The Conservatives and Canadian Capital
a New Alliance?

By Murray Cooke
From New Socialist Magazine

The Liberal government led by Jean Chrétien was the most conservative federal government of the postwar period in terms of its economic and fiscal policy. However, the Conservative government led by Stephen Harper represents an even greater threat to the working class and oppressed groups.

While limited by its position as a minority government, the Conservative Party is led by hardcore economic and social conservatives. Harper will be carefully attempting to forge a Conservative coalition that can produce a majority government which will be much more aggressive in pursuing its agenda.

One must be cautious in describing the 2006 election as a shift to the right. It would be more accurate to say the Liberals lost the election than to say the Conservatives won. Paul Martin’s Liberals were reduced to minority status in 2004 and then shunted to the opposition benches in 2006. The sponsorship scandal and the revelations from the Gomery Commission led to the Liberals’ defeat. By the 2006 election, the Liberals had alienated not only many voters but also many of their traditional allies in the capitalist class.

THE LIBERAL MINORITY AND CORPORATE CANADA
In February 2005, when the British magazine The Economist dubbed Paul Martin “Mr. Dithers,” it gave voice to a common perception among Canadian business leaders. As Finance Minister, Martin had been heralded by the business elite, but his tenure as Prime Minister was being viewed with increasing disappointment from the same circles.

Ironically, Martin’s downfall was largely due to the area in which he had built his reputation: fiscal prudence. The financial scandals of the sponsorship program started while he was Finance Minister. Ultimately, Martin’s minority government would be seen from the business perspective as reckless with spending and insufficiently aggressive with tax cuts. Before and during the 2005-06 election campaign, the Liberals were accused of being on a spending spree.

After being reduced to a minority government in 2004, Martin reached a $41 billion, ten-year deal with the provinces for healthcare. In December 2004, Jack Mintz, the head of the right -wing C.D. Howe Institute, complained in Canadian Business magazine about a Liberal “spending orgy.” Mintz suggested that we were seeing “the return of government to the 1980s: lots of misdirected social spending, accompanied by subsidies geared to save politically favoured industries from international competition.” He was especially critical of federal activity in areas of provincial jurisdiction such as cities and childcare.

Then in early 2005, Martin signed a deal with Newfoundland over the relationship between equalization payments and the province’s offshore oil and gas revenues. This deal led to a similar deal with Nova Scotia and demands from Saskatchewan. The Conference Board of Canada, among others, complained that Martin appeared to be agreeing to expensive ad hoc arrangements with little concern for the overall coherence of the equalization payments system.

Business concerns about the minority government were magnified by the Liberal-NDP partnership over the 2005 budget. The NDP amendment included a $4.6 billion spending increase and cancelled corporate tax cuts. Nancy Hughes-Anthony, the president of the Canadian Chamber of Commerce complained that “it puts Mr. Martin’s credibility in doubt and Mr. Goodale’s credibility in doubt…Canada’s reputation as a place to do business will be tarnished by this decision.” Tom d’Aquino, the president of the Canadian Council of Chief Executives (CCCE), described the rollback of tax cuts to be “bad policy that does not serve the interests of Canadians.”

The CCCE is the peak organization of Canadian business, comprised of the chief executive officers of 150 of the largest corporations in the country. In June 2005, the Executive Committee of the CCCE issued a highly critical statement on the direction of the federal government. Overall, it declared that “as a political entity, Canada is a nation adrift. A minority federal government is frittering away the fruits of years of sacrifice…In the political arena, the very idea of strategic policy-making is drowning in the swirling search for momentary tactical advantage.”

Specifically, they warned that “The country’s fiscal base remains strong, but is threatened by runaway spending growth.” On foreign affairs, the CCCE warned that: “The most direct threat to Canada’s interests lies in terrorism’s potential to undermine the efficient flow of goods and people across our border with our largest trading partner, the United States. But the more fundamental threat is to the open global economy on which our prosperity is based and to the values that lie at the heart of our society.” Therefore, the CCCE applauded the expansion of military spending in the budget. According to a separate press release, “The CCCE has argued for many years that an effective military is essential to protect Canada’s sovereignty, do our share in defending North America and make a meaningful contribution to global peace and security.” The CCCE has also been very critical of the Kyoto Accord: “We remain deeply concerned…with the government’s public commitment to the costly and unattainable target set by the Kyoto Protocol.”

Business leaders blamed the Liberals for souring Canada’s relationship with the United States. In 2005, Tom d’Aquino of the CCCE went on a speaking tour of the US calling for a North American customs union, energy pact and security perimeter. On missile defence, he told American audiences that “like many Canadians, I am greatly disappointed by the decision of my government to reject a course of action so manifestly in our national interest and so consistent with our long-standing commitment to the defence of North America. It is my hope that this decision will be reversed by a future Parliament…that will recognize the logic and wisdom of full Canadian participation and that will vigorously make the case for involvement to the electorate.” In December 2005 in another issue of Canadian Business, Jack Mintz worried that if trends continue, “Our relations with the U.S. shall be strained: a protectionist Congress will be in a surly mood to negotiate trade issues with a marijuana-exporting, missiledefence-opposing country that criticizes US policy.”

At a public forum shortly after the 2006 election and in a subsequent article for the Globe and Mail, Canada’s former ambassador to the United States Allan Gotlieb suggested that the Martin government offered lessons on how not to manage Canada-US relations. From this vantage point, even the minutely independent stance taken by the Liberal government on foreign policy is too much. Gotlieb suggested that, “Surely it’s time to tone down our rhetoric and handle our differences with greater regard for US sensitivities.”

On fiscal policy, foreign policy and the Kyoto Accord, the Liberals were offside with the leadership of the Canadian capitalist class.

BUSINESS TURNS TO THE CONSERVATIVES
Historically, Canadian capitalists have hedged their bets by financially backing the two main political parties, the Liberals and Conservatives. The collapse of Mulroney’s coalition of western conservatives, Bay Street and Quebec nationalists created a dilemma for business. They succeeded in ensuring that the Chrétien Liberals followed the neoliberal path, but the collapse of the Progressive Conservatives (PCs) and the emergence of the Reform Party split the right-wing opposition. Business embraced and bankrolled the Liberal government but was unsure about the opposition parties.

The Reform Party was spawned by western disappointment with the Mulroney government. Formed as a regional protest party, Reform received support from members of the Alberta oil patch. The formation of the Reform Party was also supported and promoted by Ted Byfield, the owner/publisher of the hard-right, Christian fundamentalist Alberta Report and BC Report magazines. Stephen Harper was among the former Progressive Conservatives who supported the formation of a new more solidly right-wing option. At the founding convention of the Reform Party in 1987, Harper complained that “the Mulroney government has shown itself far too willing to back down on the issues that matter to its political base.”

The Reform Party achieved its electoral breakthrough in the 1993 election. The party’s main electoral pledge was to eliminate the deficit in three years, which garnered approval from the Globe and Mail and other media. Still, Reform did not have the widespread support of Canadian business. In 1993, Reform received a little over $100,000 from corporations compared to $13.2 million for the PCs and $8.3 million for the Liberals. Even after 1993, the Canadian business elite didn’t know what to make of the Reform Party.

Reform’s financial support from business was limited because it didn’t appear as a legitimate contender for power and it was confined to the west. Headquartered primarily in the Toronto-Montreal corridor, corporate Canada was nervous about Reform’s populism and its anti-French, anti-Quebec stance. Corporate Canada always saw Reform as too unpredictable and divisive. During the election year of 1997, corporations gave just over $3 million to Reform and its candidates, while the PCs received close to $9 million and the Liberals scored over $16 million. Large corporations were now funding three political parties. For example, the chartered banks were making roughly equal contributions to the Liberals and PCs while donating smaller, but sizable amounts to Reform.

It wasn’t until 2000 and the transformation of Reform into the Canadian Alliance (CA) that the party was able to tap into large sources of corporate funds. Buoyed by a leadership race that included Tom Long, an Ontario candidate and one of the architect’s of the Mike Harris regime, the CA and its candidates received over $9 million from corporations in the election year of 2000, compared to only $3.8 million for the PCs (the Liberals cruised along with over $17 million). However, Stockwell Day and the CA failed to “unite the right,” break into Ontario or seriously challenge the Liberals. These failures and the dysfunctional ature of Day’s leadership led to increased pressure from business upon the CA and PCs to get their act together.

Stephen Harper defeated Day for the leadership of the CA in 2002. Though extremely critical of Joe Clark and other “red Tories,” Harper had spent years calling for a coalition of conservative forces from across the country. By 2003, with Manning and Day out of the way, the door was opened to a merger on the Right once Peter McKay replaced Joe Clark. The merger was pushed externally by the capitalist class, and internally by fears of being crushed by Paul Martin.

On his way out the door, Prime Minister Chrétien dropped two bombs on his successor: the sponsorship scandal and a new election finance law that severely limits the ability of corporations and unions to finance political parties. Individuals can donate up to $5,000 per party, while unions and corporations are limited to $1,000 per candidate. Over the previous ten years, the Liberals had raised huge sums of money from the corporate sector while struggling to generate small donations from individuals. Therefore, it’s not surprising that Liberal Party president Stephen LeDrew described the new law as “dumb as a bag of hammers.”

THE NEW CONSERVATIVE PARTY OF CANADA
The new Conservative Party of Canada (CPC) was officially created in December 2003. During the last three and a half weeks of the year (the last year under the old rules), the party received $3.3 million from corporations including $380,000 from Magna International. During the 2004 CPC leadership campaign, Harper raised $2.7 million, a large sum of money that included many corporate donations, but it is paltry compared to Martin’s $12 million war chest.

The Liberals have been slow to adapt to the new party finance regime. In 2005, the Conservatives were able to raise more than twice as much money (close to $18 million) as the Liberals (close to $8 million) and more than three times as much money as the NDP (slightly more than $5 million). While 70% of the contributions received by the Conservatives were under $200 only 59% of NDP and 24% of Liberal contributions fell into this category. The Liberals appear to be reliant on a relatively small base of wealthy individuals, while the Conservatives have a much larger number of contributors, many of them donating small amounts.

The Conservatives have grassroots support but Harper has also positioned the party to strengthen its ties to the corporate elite. Two days after the 2006 election victory, the Globe and Mail reported that, “a small group of Ontario-based business leaders have held meetings with Mr. Harper at Stornoway [the official residence of the Leader of the Opposition] over the past two years to build bridges to the new party.” An unnamed bank official was quoted as saying, “Every large business with registered lobbyists would have had people talking to Stephen Harper and his caucus for several years.”

Bay Street gave positive reviews to Harper’s cabinet choices, including the appointment of Jim Flaherty as Finance Minister. Perrin Beatty, a former cabinet minister under Mulroney, and now the president of the Canadian Manufacturers and Exporters, told the National Post that “Mr. Flaherty is well-known to the business community in Toronto. I found him an excellent person to deal with because he’s open, businesslike and effective.” Garth Whyte of the Canadian Federation of Independent Business described Flaherty as a “thoughtful guy…He reads everything that’s put before him. We want a multi-year tax and debt-reduction plan – and I think we are going to get it.” Tom d’Aquino of the CCCE suggested that “We see it as a government that will govern from conviction. We see it as a government that will be bold, even though it is constrained by its minority status.” An unnamed Bay Street executive was quoted in the Globe as saying that “These are true blue Conservatives, not pink Tories.”

Yet, a few reservations emerged from business circles. For example, the Globe described Gary Lunn, the Natural Resources Minister, as typical of the Conservative cabinet in that “he has first-hand experience in small business, but little connection to Corporate Canada.” Aware of this limitation, Harper sought out ministers more directly connected with the corporate elite. The two surprise additions to the cabinet, former Liberal David Emerson and the unelected Michael Fortier, were presented as additions to represent major cities, Vancouver and Montreal respectively. They should perhaps be more accurately seen as representatives of corporate Canada. Along with stints as a high-level civil servant in the BC government, Emerson was previously the CEO of forestry giant Canfor Corp. He was also one of the few Liberals to have endorsed bank mergers, another bone of contention between sections of business and the Liberals. As the minister responsible for the Vancouver Olympics, Emerson will be working to ensure that public funds enrich corporate interests.

Fortier is an investment banker formerly with Crédit Suisse First Boston and then TD Securities. Previously he practiced law with Ogilvy Renault, the same firm as Brian Mulroney. He also has vast experience as a corporate fundraiser for the PCs and the new CPC. An unnamed investment banker was quoted in the Globe as pointing out that “For all of Flaherty’s experience, he’s not a Bay Street guy, while Fortier is a real player…[he] can give a sense of how the capital markets will react to their plans.” As a banker and lawyer, Fortier is seen as having the skills to handle privatizations and publicprivate partnerships.

The new government is following the agenda set by the CCCE. Conservative priorities include tax cuts, reigning in federal government spending, gutting Canada’s commitment to the Kyoto Accord and improving relations with the US. The Harper government’s first budget presented a wide range of tax cuts, including cuts to corporate taxes and capital taxes. The promise to address the fiscal imbalance with the provinces will involve significantly downsizing the federal government.

The Conservative Party’s ties to the oil patch are demonstrated by the new government’s approach to the Kyoto Accord. The new Environment Minister is Rona Ambrose, an Alberta MP who previously worked for the Klein government. One of the government’s first actions was eliminating the funding for 15 projects related to climate change. Canada’s commitment to Kyoto, which was tenuous at best under the Liberals, is now effectively dead.

The Conservatives have acted quickly to improve relations with the US. Michael Wilson, formerly Brian Mulroney’s Finance Minister, was appointed as ambassador to the US. In 2003 he criticized the Liberal government for not supporting the American war against Iraq. The Harper government quickly finalized a controversial deal with the Americans on softwood lumber. They also reached an agreement to renew NORAD and extend it to marine surveillance.

The election of 2006 was in many ways a repeat of 2004. The results were actually not very different. One of the clearest differences, however, was the media treatment of the respective parties and leaders. In 2006, Harper was portrayed in a more positive fashion and Martin in a less flattering manner compared to the previous election. Obviously the continuing revelations about the sponsorship scandal had something to do with this, but perhaps it also reflects a wider sense among the business elite and the corporate media that it was time for a change.

ECONOMIC AND SOCIAL CONSERVATIVES
Stephen Harper has a BA and MA in Economics from the University of Calgary. Throughout his years in partisan politics and his tenure as president of the National Citizens Coalition, Harper’s main focus has been taxation, government finance and reducing state intervention in the market economy. Harper has consistently attacked federal intervention in provincial areas of jurisdiction, including health and social policy. In January 2001, Harper co-wrote the Alberta “firewall” letter, calling on Ralph Klein to create an Alberta Pension Plan, an Alberta personal income tax system, an Alberta Provincial Police force, and to ignore the Canada Health Act and hold a provincial referendum on Senate reform.

Although Harper is an evangelical Christian and a member of the Christian and Missionary Alliance, he has rarely appeared as an enthusiastic supporter of social conservatism. For years, he has advised his party not to take policy positions on so-called moral issues, but to leave this to the individual MP. On various social issues (including same-sex marriage, abortion, bilingualism, multiculturalism and immigration), he has warned of the dangers of extremism and their potential to damage the party image. The success of the Conservatives in keeping a tight lid on their candidates was a key aspect of their success in the 2006 election.

Still, Harper has been well aware of the importance of social conservatives to the party as voters but even more importantly as the activist and financial base. Harper has frequently courted the social conservative vote and insisted upon the compatibility of social and economic conservatism. In an April 2003 speech that was revised for publication in Report magazine, Harper made an unusually outspoken pitch for the importance of social conservatism. He pointed out that fiscal conservatives have been so successful that liberal and social democratic parties have enacted neoliberal policies. “The real challenge is therefore not economic, but the social agenda of the modern Left…while retaining a focus on economic issues, we must give greater place to social values and social conservatism.” Accusing the Left of “moral nihilism,” he suggested that, “On a wide range of public-policy questions, including foreign affairs and defence, criminal justice and corrections, family and child care, and healthcare and social services, social values are increasingly the really big issues.”

Furthermore, “the emerging debates on foreign affairs should be fought on moral grounds…Conservatives must take the moral stand, with our allies, in favour of the fundamental values of our society, including democracy, free enterprise and individual freedom.” Whether this was an attempt to shore up social conservative support for his leadership or a sincere indication of his views on the direction of the party, this speech indicates that it would be a mistake to underestimate the strength of social conservatism of the CPC under Harper’s leadership.

The 26 member Conservative cabinet includes at least nine ministers that are prominent social conservatives. The most notable and highly placed are Stockwell Day, the Minister for Public Safety, Vic Toews, the Justice Minister and Attorney General and Monte Solberg, the Immigration Minister. Unlike recent Immigration Ministers who have hailed from Canada’s largest cities, Solberg is the MP from Medicine Hat, a riding in which less than 9% of the population is comprised of immigrants. Obviously this reduces the incentive for the minister to be sensitive to the concerns of immigrants. Solberg is unlikely to feel any direct political heat for the recent crackdown and deportations.

CONCLUSION
None of the opposition parties are in a rush to bring down the government, which provides the Conservatives with a window of opportunity to try and broaden their support before the next election. The underlying preoccupations of the Liberal leadership race are likely to be patching up relations with business and searching for a leader who has the ability to attract funds both from business and individual Canadians.

The government of Stephen Harper will be actively pursuing the agenda of the capitalist class and trying to appease the social conservatives from the party base, while hoping that tax cuts and addressing the fiscal imbalance with the provinces can attract the voters that he needs, especially in Quebec, to take the next step to a majority government.