Wildrose Alliance to choose new leader

I haven't blogged in more than a month, which is a good recipe to discourage any regular readers, but my excuse is that I was travelling in South America and the internet connections were often dodgy.

Paul Hinman has decided to step down as leader of Alberta's Wildrose Alliance party and I wish him well. Although there have been grumblings about his organizational skills he was keen and open to evidence-based policy. His performance in the leaders debate during last year's election was a highlight for me.

There has been considerable media speculation that Danielle Smith, until recently director of the Alberta wing of the Canadian Federation of Independent Business, may run for the party leadership. Link Byfield has been encouraging her to take the plunge and I would add my support. The first and most important reason for supporting a urban, business friendly leader is that the current government has cornered the market on populism. Populism is at the root of Alberta's (and America's) problems (why have Albertans squandered the Heritage Fund? why are Americans fat and indebted? to a large extent because they elect officials who indulge them... this is a column for another day...) and nobody plays the political game with greater cynicism and success than the Alberta Tories.

One of the most notable agendas of Kevin Lynch when he was Deputy Minister at Finance Canada (he later became Clerk of the Privy Council, Canada's highest ranking civil service office) was a reduction of corporate taxes. As someone with a PhD in economics, Kevin Lynch knew the arguments in favour. But business friendly policies are not popular. Corporations do not get a vote, and it is rare to see politicians advocate for lower corporate taxes. Jurisdictions like Hong Kong and Singapore are as business friendly as they are largely because populist politicians have limited influence there. Business hostile policies superficially appear to defend the "ordinary citizen", but usually end up hurting ordinary citizens by way of more limited wage and employment prospects, never mind investment opportunities. It is generally difficult to invent and produce the next problem solving widget apart from using the corporate form. Investments in property, plant, and equipment, things that move out the long run supply curve which is the ultimate solution to economic scarcity, are business investments (innovation also plays a role but this too is driven by how competitiveness-friendly government policy is).

Can Albertans appreciate the arguments for improving the province's business environment (which is currently internationally average at best despite the popular assumption that the province is "right wing")? Of course, but just like building of a sovereign wealth fund vs current spending, it is much easier to make the argument about the chickens when they have come home to roost. The Wildrose Alliance has been proven right on the royalties issue, given that the Tories have reversed themselves 110% as business left the province. We've also been proven right on spending, if one wished to style it as such, as the government is currently running a deficit and not just a one-off deficit but what looks to be a structural deficit for years to come. What's changed is simply that hazards that were previously warned off have gone from abstract and distant to concrete and immediate. This focuses the mind of even the populists. In my view, the party needs to continue down the (intellectual) high road: win over the media and the opinion leaders and the rest will follow. In theory the Alberta Liberals could seize this space. Indeed, at the federal level they appear to be doing that. But provincially the Alberta Liberals decided to make David Swann their leader and front man, which means they are not going to be wholeheartedly embracing a business friendly agenda anytime soon (one of my questions for Swann is why he decided to become a provincial politician if his biggest concern is for international issues like Darfur and Kyoto).

A business friendly Wildrose Alliance could potentially be well placed in Alberta, because it could reach the cosmopolitan urban voter by argument and the rural voter by the natural affinity between supporting competitiveness and "freedom". The correlation between freedom and competition is not one-to-one; the economist in me firmly supports the latter (competing on price and quality is what drives the process of getting more for less) whereas my support for the former is less intellectual and more ingrained in my being raised in a culture founded by fiercely independent pioneers. To an increasing extent I think a misguided obsession with freedom that is divorced from the idea of discipline (and by extension, competitiveness) is behind Alberta's and America's current problems: we are fat because we can drink pop in school cafeterias, we are in debt because we seek payday loans and others are only too eager to provide that service, we are free to innovate financial products whose complexity has no necessary correlation with economic competitiveness (in fact they obscure the price mechanism that govern real production), in short we are uncompetitive relative to, say, the Asian tigers because we are free to be undisciplined and therefore uncompetitive. But, as mentioned earlier, a discussion of this thesis in depth is another column. My point here is simply that whereas we can get educated urban voters to support, say, private property rights by discussing the Coase Theorem, rural voters would be inclined to support simply by virtue of their ingrained skepticism of the claims of the state. Both groups would support policy that preserves and creates incentives for self-starters and hard workers, the one group primarily because of the sound economic arguments and the other because of a sociological background heavily influenced by what Weber dubbed the Protestant work ethic. To a certain extent the anti-state-power temperament could be an obstacle, in that it can be anti-intellectual, not so much directly as indirectly by being skeptical of elites telling them what to do. But anyone who thinks signing on to simple redneck-ism is the way to go should look to the Republican Party south of the border to see the direction such a route is taking them: fighting a continual rearguard action all the way back to Alabama.

Danielle Smith is urban and articulate, with a media friendly personality. Her resume is that of someone who understands the merits of sound, enterprise friendly policy. She would have my support as leader of the Wildrose Alliance.