Canada Turns Left The Liberals get a chance to show they can run an economy.
http://www.wsj.com/articles/canada-turns-left-1445381947
Every ruling party in a democracy eventually wears out its welcome, and on Monday Canadians tossed out the Conservative Party after nine years in power under Prime Minister Stephen Harper. They’re now taking a gamble that the winning Liberals, led by 43-year-old Justin Trudeau, won’t return to the anticompetitive economic policies of the past.
Mr. Harper resigned as Conservative leader and said in a gracious concession speech that “the people are never wrong.” They’d clearly had enough of Mr. Harper, who governed sensibly but in his later years had grown increasingly insular and autocratic in stifling party debate. The Conservatives also suffered from the global commodity bust, which has sent Canada into a mild recession after years of outperforming most of the developed world.
The popular desire for change vaulted the Liberals to a surprisingly large victory with 184 seats in Parliament. They were also helped by the collapse of the hard-left New Democratic Party, which won only 44 seats compared to 103 in the 2011 election. The Conservatives will settle for 99.
The question now is what the Liberals will do after having campaigned on the gauzy agenda of “change” and what Mr. Trudeau calls “positive politics.” The son of the late former Liberal Prime Minister Pierre Trudeau, Justin Trudeau is a former schoolteacher whose main selling point was that he is more likable than Mr. Harper.
He’ll be helped by not having to form a coalition with the New Democrats, who would have pulled him to the economic left. Mr. Trudeau moderated his populism in the campaign, promising to keep Canada’s top federal corporate-tax rate of 15%, which is a major competitive advantage compared to America’s 35%. He also supports the Keystone XL pipeline that President Obama has blocked.
On the other hand, Mr. Trudeau pledged to begin running deficits of up to $10 billion a year for the next three years while raising taxes on the 1%. That won’t do anything for growth. But Mr. Trudeau’s most corrosive threat in the long term might be his pledge to reduce carbon emissions, which could reduce investment in Canada’s vast energy reserves.
On foreign policy, Mr. Trudeau agrees with the campaign against Islamic State but he opposed the Harper government’s decision to commit the Royal Canadian Air Force to help in Syria. Mr. Harper also made a priority of stepping up Canada’s NATO commitments, which will now be at risk. Mr. Trudeau may also be less helpful against Vladimir Putin’s revanchism in Europe and perhaps the Arctic.
Not long ago Canada was the sick man of the developed world, thanks to the Liberal Party’s statist economics. But with reforms that began under Liberal Prime Ministers Jean Chrétien and Paul Martin, and then accelerated under Mr. Harper, Canada welcomed trade, shaped up its fisc, and rode out the financial crisis far better than did the U.S.
Now the commodity bust is challenging this prosperity, with the Canadian dollar trading below 80 cents against the U.S. greenback after having reached parity. Any return to a runaway fiscal policy in Ottawa will send a signal to global investors that the bad old days are back. Mr. Trudeau’s challenge is to show that Canada’s party of the moderate left can keep the country competitive.
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