Michael Ignatieff drags around the longest paper trail of any Canadian politician. As an author, professor, high-brow journalist and broadcaster, he wrote a stack of books, countless lectures, and many articles, not to mention documentary scripts, usually about human rights, foreign affairs, and security. But not much about the economy. And as federal Liberal leader—the job he landed sooner than expected at the end of the recent parliamentary crisis—economic policy is his first priority. He’s not in a mood, though, to fill in all the blanks when asked exactly what ideas he wants Prime Minister Stephen Harper to adopt in next month’s recession-battling budget. “I want to be constructive,” Ignatieff told Maclean’s, “but I don’t see any particular reason why I should be especially helpful.”
Constructive yet not too helpful—it’s a pretty fine line. Ignatieff finds himself facing, from the very start, the dilemma that eventually confronts all Opposition leaders. On the one hand, the job is by definition to oppose. On the other, public approval tends to attach to politicians who project a positive vision. The trick is to present compelling ideas, but somehow not give them away to the governing party. So in the consultations leading up to Finance Minister Jim Flaherty’s Jan. 27 budget, Ignatieff’s challenge will be to display enough economic competence to build credibility for his Liberals as a government-in-waiting, without letting the government-in-fact simply snap up the best parts, and then boast it has built a multi-partisan consensus.
Ignatieff revealed just enough in an interview to leave no doubt he’s adopting the stance of a classic, centre-straddling Liberal. He argues that an economic stimulus package should put money in the pockets of the low-income Canadians who are bound to spend it. “There are all kinds of ways that we could pump money into this economy that, unless targeted, will just go to people who have disposable income anyway,” he said. “The trick is to get stimulus to the people who’ve got little disposable income, so they can keep their families afloat, and, in doing so, keep the economy afloat.”
Casting the stimulus package as a chance to redistribute wealth puts Ignatieff squarely in the camp of social-justice Liberals. But he placed just as much emphasis on using stimulative spending to reward companies for boosting productivity during the downturn. “We have to think about how we seize opportunity here,” he added, “to become more energy-efficient, to produce cars that people actually want to buy, to commercialize R & D, to invest in infrastructure that is badly needed, to address the productivity challenge that we’ve talked about for 10 years.”
Ignatieff said he “would not be drawn out” on specifics. But in separate interviews, his finance critic, Nova Scotia MP Scott Brison, and a key economic adviser, Ontario MP John McCallum, both touched on the same cluster of ideas. They stressed infrastructure spending and benefits targeted at those hardest hit by the downturn, with Brison suggesting the employment insurance system should be used to flow more money to the jobless, especially in Ontario. Neither mentioned any tax cuts beyond those already planned.
Ignatieff’s two-pronged prescription—stimulus based equally on compassion and competitiveness—might sound suspiciously like a politician trying to be all things to all people. But his interest in blending ideas about creating and spreading wealth go back to his early days as an academic. In 1983, when he was a research fellow at Cambridge University, Ignatieff collaborated with economic historian Istvan Hont on a paper about the 18th-century Scottish philosopher, and icon of economic conservatism Adam Smith. They read Smith’s Wealth of Nations as more than the foundational work on how competition creates prosperity. “Our argument,” Ignatieff and Hont wrote in the introduction to an essay collection entitled Wealth and Virtue: The Shaping of Political Economy in the Scottish Enlightenment, “is that the Wealth of Nations was centrally concerned with the issue of justice, with finding a market mechanism capable of reconciling inequality of property with adequate provision for the excluded.”
Ignatieff studied Smith at about the same time Harper was taking economics at the University of Calgary. Whether in England or Alberta, the academic atmosphere of the early 1980s was charged with the conservative doctrines of Ronald Reagan and Margaret Thatcher. For Harper, that climate was formative, pushing him permanently to the right. Ignatieff remained a Liberal, but the era’s lessons weren’t lost on him. “If you’ve studied and written about Adam Smith, you’re a believer in markets,” he said. “But Smith always believed that markets had to be regulated. So I’m a market guy, and I think we’ve all discovered that light-handed, smart regulation by government is needed to keep markets safe, honest, fair and transparent—that’s the lesson of the past six months.”
He is also keeping up on the way his elite U.S. network sees the global slump. When Ignatieff was director of the Carr Center for Human Rights Policy at Harvard University, from 2000 to 2005, the university’s president was economist Lawrence Summers, who was recently named director of U.S. president-elect Barack Obama’s National Economic Council. Ignatieff mentioned Summers when he talked about how his Harvard stint sharpened his thinking on the economy. “If Larry Summers is at the lunch table,” he remarked, “you tend to learn things.” He also made a point of looking up a recent quote from Summers and reading it aloud: “All financial crises end, and when they end, they end in ways that create spectacular opportunity.”
Summers favours governments acting agressively to fight off hard times, resisting the temptation to believe upbeat forecasts for when the recession might end. “It’s a lot easier,” he reportedly said in late October, “to correct the errors of overreaction than the errors of under-reaction.”
Summers’ advice to see in the slump a chance to act decisively, and maybe grab a lasting edge, is certainly attractive. But how? Ignatieff suggested using this period of upheaval, when many companies are thinking about what it takes to survive, to actually encourage them to make the investments needed to get ahead. “How can government help small- and medium-sized businesses invest in information and communications technology so they can improve their productivity and get more market share?” he said. “Let’s look at what we need to do to address some of the productivity and investment challenges that will help us bottom out and get back in business quickly. Let’s not just measure the budget by the size of the stimulus.”
Inevitably, though, the size of the stimulus has to be a major question. In his contentious Nov. 27 economic update statement, Flaherty suggested stimuli the Tories have already introduced, especially $31 billion in tax cuts next year, might be enough to carry Canada through the recession. But by this week, when he met with Liberal MPs, Flaherty seemed to have bowed to demands for much more. Ignatieff wouldn’t even hint at how many billions it would take to satisfy his party. “I’m not going to negotiate in public with the government on the size of stimulus,” he said. “We’re into the middle of it.”
Economists are split on how much should be spent, in what areas, and how soon. But most agree time is running out. The Bank of Canada officially declared on Dec. 9 that the Canadian economy is in recession. Nobody really knows how long it will last. This week, the independent Conference Board of Canada called for $10 billion to $13 billion in federal stimulus in 2009, from boosts to unemployment benefits, to tax credits for low-income Canadians, to faster infrastructure spending, all on top of ongoing intervention in financial markets to make sure companies can keep borrowing. But Peter Dungan, an economist at the University of Toronto’s Rotman School of Management, said anything Flaherty announces in late January would take at least a few months to be approved, and the economy could be recovering anyway by late 2009. “Much of the stimulus,” Dungan said, “would miss the worst part of the downturn.”
Liberals agree it would have been better to have moved much faster. But McCallum, a former Royal Bank of Canada chief economist, said this recession will likely drag on long enough that even measures that take months to roll out out will help. He said prime candidates for quick cash include “shovel-ready” infrastructure projects, like deferred maintenance on university campuses, and bridge and road upgrades. Projects like these have the advantage of not needing long planning or environmental assessments, although standard contracting processes can’t be avoided. It’s not clear, though, how paving highways and adding more insulation, say, would pass Ignatieff’s basic tests about helping the needy and creating the economic winners of the future.
More detail might, or might not, be forthcoming from the Liberals before Flaherty tables his budget late next month. “On a parallel track we are developing our own plan,” McCallum said. “How and when that will be deployed is a matter to be determined in the future.” Ignatieff refused to be pinned down. “I think we will have some constructive suggestions to make in early January,” he said. “But I have to stress: we’re the Opposition, they’re the government.”