A few weeks ago I predicted that Harper would suffer little lasting damage from the prorogation debacle. Many challenged this conclusion, pointing to the drop in Conservative support in the immediate aftermath.

I was not claiming that there would be no short term damage. It was a dumb move that caused many soft voters to doubt whether Harper’s apparent re-make over the last year or so is authentic. A number shifted to the Liberals or to undecided in their immediate party preference.

However, it still seems to me unlikely that there will be any permanent gain for the Liberals under current circumstances. Indeed I expect that we will see the Conservatives creep up to around 35 % support and the Liberals drop below 30% among decided voters as we move into the spring and summer. There is a fairly stable equilibrium at around these levels, with some chance of a further slight improvement for the Conservatives rather than for the Liberals.

The reason can be found in the public’s assessment of the Party leaders contained within the recent Ekos poll. One number says it all. Liberal Leader Michael Ignatieff has the approval of only 15% of Canadians. This is hard to believe. It is below that which George Bush Jr. and Richard Nixon had during their very worst days as Presidents. It boggles the mind to try to comprehend how an opposition leader can be held in such low regard. And it is almost impossible to imagine any scenario that could see the Liberals make any real long term gains in support under these circumstances. Indeed the risk is that the longer Ignatieff stays on, the more his numbers will pull down Liberal support generally. It is this continuing eroding of part loyalty because of the disappointment in the Liberal leader that is most likely to turn the tide enough to let Harper prevail again in the next election.

The Liberals appear to be paralyzed. Having so mishandled the choice of leader three times in six years, no one knows what is to be done. A faint hope that Ignatieff can redeem himself is the straw that party insiders offer to loyal supporters. Most are too smart to buy that, but they are powerless. Deep down, most just wish that Ignatieff would do the right thing, sooner rather than later.

It was with a sense of despair, frsutration and anger that I reviewed the just released report on government fiscal policy by the CD Howe Institute. Self styled as the ‘venerable’ centre of economic policy in Canada, the report simply confirms the depth of the failed orthodoxy in economics today and the incredible inability of intelligent people to think and act outside the politically correct language and narratives of a discipline that once placed empirical kinowledge and research ahead of immoveable beliefs.

The Institute is, like all of us, thinking of policy after the highly successful stimulus and the deeply flawed monetary policies of the past year and one-half. It seems to have learned nothing from developments of the last 18 months that should have set off a period of deep reflection about all of the old nostrums that brought us to the sorry state the world economy is in today. Measures badly needed like credit rationing to avoid new bubbles in the face of run away money creation and measures to steer the massive help given to banks into invesment in the real economy get no attention. These it seems cannot be contemplated if you are a true believer in the make believe economic world of the Institute’s experts. Nothing about industrial strategy and re-positioning major parts of our economy even comes to mind. What about the necessiity of policy to sustain a high wage, higg skilled, knowledge based economy, much of which would be devastated by its proposals? And of course social development is beyond its remit, so child develoment and the like can be left a casualty for all the Insititute cares. So what does CD Howe want? Well predictablly cuts in government expenditures. And – how imaginative – these must be driven by another round of dramatic cuts in transfers to the provinces. And higher taxes on workers. But of course nothing at all of that sort for capital, notwithstanding that there are strong arguments for targetted capital taxes, say on banks and international capital flows, just for starters.

The Institute’s ideas come as they always have from two sources: orthodox economics and the interests of the corporate sector. The Institute feeds off its well heeled partners , each enjoying the other’s prerogatives and perks. If it relies on any substantive argument at all for the policy measures it proposes, it is that they were needed in the 1990’s and it must be repeated to avoid a deficit and debt crisis. Defict and debt, absolutely critical long term concerns if we are to have stable development, seems never to have occurrred to it when for instance all governments – the BC government is a particularly apt example – spent like drunks on infrastructure through massive future payment obligations to PPP’s – debt in disguise – during the mid -2000’s.

The important point is that there are virtually no parallels between the two periods. The 1990’s assualt on government spending followed a prolonged structural deficit that had its source as much in embedded neo-conservative ideas supporting tax cuts and de-regulation as it did in uncontrolled spending. But spending was planned on false assumptions about revenue (and it was not all foolsih liberals – read kemp on Reagan). There was no doubt that fiscal integrity had to be restored and that someone would have to pay. Whether the targets were right can be argued, but is largely irrlelevant today, since the current situation is completely different.

Canada is strugglying its way out of a unprecedented economic crash. It resulted from world wide economic polilcy error founded on the beliefs of the CD Howe Institute and others. The ability to use monetary policy was completely shattered by the developments that flowed from these years of foolish adherence to ideology. When push came to shove, fiscal policy was all there was, and it has worked exceptionally well. But the recovery is going to be long and slow. Cool and sensible heads must prevail. Ideology, based on nothing more than big ideas – the kind of thinking that was once the preserve of socioligists – needs to be vigoursly rebuffed.

Substantial government management of the economy will be essentail for a very long time. Re-regulation of banks and credit markets must be vigorously and intelligently pursued. Volker and Tobin are shining beacons as are lots of young thinking economists sidelined in the poltically correct frenzy of the past two decades within the economics profession. Fiscal policy must not now be undermined by continuing prejudice and self interest. It is no time to undermine seeds of the recovery and the powerful affect of fiscal stimulus on real demand and perhaps more importantly expectations. Stock markets are expressing a more or less rational expectation that the stumulus and other measures are working. It is not time to undermine that. Stable fiscal transfers between Ottawa and the provinces will be important if we are to have a rational, stable, dependable fiscal environment, so necessary to a good solid recovery. It is not the time to return to the bad old ‘let’s-make-a-deal federalism’ that CD Howe suggests.

Perhaps one shoould not be surprised by the shallow, reflexive and largely ideological thinking of the Institute. After all, these views have been appearing in columns in the business pages for the last few months. However, the Institute does occupy an important place in the national policy dialogue. It is sad to see in caught in signs of such ideological bankruptcy. Most of us would wish it success in its work. But this deeply disappointing report, taken in conjunction with the Institute’s failure to come forward to embrace sensible recovery policies, some of which I have written about on these pages, and all of which are well known among good economists, is a disappointing sign that ideology still holds its grip over established policy institutions.

One province has finally got it right on green energy. Ontario Premier Dalton McGuinty has just announced a $7 billion deal that will have Samsung commit to a major transformation of the electricity generating system. Samsung will invest in a big way in wind and solar energy as part of a move away from dependence on fossil fuels. Samsung will also make a commitment to develop secondary industries associated with these new green energy sources. Incentives are included in the package to ensure the creation of over 150,000 new jobs. Transmission capacity will be reserved on the grid to ensure that the new green electricity will get to Ontario consumers when they need it.

Contrast this to the approach in British Columbia under Gordon Campbell. Campbell is trying to sell a hopefully gullible public on a plan to subsidize large numbers of private investors to develop hydro power at sites on sensitive rivers and in vulnerable watersheds across the province. These projects, such as the giant Plutonium power project in Bute Inlet, are destroying pristine rivers, salmon habitat, and forested valleys out of the sight of most British Columbians. Valuable licences and other incentives are being offered up by the BC government to the private companies – the venerable BC Hydro is not permitted to develop any of the projects. The biggest problem with the whole undertaking is that it can do little to displace fossil fuels as the source of electrical energy when river runs and lake levels low, but indeed increases the need for fossil fuels during such periods. Under the deals the government has put into place, BC Hydro is forced to pay exorbitantly high prices for energy produced when it isn’t needed (when lakes and rivers are high and Hydro can meet demand with its own large dams), which it must then resell at a large loss, and then it will have to go outside the province for mostly dirty coal fired electricity when the rivers are low, purchasing this power at exorbitantly high prices. These outside purchases are being forced on BC Hydro because the government has ordered the shut down of the relatively clean and efficient Burrard Thermal plant.

The sad fact is the the BC scheme is just a large scale scam to line the pockets of the friends of the government who are getting the permits and licenses for these new, dysfunctional private hydro projects. They get guaranteed high prices for electricity that is not produced when it is needed, and when it is produced must be resold by BC Hydro at a large loss because it all comes when it is not needed; a sweetheart arrangement if ever there was one. And most offensive of all, the whole plan is being “green washed” by the claim that it is a green energy plan. Sadly in this it has had the support of a couple of high profile BC environmentalists who one has to assume do not understand the admittedly complex scheme.

The Ontario plan is completely different. There will be no-payoffs to private interests who are friends of the government for unneeded power. The new wind and solar plants will to together produce power when it is needed in a planned, balanced, systematic way. Old dirty energy will be replaced by new clean energy. There are no complex transfers of money to friends of the government at the expense of provincial ratepayers. Spin-offs and new jobs will be assured. And there is no green washing, because the plan, unlike the BC one, really does, replace old dirty energy with clean energy.

Predictably the self serving private power producers who have lined up at the trough in BC are complaining about the Ontario plan. If nothing else, their criticisms confirm that the scheme they are pushing have nothing do do with green energy. If it did they would be demand that the BC governments adopt real green energy plans like the Ontario one. The fact is that the flawed BC plan is the fault of a patronage obsessed government and a corrupt arrangement that does nothing to advance green energy. It is time that energy specialists, the media, academics, and environmental groups debunk the nonsense of their claims. Until that happens all of these groups must share some of the blame for the collaboration in the green washing that has accompanied the BC plan (the worst offender is the Vancouver Sun, which has virtually become the public relations arm for the BC plan. So much for a critical, watchful media).

Ontario is to be congratulated for going green in a meaningful and in many ways radical shift in direction. What a refreshing change.

Finally, a government in Canada has done something significant and even radical.