Chaos in Ottawa reflects an economic crisis rumbling across the world

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John Rapley is an author and academic who divides his time among London, Johannesburg and Ottawa. His books include Why Empires Fall (Yale University Press, 2023) and Twilight of the Money Gods (Simon and Schuster, 2017).

And another one bites the dust.

A couple of weeks ago, the French government, unable to get its budget through parliament, fell in a vote of confidence. Over the past week, South Korea’s President was impeached and the German government fell. With the dramatic resignation of finance minister Chrystia Freeland Monday, one can’t help but wonder how long Canada will hold off being the next domino.

Strong mandates may not count for much these days, either. Just look at Britain. There, the Labour Party emerged with a massive landslide victory in the summer election. Today, not even half a year into its term, the government faces dire polling that suggests that if an election were held today, Labour would not only lose its majority but possibly go back into opposition.

The truth is that across the developed world, voters are in a sullen mood and turning quickly on governments they judge to be falling short – which, by their current standards, appears to be all of them. In every major democratic country to have held an election in 2024, the incumbent party was punished by voters, either losing power altogether or seeing its parliamentary representation fall. Even the United States, with its comparatively healthy economy, still joined the anti-incumbent wave when the Democrats lost the November election. What hope is there for democratic countries with economies that are struggling?

This anti-incumbent wave reveals the common underlying problem that will probably continue making it difficult for governments to ensure their longevity, no matter how strong their initial electoral mandates: Voters want more than governments can deliver. Meanwhile, politicians seal their fate by promising to deliver what voters want, when they can’t. This problem has deep roots.

Historically this is how empires fall. All imperial economic systems follow a lifecycle of expansion and contraction. Growing rich off their periphery, they inadvertently develop the periphery until it begins to overtake the old imperial heartland in its economic dynamism. That’s the point we reached around the turn of the millennium, when the economies of the West began slowing while those of the erstwhile periphery, such as China and India, raced ahead.

Things came to a head during the pandemic, when Western economies went into free fall. To stave off collapse, governments borrowed hugely to sustain their citizens during the lockdowns. While these spending programs did prevent the worst, economies nonetheless contracted and countries were left with large debts (significantly, developing countries borrowed much less during the pandemic, yet not only suffered proportionately smaller economic hits but also bounced back more quickly).

When economies reopened, those debts acted as a deadweight on growth. Only the United States resumed growing strongly, but that was only because, unlike its peers, it kept borrowing big – in effect, merely postponing the fall. Everywhere else, governments have been forced to grapple with their increased burden, which requires one of three things: raising taxes, cutting spending or allowing inflation to run hot to inflate away the debts.

Any of these solutions hurts one political constituency or another. Rather than seek mandates to do that, politicians instead promise they’ll magic away the problem by making the economy grow faster, usually with anodyne changes – finding “efficiencies,” cutting the odd tax, reducing immigration, that sort of thing. That’s how Labour got its big win in the U.K. in July: promising to restore growth and repair public services while still freezing income taxes. So far, at least, it hasn’t worked out, raising the prospect this could be a one-term government.

Within Canada, recent provincial elections in Manitoba, Alberta, Saskatchewan and British Columbia saw incumbents take losses, while polls suggest Quebec would expel the CAQ government were an election held today. Even in Ontario, where the Conservative government looks safe, that might change once it loses the counterpoint of an unpopular Liberal government in Ottawa.

In the era of slower economic growth, we face major decisions about how we’ll pay to maintain our social programs, balance the books or fix the housing crisis. Until politicians secure mandates for such choices, we’ll probably keep cycling through governments, because easy solutions are short-term ones.