1. What’s wrong with the economy?
The Canadian economy is technically in a recession, according to data from Statistics Canada. Real GDP dropped 0.2 percent in the first quarter of 2015 and declined 0.1 percent in the second quarter. One of the purported causes of the economic slowdown is the decline in global energy prices. Between June 2014 and July 2015 revenue from Canadian energy exports decreased 34.6 percent, forcing producers to cutback on investments and hiring.
But the bust in the commodity cycle is not the fundamental reason for Canada’s current recession, because energy represents less than 10 percent of its GDP. As reported here and here, structural problems such as low productivity growth, deteriorating export performance, and low levels of innovation in manufacturing and services have contributed to a slow recovery since the Great Recession of 2008-09.
According to Brookings-Financial Times TIGER data, the American economy has performed better than the Canadian economy every year between 2011 and 2014–which means that Canada’s current economic slowdown is a symptom of deeper, long-term problems.
2. How are voters responding to the recent economic news?
Canadian voters are worried about the economy. According to a Nanos survey conducted at the end of August, 79 percent believe the economy is in a recession. Another survey found that 68 percent of Canadians feel quite a bit of economic anxiety. The “insecure haves” and “indebted have-nots”—who make up a combined 41 percent of voters—worry quite a bit about losing their jobs (63 percent and 72 percent respectively.) The “younger have-nots”—who account for 27 percent of the electorate –are especially concerned about their financial situations and job prospects.
These reactions are worse than public sentiments during the Great Recession, even though that recession resulted in more people out of work than this one. While Canadians were inclined to be more optimistic in the last recession even though the objective economy showed real distress, this time around, Canadians have tended to be more negative in the recent downturn despite it being shallow so far.
3. How has the economy affected voters’ evaluation of candidates?
Stephen Harper’s minority Conservative government was credited for taking the economy out of the recession in 2010. As a result, the Tories won a legislative majority in 2011 for the first time since 2006. In April 2015, 45 percent of Canadians believed that Harper was most qualified to “manage during tough economic times,” in contrast to the 28 percent who thought that about New Democratic Party leader Thomas Mulcair and the 27 percent who believed that of Liberal Party leader Justin Trudeau.
But Harper’s advantage has slipped away with the more recent economic downturn. According to a recent Angus Reid poll, NDP’s Mulcair is now the candidate with most voters’ trust on economic issues. He’s seen as the lowest-risk choice to manage the economy, and as the most disposed to working with provinces to fix economic problems.
But wait, there’s more bad news for Harper: only 46 percent of voters endorse his current economic management approach, and 61 percent are in favor of deficit spending to invest in job-creating infrastructure projects. Notably, public support for fiscal stimulus is greater today than it was at the beginning of 2009, a moment when the Canadian economy had seen larger losses to real GDP.
That’s all good news for NDP’s Mulcair. He now has the attention of the electorate on the issue they care about most. From the beginning of the race, the NDP leader had the most public trust on social welfare issues (such as fixing the health care system and curbing rising living costs), confronting climate change, and reforming the Canadian Senate. Being most trusted on the economy is a good sign for his campaign.
4. What are candidates saying?
Hoping to regain lost ground, the Harper team has honed its economic message recently, promoting its post-Great Recession strategy of “expansionary fiscal contraction” which combines low taxes and balanced budget, and stressing the risks of the NDP and Liberal’s approaches.
But the NDP and Liberals have seized on the latest economic data to make the case for economic policy change—namely, diversifying the economy toward renewable energy activities and promoting innovation in manufacturing and services. Both parties have also taken aim at the Tories’ tax cut agenda, such as calling for a reduction in the tax-free savings account contribution limit, which they argue benefits the wealthy.
Where they differ is on the action plan to be used to reorient the economy. The NDP has pledged to promote innovation and investment while practicing fiscal restraint. The Liberals have been quite public about the need for deficit spending in the immediate term in order to steer the economy in the right direction.
When left-of-center parties are in power, their supply-side policies (such as investing in human capital and public infrastructure) tend to be shaped by the fiscal circumstances they face. That’s what the NDP is stressing to voters: its policies would be fiscally prudent, much as were those of past NDP premiers in the province of Saskatchewan.
5. Which party platform appears to be most appealing to voters?
But so far Mulcair has not been able convert his improved standing on economic issues into a meaningful lead in the polls. As of Sept. 17, the NDP was in the lead with 31.3 percent, followed by the Liberals at 31 percent and the Conservatives at 29.1 percent. That’s not very much of a shift since Aug. 15, almost two weeks after the Conservatives called new elections, when the Tories led with 31.8 percent while the NDP and Liberals trailed closely with 29 percent and 28.7 percent respectively.
In such a close race, the Tories could regain the lead in the next weeks and win on Oct. 19. The unusually long election season, as Richard Johnston has pointed on this blog recently, gives the advantage to the well-funded Tories. What is more, Harper’s renewed focus on the economy and the recent announcement that his government achieved a $1.9 billion surplus during the 2014-2015 fiscal year could also help the Tories build and hold a lead.
On the other hand, at least two factors could help the Liberals and NDP in the weeks to come. First, the Tories’ ability to expand their base of support is limited because, as Paul Fairie notes, only about 5 percent of current undecided voters want the party to stay in power, and a large share of NDP and Liberal supporters choose each other’s party as their second choice. Second, a large majority–69 percent–of the electorate believes that it is time for a change.
As the election day nears, expect the battle between Mulcair and Trudeau to heat up, as both try to win over the remaining undecided voters and convince voters to convert their second choice into first.
Prosper M. Bernard, Jr. teaches political science at the City University of New York.