Canadian Prime Minister-designate Justin Trudeau's seismic landslide victory over Stephen Harper and the Conservatives this past Monday offers a critical lesson for center-left parties around the world: it's time to finally bury, once and for all, the timidity of austere neoliberal third way economics and embrace bold, progressive (and pro-growth) Keynesianism.
For much of their modern history, especially during the postwar years of the 20th century, center-left parties (whether under the political banner of social liberalism or social democracy) have confidently advocated for progressive economics. Specifically, these parties embraced the expansionary fiscal policies of Keynesianism with its countercyclical focus on demand management through constructive deficit spending during times of economic contraction to keep the economy humming.
However, with the string of electoral defeats suffered by center-left parties during the 1980s brought about, in part, by the ascendancy of Reaganism and Thatcherism that paved the way for the neoliberal revolution, these parties during the 1990s came to reject their Keynesian tradition that led them to accept the idea—the third way (or as some call it, compassionate neoliberalism)—that to be politically viable in the age of neoliberalism they had to adjust to the new settlement and move to the economic center-right. In essence, embracing an economics of tight fiscal policy (austerity) under the rubric of “sound finance” (that’s actually, well, quite unsound), aversion to Keynesian demand management, market-centric approaches to public policy, financial deregulation, and privatization, while ameliorating some of neoliberalism’s harsh edges. This trajectory toward the economic center-right was famously embodied by the rise of New Labour in the U.K. and New Democrats in the U.S. during the 1990s, and the rise of Orange Book Liberalism (emphasizing classical liberalism) within the traditionally social liberal British Liberal Democrats, in 2004, that culminated in leading that party to become junior partners with the Conservative Party of the U.K. during Prime Minister David Cameron‘s coalitional premiership from 2010-2015.
Now, despite the 2008 global financial crisis discrediting neoliberalism, it seemed that the firm grip of third way economic thinking on center-left parties would remain unchallenged with progressive Keynesianism continually marginalized.
(It must be said, though, Keynesianism did make a comeback with some of the center-left parties immediately after the global financial crisis. However, this resurgence was short-lived as many of these parties soon reverted back to the default third way posture during 2010 and afterward where they soon administered the harsh medicine of austerity without, tragically, healing their ailing economies that unnecessarily resulted in devastating human suffering.)
But then a funny thing happened along way that finally broke the all-too-familiar narrative of center-left parties still clinging to their neoliberal ways.
That thing being Justin Trudeau and the Liberal Party‘s seismic landslide victory in Canada, this past Monday, over the unpopular incumbent Conservative government of Prime Minister Stephen Harper. An election where the Liberals won a solid governing majority government on a platform that rejected austere, third way economics and boldly embraced pro-growth, progressive Keynesianism. This is all the more remarkable when one considers the backstory that led to Trudeau and the Liberals’ smashing victory last week.
When the dropping of the writ occurred on August 2, 2015 that dissolved Parliament by the Governor General of Canada and ushered in the longest federal election in Canadian history (78 days or 11 weeks), the electoral prospects for Trudeau (the son of the legendary Canadian Prime Minister Pierre Trudeau) and the Liberal Party were quite, well, daunting, to say the least. With a meager caucus of only 36 sitting MPs out of 308 seats in the 41st Canadian Parliament (the parliamentary session at the time of its dissolution that inaugurated the election) and coming bleakly into the race initially mired in third place, the Liberal prospects of coming into second place over the social-democratic New Democratic Party (NDP) to become the Official Opposition, let alone toppling the then-ruling Conservative Party of Canada to form a government, were dim.
But then came the bold, game-changing policy pivot in late summer championed by Gerald Butts (Trudeau’s close confident and principal adviser), and other Liberal Party advisors and MPs to isolate, at that time, the frontrunner NDP (led by Thomas Mulcair) in order to become the leading progressive party that captured the all-important anti-Harper voting bloc among center-left and left-wing voters. The Liberals—rather than succumbing to the economic conventional wisdom peddled by austerians within the Canadian business, media, and political establishment in thrall with a “balanced budget fetish”—intelligently rejected all that. Instead, Trudeau and the Liberals essentially embraced the following campaign posture: Go progressive, Keynesian bold or go home!
In one fell swoop, Trudeau and the Liberals wisely rejected almost three decades of anti-deficit hysteria that, for far too long, has plagued the Canadian political landscape (as outlined brilliantly in a piece penned by noted Toronto Star columnist Rick Salutin) by narrowing national economic debate. During much of that time, even significant segments within the major center-left parties in Canada, the Liberals and NDP, succumbed to the hysteria; most notably then-Finance Minister Paul Martin‘s austerity policies during the 1990s, under Jean Chretien‘s premiership, that famously reneged on some of the Liberals’ major public investment promises in their then-touted 1993 campaign manifesto, the Red Book, and then-NDP Ontario Premier Bob Rae‘s imposition of austerity measures on the civil service workforce through his widely criticized Social Contract. The anti-deficit hysteria, for almost three decades, has circumscribed the ability of Canadian center-left parties to offer a coherent progressive, pro-growth Keynesian alternative as the Overton Window—the range of acceptable discourse and ideas in the political public square—has long been dominated by elite austerian delusions.
So, on August 27, at a televised campaign event in Oakville, Ontario, Trudeau publicly shifted left, in the economic sphere, and unveiled the Liberals’ Keynesian program of much-needed, robust public investments in infrastructure to revitalize the sluggish Canadian economy. To further drive home the Liberals’ emphasis on their shift to the left, on economic policy, they strategically—and brilliantly—showcased their infrastructure program by holding its announcement at an NDP-friendly locale to win the game of optics and symbolism to favorably drive home their campaign message. Their message being that Trudeau, not Mulcair, is the true progressive change agent in this election for the important left-wing and center-left anti-Harper voting bloc split between the red Grits and the orange Dippers. John Geddes, writing in Maclean’s, perceptively noted Trudeau’s campaign trajectory to the left (emphasis added):
Trudeau made his unexpected vow to spill red ink at the headquarters of Local 793 of the International Union of Operating Engineers, located in Oakville, Ont., which bargains for thousands of heavy-equipment operators in the province’s construction industry. And the Liberal leader wasn’t there just to pose for the cameras at the controls of a Manitowoc crawler crane. By staging his campaign-disrupting announcement at a labour-run training facility, Trudeau left no doubt that he means to challenge the traditionally union-allied NDP on its left flank.
As highlighted by Martin Patriquin‘s piece in Maclean’s, the point of Trudeau and the Liberals’ pro-growth Keynesian program was to make a sharp contrast, on a substantive policy-level, between their plan’s robust focus on constructive deficit spending (that would, again, jump-start the slowing Canadian economy) and the austerity measures outlined in both economic plans offered by the Conservatives and NDP:
On Aug. 27, Trudeau pounced, announcing $125 billion in infrastructure spending [an ambitious increase; up from $65 billion (Cdn) currently spent]—“the largest infrastructure investment in Canadian history,” as the Liberal campaign put it. Of course, spending oodles of money on bridges, roads and the like is nothing new, particularly during a campaign. The main difference is that the party plans on going into deficit to fund it, a marked difference from the NDP and the Conservatives. (Emphases and italics added.)
In 2013, Conservatives claimed that their New Building Canada Plan offered the “largest and longest federal infrastructure plan in our nation’s history.” Liberals similarly claim that their infrastructure pitch would comprise the “largest new infrastructure investment in Canadian history.” The difference? The Liberal plan augments existing Building Canada funding, eventually to the tune of $9.5 billion a year. It parcels the money into three categories: public transit infrastructure, social infrastructure (e.g., affordable housing, child care and seniors’ facilities), and green infrastructure (e.g., wastewater facilities, clean energy, dams). (Emphases added.)
With their late summer pivot, Trudeau and the Liberals, with unapologetic boldness, embraced and renewed the traditional center-left progressive Keynesian economic position that, again, for the past three decades, had been (for far too long) superseded by center-right third way economic thinking among many of the world’s center-left parties. Alas, a center-left progressive party finally making a decisive break with the past.
With that embrace, the Liberals, with laser-like focus, hit home the following message to Canadian voters: We are the party of progressive liberalism who will not be tied down by the empty economic conventional wisdom of neoliberal austerity. And, as such, we will be offering Canadians a real alternative this election.
In other words, the Liberals offered a real alternative that embraced responsible economic growth through stimulative Keynesian deficit spending (running a modest deficit of less than $10 billion [Cdn] a year for three consecutive years) to make the critical, constructive public investments to get the sluggish Canadian economy “moving again” (to borrow the key words from JFK’s 1960 campaign mantra). (It is interesting to note that the Liberals’ election platform of Keynesian deficit spending in the area of public investments in infrastructure was drafted, as reported in the Toronto Star, in consultation with members of the Federation of Canadian Municipalities; individuals who, more than anyone else, are at the frontlines in knowing the direct, adverse economic impact from Canada’s crumbling national infrastructure and the harsh effects of federal cuts to public investments.)
Throughout the campaign, Trudeau and the Liberals, with tight message discipline, kept emphasizing their embrace of the tried-and-true progressive Keynesian approach of “pump priming” to stimulate the Canadian economy in the throes of an economic slowdown. In fact, the Liberals went so far as to preach their gospel of Keynesianism on major Canadian television networks, such as CBC and CTV, as well as putting out one of the election’s most memorable ads, “Escalator: Harder to get ahead,” that is, perhaps, the best explanation of Keynesian economics in 30 seconds ever produced. (In regard to the Liberals’ campaign ad, the National Post went so far as to implicitly put it on par with LBJ‘s memorable 1964 “Daisy” commercial in its impact to convey a potent metaphor that defines an election.)
To drive their policy pivot firmly into the minds of the Canadian electorate, the Liberals also kept pounding on Mulcair for his inexplicable decision to embrace the Tory narrative on economic priorities the emphasized austerity and balanced budgets over Keynesian stimulative policies that lead to economic growth.
As such, during the summer, Toronto-area star Liberal MP (and a former internationally acclaimed business journalist who’s part of Trudeau’s economic team of advisors), Chrystia Freeland, attacked Mulcair’s embrace of center-right economics by accusing him of advocating austerity: “Thomas Mulcair talks a lot about looking out for average Canadians, but his only path to a balanced budget so quickly is massive cuts and backing away from the NDP’s spending promises.”
Joining in on Freeland’s line of attack, Trudeau made the following devastating point: “Let me tell you this my friends, the choice in this election is between jobs and growth or austerity and cuts. Tom Mulcair chose the wrong side.” And during the French language leaders’ debate hosted by Quebec network TVA in early October, Trudeau honed in on his attack on Mulcair’s embrace of the austere Tory economic playbook of balanced budgets over investments by pointing out the latter’s conservative-lite posture (italics added): “Mr. Mulcair, you made bad choices. You chose to balance Mr. Harper’s budget at all cost which means you can’t invest right now in the help that Canadians and Quebecers need. We have made another choice — three modest deficits to give help to children and pull 315,000 kids out of poverty.”
In fact, Mulcair’s bewildering reaction to Trudeau’s Keynesian program did more to emphasize the Liberals’ campaign argument that they, not the NDP, were the credible progressive alternative in the race. As reported in Tom Wells’ brilliant long-form Maclean’s article (a recollection of the 2015 Canadian election), Mulcair’s response to the Liberals’ progressive pivot on the economy sounded as if a Milton Friedman acolyte had handed the NDP leader a right-wing talking point:
Mulcair took a question about the Trudeau deficit plan. “Governing is about priorities, and we’ve watched the Conservatives run up eight deficits in a row,” he said. “Now the Liberals are telling us that they want to run several years of deficits.”
And? And? “I’m tired of watching governments put that debt on the backs of future generations,” Mulcair went on. “Stephen Harper’s approach has always been, ‘Live for today, let tomorrow take care of itself.’ At some point, you have to start having different priorities.”
This was the sort of reply that Liberal strategists wanted insofar as it accomplished three things. First, it isolated the NDP away from the large bloc of center-left and left-wing anti-Harper voters. Second, it blurred the distinction between Harper and Mulcair on the economy (notwithstanding the anti-progressive attacks by the former against the latter). Third, it boxed in the NDP into the right-wing, budget-cutting corner that would prevent the social-democratic party from credibly running as Canada’s progressive change agent this election.
Furthermore, as Wells’ article points out, Mulcair’s reaction to Trudeau’s pivot devastatingly undermined the NDP’s traditional political brand as being the authentic progressive conscience of Canada of the two center-left parties:
When they heard Mulcair’s answer, Liberal campaign staffers were jubilant.
“It was a huge blessing when Mulcair went on the other side,” the Liberal who had followed public opinion on the deficit question said later. Not even a competent salesman like Mulcair could sell the notion that Liberals and Conservatives were peas in a pod. Not when he was joining Harper in insisting that budgets must be balanced henceforth. “Now we had the change lane all to ourselves,” the Liberal said. (Emphases added)
Moreover, Mulcair and the NDP’s head-scratching posture, throughout the election, to campaign against the Liberals to their right on a program of sound finance made no sense from a sober economic standpoint. As pointed out by Slate‘s senior business and economics correspondent, Jordan Weissmann, the present economic climate in Canada (in particular on the monetary side) favors a fiscal expansionary policy rather than one of retrenchment:
Last [Monday] night, the Liberals and Trudeau surged to victory, largely on the strength of their economic platform. This is good news for Canada: Given the state of the world economy, it is absolutely insane that more rich countries aren’t running larger deficits.
How come? Because this is an incredibly inexpensive moment for governments to borrow money. In fact, it may be the best time in recorded history [italics in original] for sovereigns to load up on debt. Interest rates have been hovering around zero more or less since central banks cut rates during the recession, and given the many economic headwinds before us, it may be a long while before they rise much higher. At points this year, countries have issued bonds with negative interest rates—meaning investors are literally paying governments to hold their money because they can’t think of anything safer to do with it. In circumstances like that, when the global bond markets are basically shouting “treat yo’self” at just about every finance minister in the developed world, the only reasonable move for a government is to borrow and use the free or nearly free money to make investments that might help the economy grow long-term, like building or fixing up roads, bridges, and other infrastructure. (Emphases and italics added.)
Former U.S. Secretary of the Treasury Lawrence H. Summers, writing in the Washington Post, perfectly summed it up in his reflection of the 2015 Canadian federal election by echoing Weissmann’s point (emphases added):
[I]n an era of extraordinarily low interest rates and slow growth, it is becoming increasingly clear that progressives do best when they reject austerity and embrace public investment. The British Labour Party and the Canadian NDP sought to demonstrate their soundness by embracing budget balancing as an objective. Their results were terrible.
(The title to a commentary, published in The Globe and Mail, penned by University of Ottawa economist, Marc Lavoie, also perfectly sums up Mulcair’s mystifying decision to go right: “The NDP goes down the ‘sound finance’ rabbit hole.”)
At the end of the day, Mulcair and the NDP committed an unforced political error by outmaneuvering themselves when they ceded their economic left flank to the center-left Liberals—and thus weakened their traditional social-democratic identity as the progressive conscience of Canada—by making one of the most stupefying decisions ever committed by a center-left political party: undermining its own progressive brand and credibility by embracing a narrative dictated by the right. In other words, in the political and cognitive linguistic sense, the NDP committed what UC Berkeley Prof. George Lakoff—in his Toronto Star piece, “How progressives can take back Canada,” published earlier this year—described as the following: “When you speak your moral language, you strengthen your political frames. When you speak in the language of your opponents, regardless of what you say, you only strengthen theirs” (emphasis added).
In light of Lakoff’s shrewd cognitive linguistic analysis, it is only fitting that the dueling campaign slogans for the Liberals and NDP were a study in contrasts as to who would decisively carry the anti-Harper banner as the authentic progressive change agent in the Canadian federal election. The Liberals ran under the emphatic banner of “Real Change” [emphasis added], while the NDP merely ran on “Ready for Change”—a difference with tremendous distinction that Canadian voters clearly understood when they voted for a Liberal majority government in a landslide last Monday.
Alas, that was the problem with Mulcair’s calculation. By veering right on economics to build up the NDP’s fiscal credibility that would appease austerians within the establishment commentariat (who, with unfathomable intellectual gusto, still embrace neoliberalism as if the 2008 financial crisis never happened), Mulcair and the NDP undermined another point of credibility: the credibility to be viewed by the vitally important bloc of center-left and left-wing anti-Harper voters as the progressive alternative in the best position to unseat the Tories.
Mulcair and the NDP’s tight embrace of the ideologically exhausted—and politically feckless—third way route to social democracy, in this election, is even more mystifying since they should have seen the Liberal “go left” playbook coming. Their provincial party in Ontario, the Ontario NDP, led by Andrea Horwath went down to ignominious defeat at the politically nimble hands of Premier Kathleen Wynne and the Ontario Liberal Party when the former allowed the latter to outflank them on the left during the 2014 Ontario provincial election. This defeat generated tremendous NDP grassroots backlash that manifested itself in a strongly worded public letter penned by party activists, during the provincial campaign, that excoriated Horwath for giving up on the party’s progressive base in a vain attempt to win over conservative voters in Ontario.
At the end of the day, by veering right during this year’s federal Canadian election, on a major economic policy issue, the NDP lost the all-important “progressive primary” to the Liberals that resulted in the center-left and left-wing bloc of Canadian voters to massively coalesce around the latter, during the late stages of the election, to be the standard-bearer of the progressive anti-Harper vote. A decision that proved quite decisively costly for Mulcair and the NDP such that it, alone, may have very well cost them the opportunity to become Canada’s governing party this past Monday. Theirs is a cautionary tale for center-left parties around the world: by moving to the center-right on the economy, you not only lose your credibility, you also lose your progressive brand that alienates both supporters and potential supporters on the left and center alike—that, ultimately, lead to losing elections.
On the other hand, the lesson of Trudeau and the Liberals’ victory for the center-left is this: it’s time to bury the losing, timid and uninspired ways of austere third way economics and embrace the winning path of bold, optimistic and progressive (pro-growth) Keynesianism. At their best, for center-left parties, embracing progressive economics is not just a laundry list of sound, constructive policies that will do much to economically lift up the many (rather than just the few), but it also goes to heart of the social liberal and social-democratic project: fighting for a hopeful and just vision of society where—to borrow the memorable words from the election victory speech of Prime Minister-designate Justin Trudeau—it means rejecting “good enough is good enough and that better just isn’t possible” and fighting for a future where the “better is always possible.”
“Victory Speech – Election Night” from the Liberal Party of Canada
“A look back at the key moments of the election campaign” from The Canadian Press
(Photo: Justin Trudeau at the Toronto Centre campaign office opening of Liberal Chrystia Freeland, October 2, 2013. Photo by Joseph Morris on Flickr under a Creative Commons Attribution-NoDerivs 2.0 Generic license.)