Saturday 9 May 2015

Alberta—Amazing shift away from market-oriented economics?



       Last week, the province of Alberta held an election in which, contrary to all expectation, the New Democratic Party (NDP)—Canada’s socialist party—gained a majority by jumping from its existing 4 seats to a shocking 53  (63%). The new premier, Rachel Notley, has her task cut out for her and her inexperienced crew—many of which never expected to get elected. Although she has told business leaders that they will be A-O.K. in Alberta, the election is bad news for the economy. At a time when the provincial economy is already reeling from the decline in oil prices, she has promised, among other things, to appoint a year-long commission to review the royalties paid by resource companies, to raise corporate taxes by 2 percent and significantly raise the minimum wage. Higher taxes and at least a year of uncertainty about the companies’ cost structure! All well managed companies are bound to suspend possible new investments until the situation clears—if not much longer. Employment prospects will only become worse—not only in Alberta but also in the rest of Canada that supplies the resource companies with machinery and equipment.

Not a major shift to socialism

      The results should, however, not be interpreted as a major permanent sea-change away from  market-oriented economics which signals a similar change at the federal level in Canada. In the first place, the results are heavily influenced by voter revulsion against the ruling Progressive Conservative (PC) government which under various leaders has been in power for forty years. In particular, the second to last premier, Allison Redford, was mired in scandal and forced to resign last year. The new leader, an experienced, well-thought off former federal cabinet minister was unable to stem the tide. The NDP probably picked up most of this “protest” vote. This suggests that we are not dealing with a major underlying shift to the left. In four years, if the conservatives rebuild their forces they are likely to be back in some form or other. Moreover, that underlying temporary resentment against the PC’s is unlikely to carry over to the federal level.

It’s the fault of the electoral system

               In addition to this voter resentment, Canada’s outmoded “first-past-the-post” electoral system has exacerbated the shift and provided the NDP with an undeserved majority.  In all Canadian provinces and the federal parliament, members of the legislature are chosen by district/riding. The person who receives the most votes wins although he/she does not have to have a majority. The system is similar to that in the U.K. and the U.S. In most of Europe, however, some form of proportional representation is used which ensures that the party that gets the most votes also gets the most seats in the legislature.

               The “first-past-the-post” system has led to strange, undemocratic results as illustrated in Alberta.  First, we need to recognize, however, that Alberta has two conservative, (nominally) market-oriented parties—the PC’s and Wildrose, which has grown since 2008 as a home for those conservatives who objected to the more centrist PC’s. In the recent election,  these two “conservative” parties together still received a majority of the votes (52%). Yet, the NDP at 41% of the votes received the majority of seats and the reins of power. If Alberta, had a system of proportional representation, the NDP would not have been able to form a government. Instead the most likely result[i] would have been a coalition of PC and Wildrose (or perhaps a minority government of PC loosely supported by Wildrose). Of course, the NDP as the largest party would, by convention, be asked to form a government first, but would unlikely be able to form a stable government since it would have to depend on one of the others.

               Within the “first-past-the post” system, the disunity in the conservative ranks allowed the NDP to become the winner. Based on the Unoffical Elections Alberta poll results, I calculated that if the PC’s and Wildrose had united, they could have elected another 28 members. That is, in 28 ridings won by the NDP, the combined total vote of the two parties was more than the NDP. In fact the results would have been PC/Wildrose 59, versus 25 for the NDP. A very solid majority for the conservatives!

Conclusion

This analysis indicates that the Alberta outcome is the result of voter revolt and a flawed electoral system. It is no signal that the majority of Alberta voters have rejected the preference for the market that I have been advocating in this blog.




Related Posts

Choice of Economic Systems: A Conditional Preference for the Market—what does that mean?

Does the Minimum Wage help the Poor?

















[i] This is based on the current vote results. Under proportional representation, people might have voted differently and many more parties might have taken part in the election—e.g. a Christian party.