A look at Conservative political economy

One of the more surprising features of the Conservatives’ current term in Ottawa has been their policy on the political economy of Canada.

We have a pretty good idea what social and moral conceptions they were working from, though we have yet to see these full blown, but their economic policy is a bit subtler, though quicker in revealing itself. It might be useful to begin a read on this important feature of what they offer us as Canadians.

We have learned that the Conservatives will not be quick to encourage the interest rate policy of the Bank of Canada to abate the sharply increasing value of the Canadian dollar. This is itself a departure from the previous two Liberal administrations, which seemed more inclined to urge the Bank to use interest rate policy as a way of serving the growth of the economy, seemingly with an eye to protecting industries and jobs.

Some of the fast rise of the Loonie, of course, has more to do with American economic woes than it does with Canadian monetary policy. But the rapid rise is not seemingly a point of discomfort for the Conservatives. They appear to believe that a high dollar, which makes our products, including our tourism services, harder to market in the States, will force Canadian companies to become more “competitive,” this by re-tooling their shops, by keeping tight reins on wages, and by letting weak sisters perish.

Slow down take-overs

The Conservatives may also see the bigger buck as a way of slowing down the take-over by Americans of Canadian corporations, favouring the sort of economic (business) nationalism touted recently by Peter Lougheed, and indeed making it possible for Canadian corporations to move into the troubled American market for acquisitions. And they may see the current rise as a way of moving to an integrated North American currency down the road.

On the fiscal federalism front—where federal and provincial governments struggle for shares of the tax payer’s dollar in order to provide services (for which they take political credit—the Conservatives have promised legislation that mimics the limits on federal spending power advanced by the Meech Lake Accord. The idea is to limit the federal government’s power and desire to spend in areas of provincial jurisdiction.

This they wish to do by requiring that the Feds pay provinces who demure on federal spending a bag of money sufficient to achieve generally similar policy aims of the federal government. Why would any subsequent federal government, they reason, choose to spend in the provinces if provinces can opt out and take the political credit for spending the money themselves?

This proposed limit to the federal spending power was meant to appeal to soft Québec nationalists, though it apparently hasn’t. And it wouldn’t be effective in any event. The Meech Lake measure would have become part of Canada’s constitution, difficult if not impossible to amend, while the proposed Conservative legislative gesture can be overturned by any subsequent government on a whim.

Has helped Nova Scotia

Federal spending in areas of provincial jurisdiction, by the way, has always helped Nova Scotians, so I was surprised to hear that our premier favours the Federal movement away from it.

On the tax front the Conservatives have been both predictable and surprising. Last year they gave their faithful some modest breaks—tax cuts for hockey moms and dads, a bit of a break for families with one stay-at-home parent, and retirement tax sharing especially valuable for couples one of whom has stayed out of the pensionable workforce. Last week they granted “corporate Canada” one of the largest tax windfalls in recent memory. When you have a mini budget or budget with which most in business can’t find fault, you know that a major change has taken place. And the Conservatives have offset the appearance of the injustice of this -- banks and oil companies being amongst the recipients -- by a second one per cent reduction in the federal sales tax, and with modest income tax cuts for those on the lower end of the income scale.

The GST cut, of course, is a lot more valuable to those who have and spend lots of money.

The upshot of all of this is that the Conservatives see the political economy of Canada paradigmatically in terms of corporations and consumers. That is, they don’t see us as farmers, workers, fishers, students, or as economic communities. They see us moving closer to the American economy, with the corporate sector significantly growing, and they need to have the rest of us continue to spend like there is no tomorrow.