A dilemma for social democrats

When economy goes bad, that’s when social will is tested

For social democrats, winning power can be a mixed blessing. Alberta Premier Rachel Notley is learning this through experience.

Sometimes, left-leaning parties such as Notley’s New Democrats inherit government when the economy is going gangbusters. In such situations it is easy to introduce modest reforms without upsetting the big players of market capitalism.

But more often than not, voters turn to the left only when they calculate that the economy isn’t working for them.

In these circumstances, the job can become tougher.

Think of Greece where Prime Minister Alexis Tsipras’s left-leaning Syriza government, after winning a mandate to fight austerity, reversed itself and undertook the drastic social spending cuts it had specifically promised to avoid.

At one level, Tsipras had no choice. International creditors, in the form of the European Union, the European Central Bank and the International Monetary Fund, threatened to wreck Greece’s economy unless he complied.

But at another level, Greece’s experience points to an important role social democracy plays in global capitalism — which is to act as the reluctant heavy when tough measures are needed to keep the system intact.

If right-wing parties cut social spending, they are labelled mean. But if left-wing parties do the same, they are called realistic

Alberta is not Greece. Its economy is radically different; its public finances are significantly sounder.

Still, Notley was elected last May on a wave of discontent. The ruling Progressive Conservatives were seen as out of touch. Their fiscal solutions — spending cuts plus tax increases for the middle class — were thought unfair.

Some voters moved to the even more right-ofcentre Wildrose Party. Others gravitated to the NDP, with its call for higher taxes on corporations and the rich, action on climate change and more spending on infrastructure, health and education.

On winning power, Notley moved quickly to implement part of her platform. She raised taxes for corporations and the well-to-do. She also announced a new carbon tax set to take effect next year.

She did all of this without antagonizing the main corporate players in Alberta’s oilsands.

Had oil prices remained in the $100 per barrel range, this moderate tinkering would have been relatively painless. But the collapse in world oil prices and the consequent recession in Alberta have changed everything.

A fiscal update this week from the provincial finance department predicts that Alberta’s economy will shrink by 2.7 per cent this year, while the unemployment rate will hover at about 8 per cent.

Government stimulus is expected to create 10,000 new jobs this year. But that number will be swamped by the 50,000 jobs already lost to the oilprice induced recession.

Thanks in part to the Fort McMurray fire, Alberta will face a $10.9 billion deficit this year. The government’s books are not expected to reach balance until 2024.

The province’s usually stellar credit rating has already been downgraded.

In spite of all of this, the NDP government insists it will stay the course — that it will not slash government spending and that it will continue to fight the recession with fiscal stimulus.

Logic is on Notley’s side. Her government may be running deficits. But net debt as a percentage of the province’s gross domestic product is still below 4 per cent, a remarkably low measure. By comparison, Ontario’s debt to GDP ratio is about 40 per cent.

Her promise to wean Alberta’s economy away from its reliance on the vagaries of world oil prices should, in today’s context, have even more urgency.

And her job-creation measures, while not enough to make up completely for the collapse in the oil economy, are better than nothing. Still, the pressure on her government to change course promises to be intense.

Notley is already onside with business when it comes to the oilsands. She spends much of her time lobbying for pipelines to move bitumen to the oceans.

Yet she still insists on social democratic nostrums, such as spending public money on health care and education and refuses to fret about deficits.

“Austerity just makes things worse.”