Ever since it was founded in 1961, the federal wing of the New Democratic Party has been trying to figure out a way to break out of its nasty, Catch-22 trap:

• Many/most voters won’t consider it to be a credible alternative until it wins an election and gets some experience in government.
• It can’t get experience in government unless it wins an election.

So for much of its history, the federal NDP’s campaign has taken the form of asking to a ‘stronger voice’ in the House of Commons. The problem with this approach is of course that the actual decisions would be made by the party that formed the government.

A significant – possibly the largest – obstacle between the federal NDP and being in a position to contend for power is its perceived lack of credibility on economic issues. But yesterday’s election might signal a turning point of sorts.

The federal NDP has always argued that this perception is ill-founded: several of its provincial wings have won power and have governed responsibly. And the NDP is somewhat justified in feeling that it’s being held to a higher standard than the Liberals and the Conservatives.

But there’s more to the problem than simply perceptions and media spin. For much of the past three decades, the NDP’s approach to economic policy simply wasn’t credible. Among other things, it has campaigned against free trade and the GST, in favour of an ‘industrial policy’, and its views on monetary policy appeared to have been taken from an intermediate macro textbook published sometime around 1971.

In another party, these faults may have been overlooked or ignored: after all, the Liberals won power in 1993 on a platform that made little economic sense. But since few really expected the Liberals to actually keep their promises (Sheila Copps excepted), it didn’t really matter much. We’ve become accustomed to newly-elected governments making – after a decent interval – rueful announcements that things were worse than they thought, and they they’d not be able to carry out their promises.

But the NDP is different: it sees its platform not just as an instrument for getting power (and which can be discarded once it’s done the job), but as an agenda for what it would actually do if it got into power. So it’s lack of credibility isn’t entirely based on the fact that it was promising to do dumb things – the other parties have also promised dumb things for electoral gain. The problem was that the NDP – being comprised of a class of politicians with generally more integrity than that found in the other parties – would have felt honour-bound to actually implement them.

Since the NDP hasn’t been able to receive the crash course in reality-based economics that the Department of Finance offers to new governments, it’s been forced to work through some difficult material on its own, and not always with success. For example, their analysis of corporate tax policy has often bordered on the crude and cartoonish.

But it was different this time. It’s probably a mistake to focus too much attention on Paul Summerville, the former chief economist for RBC Dominion who came in third in the Toronto riding of St. Paul’s, but he represents an encouraging development. Especially since it appears as though the NDP is listening to what he has to say.

In 2004, the NDP campaigned against the GST and wanted to raise corporate tax rates: a combination that leads in the exact opposite direction than where they say they want to go. This time around, the NDP promised to leave the tax structure alone. One suspects that this represents a compromise between Summerville and traditional NDP strategists, but it’s definitely progress.

What struck me most was this passage in the NDP platform (52-page pdf):

The NDP will support a careful review of federal tax policies to assess the utility and timeliness of “smart incentives”, including: accelerated depreciation rates for capital investment; incentives to develop environmental technologies; harmonization of the federal capital tax rate; harmonization of federal and provincial tax and regulatory policies; and incentives to promote workforce training.

There was a time when the NDP would have denounced such measures in no uncertain terms; the word ‘loophole’ would almost certainly have been used. But if the NDP realises that tax policy does have incentive effects, and that those incentive effects can be instrumental in increasing fixed business investment, then it has already made significant progress over the past two years.