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Moving Towards Proportional Representation Will Come at a Price

Release Date: September 29, 2005
Electoral reform is becoming a prominent issue in Ontario. Last week, the Ontario Government’s Select Committee on Electoral Reform began a series of consultative meetings to review the viability of alternative electoral systems. Thus far a number of groups including the Ontario Green Party, Fair Vote Ontario, Equal Voice, and the Canadian Taxpayers Federation have made submissions for reforming the way in which Ontarians elect their politicians.

Surprisingly, in one way or another, each of these groups has recommended a move towards greater proportional representation. These unlikely allies have all advocated a system where there is a closer relationship between the percentage of the vote a party receives and the number of seats it wins. Unfortunately, these advocates of greater proportionality tout the benefits of proportional electoral systems without addressing the substantial costs. If Ontarians are to make an informed decision, they must fully understand both the benefits and the costs of changing their electoral system.

One of the effects of greater proportionality is to increase the number of political parties vying for power. Most often, the result is that two to three major parties emerge with a host of smaller parties. Coalitions become the norm rather than the exception.

Proportional electoral systems transfer power from the main parties to smaller parties. In coalition governments, smaller parties are able to exert influence well beyond that afforded them by the electorate because the main parties are forced to broker deals with smaller parties in order to form the government and/or pass legislation. Electoral systems favouring more proportionality generally result in transfers of political power from the larger parties that receive substantial electoral support to smaller parties that garner much less electoral support.

It is this need to broker coalitions that leads to what is perhaps the single greatest cost of more proportional electoral systems: higher levels of government spending and taxes. The economic intuition underlying such an argument is quite straightforward; the main party is forced to appease the coalition party or parties through spending initiatives, regulatory programs, and/or tax measures.

There is a growing body of research, best represented by a series of studies completed by scholars Torsten Persson and Guido Tabellini, which shows a clear link between the method of electing politicians (as well as the political governance system) and fiscal performance, specifically the level of government spending and taxes.

The Perrson and Tabellini research, which culminated in a 2004 article, “Constitutional Rules and Fiscal Policy” that appeared in the prestigious American Economic Review, examined 80 democracies in the 1990s along with a smaller panel of 60 democracies between 1960 and 1998. Their results indicate that political constitutions (elections and form of government) have a causal effect on fiscal policy (government spending, taxes, and deficits). With regard to electoral systems, Persson and Tabellini find that “A reform of the electoral rule from majoritarian to proportional would increase [government] spending by about 6 percent of GDP, financed by higher taxes and deficits in similar proportions.”

The Persson and Tabellini work confirms earlier work by other scholars finding similar results. Namely that electoral systems that lead to more political parties and the need for coalition governments result in more government spending and higher taxes. This basic economic intuition is now backed by solid empirical evidence.

Despite this research, some have argued that forcing parties to work with other political parties yields better political outcomes. Such a view completely ignores the fact that the imposition of proportional electoral systems does not create the need for coalitions but rather transfers coalition building from within parties to between parties.

Political parties like the Liberal and Conservative Parties are currently forced to build coalitions within their ranks in order to garner enough electoral support (votes) to form a government. The Liberal Party, for example, maintains multiple groups of interest under its broad umbrella, including a pro-business wing, a more socially-focused wing, and an environmental wing. Enacting proportional systems of elections simply removes this coalition building function from within the parties to between them.

Advocates of a more proportional system of elections are correct in arguing that proportional systems better match seat allocations with votes. However, Ontarians must understand that such a change is not costless. There are significant costs associated with implementing electoral reform based on greater proportionality. Those risks include more and smaller political parties that necessitate coalition governments, which in turn typically result in higher levels of government spending and taxes. Ultimately, citizens must decide whether such costs are worth the benefits of greater proportional representation.