For those of us who follow market trends, the past few weeks have been particularly stressful. With huge corporations like Apple seeing massive declines in market value, questions are being raised regarding the stability of the market. While news on the Canadian front doesn’t seem too bad yet, a potential economic crash in the U.S. could have devastating effects on the rest of the world – especially Canada. The consequences of such a meltdown would be more than economic – they would be political.
While forecasting an upcoming economic crash is certainly a matter of speculation rather than an exact science, there is significant evidence of a potentially falling economy. Understanding the political implications of such a potential event is therefore paramount.
In most political jurisdictions, the economy is a topic afforded much visibility and scrutiny. Canada unsurprisingly follows this political dogma and has always attributed major importance to economic issues. This means that when there is a shift in economic stability or strength, it is also usually accompanied by a political shift as well. For example, in periods of economic stagnation, the government will often lower interest rates to encourage the borrowing of money with the goal of stimulating economic growth. This is known as Keynesian economics – a prime example of the impact of economics on political decision making.
Beyond calculated political responses, these shifts can also cause massive changes in the outlook of the economy by people and politicians. For example, when Trudeau won with a platform based on running a national deficit, he cited low-interest rates as a sign that it would make sense to invest now. The condition of the economy, and specifically of interest rates, therefore played a role in determining the popularity of such a political decision. The Trudeau government deficit subsequently created many jobs, helping to lower Canada’s unemployment rate to 5.6% – the lowest since 1976. The low-interest rate due to poor economic growth near Trudeau’s election allowed the Liberals to preach a deficit and reap the benefits in the following years as its effects began to manifest.
Beyond policy, the economy impacts electoral dynamics. Because economics is a subject so important to politicians and citizens alike, it has the potential to dominate a political race. The 2015 election saw global market turmoil, low oil prices, and a general economic slowdown, which encouraged the NDP, the Conservatives, and the Liberals to adapt their own economic plans.
Going into the 2019 election, the track record that the Trudeau Liberals have created for themselves will likely bode well. Not only did the Trudeau government boost the economy as a whole, but increased spending also meant more citizens got what they wanted at the individual level. The presence of personal rewards for many Canadians likely furthers the positive perception of the Liberals.
However, all is not sunshine and rainbows. By increasing spending, the Liberals have ballooned the national debt by billions of dollars – an issue about which the opposition parties will not be quiet. Ultimately, it will be up to the Liberals to present the economic situation of the last four years in a way that boosts their popularity throughout the election.
The economy plays an important role in politics regardless of the present economic situation. However, a major economic meltdown would shift the entire debate. While a healthy 2019 economy would likely see the parties comparing track records of how they’ve served the Canadian economy well, a crash would completely shift this narrative into one similar to that of 2015 – dominated by plans to rebuild what has been toppled. This is not to say that the Tories and NDP will take it easy on Trudeau regardless of the economic situation: from the beginning they’ve labeled the Liberal strategy as irresponsible, seeing as both the NDP and Conservatives pledged in 2015 to balance the budget.
Canada’s future economic situation remains both supremely relevant and largely uncertain. One thing we can know for sure is that economics will figure large in the 2019 election.
The opinions expressed in this article are solely those of the author and they do not reflect the position of the McGill Journal of Political Studies or the Political Science Students’ Association.
Feature image by geralt via PixaBay.