No Longer Hyphenated, Liberals Cast Aside the Business Faction by Ian

No longer hyphenated, Liberals cast aside the business faction

By Ian Lee, Ottawa Citizen April 15, 2013 7:15 PM

Pundits and analysts agree the election of Justin Trudeau as the new leader of the Liberal Party of Canada has finally put to rest the divisive demons of internecine warfare between the Jean Chrétien and Paul Martin factions within their party.

Indeed, in his acceptance speech, Trudeau urged Liberals to rediscover their “sunny ways.” And to emphasize the point, he said, “The era of hyphenated Liberals ends right here, tonight.”

Consequently — so goes the argument — a united Liberal party will finally be able to return to power with its divisions behind it.

However, a deeper and more empirical understanding of these events suggests Canadians witnessed the death of the historic Liberal party in Ottawa on Sunday.

For a hundred years, the Liberal party was a grand coalition between “red” or social liberals and “blue” or business liberals who worked together very effectively to become Canada’s “natural governing party.”

It is not fully understood by many analysts that while the Conservatives were historically supported by small business and other “outer” groups such as farmers, big business or “Bay Street capital” historically had far closer ties with the Liberal party.

To that end, over the generations, distinguished and influential leaders from big business entered politics and became Liberal cabinet members. C.D. Howe under Louis St. Laurent, Robert Winters under Lester Pearson, John Turner, Donald Johnston and Roy MacLaren under Pierre Trudeau, John Manley under Chrétien, Martha Hall Findlay under Martin. Each performed a critically important role as the bridge and intermediary explaining business to the red Liberals and Liberal party policy to big business.

However, the strategic alliance that served the Liberal party so well for so long started to disintegrate under the leadership of Stéphane Dion, accelerated under Michael Ignatieff and culminated Sunday night in the decisive, comprehensive repudiation of leadership candidate Martha Hall Findlay, the current leader of the blue liberals. The century-old grand alliance started to come apart ironically over a policy initiated by Martin as finance minister in the Chrétien government and extended by the Harper Conservatives — corporate income tax reductions.

Under Dion’s leadership, perhaps recognizing the Liberals were in a two front war — facing the surging NDP on their left flank and an increasingly vigorous Conservative party on their right flank — the Liberal party moved towards the left in order to shore it up during the 2008 federal election.

Following Dion’s resignation upon the Liberals’ disastrous election results, the party, now under Ignatieff, doubled down. Ignatieff reversed Liberal party policy to reduce corporate tax rates — although they are supported by 30 years of peer reviewed research across the OECD — and developed attacks that eventually led to the 2011 platform promise to end money for “tax cuts, jets and prisons” in order to fund additional social spending promises. In so doing, the Liberals betrayed members of the blue base of the party who had quietly supported corporate income tax cuts.

Polling data suggest large numbers of voters — presumably Liberals — in the Greater Toronto area switched in the final 72 hours of the 2011 campaign to vote for the Conservatives in order to prevent a Liberal-NDP coalition government. This view was shared by Martha Hall Findlay in a conversation with me for my article, “The Harper Election victory, the Liberals, and the debate over corporate tax reform in how Ottawa spends, 2012-’13.” And in a prescient crie de coeur in The Globe last week, Hall Findlay said “There are, however, many Liberals who are economically protectionist, anti-‘big corporations,’ and anti-development environmentalists.”

Days later, Hall Findlay — the carrier of blue Liberal values from the “Martin- Manley-McKenna-MacLaren” wing — came third with a humiliating 5.7 per cent of all the leadership votes cast across Canada.

The repudiation and de facto purging of blue Liberals will make the Liberal party more palatable to the NDP for a merger, just as the NDP watering down of its more extreme positions at the convention in Montreal this weekend will make the NDP more palatable to the Liberals. Restated, an unintended consequence of this weekend is the increased probability of a merger after 2015.

Nonetheless, the single most important problem remains for the Liberals (and for a Liberal-NDP party). Although Joyce Murray — the bridge between the Liberals and NDP — would disagree, giving away free trees is not an economic policy to support a government in power.

It is for this reason that instead of demonizing Harper, the Liberals should pose a vastly more penetrating question. Why did nearly 40 per cent of Canadians vote for Harper in 2011, in the same ballpark as the three Chrétien majorities?

While a “red Liberal” campaign worked once, in 1968 with the promise of a Just Society, unfortunately for Justin Trudeau and the Liberals, the next election in 2015 must address what Chrystia Freeland has characterized as Canada’s place in the globalized, technology-revolution, winner-take-all economy.

Following the rout of the business Liberals, the Liberal Party of Canada is less prepared for 2015 than before.

Ian Lee is a professor at the Sprott School of Business, Carleton University.

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