An election would not harm the economy

A Conservative Party talking point is that an election would put the economic recovery at risk. The theory behind it is that the markets do not like policy instability and it is a sound theory. Would you like to make an investment if you didn’t know if the government would rip your investment away from you? Political stability in general is a key component to a market economy.

Except that market fear of instability doesn’t really apply to a Canadian election.

Consider the two most likely outcomes of this election, a Conservative minority or a Liberal minority. From a businessman’s perspective what is the policy uncertainty? If the Liberals win there will be a few extra billion dollars of entitlements and slightly higher corporate taxes. Both may be bad policy but the differences in the scheme of things are minuet.

Both the Liberals and the Conservatives are generally committed to free trade, both are generally open to foreign investment, both want to keep corporate taxes relatively low compared to other G7 countries, and both at least have a nominal commitment to balancing the budget. There is no debate about curtailing property rights or nationalizing industries. Corporate welfare levels would likely remain the same under either government and neither seems interested in significantly increasing regulatory burdens.

In short there is no instability and there is no real danger that the market would react badly to an election. As evidence, even though an election is almost certain the TSX has remained stable and there are no reports of foreign investors pulling out their capital.

The Conservative Party is free to argue that a Liberal government would be bad for the economy, but there is simply no truth to the claim that an election itself would be detrimental to the recovery.