Fear factor
The markets are starting to worry about a surging NDP. But should you?
by Max Fawcett
by Max Fawcett, Managing Editor
Forget the polls. When it comes to assessing the impact of Jack Layton’s surge in popularity among Canadian voters, the markets are the most accurate tool of measurement.
At least, that’s the well-worn thesis trotted out by the Financial Post’s Claudia Cattaneo, in a piece that’s accompanied by the most sinister looking picture of Jack Layton the paper could possibly find. Those markets, apparently, are growing increasingly anxious about the idea of a socialist coalition in waiting. “Some of the investors, big funds in the U.S., are starting to wonder about the chance of an NDP/Liberal coalition,” she quotes a “senior investment industry source” as saying.
Why are they worried? “An NDP as the Official Opposition, or even an NDP led-coalition government, would be bad news for the business community at large, the oil industry would be a target,” Cattaneo writes (although that’s an awfully generous way to describe such a grammatically-challenged sentence). “One of the complications is that Mr. Layton is a stranger to the oil industry,” she continues, “resulting in a long learning curve until he understands the difference between policies that appeal to the fringe and what is best for the country…the threat would result in uncertainty and market pain for months, if not years. Capital would sit on the sidelines until the rules are clear, depriving many regions of the country of economic growth at a time they need it.”
There are two problems with this series of statements. The first is that Layton’s surge in the polls directly contradicts Cattaneo’s assertion that he doesn’t understand “the difference between policies that appeal to the fringe and what is best for the country.” Either that, or the fringe is getting much, much wider. But more important than that is the idea that an NDP opposition or even an NDP-Liberal coalition would “result in uncertainty and market pain for months, if not years.” This is pure caricature, and it’s not one that’s supported by the facts. Layton’s proposal to create a cap-and-trade system, after all, isn’t terribly different from one the Harper Conservatives put forward in the 2008 election. Layton’s suggestion that exports of unprocessed resources ought to be discouraged in favour of upgrading that takes place here in Canada, meanwhile, hardly qualifies as anti-energy sector posturing, given that economists and elected officials (of all partisan affiliations) have been saying the same thing for years.
Cattaneo appears to be confusing the Layton-era NDP with one of a more Broadbentian vintage. As the Globe and Mail’s Michael Babad writes, “Not only is it not your father’s NDP,” he writes, “it’s not your father’s economy either.” He brings in a whole host of economic analysts and experts, all of whom say approximately the same thing about the NDP’s surge in the polls and its effect on markets and the economy: chill out. David Watt of RBC Dominion Securities, for example, notes that “The NDP election platform still projects a four-year deficit-reduction strategy, as Canadians have no desire to revisit the dark days of the early to mid-1990s. As well, the Liberal party wrestled the deficit to the ground in the late 1990s, and is unlikely to support a fiscally irresponsible agenda. Both parties do plan to unwind corporate tax cuts and to raise corporate taxes to 18 per cent (Liberals) or to 19.5 per cent (NDP). Even so, the NDP do pledge to ‘keep Canada’s corporate tax rate competitive by ensuring that our combined federal/provincial Corporate Income Tax rate is always below the United States’ federal corporate tax rate.’”
In the end, Cattaneo seems to be forgetting one key thing: the markets might always be right, but the people still get the final say. We’ll all have to wait and see what they tell us on Monday.
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