Tuesday, January 20, 2015

The Rooster's Mistake


Since coming to office, Alan Freeman writes, Stephen Harper has had an incredible run of good luck:

The Liberals had bequeathed the Tories a sound fiscal situation and a string of surpluses, so much so that in its early years, the Harperites could cut taxes and still boost spending on their favourite causes like the military, with seemingly no consequences. They also inherited a well-regulated banking system and an earlier ban on bank mergers that meant no Canadian bank was big enough to swagger on the world stage and do the kind of foolish things their U.S. and UK counterparts ended up doing. These factors, the consequence of Tory fortune rather than policy decisions, made a real difference when the financial crisis hit.

But the Tories’ real stroke of luck was that resource prices, particularly oil but also coal, iron ore and other commodities, remained strong even after the financial crisis, reflecting China’s continued growth. As manufacturing in central Canada collapsed, the West surged, filling federal coffers and providing jobs to unemployed workers from Central and Eastern Canada.

What’s more, real-estate prices not only didn’t dip, they kept roaring ahead. Again, luck was the major factor at play. Like other bubbles, Canada’s real-estate boom was powered by its own internal logic, as well as low interest rates. It didn’t really make any sense but the politicians weren’t about to complain. When it came time to vote, Canadians peered south of the border and saw devastation when it came to employment and house prices. Canada was doing pretty well so they held their noses and voted for Prime Minister Stephen Harper, in 2008 and 2011.

Perhaps appointing Jim Flaherty as Minister of Finance bestowed the Luck of the Irish on Harper. But that luck has run out:

The collapse in the price of oil isn’t the fault of Harper or his hapless finance minister, Joe Oliver, but neither was the run-up in the price to their credit either. There’s nothing wrong with taking advantage of fortuitous circumstances. The problem occurs when you take that luck for granted, promising tax cuts and a return to surplus when prudence would have told you to hold off.

Harper has made the rooster's mistake. He has assumed that, because he crows, the sun comes up every morning. He's still crowing -- but the sun is setting.


mogs moglio said...

"He's still crowing -- but the sun is setting"

Good analogy Owen I'm literally giggling.


Owen Gray said...

The big question, Mogs, is: "How many Canadians are giggling with you?"

Anonymous said...

I'd be 'giggling' too...

But I remember that sinking feeling in the pit of my stomach on May 14, 2013.

Owen Gray said...

Care to elaborate a bit more, Anon?

lungta said...

any political discussion around here
usually ends with
"but if you elect a liberal who will manage the economy?"
my standard answer
"how much talent do you need to close your eyes, cross your fingers and whistle in the dark?"
sad really
i think cons are willing to be wrong time after time and suffer from it
rather than admit they were ever wrong once and end the pain
it has to be some sort of mental default setting involving loyalty
or that americanadian "my country right or wrong" attitude
and i guess
martyrdom isn't just for the jihadists

Owen Gray said...

Paul Krugman wrote an interesting piece the other day in the New York Times, lungta. He argued that conservatives are reactionaries who are immune to evidence because they want to perpetuate a hierarchy.

Real economic progress would give everyone a piece of the action and doom the hierarchy -- the one that puts conservatives on top.

Anonymous said...

May 13, 2013 was general election day in BC... most of us thought the BC Liberal era would be over... didn't happen.

Getting giggly about the Con's demise before they are formally turfed this fall is... not helpful.

Owen Gray said...

I understand your reference, Anon. Another case of counting your chickens before they hatch.