In 2005, it’s not the economy, stupid. Contrary to James Carville’s famous U.S. campaign doctrine in 1992, it’s hard to imagine that economic issues will play a dominant role in the federal election campaign this time around.

By all the macro indicators, Canada’s economy is in pretty fine shape. Unemployment is at a historic low, inflation is tamed, and the federal budget is firmly in the black — giving the Liberals ample fiscal room for all those pre-election announcements (and the opposition parties just as much space for their own goodies). Usually, all this would lead to two immediate conclusions: (1) The economy won’t be an issue; and (2) the Liberals will have economic wind in their sails.

Lurking under this seemingly placid macroeconomic surface, however, are some turbulent and challenging economic problems that could conceivably show up in the campaign. Here are some “sleeper” economic issues that just might rear their heads over the next six weeks:

Plant closures: The overall jobless numbers look good, but an awful lot of pain is being felt in Canada’s industrial heartland. We’ve lost 150,000 manufacturing jobs in a year, thanks mostly to the soaring loonie and our growing trade deficit with Asia. And a wave of plant-closure announcements has heightened the insecurity felt by rank-and-file voters in most of the country.

There’s an eerie parallel here to the Ontario election in 1990 — which, incidentally, was the last time our dollar surpassed 85 cents U.S. The then-ruling provincial Liberals took it on the chin, due to a wave of shutdowns that swept the province right alongside the campaign buses. But, this time, the industrial downturn could hurt the federal Tories even more, given their knee-jerk opposition to government aid for struggling sectors. Their loyal support for the rule of markets, no matter the human costs, could cost Tory seats in ridings from Oshawa, Ont., to Prince Albert, Sask., to Vancouver Island.

Free trade: The Liberals have been talking tough with Washington, to their full political advantage. At the same time, however, they’re pushing full speed ahead to negotiate NAFTA copycat agreements with Asia: first South Korea (a deal that could be done by summer), then Japan, and then China.

Anyone who complains that the Americans haven’t lived up to the letter or the spirit of NAFTA should get ready to meet the Koreans. They use flexible, behind-the-scenes measures to keep imports out, while ramping up their own exports year after year. At least in the softwood lumber dispute, we could see what the Americans were doing to us; with Korea, we won’t even know. Eventually, another minority Parliament may be the only thing that can stop this one-sided version of “free trade.”

Pensions: Bank of Canada Governor David Dodge recently reviewed the structural challenges facing our occupational pension plans. Millions of Canadians, wondering if their pension will be there when they need it, share his concerns more personally. Here, too, the Tories’ predisposition to support private-market solutions (like the old Reform proposal to convert the Canada Pension Plan into individual RRSPs) will hurt them. On the other hand, the NDP could solidify its traditional core blue-collar vote with a promise to prioritize stronger pension protections under another Liberal minority.

Productivity: This big-picture economic challenge has attracted wads of expert prognostications over the past couple of years. But it won’t resonate in an election campaign: The issue is too abstract, and has been interpreted (so far) as just another call for more business tax cuts. That will never get popular traction. Since 2001, business taxes have already been cut deeply, yet Canada’s productivity growth has stalled entirely. Despite that, the Liberals promise more corporate tax cuts, and the Conservatives egg them on. To their credit, the Liberals have taken other measures that will more meaningfully boost productivity growth — substantially expanding public R&D, and leveraging high-tech private-sector investments.

There’s an indirect way, however, in which the productivity debate nicely sums up the strangely joyless state of Canada’s supposedly prosperous economy. Canadians work harder and longer than they ever have. They have more skills, and a stronger work ethic, than ever. Yet their incomes are stagnant, and their jobs are at risk. All that’s a recipe for a populist backlash. And who knows, one might even show up.Canadians work harder and longer than they ever have. They have more skills, and a stronger work ethic, than ever. Yet their incomes are stagnant, and their jobs are at risk.

Jim Stanford

Jim Stanford is economist and director of the Centre for Future Work, and divides his time between Vancouver and Sydney. He has a PhD in economics from the New School for Social Research in New York,...