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What Canada's Election Means To The Markets

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The news from Canada that the Conservative Party's Stephen Harper secured a majority government in last night's election received a positive response from the financial community. The Canadian dollar is expected to play catch-up now, after lingering in a weak zone for months while the market worried about political uncertainty. (Relatively speaking, of course.)

But the election results -- which saw the socialist NDPs surge in popularity in the 11th hour, fatally dividing the left wing vote -- also revealed a deepening polarization among voters. Here are some opinions about Canada's post-election future (economic and cultural) from across the political spectrum:

Geoff Dembicki for The Tyee

The Conservative majority suggests a business-as-usual trajectory for Canada's climate change ambitions: rapid oil sands expansions, soaring greenhouse gas emissions, reductions targets on paper, if nowhere else. The Tory environmental platform, made public in early April, drew a sharp response from even the typically non-partisan Pembina Institute. Executive director Ed Whittingham lambasted the government's "five-year track record of failing to meaningfully tackle greenhouse gas pollution and avoiding federal responsibility for oil sands development."

Harper's platform doesn't contain the phrase "oil sands" once in its 66 pages. It does note as an achievement that Canada "aligned our climate-change targets with those of the Obama Administration."

No mention though that Environment Canada fears current provincial and federal policy still leave us three-quarters short of meeting our first serious benchmarks.

Terrence Corcoran for the Financial Post

The Harper Tories hold the upper hand, but they are no conservatives. In Ottawa, no party stands for less intrusive government and more disciplined spending. Chances of lower taxes and greater reliance on private enterprise and markets in key economic sectors are now out of reach. The possibility of smaller bureaucracies and fewer subsidies and handouts to cabals of handout-seekers are unthinkable in the wake of Monday’s vote.

Even the extreme electoral result of an all-out Tory majority, out of reach according to polls through the campaign, pales in importance when viewed against the official Conservative election platform, a gigantic basket of political baubles that betrayed the party’s post-progressive role as Canada’s only hope for a less intrusive government.

The Tory campaign slogan, “Here for Canada,” scored high on the vapidity metre. The words “free markets” or even private enterprise were missing from the Tory platform. Milton Friedman’s famous phrase, “Free to choose,” appears only in relation to the provinces, who under Tory rule, the platform reports, have the “freedom to chose” whether to harmonize provincial sales tax regimes with the GST. The rest of us, apparently, never get to choose much of anything beyond what the government delivers.

That’s where Canada stands today. The Conservatives prior to Monday had an opportunity to do much more to change the Canadian ideological landscape over the past few years. Instead, the party stuck to the status quo. While governing and in their plat-form, the Conservatives made it clear that even with a majority they would not change the culture of Canadian politics.


Speaking to the Globe and Mail, senior economist Jennifer Lee of BMO Nesbitt Burns noted that the Tory win sets the stage for the reintroduction of the March budget, which should remain basically intact.

"The more stable government is also good news for foreign investors, particularly as balancing the budget remains high on the agenda," Ms. Lee added. "With its majority hold, the Conservatives will likely blunt the impact of the new official opposition, the NDP. And with the Bloc Québécois losing official party status, separatist issues will retreat to the back."

Still, economists Karen Cordes Woods and Derek Holt of Scotia Capital questioned just how much of an impact the election results had so far, describing any effect as "tiny and nearly impossible to discern" compared to other issues in the market.

"Theoretically, the results could be bullish by restoring certainty over corporate tax policy and the environment for foreign and domestic investment, enhancing fiscal stability compared to alternatives, and removing the Quebec separatist agenda entirely from federal parliament," they wrote today.

"Then again, markets were fine with the checks and balances of minority governments, so the theoretical impact was always in doubt. But as we noted throughout the campaign, global markets have bigger issues to think about than the fourth Canadian election in seven years that might finally buy four years of peace and take Canada out of the league of Italy and Japan in terms of political instability across developed nations. Those issues include the reduced appetite for risk on waning U.S. growth figures, how that translates into monetary policy as a symptom rather than a root cause of market turmoil, looming U.S. fiscal worries in light of each of the debt ceiling, the approaching election year and rating agency warnings, ongoing European debt concerns."

Graham F. Scott For This magazine

The apocalyptic showing of the Bloc Québécois spells the end of the separatist movement at the federal level; it’s hard to see how it can be otherwise. Reduced from 47 to just four MPs, with their leader defeated in his own riding, and swamped by the NDP in Quebec, the Bloc is over as a parliamentary force. That’s important because the party since 1993 had been a spoiler, changing the electoral calculus necessary to take the House of Commons. That fourth party, wielding many more seats than its popular vote would indicate, had been a keystone of the minority government structure that has prevailed since 2004. Their decimation will change the math for every election to come. What this means for the sovereigntist movement in general is unclear, too — will it dampen the appetite for another referendum, or embolden the Parti Québécois provincially? Again, who knows? We’re off the map here.


Graham F. Scott For This magazine

As special-interest party the Bloc exits stage left, the election of Elizabeth May as the first Green Party MP ushers in a new parliamentary voice. This was an important symbolic win for May and for the Greens, and perhaps an important substantive win, too. Being the only Green in the house of commons will hardly make May a power broker, but it’s a foothold, and May is known for being an articulate rhetoritician; she’ll make hay from even the sliver of Question Period time this seat grants her. Whether that translates to growth for the Greens remains to be seen, but if that federal election campaign per-vote subsidy is taken away — now a near-certainty — the Greens stand to lose a big chunk of the funding that helped put May in her seat. Have they built a big enough party machine in the last few years (and can they continue to build it for the next four or five) to do it on their own?

For the full story behind the Liberal Party's historic loss  --and the resignation of party leader Michael Ignatieff, public intellectual, author, historian and former director of the Carr Center for Human Rights Policy at Harvard University, depicted in Conservative attack ads as "the latte-sipping elitist, who returned from the hallowed halls of Harvard and London after a 30-year absence to take over the party and grab power for the sake of power" --click here.
POSITION:  No positions in stocks mentioned.