Canada just voted for a liberal government in a landslide. It seems that millions of her citizens are unhappy about the Canadian economy and their opportunities therein. They also seemed to be expressing unhappiness with Harper’s conservative policies on national defense and environmental issues. As with Americans eight years ago, Canada voted for the hope and the change.
What has the new Prime Minister Trudeau promised? Free stuff. This will include billions of infrastructure spending with borrowed money, a lot more social spending, reduced role in international military efforts, more government control of research and development in energy projects, increased taxes, and a whole lot of hope with that change. Don’t worry all of the financial press is saying, Canada doesn’t owe very much money, they can afford to borrow a lot, and the rich can afford to pay more as well.
Will Trudeau’s policy prescriptions work? One of the main tenants of his environmental reforms will be a stronger belief in and more legislation to combat ‘climate change.’ This will include reduced support for pipelines, a carbon cap and trade program, and government ‘investment’ in ‘clean energy technologies.’ The precipitous drop in crude oil prices has led to the predicament Canada is in economically. In addition to diversifying the economy, a recovery in the energy sector is one way Canada can quickly recover economic growth. It seems highly unlikely that policies that will further harm a recovering energy industry will lead Canada to stronger economic growth.
During his concession speech according to CBC, Prime Minister Harper listed his government’s accomplishments including strong fiscal management, international trade deals, and job creation. The relatively low debt to Canadian debt to GDP ratio is an especially valued accomplishment in an era of global debt crisis and default. Does Canada really want to throw all of that away?
How have these policies worked elsewhere? After all, this is not the first time they have been tried recently. How is Europe working out? Greece? Italy? France? The United States economy can’t recover fully due to overreaching government interference in the economy. It was Barack Obama who nixed the Keystone XL pipeline, not Stephen Harper. The United States now has a debt to GDP ratio of somewhere around one hundred percent, almost twenty TRILLION dollars. A record number of Americans are on foodstamps and almost one hundred million have given up looking for a job and have left the labor force. It seems America got a different kind of change and the hope never materialized. The next election in 2016 will most likely restore a conservative government to power.
The problem with liberal economic policies is that yes, they provide lots of hope and promises, but in the end, they don’t work. The fact is energy dependent economies all over the world have been hurt by the oil price slump. The only way to get out of this hole is to do the hard work to change your oil dependency. It’s much easier to vote for hope than to retrain an economy. Also, the world has become a much more threatening place. Dictators and anti-freedom political ideologies are on the march around the globe. Withdrawing from the world’s political stage and hoping it all goes away doesn’t work either.
The New York Times reported on Trudeau’s recent comments in Montreal, “More than a hundred years ago a great prime minister, Wilfrid Laurier, talked about sunny ways, he knew that politics can be a positive force and that is the message Canadians sent today. Sunny ways, my friends, sunny ways, this is what positive politics can do.”
To borrow a phrase from the global warming crowd, denying is not a policy, it is hope and the change may not be what you are looking for.
L. Todd Wood is a former emerging market debt trader with 18 years of Wall Street and international experience. He is also an author of historical fiction thriller novels. His first of several books, Currency, deals with the consequences of overwhelming sovereign debt. He is a contributor to many media outlets and is a foreign correspondent for Newsmax TV. LToddWood.com