Canadian Crisis? Give me a Break!
December 27, 2008
One of my favourite Albert Einstein quotations: “Two things are infinite: the universe and human stupidity; and I’m not sure about the universe.”
Selling all Canadian Assets
Due to political events in Canada where we are seeing a real possibility of a successful coup attempt of the Federal Government by the separatists, communists, and reds, I am selling everything and anything with primary exposure to Canadian assets & operations. Similarly, I would suspect all International Investors in Canada have this morning started to pull their assets out of Canada, further weakening the Canadian dollar, and decimating Canadian large cap equities… one cannot help but feel this process of coup - if successful - would sound the bell for the end of democracy in Canada, and ring in a new era where investment and politics in Canada become comparable to those of unstable nations.
This italicized passage (corrected for spelling) brings Einstein’s words immediately to mind. I must confess that I’ve been mulling over this one since it arrived in my inbox on the morning of December 1st. Later that same day, I received a message from a friend in Texas, linking me to this same passage, and asking, “What’s this all about?”
Let me break with tradition and cut right to the chase. It’s utter nonsense, every last word of it. Now let’s take that wander around the barn, shall we?
I’ve been mulling because I haven’t been able to pinpoint what troubles me most about it.
- The content of the message stands near the front of the line, to be sure.
- That such codswallop is served up by someone who purports to facilitate intelligent Internet investment discussion certainly presents itself as a prime candidate.
- That the Internet enables anybody on the planet to spew out misleading information on which others may make investment decisions is warming up in the wings.
- Finally, I’m bothered by the fact that I even feel inclined to make comment. There’s just too much garbage on the Internet to answer it all. Part of me (a small part, I should say) says I should stay mum and listen to Voltaire, who declared, “I do not agree with what you have to say, but I’ll defend to the death your right to say it.”
Nonetheless, I can be nothing if not frustrated to see someone making declarations about a political system about which, clearly, he hasn’t the first understanding. I do wish that people would do just a little bit of background research before stepping out so far from their territory of comfort.
So… I’ll bite.
This fellow talks about “communists and reds”, not knowing that one means the other. Neither is involved in the current Canadian political scene… beyond coffee shops, that is.
He suspects that all international investors have (on that very day) started to abandon Canadian assets. This hasn’t happened, and shows no signs of happening soon.
He talks about a “further weakening [of] the Canadian dollar.” Aside from the momentary negative spike with this ‘coalition’ news, the Canadian dollar is now stronger against the U.S. dollar than it was on December 1st. Personally, when the U.S. dollar jumped to its peak at $1.30 Canadian, I took the opportunity to immediately move all of my U.S. dollar holdings into Canadian. The USD is now back down to CDN$1.22. It gives me great pain to say that I believe the U.S. dollar is temporarily and artificially being puffed up, and will in due course see very difficult times. As a Canadian, the majority of my business transacts in U.S. dollars, so you can imagine my angst in this contemplation. You can’t just keep printing new money and not expect its relative value to fall. You also can’t keep running huge deficits and not eventually get called to pay the piper. In contrast, Canada has enjoyed consecutive budget surpluses since 1997-98. That may soon end. Time will tell.
“… decimating Canadian large cap equities…” As the title of this piece says, give me a break!
“… sound the bell for the end of democracy in Canada and ring in a new era where investment and politics in Canada become comparable to those of unstable nations.”
It’s this last bit of hyperbole that finally prompts me to launch into response. To be blunt, while the entire coalition episode, itself, is nonsensical (see below), there’s absolutely nothing undemocratic about it. Canada has a multi-party system where the government is formed by whatever group holds a majority of seats. There are 308 seats in parliament. Currently, the distribution of these seats is as follows:
| Conservatives | 143 |
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| Liberals | 77 |
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| Bloc Quebecois | 49 |
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| New Democratic Party | 37 |
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| Independent | 2 |
While some are crying out that we didn’t elect a coalition, it’s also true that we didn’t elect a majority. Like it or not (I don’t), the Liberals and New Democratic Party are in a position to form a coalition government. This coalition does not officially include the Bloc Quebecois. The Bloc has signed a separate side agreement of support with the coalition. It’s silly nuance really, but no self-respecting mainstream political party in Canada’s federal system could live down having formed an official coalition with a party whose singular mandate is to bring about sovereignty for la belle province. So… the Bloc has agreed to support the coalition, but not be a part of it. You say tomato.
The fact remains that, in a multi-party parliamentary system, where the ruling party does not have a majority (or is foolish enough to allow a vote of non-confidence when enough party members are not in town to participate – reference Joe Clark’s fall from power after just nine months in office), it is perfectly legal for opposition parties to add up the votes and bring the government down. There are two possible outcomes from such a non-confidence vote. First, an election may be called, with one side asking voters to turf the failed minority government and the other side asking for a shift up from a minority to a majority mandate. Second, the collective opposition parties can take a swing at forming a coalition government. All is perfectly legal and entirely democratic.
Canada is a relatively stable place to do business. If and when the Western world falls, Canada will fall with it. Until then, in terms of the Western world, times are good.
As reported by Reuters in October 2008, the World Economic Forum produced a ranking of stability for 134 banking systems around the globe. Number one ranking went to Canada. Sweden, Luxembourg, Australia, and Denmark rounded out the top five.
Other notables on the list were Germany (39th), the United States (40th), and Great Britain (44th).
Notwithstanding the general silliness that permeates Canadian politics, this country remains among the most competitive business domains in the world, repeatedly topping the G7, and regularly ranking in the top five countries worldwide. If the Canadian dollar should fall further against the USD, as suggested in the opening passage, contrary to this fellow’s thesis, the country would become even more competitive as an exporter, and more attractive to foreign investment. This fellow’s got it backwards.
Here’s where I bridge from commentary on the foolishness of the cited passage into discussion on the general absurdity of Canadian politics, with particular reference to the current coalition ‘crisis’. In the first place, it’s no crisis. It’s just game-playing… brinkmanship, if you will… but first a little background to set the stage.
The current Conservative Party is a recent creation. From 1867 (Confederation of Canada) until 1942, there was a Conservative Party. In 1942, it changed its name to become the Progressive Conservative Party (PC). A group of its members splintered off in 1987 to form the Reform Party, based in Western Canada, and taking the position that the PC party was not conservative enough. In the year 2000, it morphed into the Canadian Alliance Party, then merged again with the PCs in 2003, giving rebirth to the name - Conservative Party of Canada.
As this party meandered through its various configurations, at a convention in 2000, it became the Conservative Reform Alliance party. When the media promptly dubbed the new party as CRAP, yet another name change quickly surfaced. Across the country, we were left only to shake our heads and laugh, wondering, “what could they have been thinking?” That’s a Canadian quality. We easily laugh at ourselves. Good thing, too. The opportunities are never in short supply.
The Liberals have been the dominant ruling party in Canada, holding office for 69 years in the 20th century. The most recent federal election (October 14th) saw the worst showing for this party since 1867, winning just 26.2% of the popular vote.
The New Democratic Party is Canada’s socialist party (though some Americans would view all Canadian political parties as socialist). The NDP is (I hope) on its last legs. It currently holds 37 seats in parliament (gaining 8 in the most recent election, owing to the abysmal campaign run by the centre-left Liberal party). Over the years, I’ve heard a number of these folks voicing support for the idea that factory workers should be paid on level with doctors in emergency rooms. I can still hear The Guess Who blasting it out. Loved the band but say no more about the NDP.
The Bloc Quebecois as a ‘federal’ party is an afterthought from the separatist movement in Quebec, a movement that first came to provincial power in 1976 with the election of the Parti Quebecois. Having failed to win one referendum to secede from the nation in 1980, the separatists decided to fight for profile on the national stage. The Bloc was founded in 1991 as a temporary measure, intended to last only until an eventual referendum victory. The second referendum (1995) also failed, though by a razor sharp margin of 50.58% to 49.42%.
I found it of particular interest that the separatists’ entire case was based on a territorial right of the people of Quebec to choose whether or not they wanted to remain a part of Canada. At the same time, when representatives of the Aboriginal people in Quebec voiced their desire to remain in Canada, the separatists argued no legal basis for such a claim. Quebec is an indivisible unit. Canada is not, they suppose, but Quebec is indivisible. I’m not so sure that the western half of Montreal (English) wouldn’t vote to remain in Canada. Not so sure that major portions of the northern stretches of the province (Aboriginal – where most of the abundant mineral resources are located) wouldn’t vote to remain in Canada.
In the broadest of terms, I have only sympathy for cultural nationalism… but let’s be realistic. We’re in an age where diversity is strength and scale is the only path to economic stability. Our world is shrinking rapidly with the spread of global commerce. Isolation offers very temporary warm and fuzzy feelings for those desperately hanging on to cultural nuance. Understand me well not to be making a value judgement here. I very much enjoy distinct cultural aspects of the many places I visit, including Quebec. I’m not judging. I’m just saying what I see. What I see is that, economically, such isolationism is already untenable. For Quebec, in my view, rejection of the Canadian economic partnership would be a major step backward. Another ghettoized, but culturally pure (?) player would enter the world stage.
The notion of a political party (the Bloc) holding 49 seats in a federal parliament when that party’s sole objective is secession from that federation exemplifies our tip of the tuque to Voltaire’s quotation, as cited above. Come to think of it, it also does justice to Einstein’s thoughts on human stupidity.
In any event, enough backgrounders. On to the soap opera currently at play.
- Having performed miserably in the October 14 election, Stephane Dion announced that he was stepping down as leader of the Liberals, effective with the Party convention in May 2009.
- On November 27, Conservative Finance Minister Jim Flaherty delivered an Economic and Fiscal Statement in the House of Commons. As part of this, he proposed that Federal funding for political parties be eliminated entirely. This subsidy amounts to $1.95 per vote per year until the next election, or about $27 million annually in total across all parties participating in the most recent election. The Conservatives would lose the largest subsidy ($10 million), but this accounts for a much smaller share of their total funding (37%), as a result of private donations. The proportion lost to other parties ranges to a high of 86% for the Bloc Quebecois. Such a play would have been a brilliant move by which to cut the legs out from under the separatists, but the Liberals (63%) and NDP (57%) would have no part of it.
- On December 1, the Liberals and NDP form a coalition, with the side deal for the Bloc, announcing that they mean to bring down the government in a non-confidence vote, and that they will form a coalition government. Their argument in favour of bringing down a government elected just 48 days earlier was that the government had failed to address the economic crisis facing the nation. Huh? They maintain that their objection to the Conservative government is in its failure to deliver a major stimulus package designed to rescue the economy. I think I’m pretty clear on my feelings about stimulus packages as solutions to problems brought on by bad management, bad credit, and – hey! – stimulus packages. Shine a bright light on these guys and I think you’ll find that they scrambled to bring the government down before it could pass legislation that would ‘un’ fund them out of contention for the next election. This soap opera was introduced by a game from the Conservatives, in the name of fiscal responsibility. The stakes in this game have only escalated with this move from the Opposition, also presented in the name of fiscal responsibility.
- Oh, did I forget to mention? Stephane Dion, the shamed lame duck leader of the Liberals… the one who had announced that he would step down come May 2009… well, with the announcement of the new coalition, he’s named to be the next Prime Minister! Candidates to replace him next May bite their collective tongues, pull their tuques tightly over their ears (and perhaps eyes), and go along for the ride.
- December 3 – Stephane Dion releases an official statement video that looks like it was captured on a cell phone camera. Embarrassment ensues all around. Coalition partners get miffed. Liberal party goes behind the curtain and gives Dion the hook. He’s gone and within hours the three leadership candidates jockey for position. One backs out quickly. Another gets blocked by deft procedural manoeuvring. Presto!
- December 8 – Jon Stewart joins the party. Don’t miss it!
- December 10 – A new (interim) leader (Michael Ignatieff) emerges, certain to be confirmed at the May convention. As an aside, for the flame-throwers among you, his grandfather, Count Paul Ignatieff, was Minister of Education to Russian Czar Nicholas II. His grandmother was a Princess. His late father, George Ignatieff, served as: Canadian Ambassador to Yugoslavia; representative to NATO; Ambassador to the United Nations; and president of the UN Security Council. He was later Chancellor of the University of Toronto. Fine stock, indeed.
Here’s the thing. These so-called coalition partners fear causing another election, yet desperately want to bring down the Conservative government. Michael Ignatieff, however, is not on the left side of the Liberal Party and as such is not likely to be a strong proponent of a coalition with the socialist NDP. He certainly doesn’t want to get into bed with separatists.
If this mess results in a federal election soon, at an estimated cost of $300 million to taxpayers, a Conservative majority government will be all but guaranteed. The Canadian population will brutally punish the Liberals and the NDP for an unwanted election.
In all of Canada’s history (since 1867) there has been only one federal coalition government. This was formed in 1917, in support of conscription during World War I, but fell apart after the war ended.
A Canadian coalition government that calls on three so dramatically different parties to get along for any length of time, other than in time of war, will result in either absolutely nothing being accomplished or a very short tenure… or both. I cannot imagine such a partnership lasting any serious length of time. From where I sit, the shorter the better. Give us a majority government, either Conservative or Liberal (there’s not a great distinction between the two), without the need to pander to either the socialists or the separatists… and get something done.
In short, the current Canadian political environment is little more than a comedy of errors. We all need neck braces to protect against excessive head-shaking, but the beat goes on. On this side of the border, it’s laughable at best. I’m pleased to see that it also offers Jon Stewart some good chuckle material.
All this to suggest that I find it difficult to imagine that anyone could take Canadian politics so seriously as to recommend that people liquidate all Canadian holdings. This is (sad to say) democracy at work, not the end of democracy. Oh well… infinite stupidity, perhaps, but he’s entitled to it… I guess.
Best,
Kevin Graham