social programs, and social programs that increase opportunity and social integration are the best way to ensure growth over the long term. Social programs and robust capitalism are not, as so many would have you believe, inherently opposed propositions. Both are required for meaningful national prosperity.”

You can call this “Third Way” politics, or you can call it Statism Lite, or you can call it, as Marche does, hardheaded socialism (a term I really like). But the fact is: It’s what works in developed post-industrial economies — both in Canada and Scandinavia. It even works in Massachusetts, even if Romney (bizarrely) doesn’t like to admit it.

That’s fantastic news for Canadians. But it’s weird news for the Canadian conservatives who grew up bashing Paul Martin and his boss. What they did in the 1990s is the reason a nation of Honda Civic drivers are so rich in 2012.

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Tags: economy, ideology, standard of living, tax

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