Losing the federal election to the Chretien Liberals may, as Lady Churchill said to her husband following electoral defeat in 1945, “be a blessing in disguise” for the Canadian Alliance. For the prospects facing a third-term Chretien government hold the best chance for a lasting and convincing electoral victory for the Alliance. 

I am, readers should know, plagiarizing an idea (and the Lady Churchill quote) put forward by conservative commentator John O’Sullivan, who wrote recently that a Gore victory would be a blessing in disguise for U.S. Republicans. A divided Congress, a shaky electoral mandate and the likely prospect of a stock market correction and a recession are O’Sullivan’s reasons for taking “the long view” — that a Democrat victory today can profitably be traded for a Republican victory tomorrow. 

The situation is similar in Canada. Jean Chretien is faced with a Parliament as divided as the prospective U.S. Congress. The Canadian divisions are regional rather than partisan, but they present an equally formidable obstacle to effective governance. Mr. Chretien must govern a diverse country without the benefit of a diverse caucus — the Liberals lost one quarter of their seats in the West and the 101 Liberal Dalmations from Ontario may now number 100, but they are the critical bloc in the Liberal majority. 

But Ontario seems to have voted not for Mr. Chretien, but for the prospect of Paul Martin. And Mr. Chretien gave them a reason to do so by raising the prospect of an impending retirement. The combatants for the Chretien mantle — Paul Martin on the right, Brian Tobin on the left and Allen Rock in the middle — will therefore have no reason not to drag the ideological divisions within the Liberal party into the open. 

Mr. Chretien also faces a third strike: not having the support of a majority of Canadians. This appeared not to hamper him in his last term because he managed to stay ahead in the count — his caucus was slightly more regionally diverse, and the prime minister handled the Martin challenge with the blunt announcement that he wasn’t going anywhere. A weak electoral mandate, internal struggles and a regionally divided parliament are three pitches Mr. Chretien is unlikely to hit. 

The prime minister is likely to face a much more serious situation outside of Parliament and the Liberal party. Daniel Schwanen, senior economist at IRPP in Montreal, has written convincingly that the U.S. economy is headed for a serious slowdown in late 2001. And the C.D. Howe Institute has been warning for months that Canadian interest rates will have to rise to counter a growing inflationary threat. Both signal trouble for Mr. Chretien on the economic front. 

And what would a Chretien government do if faced with a serious reduction in revenues due to an economic slowdown? What will happen to those tax-cutting promises delivered by Mr. Martin in his pre-election economic update? The economic statement already delivered too much tax relief to fit comfortably in the 50-50 spending /debt and tax reduction ratio set out by Mr. Chretien during the campaign — meaning tax cuts are likely the first to go if the economy turns sour. Canadians may miss out on that pay raise they thought they voted for when they marked their ballot Liberal. 

The Alliance should count its blessings — history has not looked fondly on parties that preside over economic malaise. And parties that have presided over economic malaise and then decide to get a new leader have not fared well either — ask John Turner and Kim Campbell. In each case the party in waiting won a majority government and ruled for at least two terms. 

Stockwell Day should use the next few years to prepare for the next battle. Mr. Chretien cynically called the election in order to catch the rising Alliance off its footing, and to some degree he succeeded. But the Alliance has not been tripped up. It is further ahead in Ontario, Quebec and Atlantic Canada than the Reform party ever was, and has solidified and intensified its western base. The long view — however much it hurts in the short run — means that a Chretien victory today makes a strong Alliance victory more likely the next time around. 

Ken Boessenkool, an economist in Calgary, was a policy adviser to the Reform party from 1993-1996, and to Stockwell Day from 1998 to July, 2000.