Reflecting on the recent outcome of the Canadian election, in which the Liberal Party of Canada cast itself as a progressive left of center party and reversed its fortunes in a major way to win a strong majority government, Larry Summers wrote in the Washington Post that “More infrastructure investment is not just good economics. It is good politics. Let us hope that American presidential candidates get the word!”
Anyone who has heard Mr. Summers speak over the course of at least the last five years will be familiar with his message, that he can’t imagine a better time—with historically low interest rates, lower wages, and higher unemployment—to be investing in the country’s infrastructure. Just when would be a better time to revamp Kennedy airport, and the nation’s roads, bridges, and dams, than now?
Paul Krugman echoes the same sentiment in a New York Times column entitled, somewhat inappropriately, “Keynes Comes to Canada.”
Good economics it is, and not simply for pump-priming reasons in the old Keynesian way. If there is a rock solid case to be made for productivity improving public investments, it should be made regardless of the state of the macro-economy.
But as the obvious frustration in the tone of Mr. Summers’ voice suggests, the fact that his advice does not lead to policy, suggests good economics doesn’t always line up with good politics. And there are a number of peculiarities in both personalities of political leaders, and the structure of politics, suggesting the Canadian example does not automatically translate to the American setting.
It is too simplistic to pin this just on fundamental differences between the political systems of the two countries. After all the UK is a parliamentary democracy like the Canadian, and the outcome of last spring’s election saw a strong victory for an austerity agenda, to the point that Prime Minister Cameron somehow convinced his electorate that the high spending ways of the Blair/Brown years caused the downturn, and the austerity he advocated during the coalition years moved the economy forward.
Nonetheless some particular dynamics of the current configuration of the three-party system in Canada certainly play an important part in understanding why the lessons for the US are not straightforward.
There is something deeper that both countries share, and something they don’t, that sets an important backdrop.
Both countries have a significant need for important public sector investments in physical, and I would also say social, infrastructure. The populace sees this need as much in Canada as in the United States.
In Montreal, concrete slabs have fallen off of expressway overpasses, and killed unfortunate commuters. In Toronto, the gridlock associated with the commute to work is more than just a daily aggravation; it is a significant block to economic growth. In Vancouver, expansions in public transit are in need of significant funding. And the majors and city councils in countless municipalities battle with the need to update sewers and roads.
Both countries have this need, but in the US it is a harder sell. In a poll that I conducted with EKOS and The Pew Charitable Trusts, we found that the most significant difference in values on the two sides of the borders has less to do with philosophical issues associated with how to define a good life, but rather the role of government. Americans are much more likely to see government as hindering rather than helping them to achieve their personal goals.
My own view is that this comes down to a different view on the efficiency of government by a significant fraction of the population in the two countries. Canadians are much more likely to see government as a tool or a means to an end, Americans to see it as too inefficient and incapable of helping them accomplish their goals. A significant fraction of Canadians continue to have—in spite being told otherwise for a decade by their out-going conservative Prime Minister—a certain trust in the capacity for collective action through the public sector. Americans have seen too many failures to feel otherwise.
So in fundamental ways, Canadians may be more receptive to the message that Mr. Summers and Mr. Krugman would like to send Americans. The core support for a strict austerity agenda never wavered much from 30% during the Canadian election campaign.
But we need to appreciate that there are significant regional differences within Canada, and that provinces are much bigger and more powerful in the Canadian federation than states are in the American. In particular, the Liberals owe their victory, in some significant degree, to a major reversal of their fortunes in Quebec.
And austerity is a song that does not ring sweetly in the ears of many Quebecers. The last time a provincial government put forward a strong austerity agenda, instigated by what in most considered opinions was a proposal for a relatively small increase in university tuition fees, there was sustained protests in the streets—the so-called Maple Spring—that ultimately led to the fall of the government. Quebec is closer in its politics and attitudes to France than to any jurisdiction in North America.
The New Democratic Party, the left-leaning union based party, vaulted to official opposition status by virtue of a surprising performance in the 2011 election, taking 59 of Quebec’s 75 seats. During the 2015 election, the Party’s new leader moved to the center, promising balanced budgets and good management.
To somehow crudely translate this into American terms, imagine if Vermont had 124 of the 538 Electoral College votes and Bernie Saunders decided to lean hard to the right to court Texas. Would not a progressive message—higher taxes on the rich and spending on infrastructure—make a bit more political sense in the Clinton campaign war room? Cutting to the left by promising to run a series of small deficits, increase spending on infrastructure, and a higher tax rate on those making more than $200,000 was one of factors propelling Mr. Trudeau’s Liberal party from less than 10% of the Quebec seats to over one-half.
In the UK, the three party dynamic was different, the Liberal Democrats having sold their soul to the Conservatives, while at the same time the more progressive wing of Labour centered in Scotland seeing more to be gained by opting out, than engaging, playing out a script that in Quebec and Canada is now about 15 years old.
The final dimension is one of personality, and the new leadership style that Mr. Trudeau seems to sincerely espouse. I served as a member of his council of economic advisors, and he made clear to the committee members that he was not interested in their opinions about what was politically feasible, clearly stating he wanted to have discussions that informed economically sound policies. In other words, there was a clear channel and openness to hear a message about good ideas.
The Harper years were characterized by a decade of denigrating experts, reducing analysis from a professional public service to the sidelines, and chipping away at the evidence base for policy. This in itself became a political issue, with scientists and the most educated members of the public clearly falling in line behind Mr. Trudeau. Though not a sufficient condition for good public policy, having a political leader who is an active listener certainly seems like a necessary condition. It is not clear to what extent all politicians share this trait, leaving Mr. Summers and his colleagues—I guess—nothing more than hope that American politicians will get his message.