Canada’s Downturn Could See Harper Lose Power

With low oil prices pushing the economy into recession, Canada’s Conservatives could lose power after a decade.

Canadian prime minister Stephen Harper in Ottawa, Ontario, September 17, 2014
Canadian prime minister Stephen Harper in Ottawa, Ontario, September 17, 2014 (Canadian Prime Minister’s Office/Stephen Harper)

Canadian prime minister Stephen Harper called parliamentary elections for October on Sunday that could see his Conservative Party lose power after a decade in office.

Polls have the Conservatives neck and neck with the left-wing New Democratic Party which has surpassed the Liberal Party as Canada’s second largest.

After years of growth, with a quick recovery from the 2009 global downturn, low oil prices threaten to push Canada into recession this year or next, calling into question Harper’s stewardship of the economy.

The prime minister nevertheless urged voters not to risk a change in policy. “This is no time for risky plans that could harm our future,” he said on Sunday. “It is time to stay the course and stick to our plan.”

He warned that the opposition would pursue “dangerous” policies, such as higher spending and more debt.

By contrast, Harper promises to balance the budget this year after seven years of deficits.

His government has presided over higher military spending, with a special focus on the Arctic region, lower taxes and light regulation of an oil industry that has driven much of Canada’s growth in recent years.

Trading at some $45 per barrel, however, oil is now too cheap to make the tar sands of Alberta in western Canada profitable. Breakeven prices for extraction there are between $60 and $80 per barrel.

The fall in oil prices has forced companies to shelve plans for tar sands projects. A proposal to build a new liquified natural gas terminal on the Canadian west coast was also canceled last year.

Consumer confidence has dropped as a result and hiring is at its lowest level since 2009. Unemployment, at 6.8 per cent, is nevertheless still at its lowest since the crisis.

The National Post, Canada’s largest conservative newspaper, cautioned in its editorial on Friday against heaping blame on Harper for global economic trends he cannot control.

Sure, they control the money supply and can inject stimulus but in the grand scheme of things these measures are minor. Global economic and political events, the price of oil, private sector investment and a multitude of other things outside government control are the true drivers.

An opinion article in The Globe and Mail, a centrist newspaper that has endorsed the Liberals in the past, argues the economic uncertainty could even benefit the ruling party.

When voters think things are so bad that they couldn’t get worse, they want change.

When they think things are so good that nothing could go wrong, they are open to sampling fresh talent and ideas.

But when people aren’t sure what lies ahead, when they imagine that government might need to do something or that doing the wrong thing could make a soft patch turn into a hard landing, people size up their options more carefully.

Recent polls have put the Conservatives at north of 30 percent support, not far behind the New Democratic Party — which has never been in government.

The Liberals, who ruled Canada for much of the twentieth century, are in third place with around 26 percent support.

That could mean no party wins the 170 seats needed for a majority, leaving Harper at the mercy of the opposition as the head of a minority government or forcing the Liberals and New Democrats into a coalition.

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