With the NDP riding high in a number of national polls at the moment, there is an increasingly real possibility the New Democrats will form the next federal government. Some are predicting, however, an NDP win would be catastrophic for Canada and would spell economic doom for the country.
After decades in third-party obscurity, an NDP win would certainly be one for the history books, and mark either the beginning of the end for the Liberal Party or quite possibly the beginning of a healthy three-party system.
Democratic issues aside, some pundits have begun the fear-mongering, warning of catastrophic events if the NDP would indeed form the government. In many ways, this is not surprising.
Fear-mongering is a normal, albeit unfortunate, part of all elections. We saw it in Greece recently, with powerful financial interests during the recent referendum warning against rejecting the austerity plan. Before that, it was of course a staple during the referendum campaigns in Quebec on sovereignty.
Irrespective of the specific events, the refrain is usually the same and goes something like this: if voters choose to elect a party that appears to go contrary to the interests of the private sector or the banking system, then we should expect markets to react and punish the citizens of that country. Money and finance will move out, and it will be the beginning of the Balkanization of the Canadian economy.
Such rhetoric of course is just poppycock. That's not how markets react, and not how financiers behave. Sure, they may prefer one political party over another, but for them, life goes on.
History is full of events that were far more catastrophic than a possible NDP win, and markets, although maybe shaken for a few days or longer, eventually bounced back. That's what markets do; they adapt. That is part of their resilience.
Take for instance 9/11 or the 2007 financial crisis. Surely these events would register as more catastrophic than the prospects of the NDP forming the next federal elections.
Yet, markets did not fall apart. They were bruised and battered, but they bounced back.
'Considerable financial uncertainty'
In a recent column in the Globe and Mail, Gordon Pape declared that an NDP win would bring "considerable financial uncertainty." He predicts dire consequences for our dollar and a frosty relationship with Washington — as if it could be any frostier than it is now.
Yet, Mr. Pape nowhere mentions what would cause this uncertainty. Which policies, specifically? He is silent on that question. He just claims that the loonie would fall even further.
Well, that's not exactly a bad thing. The Bank of Canada has been trying to push the loonie down anyway. Plus, the loonie is already low due to the oil shock and various other factors.
And why would that be a bad thing? It may contribute to increasing our exports and lead to higher growth. So far, nothing wrong with that. Sure, it would cost us more to travel to the U.S., but then more Canadians would vacation in Canada, and that's not a bad thing either.
He warns of a sell-off on the TSX. And why would companies do that? Markets are interested in one thing only: Profits.
After all, the policies offered by both the Liberals and the NDP are quite market-friendly and growth-oriented. They seek to put an end to the Conservatives' policies favouring the rich and famous, and instead aim at reducing inequality and to spend more on infrastructure. Both are growth-oriented policies that could help us out of this recession and unto a better path than the last eight years of an underperforming economy of mediocre growth.
Canadians need not fear an NDP win.
Personally, I have always voted Liberal, but an NDP win is not the end of the world. Thomas Mulcair's policies are not scary and are, in some respect, quite friendly to the private sector. Market players will have a chance to consider these policies as the campaign develops, and they will factor in a possible and eventual NDP win. Oct. 20 will be business as usual on the TSX.
Fear-mongering is unfortunate and it preys on the fears of voters in a most undemocratic way. But it also does reveal one thing: the sheer fear shared by those who support the Conservative Party and the level to which they will go to sow the seeds of despair.
They must indeed be seeing orange, and they are pulling out the stops and going at it from every angle possible.
Louis-Philippe Rochon is an associate professor of economics at Laurentian University and co-editor of the Review of Keynesian Economics.