Ontario's Socialist Leader Sets Businesses on Edge
COME October, Ontario will have the only socialist government in North America. Campaign promises ranging from phasing out nuclear power to a special corporate tax have business jittery, though the list may be tough to carry out. The New Democratic Party (NDP) scored its surprise victory on Sept. 6, winning 73 seats in the 130-seat Ontario legislature. Its leader, Bob Rae, will take over as premier on Oct. 1. It is the first NDP government in Ontario, although the party has run provincial governments in western Canada.
The new government's opposition to nuclear power especially troubles business. In Ontario, nuclear plants supply 50 percent of power needs.
The man most likely to be energy minister, Brian Charlton, says he wants to cut back nuclear power. ``Unfortunately, we are in a position of not being able to run out tomorrow and shut down nuclear power plants,'' he says. ``They are providing half the province's power.'' He suggests energy conservation to make up for cuts in nuclear power. The NDP may impose a consumption tax to finance research into alternative energy.
``We are going to run out of juice before the year 2000 despite conservation measures,'' says Thornton Lounsbury, president of the Association of Major Power Users in Ontario.
During the election campaign NDP leader Rae charged some corporations with cheating on taxes. He promised a minimum 8 percent tax on corporations to ``ensure that profitable corporations could not use tax loopholes to reduce their taxes to zero.'' He further plans to spend Ontario out of its current slump and increase the minimum wage from $5 to $7.20 an hour. The NDP also wants government-run auto insurance.
``Those promises will mean higher taxes because the money just isn't there,'' says a Toronto banker who asked not to be named because he does business with the provincial government. Banks and financial holding companies could be the hardest hit by a minimum corporate tax. ``The big worry about this government is that industry has been leaving the province already and this makes Ontario even less appealing,'' the banker adds.
During the past year an estimated 60,000 manufacturing jobs have been lost. The steel industry is partly shut down by a strike at Stelco Inc. and the Canadian Auto Workers Union is striking Ford Canada. Business is also worried about the NDP's close ties with labor unions. They provide the largest single part of the party's financing.
Ontario has 9.5 million people, more than a third of Canada's 26 million population. It is by far the richest province. Ontario is No. 1 in Canada in manufacturing, agriculture, and mining. It has huge gold reserves and the world's largest nickel mine at Sudbury in the north. Ontario's gross domestic product is larger than Australia's, a country with about double its population.
But the socialists are taking over at a bad time. Ontario is in a slump, especially in the auto industry, which provides directly or indirectly one in six jobs in the province. Economists say it will be tough for Rae to enact his spending plans. ``His promises if implemented tomorrow would be a disaster. But he is taking over when the province is in recession, so he'll probably have to be more careful,'' says Patti Croft, economist at Burns Fry Limited, a brokerage house.
However, Gerald Caplan, a former secretary of the NDP at the federal level, predicts Rae will stick to his promises even if it means more spending.
``Canadians understand that tax increases can't be avoided,'' Mr. Caplan says. ``They simply demand that the system become fair and progressive.''
The NDP leader is seen as a moderate socialist. That moderation has prompted Toronto economist Carl Begie to tell the financial community to ``grow up'' and stop worrying about the socialist hordes.
Gerald Tremblay, industry minister in neighboring Quebec, says business nervousness over the New Democrats in Ontario could be good news for his province. ``When there is a change of government as radical as the one in Ontario it creates a certain amount of insecurity,'' he says. ``Over the short term the NDP win may help us attract more investors.''