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Monday, August 09, 2010

The consequence of the Conservative Party abandoning conservative economic theory: who will stand up for Hayek?

Almost two years ago a remarkable thing happened. Stephen Harper, the prime minister who once wrote a dissertation describing why deficit spending couldn’t possibly help the economy, declared himself a Keynesian. Mr. Harper once would have described himself as a classical liberal, a student of Hayek and Friedman. Suddenly he abandoned his own intellectual history and embraced policy formulas that he once railed against.

Many have said that he did it for pragmatic reasons. The opposition parties and the political climate in general conspired to force Stephen Harper to act against his will. I have never really been convinced by this argument but even if it is true it does not explain Mr. Harper’s full hearted embrace of the flawed ‘stimulus’ theory.

Basically the 2009 budget was the Conservative Party of Canada winning by surrendering before the battle could be fought. Instead of presenting a conservative position in the tradition of intellectual thinkers such as...well such as Stephen Harper, and negotiating a compromise with the Liberal Party, the Conservatives skipped the negotiations. They simply presented the position of welfare liberalism and faith in the government’s ability to fix all problems to win Liberal support. In the process the Conservatives abandoned any defence of conservatism.

The consequence of this has been profound.

Liberal leader Michael Ignatieff has lately been saying that a second round of ‘stimulus’ may be needed. Harper’s government is meanwhile sticking to March 2011 as the deadline for all stimulus spending. Mr. Ignatieff makes the point that the government doesn’t know what the economy is going to look like in March so how can it rule out any new spending?

Mr. Ignatieff’s position makes a certain amount of sense, or at least it smacks of intellectual consistency. Once you accept that deficit spending can be a good thing, you can never automatically rule it out. The Conservatives don’t really believe in this stimulus notion and they truly want a balanced budget, so they do not want to leave a door open for more spending.

Yet by publically embracing Keynesianism they have stripped themselves of any coherent argument against stimulus spending. If it was a good idea in one recession why wouldn’t it be a good idea in the next recession? Or the recession after that and the one after that one? Canada has drifted back into the 1970s and a political dynamic that blindly calls for the government to spend Canada into prosperity with no dissenting voices.

We have two Keynesian parties with no one standing up for Hayek.

Posted by Hugh MacIntyre on August 9, 2010 | Permalink


Has CPC's economic policies ever been related to Hayek?

Posted by: Johan i Kanada | 2010-08-09 5:04:44 AM

"The Conservatives...truly want a balanced budget"


Posted by: Kalim Kassam | 2010-08-09 7:22:03 AM

It may not be true that Stephen Harper himself cares if the budget is balanced, but I think the membership (including MPs) as a whole believe in balanced budgets and want to cut spending.

As evidence I submit the fact that the deficit is always defended as a political necessity, not as a good thing in of itself. They always say things like "He had to because it is a minority" and "just wait till we get a majority." This suggests that they want a balanced budget; they just don't think they could have gotten one.

Posted by: Hugh MacIntyre | 2010-08-09 7:27:08 AM

On my personal blog I'm already getting comments like the ones I just mentioned.

Posted by: Hugh MacIntyre | 2010-08-09 7:27:42 AM

Stephen Harper abandoned his conservative financial principles for the most [personally] pragmatic of reasons - to remain in power. This is not new behaviour for any party leader, it is in fact the norm.

Posted by: stageleft | 2010-08-09 7:42:40 AM

Hugh, Re: "He had to because it is a minority" and "just wait till we get a majority."

The essential problem with all such claims is that they are demonstrably false. Follow the logic. If a party leader is too spineless to openly oppose, say, "fighting climate change" because he only has a minority and wants to win a majority, then - if he ever gets a majority - the obvious result will be: he will not openly oppose "fighting climate change" because he will fear *losing* his majority (or the election).

In politics, a party and its leader must make a choice: will they govern with integrity, or will they lie to themselves and others?

In the case of the Conservatives, the verdict is already in.

Posted by: Paul McKeever | 2010-08-09 8:24:15 AM

This has been one of many disappointments with the present government, but I must also admit that we have not a single politician to-day among those elected who does not promote statism, more taxation and more government intervention and spending. This applies to governments at all levels, local, provincial and federal along with politicians from opposition parties. That in my opinion is much more concerning.

Posted by: Alain | 2010-08-09 10:59:24 AM

On second thought I should say that there is a reason all politicians behave this way and that reason is the voters, who otherwise would not vote for them. The old saying that people get the government they deserve remains true.

Posted by: Alain | 2010-08-09 12:48:43 PM

I agree with everything you wrote save one point: Harper's betrayal of Hayek started in 2006, not 2009 with the recession. Stephen Harper preached a libertarian/classical liberal gospel for years but leads an extreme statist government. He hasn't even sacked the gun registry even though he has all the votes to do it. Government spending is up 42% under him and that was already skyrocketing even before the "stimulus" money. There isn't one political party in Canada with the brains and/or the guts to defend Austrian Economic Theory but that's been true for four years.

Posted by: Ethan Rabidoux | 2010-08-09 2:14:24 PM

Perhaps the politicians are "graduates" of The Political School!

The Political School
By Stephen J. Gray

I must say I am encouraged to see that we have a full class for the opening of the political school. For some time I have felt there was a need for this type of school. After all, we have schools for other occupations, such as plumbing, journalism, law, cooking, etc., so why not a political school? Looking at all you students eagerly awaiting training in this political school tells me just how much you all want to be involved in the political management of the country. It is good to see such interest.

I see from your resumes that you all come from various political backgrounds. Some want to be Socialist politicians, others Liberal and still others Conservative, with a small sprinkling of Communists, Greens and others. This is good, for we are a non-partisan school and with the blurring of political ideology, floor crossing, and double-crossing these days, political labels mean nothing. The job is the thing, and of course the remuneration that comes with it. With a starting salary of around $150,000 dollars a year plus expenses, pensions, and perks, this is a dream job (but a nightmare for the people who elected you). That is, of course, provided any of you reach the pinnacle of your political aspirations, which I am sure you will.

Where else can you get a starting salary of around $150,000 a year with no experience needed, no training, and no knowledge of how the political system works? Of course this is where the political school comes in: we will give you the tools to make a success of your political career should you manage to persuade the people to elect you in the party of your choice.

Now let us get down to the first lesson. When running for political office the first thing you must do is make nice sounding promises. Tell the people that you have a vision for the country, that you have a plan. What will your vision and plan be? This is entirely up to you. Visions and plans come in all shapes and sizes. Remember that old saying: “Throw the dogs a bone.” Well this saying holds true for people. Mind you, I am not saying people are dogs (much laughter from the class) but people do like to be fed things especially monetary promises from the taxes they have already paid. So promising them a financial inducement is always good bait in an election. Should you succeed and get into office and be government you can always renege on your promise. This is how politics works. First you ask for a cross next to your name at the ballot box then you double cross the stiffs, oops, I mean the people, once you are elected.

(More laughter ensues and the trainee politicians bang their desks just like the elected politicians do in parliament.) The teacher continues: Wow, I see most of you have learned the desk-banging trick; well done. Now as I was saying before the interruption by your quickly-learned “parliamentary procedure,” a good example of this reneging on a promise is the hated Gobbling Suckers Tax (GST). Now it is accepted and brings in billions of dollars to government coffers, and now there is another tax in the offing called the Hammer the Serfs Tax (HST) But, I digress.

Another important lesson you will learn at our school is Political speak or Poli-speak as I like to call it. I will give you an example, seeing it is your first day, but we will go into Poli-speak at length in your next lesson. Here is an example of words you will have to learn in a crisis situation: “We must move forward in this complex situation, with a measured response, but it is a challenge and challenges are good. We can become better persons because of them and fulfill our hopes and dreams in the process. Read my lips no more taxes.” So what does that all mean? It means nothing, nothing at all. They are just words to use or should I say political B.S. in a crisis situation and something for the media to report and for the masses to read in the newspapers. But the words sound good and that is what I call Poli-speak.

Notice all the words I’ve used are positive, and this is the way you will learn to speak even when, as politicians, you are, as the old saying goes, “caught with your pants down” and in poop up to your eyeballs. But, if you know the right words, all can be made clean. (More laughter ensues, and all the class seem to be enjoying the course.) And so ended the first day of the political school.

Stephen J. Gray
June 26, 2010.

Posted by: Stephen J. Gray | 2010-08-09 3:39:52 PM

Devil's Advocate Mode = On

International relations also played a role in Canada's recession policy. During international meetings the major "industrial" nations agreed to stimulus spending as a bloc. It would have been diplomatically difficult for Canada to be the odd-man out.

In later meetings Canada was able to convince the others that deficit reduction was a much greater concern. We'll have to wait and see how that turns out.

Nevertheless, I think it is unfair to completely blame "weak-willed politicians" for the failing to rebel against the simple realities of representative politics in an international context. There ARE constraints on what a government can accomplish at any given time, separate from whether or not a particular policy is actually a good idea or not.

Posted by: Anonymouse | 2010-08-17 1:01:34 PM

Ethan: How on Earth do you figure that the Conservatives have all the votes they need to eliminate the gun registry?

Posted by: Anonymouse | 2010-08-17 1:06:09 PM

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