Will David Eby Prove to be a Mudder?
By: Don Wright
About 20 years ago one of BC’s political pundits – we think it may have been Keith Baldrey – made a comment on how then-Premier Gordon Campbell had dealt with a particularly challenging situation. This pundit said, “Who knew Gordon Campbell was a mudder?” Apparently, this is a horse racing reference. A “mudder” is a horse that runs well on muddy tracks. A premier who is a mudder would be one who can perform unusually well in less-than-ideal circumstances.
We recalled that memory contemplating the economic and political challenges facing the Eby government on the path to the next general election, to be held no later than October 2024. That path suddenly looks very muddy.
British Columbia Insights
Global’s Don Wright brings decades of experience in diverse roles spanning the BC government, private sector, and academia. He is a sought-after public policy expert who brings an unmatched perspective and insight into the Canadian policy, economic, and political landscape.
As we noted previously, the BC NDP had led a bit of a charmed existence between 2017-22. It inherited a relatively robust economy, and it sustained that strong growth through 2019. GDP and employment growth continued to outpace that of the rest of Canada, and government revenues continued to flow in at a healthy rate.
It looked like things might be slowing down at the end of 2019, which would have necessitated tougher political choices. But then Covid happened, and every government in the developed world got a “free pass” to run significant deficits without the political and capital market penalties that those deficits would have entailed pre-Covid. The global recovery from Covid gave a nice bounce to the prices for BC’s major exports – lumber, pulp, copper, natural gas, and coal – which delivered pleasant surprises to the Province’s bottom line. The 2022/23 budget had originally forecast a deficit of $5.5 billion. Instead, it finished up with a $700 million surplus despite the best efforts of the government last March to spend as much of the extra revenue collected before the end of the fiscal year as possible.
But that now all lies behind the Eby government. The global economy is sending confusing signals, but most of them are not positive. The US economy may have its mythical “soft landing,” though many economists still see a recession on the horizon as the US consumer appears to be finally running out of gas. China’s economic recovery after it ended its Covid lockdown has be very underwhelming, to say the least. The European economy, hammered by the indirect impact on energy costs of the Russia-Ukraine war is struggling, with its largest economy – Germany – deindustrializing at an astonishing rate. The Canadian economy shrank in the most recent quarter, with the heavily indebted Canadian consumer struggling with higher interest rates.
Data on BC’s GDP this year is not available, but other indicators suggest a slowdown. Export data shows a significant downshift that started approximately halfway through 2022, continuing through the current year. The value of total exports in the first half of 2023 was 14% lower than in the same period last year.
BC’s job growth over the past 12 months has been the 2nd lowest of all the provinces. Of greater concern is that private sector employment is actually down on a year-over-year basis. In fact, there has now been essentially no net increase in private sector employment since 2019, despite the fact there are 276 thousand more people of working age in BC than there were four years ago. It is only because of a significant increase in public sector employment and a reduction in the labour force participation rate that has kept BC’s headline unemployment rate from rising significantly.
A slowing economy and sluggish private sector employment growth present a more challenging path to the next election. To stick with our metaphor, things are getting muddy. It is more difficult to go as fast as Premier Eby might want to go, and the probability of missteps and stumbles becomes greater.
The government cannot count on healthy growth in government revenues, so it will have to get the tricky balance between spending enough to keep key stakeholders happy (or at least not angry) on the one hand, and not losing the confidence of the buyers of BC’s bonds on the other hand, just right.
The deliberation about measures that environmental groups continue to push for – e.g., more protection of old growth forests, faster decarbonization – that cost jobs and government revenue will become more fraught.
No doubt the opposition will try to prosecute the case that it is government mismanagement that has led to the current state. The government will argue that this is largely caused by situations in the international economy. But how successful will it be in that argument, particularly given that it has dined out on BC’s previously strong economy?
There is one development that plays to Premier Eby’s favour here – the apparent growth in support for the provincial Conservative party. A recent Leger poll had the Conservative’s running in 2nd place while Kevin Falcon’s BC United fell to 3rd place. A split in the centre right vote has always benefited the NDP in the past – in 1972, 1991 and 1996.
We are about to find out whether David Eby, who to date has been a remarkably adroit and successful politician, is also a mudder. Or at least a better mudder than any of Kevin Falcon, John Rustad and Sonia Furstenau.