Tory policy? Big Business isn’t feeling the love
TheGlobeandMail.com – Globe Debate
Jan. 02 2015. Jim Stanford
Jim Stanford is an economist with Unifor, Canada’s largest private-sector trade union.
We on the left of the political spectrum often caricature the Harper government as being deeply in the pocket of business. The government has handed out one corporate gift after another: a tax cut here, a free trade agreement there, some union-bashing thrown in for good measure. And to be sure, the government’s nine-year reign likely constitutes the most significant pro-business policy shift in Canada’s postwar history.
More recently, however, the relationship between Ottawa and the corporate sector has become more complicated. Canada’s business leaders might be wondering whether Santa Claus was replaced by the Grinch – because on several issues, the Conservatives have come into direct conflict with business. With a tough election looming, and the government’s actions increasingly dictated by political optics rather than any consistent economic ideology, executives have been negatively surprised by several recent edicts from Ottawa. This potential rift could be an important wild card in the coming election year.
A potent symbol of that tension was the legislation introduced at year’s end, requiring companies to “justify” price differentials between Canada and the U.S. The Competition Bureau is authorized to collect confidential corporate financial data to facilitate this comparison. Few believe the Bureau has either the desire or the resources to investigate prices in any meaningful way, and it will have no power to do anything about “unjustified” price gaps in any event. Moreover, the only reason such gaps exist – a substantially overvalued Canadian currency – is disappearing before our eyes. So the legislation is pure theatre.
But the very idea of a big central government seizing confidential business information, and demanding that prices meet some moral criteria (rather than supply and demand), sparked anger across the business community (not to mention ridicule from economists). If a Liberal or NDP government ever tried this, business would be crying that the barbarians were at the gate.
This silly but unprecedented intervention echoed another simmering confrontation between Ottawa and the telecommunications industry. The Harper government is actively aiding the creation of a fourth national wireless carrier, assuming that consumers would consequently enjoy a sea-change in quality and cost. (International evidence on that score is not encouraging.)
Ottawa even tailored spectrum auctions and other regulations to assist this hypothetical new entrant (which ironically could end up being a huge foreign carrier). The government’s talking points were amplified by millions of dollars of taxpayer-funded advertising lambasting the existing telecom firms (which, after all, are some of Canada’s most important blue-chip companies). The unprecedented anti-business rhetoric was greeted with raised eyebrows in boardrooms from coast to coast.
More open conflict was sparked by the Conservatives’ sudden decision to restrict the temporary foreign worker (TFW) program. It was the Harper government that threw this program wide open after 2007, but they soon faced growing (and understandable) popular anger – including from segments of their own base. So they dramatically rolled back the program. Business is still complaining, and loudly. The government was motivated more by polls than principle; they’d still like to expand the supply of low-wage labour through other means. But in the meantime, it’s another major irritant in its relations with business.
Even on tax cuts, which should be a shared article of faith, there is growing dissonance with business. The myriad of boutique tax cuts, micro-targeted to capture strategic little slices of the electorate, has been widely denounced in business circles. The latest gimmick – income-splitting – hasn’t gone over any better. After all, corporations have no time for social conservative mantras about subsidizing stay-at-home parents; they’re more focused on securing future labour supply. The bizarre cut in employment insurance premiums announced in 2014 (applying only to very small firms, and providing more reward for downsizing than hiring) also produced skepticism in most business circles.
The political implications of a schism between the Conservatives and corporate Canada are subtle but important. Business executives are not a big voting bloc, so the impact won’t be felt directly in polls. But their flagging enthusiasm and faint praise could nevertheless influence the coming contest.
Conservative economic actions are increasingly motivated by immediate political opportunism, rather than a consistent plan, and business leaders recognize this. Combined with “serial disappointments” in Canada’s macro-economy (which is lagging further and further behind the U.S.), the Conservatives’ economic credibility is clearly vulnerable as the 2015 election approaches.
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Tags: budget, economy, ideology, tax
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