Louis-Philippe Rochon is a professor of economics at Laurentian University and a founding co-editor of the Review of Keynesian Economics.
It is a sight history has witnessed all too often: progressive parties getting into power and becoming more conservative than official conservative parties. François Hollande, socialist by name only, is certainly a good example of this, but it is also happening in Canada now.
When Americans elected Donald Trump on Nov. 8, Americans essentially knew who they were voting for. Rightly or wrongly, in casting their vote for Trump, Americans knew they were electing someone who held very particular views regarding economics, immigration and foreign policy.
On this side of the 49th parallel, however, when Canadians elected Trudeau a little over 15 months ago, on Oct. 19,, 2015, we were led to believe he was some sort of a progressive politician with respect to social and economic issues, which essentially is what got him elected.
What a difference a year makes.
In recent months Trudeau has behaved very little like a progressive economist and has instead embraced with great fanfare some oddly conservative policies. In doing so, has Trudeau revealed himself to be a conservative wolf in liberal clothing? If so, it would appear the fix is in: Canadians voted for one guy but got another. It was the classic political bait and switch: the great Canadian hoodwink.
Yes, yes, yes, deficits have increased (due to a collapse in revenues, not just an increase in spending), but the proof is in the details. Consider the following.
Privatization musings invite questions
Since being in power, Trudeau has morphed into the privatization czar, and has gone places even Mr. Harper never dared to go. Trudeau is said to be considering a slew of privatization projects, considered once the purview of only the most neoliberal politicians. Privatization usually ends up costing consumers and taxpayers more money, pushes down wages and creates more inequality.
- Trudeau pitches public-private infrastructure projects to major investors amid global insecurity
- Fiscal update boosts Liberal infrastructure plans but offers no path back to balance
We know the government has publicly mused about privatizing Canadian airports, and there is now word the government may be considering privatizing Canadian ports. Since when has this ever been discussed? Not even the government of Mr. Harper considered this a viable policy option.
Even more troubling is the issue of the possible creation of the Canadian Infrastructure Development Bank, which by all accounts will end up costing Canadians. But this infrastructure bank certainly raises questions. The government claims it wants to attract private sector investment funds to help build bridges and roads. But there are potential problems. Does this mean only projects of great interest (profit) to the private sector will be undertaken? Where will the profits to satisfy the private sector come from? Will taxpayers end up paying more for services? Will Canadians have to pay tolls and fees so the private sector can recoup their investment? And for how many years? Who will own these roads and bridges?
In the past, when governments wanted to spend on infrastructure, they simply did it, and financed it by issuing bonds, which Canadians of all ages bought. There was never a shortage of funds.
Currently, the government can finance infrastructure projects at rates as low as two per cent over 30 years. The private sector will insist on much higher returns. In fact, Michael Sabia, current CEO of the Caisse de dépôt et placement du Québec, has stated that infrastructure can deliver returns of seven to nine per cent.
At these rates of return, any infrastructure project will easily cost twice as much over a 30-year period. In other words, for any project, Canadian taxpayers will end up holding the fiscal bag through higher fees and taxes, whereas the government could finance the project at much cheaper rates. This makes no economic sense, which raises the question, is the government doing this simply as a way of thanking their financial supporters?
There is a more sinister argument looming under all this, and it regards the role of public spending and the privatization of the state. Indeed, with all these musings about privatizing airports, ports and public spending, Trudeau is in fact championing the privatization of the state itself, robbing it further of its powers to create jobs and regulate unstable markets. This is clearly not what Canadians were expecting when they elected him last year.
To paraphrase Trudeau-père, is Trudeau-fils the defrocked prince of state?