Monday, June 10, 2013

It's the Economy, Stupid! (and why the NDP should stop defending its 1990s economic record)

Much has been written about the gap between the last BC election polls and the actual results. But that was only half of the stunning BC Liberal comeback. The remainder happened in plain view during the campaign, when the NDP lead in the polls shrank from 20% to single digits. This change was likely caused by several factors, including:

1. Adrian Dix's flip flop on Kinder Morgan
2. The Liberal campaign (clear focus on economy and negative campaigning)
3. Christy Clark's charisma and optimism
4. The BC Conservatives' collapse

I would argue, however, that the underlying cause is simply BC's economic experience in the past 20 years. Without the experience of the 1990s, Dix's flip flop would not have ignited much concern about economic development under the NDP. The Liberal focus on the economy would not have resonated. Christy Clark's hopeful message on the economy would have fallen on deaf ears. And social conservatives might not have decided to pinch their noses and vote Liberal once more to keep the NDP out.

If you're a reader of the Vancouver left-wing media (e.g. Georgia Straight, the Tyee, etc.), you may be under the impression that BC's superior economic performance under the Liberals is a myth, or even a falsehood perpetuated by a right-wing media conspiracy. Indeed, according to BC Stats, BC's real GDP grew by an average of 2.8% per year during 1991-2001, compared to 2.5% during 2001-2010. However, this is not what people felt because:

- BC's population grew more quickly in the 1990s due to a wave of immigration related to Hong Kong's handover to China. Per capita, real GDP grew by 0.8% per year in 1991-2001, compared to 1.3% per year in 2001-2010. That's 60% faster per capita growth under the BC Liberals.

- The latter period, of course, included the sharp 2008-2009 recession, while the former included the tech boom. In Canada as a whole, real GDP per capita grew by 2.3% per year in 1991-2001, compared to 0.8% per year in 2001-2010. So under the NDP, BC fell behind Canada by 1.5% per year. Under the Liberals, BC outpaced Canada by 0.5% per year. That's a difference of 2% per year, or 20% over a decade.

- In the long run, higher GDP leads to higher disposable income. But over shorter periods, disposable income may be impacted by fluctuations in relative prices, taxes, the amount of corporate profits reinvested rather than distributed, etc. Of course, not only did the BC Liberals cut taxes, they were lucky enough that the federal government also cut taxes during their years in power. As a result, in 1991-2001, real disposable income per capita grew by 0.1% per year in BC (0.8% in Canada); in 2001-2010, it was 2.2% per year (2.1% in Canada). This is the kicker: in BC, real disposable income per person grew TWENTY-TWO TIMES FASTER under the Liberals (up to 2010) than under the NDP!

Clearly, the difficulties of the 1990s were not all the NDP's fault, and nobody would credit the BC Liberals for the myriad federal tax cuts in the late Chrétien/Martin/early Harper administrations. We can argue at length about whether the difference between NDP and Liberal policies contributed to BC's change of fortune. But given that people felt their income go up 22 times faster under the Liberals than under the NDP, when the NDP pretends that its economic record was as good as the Liberals', it just sounds out of touch. Statistics correspond to reality. The NDP can argue about statistics, but if its argument diverges too much from people's experiences, people won't listen.

Usually, when you've been out of power for 12 years, people forget what happened last time around, and your opponents bringing it up won't hurt you much. But when what happened was a decade of stagnating pocketbooks, people do remember, especially when the latter decade has been much better. People also understand that parties can change in 12 years. But people will conclude that you haven't changed if you insist that there's nothing wrong with your record. And they will further conclude, perhaps unjustly given the different economic circumstances, that the same stagnation will occur if you are back in power.

If, in response to Liberal attacks, the NDP had actually repudiated its 1990s record and explained how its economic vision has evolved, Adrian Dix might be Premier today.