Ontario's Economic Future?

Well, the election is over and I must admit I was not that surprised the Liberals formed the government but I am surprised at the fact it is a majority government.  There are now numerous economic challenges facing the province and suspect after the fun of campaigning from the left, the Liberals may eventually be forced to govern from the right.  And then perhaps not. Still, what explains what is happening?

Well, I don't usually do this but here is a link to my thoughts on all of this published in another venue.  It is probably over the top but what can I say, years from now perhaps we'll get a musical out of all that has transpired in Ontario these past few years.  Have a great weekend!

Comments

[Edward]

Nick,
As one fellow market monetarist to another. Help me out here :-) I'm in a battle with British PKs at the blog social democracy for the 21st century...
Thanks
Edward

[Nick Rowe]

Edward: This is Livio's post. But I have already joined in that debate. (But PP, for all his faults, is correct that NGDP and K are very different things. Investment is part of NGDP, but not the whole. And K is the accumulated stocks of investments, minus depreciation.)

[Bob Smith]

Matt Gurney made the fair point in this morning's Post that Wynne will probably have to make a lot of the hard decisions that Hudak was promising anyhow or face the wrath of the gnomes of Zurich. Even in her recent budget, she's promising (effectively) a nominal spending freeze over the next 3 years (which fact is buried under the promises of a unicorn in evry pot), and that still triggered warnings from the bond rating agencies. If borrowing costs rise (either from downgrading or increases in the BOC rate), those pressures will be come irrisistable.

Since I supect that the public sector unions who just spent millions getting Wynne elected probably aren't expecting payback in the form of wage freezes and job cuts, that should make the next few years awfully interesting. It'll be like the last years of the Rae administration.

[Patrick]

I don't follow ON politics that closely, but from here in AB it looked to me like Hudak did this to himself. If his platform & rhetoric had been more modest small-c conservative he'd have won. As it is, he came of as a bit of a loose cannon, and people steered clear.

[Nathanael]

My advice to Wynne:

Govern from the left, economically, or lose. This is a lesson all left-wing parties should have learned from Spain and Greece and England and so on.

It doesn't hurt to cut stuff which is actually unproductive or counterproductive, but the economy is not nearly overheated enough to make general budget cuts without infuriating people.

Build useful core infrastructure. Toronto's subway system is overcrowded and needs a relief line.

Ignore the bond rating agencies.

Tax the rich as seems appropriate to prevent them from running amok.

...And start printing your own money. If you're not willing to do so openly (I don't know whether Canadian federal law prohibits it) then establish a province-owned bank with access to the central bank's discount window, and a charter telling it to buy the province's bonds; this will have much the same effect. I do not know why this particular element of the Progressive-era reform program was adopted by so few subnational entities; it's very useful.

Anyway, the worst *possible* mistake any elected "left wing" party anywhere in the developed world can make is to run economic austerity policies which hurt the 99% while leaving the 1% untouched. It's a form of political suicide. Just don't do it! Ever!

I have to point out to Mr. Di Matteo that his comments are objectively incorrect in at least one regard: the green energy subsidies have been a riotous success. It's the old nuclear energy construction which has been generating ridiculously high energy prices. Unfortunately those costs are baked in now, for decades to come; it might make sense to take them off of the energy bills and put them on the government's general-taxation dime. (Yes, I've been following the Ontario electricity market carefully.)