The Liberal Party today is the short skinny guy on the carnival midway beaming happily at his reflection  in the funhouse mirror. The tall buff giant shining back at him is his perceived reality. New Democrats, too, have issues with reality. The traditional also-rans of federal politics have ballooned into the Conservatives’ real opponent. Yet they continue to struggle with the changed expectations and responsibilities of their new role.

In the midst of an unexpected leadership contest, they are also struggling with the dramatic changes that winning the May 2 political lottery has meant. As one senior NDP staffer put it somewhat forlornly halfway through their less than stellar fall session of Parliament, ”œWe were unbeatable as a fourth party at creating news and staging stunts; as number two, as a serious Official Opposition, well…”

Canadian Liberals have traditionally seen the political landscape as a Venn diagram with three intersecting balloons. An enormous red balloon dominated the centre. A smaller blue balloon overlapped from the right, and a tiny orange balloon intruded on red territory from the left. Not only did the Liberals occupy most of the diagram, their political convictions were also everyone’s conventional wisdom. Until about 1983, that was not a delusional portrait of Canadian politics.

Today it surely is.

From Conservative and New Democratic perspectives " and their visions are curiously aligned " the political map looks very different. They each see two large balloons stretching from the borders, nearly touching in the centre. Between the blue and orange giants, squeezed into a cigarshaped sliver, is the collapsing red balloon. This, too, is aspirational, to use the fashionable term; in more conventional vocabulary, delusional.

Self-perceptions drive political behaviour, even when the image in the mirror is a hilarious distortion to onlookers. That is what causes Liberals in convention to cheer hysterically when Dalton McGuinty tells them, half a dozen times in a single speech, that only Liberals can save Canada’s health care system, create green jobs and put a chicken in every pot. They revel in this somewhat insulting delusion, in spite of the party’s current polling guru, Michael Marzolini, cautioning the party publicly " on the eve of the convention " that it is precisely this overweening arrogance that remains one of the party’s biggest electoral boat anchors.

Many New Democrats genuinely believe that the Canadian media are tools of the old-line parties and corporate Canada. One hears this delusion expressed constantly among activists despite visible evidence, and much academic research, indicating that Canadian journalists, like their cousins around the world, are predominantly antiestablishment, cultural lefties who take a dim view of business and politicians as well as of their own bosses and owners. So when the party receives scant attention for its boring leadership race and amateurish debates, run as John Ivison brutally put it ”œas if it were a race for a local Rotary club presidency,” it is merely vindication of this truth in party members’ eyes. Any reasonable outsider’s analysis is that journalists, like the rest of us, are lazy. They follow closest the shiny bauble. Parties and politicians expert at making news know how to dangle them.

It is so long since federal New Democrats have enjoyed this first-tier status " briefly in the late 1980s " that their new status still feels a little unreal. The appointment of a seasoned trade union executive, Nicole Turmel, as interim party leader, like the Liberal’s anointing of Michael Ignatieff, has been one more proof that lateral skill sets in academy, corporate or trade union life rarely translate well to political leadership roles, without at least some apprenticeship.

For most party activists, and even many caucus members, the possibilities opened by Jack Layton’s explosion into superstardom as the most popular Canadian political leader were barely being contemplated before he was suddenly gone. The aftershocks of his death still ripple through the party all these months later. The painful daily angst of many New Democrats assessing their leadership choices and the performance of the hastily installed interim caucus front bench show what a yawning vacuum Layton’s tragically brief period as Opposition Leader has left.

Older, wiser heads try to soothe the increasingly anxious young caucus members and party activists by reminding them that Layton was a two-time loser in his bids to move up from Toronto City Council, and that less than two years before his run for leadership, whispers about his likely exit from municipal politics were rife. He had no seat " indeed, he had been crushed in his attempt to win one " and had virtually no caucus support when he announced his bid for leader. His first election campaign as leader was decidedly mixed in both performance and outcome. But fates change dramatically on the greasy pole of political life.

One suspects that the New Democrat’s new leader " unknown at this writing " will quickly right the partisan ship and begin to shape the status of the parliamentary players in terms appropriate to their size and rank. Unless by some horrific fluke of politics the party elects one of the second-tier candidates, each of whose campaigns have amply demonstrated they are not ready for prime time, the next leader will arrive on a wave of goodwill and anticipation. Dewar, Nash and Topp have different strengths, but none is a Stéphane Dion.

If former Quebec Liberal Thomas Mulcair overcomes the deep antipathy toward him among the party activist base, he will have received an Ed Stelmach-style mandate, not necessarily a recipe for party harmony. Nathan Cullen ”œcoulda been a contenda” if he had not chained himself to such a foolish mast as the promotion of party mergers.

In the Liberal camp, there is cautious optimism about Bob Rae’s seasoned performance as an old political pro and about the party’s slow, steady rise in the polls. But harsh realities intrude here as well. As grudging as the growing acceptance that Rae is the inevitable new leader may be, there is also a wide recognition another caucus-anointed leader would be a disaster. When Rae steps down as interim leader next fall, as is all but certain, who will make the pointless gesture of standing against him, to ensure that there is a leadership contest?

Justin Trudeau and Dominic LeBlanc have taken themselves out of the race. The only other likely caucus challenger is David McGuinty, dismissed by most of his colleagues as simply ”œthe wrong McGuinty.” Outsiders like Martin Cauchon and other names from the Liberal’s happier days past are regularly floated. But each runs into the wall that leadership campaigns cost a lot of money. As New Democrats are discovering, when you can’t borrow campaign funds from your brother-inlaw and you have to compete with the party’s own fundraising efforts, funding a leadership campaign is not easy. Two of the 2006 Liberal candidates are still carrying campaign debts from that campaign six years later.

But the cruel reality is that Rae has a 35 year head start over his younger potential challengers in honing his craft. And he will have had an 18-month head start as a successful party leader before he steps down. Rae has access to money and organization as well as wide support among seasoned political journalists. Rae’s Ontario baggage, from his 1990-95 premiership at Queen’s Park, continues to fade over time. As his supporters mutter quietly, his recession deficit nightmare looks positively trivial when compared to the current Ontario government’s $250-billion debt load, sliding economy and mounting hostility on the public-sector labour front.

As one grumpy Ontario exMartinite put it, ”œI still grind my teeth at the prospect of him as leader, but let’s face it, the choice is between Bob and the pygmies.”

A year is an eternity in politics, but it seems likely that early in 2013 the NDP’s leader will have begun to earn his/her spurs as a real competitor, and that Bob Rae will be handed the torch to take the revival of Canada’s battered Liberals to the next level.

The quiet conversations among non-conservative Canadians about how to prevent a Harper re-election will have already been ongoing through last summer and fall. As in most important developments in political life, those who know won’t be talking about the players or the permutations being discussed. Many punditi, who won’t know, will be talking. In politics, timing is all, and the time for the discussion of rapprochement on the centre-left will only be when each player has a mandated leader to designate lieutenants to conduct the dialogue.

This political reality was sadly lost on Nathan Cullen. Why he thought he could run for leader and at the same time defend the proposition that New Democrats in many ridings would be forced to vote for Liberals caused much head-scratching among party activists. There are few partisan activities more tribal and clan-like in their rituals and vocabulary than a leadership contest. Offering as your main plank the idea that members of the hated tribe next door should be welcomed as brothers and sisters is kind of like extolling the virtues of the enemy as you seek a mandate to lead your soldiers into combat. Not recommended.

There are few partisan prerogatives more jealously guarded than the freedom of the local party members to choose their own candidates, as many a leader attempting to parachute a friend into the heavy fire of partisans from an unwelcoming local riding has discov-ered. Brian Topp wisely demurred from offering himself to Toronto Danforth, when locals pointed out that they alone had the right to choose. Danforth Liberals resisted their party heavies’ efforts to slide a fading Liberal political star into their candidate slot. For Cullen to suggest that party elders on both sides would designate ridings where one progressive candidate would be selected is naïve enough. For him to suppose that there would not be an explosion of ”œReal Liberal” and ”œIndependent New Democrat” candidates as a result is enough in itself to disqualify his claims to leadership.

It is of no comfort to his failed campaign that he was right.

The arithmetic of Canadian politics is now as brutal and unyielding on the left as it was a decade ago on the right. Four against one in a first past the post system means the one wins every time. As a short-lived former prime minister who was also right but similarly boneheaded in her badly timed pensée said, leadership contests are not the time for debating party merger terms. Kim Campbell was right about issues and elections. Nathan Cullen and his curiously wrong-footed senior strategist, former Layton chief of staff Jamie Heath, should have seen the connection.

So as the MPs return from their Easter break, a new parliamentary balance will soon become visible. The government that has treated the House as a sideshow will be drawn into a painful and difficult defence of its budget bills against an NDP comfortable fighting on its own turf " pensions, health care " and on behalf of the powerless Canadians who always feel the cut of austerity campaigns first and worst. The party will emerge from its year in sackcloth and ashes with a new leader, a new mandate and probably a new confidence as a result.

Liberal Party insiders will still be muttering thankful prayers that their convention ducked the lunacy of a nationwide party primary system. They will still need to grapple with how to implement this strange notion that ticking a box on a Web site should give you a vote for a Liberal candidate. Presumably Ezra Levant could claim to support liberal values if you include such ”œliberals” as BC premier Christy Clark’s new chief of staff, Ken Boessenkool, or the economic liberalism of Nicolas Sarkozy.

Snide commentary from the punditi about liberal interpretations of ”œliberal values” notwithstanding, such a system does present the party apparatchiks with some serious challenges. Zero-contribution new members cost a lot more than zero to service. Converting them to useful activists and donors will cost money.

If mischievous New Dems and Tories do sign up in tens of thousands, not only do they put a large strain on the party machinery, they could also put a thumb on the scales of any nomination contest. The sudden recrudescence of Liberals for Life in the Toronto Danforth nomination contest caused some Liberals to wonder where the money and organization had come from. If their incendiary pro-life candidate had been able to seize the nomination it would have been an enormous embarrassment for the party.

Each party will sort out its challenges with internal organization, leadership selection and finance with whatever degrees of professionalism it can muster. But even a newly minted NDP leadership star or a leonine Bob Rae in his prime will not put a dint in the Harper administration without new and better political material, without a more compelling narrative for their base.

As one somewhat embittered and demoralized progressive political activist, a veteran of governments in the 1990s, put it, ”œWhat are we going to offer our base? Everything they were promised about the benefits of globalization, free trade and tax cuts has turned to ashes! Every one of them can legitimately feel we failed them, that we did not make their lives better, but worse. When the Tories come along and say, ”˜You may not like us, but you know we will deliver on what we say,’ of course many of them listen.”

The collapse in confidence in the progressive narrative about social mobility, the role of the state in guaranteeing opportunity, does not mean voters are persuaded by the hard-edged ”œevery man for himself” rhetoric of American Republicans. It does mean they have lost faith in progressive promises as their incomes stagnate and their kids wander from one low-pay and insecure job to the next. Voter abstention and Conservative growth among the poor, the less educated and new Canadians " traditionally core NDP and Liberal voters " is clear evidence that they are disillusioned with their traditional political choices.

Progressive political parties in the developed world are today at a crossroads.

The golden years of growth, recon that marked the postwar era in the developed world still overshadow political discourse and government decision-making. Those three decades ended with the 10-fold explosion of oil prices in 1973. As always, the impact was not immediately obvious, and the acceptance that it was a new world took several years. The excesses of those years provide fuel for the conservative narrative a decade later.

By the time of Margaret Thatcher’s election in 1976 a new conservative consensus supplanting the liberal/social democratic orthodoxy of the Golden Decades was beginning to gel. By Ronald Reagan’s arrival five years later the battle was nearing an end: government was too big; markets thrived and would deliver more with less regulation; and lower taxes increased jobs, revenues and social mobility. This was the new political meme.

For the next three decades privatization, massive shifts in tax burdens from direct to indirect taxation and from corporations to individuals, and dramatic reductions in financial regulation and the collapse of national and technological boundaries in that sector led to several booms " and busts. Despite increasingly desperate fight-back efforts by centrist progressive politicians like Bill Clinton and Tony Blair and bankers and regulators such as Joseph Stiglitz and Dominique Strauss-Kahn, " conservative even Ayn Rand-ian " orthodoxy was dominant in the capitals of the developed and much of the developing world.

The conservative golden era ended with an explosion even more destructive than the oil shock. The first cracks were obvious in the spring of 2007, three decades after Mrs. Thatcher’s famous ”œthere is no alternative” speech. Her claim was that the accommodationist style of her Conservative predecessors was almost as sinful as the ”œsocialist ideology” of the democratic left. Her denunciation of Ted Heath, European Christian democracy and liberal Republicanism is echoed even now in the speeches of Newt Gingrich as he slashes the ”œGOP establishment.”

The ideological rigour of modern conservatism is more rigid and blinkered than the more querulous and sometimes cowardly policy stances of a generation of liberal and social democratic governments in the first Golden Era. The failure of progressive politicians to grasp serious policy contradictions in that comfortable era was masked by gushing public revenues and apparently endless 5 to 7 percent growth.

Modern conservatives have had to manage a far more challenging policy environment, with recessions in 19741976, 1981-82, 1990-91 and then the complete collapse of 2008. They have not blinked at the contradictions in running up massive deficits or the deepening poverty of a permanent social underclass. In Dick Cheney’s famous comment, ”œRonald Reagan proved that deficits don’t matter.” This is not so obvious today, as central bankers and politicians in Europe and American cities grapple with crippling levels of public debt.

Each orthodoxy had to fight rearguard resistance even in their prime. The social democratic consensus inaugurated by Roosevelt, made possible by war and then nurtured by growth, still had to fight serious anti-communist backlashes throughout the 1950s. The modern Conservative narrative has faced consistent attack from mainstream academics and the media. Reaganism was excoriated endlessly by the American liberal establishment until Clinton’s arrival more than a decade later.

Today we are in the midst of one of those periods of head scratching, nostalgia and academic backbiting over policy directions. Is the path forward a tougher fiscal austerity, or more stimulus? Can the state really pull off directed recovery projects like the successful auto bailout more broadly, or was that unique? Can further corporate tax cuts really prime investment, or does the tax expenditure merely further cripple governments with debt?

Free market and conservative thinkers are worried about the future. The Financial Times runs a series on the ”œcrisis of capitalism”; thoughtful conservatives in Europe and America publicly fret over the impact of growing inequality; Newt Gingrich confounds orthodoxy by attacking the ”œcorrupt congressional and crony capitalism” of his own party!

We are at another one of those hinge moments like 1947-48 when an earlier Greek crisis provoked the Marshall Plan. If Robert Taft and the congressional Republicans of that generation had prevailed " and they nearly did " European reconstruction would not have been given a massive injection of capital, the economic miracle would not have taken place in West Germany and the political shape of Europe might have been very different.

We are at a moment like 1979-80 when the IMF and the World Bank, staunchly supported by Washington, Bonn and London, imposed tough fiscal restructuring on governments in the OECD and the developing world, when sovereign debts were allowed to skyrocket and a tectonic plate shift of globalization was triggered.

So after three decades of social democratic consensus, followed by three more of conservative economic dominance, we sit on the cusp of another generational change. The status quo will not hold. The Great Recession’s discredit of the conservative policy recipe is too broad, too deep and now too long lasting for that political agenda to survive without major change.

The problem for progressives is that they have little credibility in proposing unique alternatives in this latest period of crisis-led change. A new Greek crisis is forcing Germany to play an unwelcome role it has successfully avoided since the war: enforcer. Personal and public debt levels make either a consumer-led or a stimulus-led recovery model problematic.

Voters may not be happy with the consequences of stagnant markets on their jobs and their retirement plans, but they see little reason to believe that centre-left politicians will do any better job than centre-right politicians in managing a path out of the crisis. Indeed, partly as a result of conservatives’ deep associations and networks in the business community locally and globally, they are seen to have more credibility in at least arguing that they will not make it worse, that they are in a better position to nudge business into hiring and investment.

It has been orthodoxy among successful progressive politicians that have prevailed during the conservatives’ golden era that the only path to success has been to triangulate, to split the difference between traditional liberal stances and those of free market economists. For some time it appeared as if Blair, Clinton and most recently Barack Obama were proof of this assessment.

The length and depth of the current crisis is causing some normally more cautious media, academic and political thinkers to suggest it is time for a new vision, for a bolder set of steps to stop the slide into more unequal, more rigid societies in the advanced democracies.

Some of these thinkers focus on the need for the state to play the role it did a century earlier in forcing acceptance of compulsory elementary public education and for today’s government to fund and ensure the quality of universal daycare and pre-kindergarten access, combined with much broader apprentice and skills training programs, and a college system assessed for performance, not merely graduate numbers.

Others focus on the need for major new funding for infrastructure spending in transit, housing, green energy, leading edge industrial research and the manufacturing and high-value service industries they support. The conventional wisdom that Japan and Germany are certain losers to demography and cost pressures is being challenged by those who point out that Germany still leads in heavy industrial exports and Japan continues to dominate precision manufacturing processes in technology.

Conservative derision about these ”œtired, big government, tax and spend liberal fantasies” notwithstanding, each political camp faces sobering realities about their failures in the face of their societies today.

Across the world, inequality is growing, faster than it has in a century. The last time that happened the result was the bloody horror of many 20th century wars.

Economists are unanimous that unequal economies are less productive and less innovative than ones with greater social mobility. If wealth abrades empathy, inequality collapses trust. Together they rip social cohesion. The costs of poverty are visible in all the usual indices of social decay: fatherless families, school dropout rates, domestic and drugrelated violence, and long-term unemployment, especially among the young.

It may be possible for conservatives to argue " for a few more years anyway " that these are merely transitional consequences of the clean-up from years of liberal spending excess.

Canadian Liberals and New Democrats bemoaning the pain that Conservative austerity inflicts on the poorest and most powerless are not likely to win back unhappy poor voters, let alone the frustrated middle class.

For those disillusioned voters it is not enough to be appalled by the social, environmental and, eventually perhaps, the global and community safety costs of conservative economic orthodoxy.

Until they can articulate a credible vision of an innovative 21st century social market economy, one that supports rising equality in a healthy liberal democracy and one that successfully competes in a global economy, progressive politicians will continue to hand their right-wing opponents a free pass at government. It’s time to give up the comforting illusions of carnival mirror politics.