International Business: CANADA
SO MUCH FOR SOCIALISM
Canadian businessman Bill Ross is on a political crusade. The president of Form & Build Inc., a 30-person masonry-supply business in London, Ont., Ross is leading a group of 850 small-business owners determined to defeat Ontario Premier Robert Rae in June 8 provincial elections. "Everything Rae has done has been antibusiness," Ross argues.
In a province that accounts for more than half of Canada's trade with the U.S., Ontario's political debate is echoing the conservative revolution across the border. Voters have soured on Rae, whom they blame for lavish spending, high taxes, and a dismal job market. Since 1990, when Rae's New Democratic Party won with less than 40% of the vote, unemployment has risen to 8.7%, up from 5.3%. Huge deficits have doubled Ontario's debt load. With $72 billion in debt, "Ontario is the world's largest nonsovereign borrower," says Brian Neysmith, President of Canadian Bond Rating Service.
Rae's problems stem in part from bad luck. As he took office in 1990, Ontario was plunging into its worst recession of the postwar era. Manufacturers were restructuring to compete in the expanded market created by the 1989 free-trade agreement with the U.S. By 1992, some 300,000 jobs had been wiped out.
Business argues that Rae's policies have compounded these problems. In his nearly five years in power, the welfare rolls have roughly doubled, to 1.3 million. Ontario's benefits are far more generous than those of other provinces. That helped spending soar to $5 billion, 21/2 times higher than at the end of the 1990 fiscal year. To pay for it, Rae imposed the largest tax increases in Ontario history, jacking the marginal income tax rate to 53%, from 48%. Even so, Rae added an average of $730 million a month to the province's debt load.
Business leaders are also incensed by Rae's labor policies. One measure made it far easier for unions to organize companies, while banning the use of replacement workers. Rae has still alienated many union leaders. Two of Canada's largest unions, angered by Rae's 1993 decision to cut government workers' wages by 5%, won't endorse him.
HARD RIGHT. Rae argues the wage cuts were necessary to keep the deficit from spiraling even further out of control. He also warns that the spending cuts advocated by his opponents would "create a more punitive and mean-spirited society." That isn't convincing many voters. Rae's NDP could end up with fewer than 10 seats in the 130-seat Parliament, predicts pollster Angus Reid.
The climate has helped the Progressive Conservatives, led by Mike Harris, a burly former golf pro. Although the Liberal Party, under Lyn McLeod, a 53-year-old clinical psychologist, also promises to balance the budget, Harris is espousing a far more dramatic shift to the right. His platform includes a 30% income tax cut, a 20% reduction in spending apart from health care, and a "workfare" program.
That might slow the growth of Ontario's debt. But whoever is elected will face a daunting challenge. The voters may get rid of Rae, but his legacy will haunt Ontario for years to come.By William C. Symonds in Toronto