Is a Liberal and NDP Coalition Inevitable?

Poor Justin Trudeau. During his infamous coalition flip-flop, he looked like a deer caught in the proverbial headlights. He just didn’t know which way to run. He’s still in the spotlight, and will be until he tries again to navigate the most vexing issue he is likely to face in the next six months of electioneering.

He and his brain trust know that this question is not going to go away. It’s going to hang over his head right up until the election. The civil society groups and others who cannot bear to even imagine another Harper government will continue to up the ante, and his dodging and bobbing will wear thinner and thinner.

The NDP’s Thomas Mulcair doesn’t much like the idea of a coalition or accord with the Liberals either, but he was smart enough to get on the right side of history on this issue precisely because he knew it wasn’t going away — especially amongst NDP voters. After showing little interest for ages, the New Democrat leader recently stated he was open to an agreement of some kind without specifying an accord or a coalition, pre- or post-election.

The advantage for the moment is distinctly Mulcair’s, as he gradually roles out policies which distinguish the NDP from the Liberals and the Harperites. The “interrogator” is already a superior politician. With a package of bold (or at least principled) policies, he could put Trudeau increasingly on the defensive.

If he is looking for some steel to put in his spine in this regard, he need look no further than the amazing rise of Rachel Notley in Alberta. Notley is in a dead heat with her rivals. And she has done it with policies the pundits have long claimed would be a death wish: reviewing royalty rates for oil and gas, withdrawing support for the Northern Gateway pipeline, freezing tuition fees, and increasing corporate taxes.

If Notley can pursue these policies in arch-conservative Alberta without being pilloried, then why can’t Mulcair capture voters’ imagination nationally with the same approach?

If the NDP is to do well, it has to capture a chunk of the progressive vote that historically went to the Liberals. Mulcair has made a start with his pledge to raise corporate taxes, to tax CEO stock options as normal income, oppose the Secret Police Act (Bill C-51), establish a $15 minimum wage, oppose the Northern Gateway pipeline and recommit Canada to a new Kyoto-type accord on climate change.

The more Mulcair follows this progressive track, the more Trudeau will eventually be forced to follow suit in order to keep his left flank intact. When — not if — Trudeau makes some strategic policy moves to undercut NDP progressive initiatives, he will also be eroding his only serious rationale for rejecting an accord: “There’s too many big issues on which the NDP and Liberal party have deep disagreements.” He goes on to mention trade, economic growth and the constitution differences over Quebec.

The only decisively different position is on Quebec. On trade, both leaders (regrettably) support most deals, but Trudeau supports the nefarious investor state provisions (allowing corporations to sue governments for lost profits) in CETA and other agreements, while Mulcair opposes them. This is the very feature which is now threatening to scuttle CETA, and Trudeau may have to reconsider his position.

But whatever the differences on these points, there are plenty of big issues on which the NDP and Liberals could co-operate — enough to form the basis of a post-election accord. For starters, there is one leftover from the Martin government that Trudeau might have trouble rejecting: a national child care program.

And there are others from the 2008 coalition agreement that should still form the basis of co-operation:

  • “Accelerating existing infrastructure funding and substantial new investments, including municipal and inter-provincial projects…
  • “Investing in key sector strategies…
  • “Facilitate skills training to help ensure Canadian workers are properly equipped to keep pace with the rapidly changing economy…
  • “We will work with our North American Partners to pursue a North American cap-and-trade market…”

There is very little separating the NDP and Liberals on these key policy areas. Indeed, the Liberals recently acknowledged that they might move away from the balanced budget obsession of the Harper Conservatives. In what seemed like a trial balloon, senior Liberals lauded a Toronto talk by Lawrence Summers (former head of the World Bank and Clinton’s treasury secretary) where he pitched the notion of “inclusive prosperity” — an overt attack on the austerity policies of Western governments. Trudeau and Mulcair are already in agreement on scrapping Harper’s income splitting and reversing the increase to the Tax Free Savings Account.

So the argument that the two parties are too far apart on key policies will become increasingly difficult to maintain, and the more Mulcair pitches the accord proposal (if he does), the more Trudeau will look like he cares more for his party than he does about ridding the country of Harper. Recent polling puts public support for a coalition at 74 per cent.

If the Liberals win a plurality in October, it is unlikely that any kind of formal agreement with the NDP is in the cards. But the outcome might look the same in any case. The Liberals always run from the left and — if they win a majority — govern from the right. But running from the left and gaining only a minority makes governing from the right much more difficult, especially when another significant party shares many similar policies as the NDP will.

The most interesting outcome, however, will be a narrow Conservative plurality and a minority Harper government. This outcome will beg for a vote of non-confidence and a coalition government of some description early in the new parliament. The legitimacy of such a move will be obvious. In 2008, there was a major barrier to the legitimacy of a coalition: the Conservatives were ascendant — gaining seats from the previous election, and the Liberals had taken a beating.

The idea of Stéphane Dion, the clear election loser, becoming prime minister was an easy target for Harper. But this time around the Conservatives will have lost seats and the Liberals (now at 33) will likely have tripled theirs. That makes a non-confidence vote and the formation of a new government far more legitimate. Then the question will rest on how badly Trudeau wants to be prime minister.

The coalition scenario is Trudeau’s best shot at becoming PM. If Harper wins a minority and Trudeau is leader of the official opposition, all his weaknesses will be on display: his intellectual shallowness, his wooden performance, his lack of believable passion on any issue. The longer Trudeau remains in that position, the more the Liberals risk losing ground to the Conservatives (with a new leader?) as they approach the next election. Trudeau will not want to be the third Liberal leader in a row to fail to become PM. He will need Mulcair to secure that post even if he is loath to admit it.

The best possible configuration after Oct. 19? Barring an NDP minority government, the best case scenario is as many NDP seats as possible. The more seats the NDP has, the more likely the coalition/accord scenario becomes. That, of course, will be up the NDP to achieve, and as the fear and loathing of another Harper government looms large they will be forced to play the coalition card ever more prominently. Polls this week have already seen the NDP draining support from the Liberals and show growing support for a coalition to supplant the Conservatives. The two results may well be connected.

What is maddening about our “democracy” is that ordinary citizens — who should determine their future — feel completely powerless to affect the change they want. But it doesn’t have to be that way. A number of civil society groups are putting unprecedented work into strategic voting efforts this time around. Prominent among them is Leadnow, a bunch of young, tireless, smart activists (with 400,000 followers) who are collecting pledges from thousands of Canadians — “people who have voted NDP, Liberal, and Green, first-time voters, and even some unhappy Conservative voters” — to work to elect the candidate with the best chance of beating Conservatives in swing ridings.

Leadnow founder Jamie Biggar states: “We’re showing the parties how people can work together across party lines for the common good, and we’re cooperating to overcome our broken first-past-the-post electoral system by voting together to elect the best local candidates who can defeat the Harper Conservatives.” History is made by those who show up. Tired of being on the sidelines? Sign the pledge.

Corporate Greed? Enough Already

A news story this week blandly described the perverse reality that is the current state of the Canadian economy. The headline read “Corporate profit margins at 27-year high and likely to stay there.” Pretty heady stuff if you took it out of context. But the context is everything: pathetic growth projections, record high personal debt, stagnating wages, hundreds of billions in idle corporate cash, a multi-billion dollar infrastructure deficit, a growing real estate bubble and a Bank of Canada chief who has no idea how to fix things. And, of course, a prime minister who thinks fixing things is heretical.

The headline describes the conclusion of a report by CIBC World Markets the gist of which is that not only has the profit margin hit a 30-year-high of 8.2 per cent (the historic average is less than five per cent) but the signs are that it is going to stay there: “profit margins are fully supported by the fundamentals.”

Ah, yes the fundamentals. The study doesn’t purport to make any ethical or moral judgments (or even economic ones for that matter) — it just states the facts. Indeed it doesn’t talk about the context of those facts at all, nor that this hyper-profitability might indeed be bad for the economy in general, for growth, for employees, families and governments. It’s as if the fundamentals were somehow God-given, having fallen from the sky.

But of course “fundamentals” don’t fall from the sky, they are the result of the actions of governments, corporations, individuals and other agents — some random, some planned, some unpredictable — like the crash in oil prices. Economists love to talk about fundamentals, but in this case they are related to a structural change in the profit rate: that is, a permanent shift from the below five per cent level to over six per cent — a 20 per cent increase. The key fundamentals, says the report: “globalization, innovation, lower cost of capital, high barriers to entry, and reduced bargaining power of labour…”

The report points out that the crashing Canadian dollar is a big factor but for the economy as a whole, for Canadians’ standard of living and for future investment it is the last item that matters: the “reduced bargaining power of labour.” Wages and salaries have been flat literally since 1980 and personal debt has tracked upwards in parallel as inflation ate into disposable real incomes. This is not sustainable for any functioning capitalist economy that depends on growth to survive.

Here are some of the consequences of a continuing high-profitability/slow growth scenario:

  • The rich will continue to get rich and income and wealth inequality will continue to grow. Stock prices will continue to rise, as corporations accumulate more and more idle cash, dividends will increase. According to the IMF Canadian corporations are accumulating “dead money” faster than in any other G7 country.
  • As increasing amounts of the wealth created every year accumulates in corporate coffers, personal debt, now at a record high of 163 per cent of annual income, will continue to rise increasing the already bloated profits of the big banks.
  • Corporations exist to make profits, not to invest for the sake of investing. What is the motivation to invest if your profits are at record levels and the bargaining power of labour remains low? According to the CIBC report, “No less than one third of Canadian GDP last year was produced by sectors with falling labour unit costs.”
  • With corporations relying on falling labour costs there is even less incentive to invest in innovation, training, or new equipment and technology to increase productivity.

Those costs — a reflection of labour’s weakened bargaining power — are not likely to increase anytime soon. The labour participation rate (the number of employable people working or looking for work) is at its lowest since 2000 — providing a reserve of workers that will continue to suppress pay. The economy produced fewer jobs in 2014 than at any time since 2009.  At the same time, corporations are on a binge of hiring part-time to avoid paying benefits. Partly as a result, Canada has the second highest percentage of low-wage jobs in the OECD.

Another CIBC study revealed that job quality is at its lowest level in 25 years. The bank’s job quality index has fallen 15 per cent since the early 1990s. The index “examines the distribution of full- and part-time positions, the gap between self-employment and the higher-quality jobs for paid employees, and whether full-time jobs were created in low-, medium- or high-paying sectors.”

Perhaps the key observation made by the report’s author, CIBC deputy chief economist Benjamin Tal, was that “The findings reveal a descending path in labour quality, a gravitational pull the study’s author warned will persist unless it’s addressed.”

Addressed by whom? He doesn’t say. But like any other economist, he clearly knows the answer. The structural nature of low quality, low paying and insecure work is not an accident of nature — it is the result of both corporate practices and government policies.

The so-called “labour flexibility” policies of the 1990s are still in place: the slashed accessibility to Employment Insurance, impoverished social assistance programs, and the abandonment of labour standards enforcement. Rather than addressing the issue of low job quality, the federal government has been exacerbating it with the Temporary Foreign Workers Program (TFWP), allowing hundreds of thousands of young people to work for nothing as so-called “apprentices”, and making commitments in trade agreements to allow companies to bring in skilled workers with none of the “red tape” involved in the TFWP.

Even though the TFWP rules have been abused, at least under that program there is supposed to be an assessment of whether Canadians can do the job before a foreign worker is brought in.  Under trade agreements, corporations have been guaranteed the right to outsource high paying jobs to foreign workers without any such assessments. According to the government’s own data, most of the foreign workers in Canada are here without any responsibilities placed on their employers to prove they tried but failed to find Canadians to do the job. For example, only one of the 14 jobs in the infamous Royal Bank example — where Royal Bank workers had to train their replacements from India — were brought in under the TFWP. The rest are likely to have got their positions through the intra-company transfer visas provided for by trade agreements. While the jobs outsourced through the intra-company transfer program are referred to as “temporary,” clauses in the program allow them to stay for up to seven years. The motivation appears to be pure greed: displacing highly paid Canadian employees with much lower paid foreign nationals.

Outsourcing expanded

The program was supposed to be limited to executive and managerial positions (applicants are supposed to have university degrees) but has rapidly expanded by exploiting a clause that says workers with “specialized” skills can also be brought in. Concerns have been expressed by insiders that companies are exaggerating employee resumes to expand the scope of their outsourcing.

No wonder Canadian graduates are having so much trouble finding jobs — the Harper government is determined to give them away.

As bad as things are they are about to get much worse. At the urging of the Canadian Services Coalition, a corporate lobby group, the multiple trade and investment agreements the government is intent on signing (or has signed) all contain sections allowing for such transfers. International Trade Minister Ed Fast boasted that the next generation of trade deals such as the Trans-Pacific Partnership will be much more ambitious about enabling the entry of foreign workers.

For sheer callousness it is hard to outdo the Harper government. But the academic cheerleaders for expanded trade agreements aren’t far behind. Shih-Fen Chen, with Western University’s Richard Ivey School of Business, opined that while the displaced Royal Bank workers would have a hard time finding other jobs, “Outsourcing is just international trade in the service sector and the rationale to support it is similar to the trade of manufactured goods.”

Well, yes that sounds about right, if the Harper government’s rationale in trade negotiations is to do to Canadian service sector jobs what NAFTA and other trade agreements have done to jobs in the manufacturing sector: outsource them.

At no time in the past 70 years have Canadian workers and their families been confronted with such a ruthlessly indifferent combine of corporations and the state. Neo-liberalism, the so-called freeing of market forces, is thus revealed as having no limits, ethical, moral or political to its greed and its contempt for society. And it has little to do with “market forces.” It’s simple corporatism.

Why is the West Spoiling for a Fight with Russia?

What are the consequences when elected governments make policy based on faith and imperial hubris instead of science and expertise? It’s a question that is forcing itself on the world as we watch the United States, Britain, NATO and the Harper government continue to up the ante in the confrontation with Russia over the Ukraine. There are real enough geo-political dangers in the world without actually creating them out of arrogance and ignorance but that is where we are right now and the consequences could be catastrophic.

Canada, Britain, the U.S. and the boys with their toys in NATO headquarters are looking for a fight with Russia. Throughout the confrontation and provocations these protagonists treat Russia as if it is some insignificant middle power that can be provoked with impunity. That is just dangerously stupid and stupidity is something the West can ill-afford given all its internal problems — economic stagnation, unsustainable inequality, collapsing infrastructure.

It is almost a truism that most politicians are, if not stupid, then woefully uninformed about the myriad of complex issues they have to deal with on a daily basis. Traditionally (going back millennia), it has been the job of the civil services to make them look smarter than they are — and they do that by rooting public policy in science and history. It is the job of professionals to bring to bear all the facts, nuances and consequences of policy initiatives. This is especially true of foreign policy and the nuanced determination of the national interest.

As I watch the Ukraine/Russia disaster unfold I am reminded of George W. Bush’s approach to formulating foreign policy. It was revealed in an article by Ronald Suskind in the New York Times magazine in April 2005. It was titled “Faith, Certainty and the Presidency of George W. Bush” and in it, Suskind quoted an unnamed aide to George W. Bush (later revealed to be the sinister Karl Rove). He wrote:

“The aide said that guys like me were ‘in what we call the reality-based community,’ which he defined as people who ‘believe that solutions emerge from your judicious study of discernible reality.’ … ‘That’s not the way the world really works anymore,’ he continued. ‘We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality… we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors… and you, all of you, will be left to just study what we do.'”

They did, of course, create their own reality — the hideous Iraq war and all that followed from it including, now, the crazed and spreading “discernible reality” of ISIS. Rove’s madness is a chilling description of the anti-intellectual roots of U.S. policy-making, which continues under Obama.

While Canada is hardly an empire, Stephen Harper clearly sees himself and his government as junior partners — indeed in terms of rhetoric Canada often goes beyond the U.S., rattling sabres it doesn’t have. Rove was referring to his own community as “faith-based.” Stephen Harper could be a charter member.

But the problem with faith is that it leads you down a single road without the possibility of reassessment — it provides a false certainty in a world where there is none. The consequence with respect to the Russia-Ukraine conflict is obvious — and was revealed in a British House of Lords investigation.

The report accused both the U.K. and the EU of a “catastrophic misreading of the mood in the Kremlin in the run-up to the crisis in Ukraine” which led to them “sleepwalking” into the crisis.

How could they have misread Putin so badly? How was it possible that senior politicians could have been unaware of the centuries-long relationship between Russia and Ukraine? Of the EU and U.S. promise in the 1990s that they would not expand NATO eastward? Of the fact Russia, too, has “national interests”? Faith in their own vision and disdain for their own advisors seems to have something to do with it. According to the BBC’s report on the Lords’ study:

“It blamed Foreign Office cuts, which it said led to fewer Russian experts working there, and less emphasis on analysis. A similar decline in EU foreign ministries had left them ill equipped to formulate an ‘authoritative response’ to the crisis. The result was a failure to appreciate the depth of Russian hostility when the EU opened talks aimed at establishing an ‘association agreement’ with Ukraine in 2013.”

British Prime Minister Cameron immediately rejected the conclusion of the report and doubled down on his crusader policy: “What we need to do now is deliver the strongest possible message to Putin and to Russia that what has happened is unacceptable.”

The crusader rhetoric doesn’t come just from the fevered minds of Harper, Cameron and Obama — the media and the punditry are mostly hands on deck, too. Even the normally rational, establishment magazine, Foreign Affairs (the publication of the Council on Foreign Relations — the unofficial custodian of U.S. foreign policy) has abandoned its role as rational foreign policy guidebook, according to economist Paul Craig Roberts, former treasury secretary under Ronald Reagan. In an article entitled “Washington Has Resurrected the Threat of Nuclear War”, Roberts is almost apoplectic in reviewing a Foreign Affairs article by a rabid Ukrainian nationalist who suggested Putin was about be brought down by internal revolt or, if not, then by an alliance of “North Caucasus, Chechnya, Ingushetia, Dagestan, and the Crimean Tatars.”

Canadian rhetoric is scarcely any more rational or in any way reflective of Canada’s national interests. It is all bellicose stupidity disguised as concern for democracy and sovereignty. And it’s mostly talk. Ukraine will need tens of billions in economic aid every year for a decade just to survive but the West has no intention of providing such largesse. We constantly encourage Ukrainian nationalism, mislead the Ukrainian people as to what we are willing to contribute and promote the false notion that Putin can be easily intimidated.

Talk of providing advanced weapons to the Ukrainian military is frighteningly irresponsible but the war-talk continues. We might expect that Canada would listen to others closer to the scene — like Germany’s Angela Merkel who is clearly alarmed at her English-speaking NATO partner’s recklessness. She stated on Feb. 7: “I cannot imagine any situation in which improved equipment for the Ukrainian army leads to [Russian President Vladimir] Putin being so impressed that he believes he will lose militarily.”

Harper and his senior partners seem to project the consequences of their pronouncements no more than a few hours into the future. They seem barely cognizant that there will be consequences to their actions and rhetoric. If the West and the corrupt and inept Ukrainian government (watch the parliamentary fist fight here) ever did end up in a war with Russia it would be over in two weeks. Then what would Harper, Obama and Cameron do? Will NATO invade to free the Ukraine and confront nuclear-armed Russia? Do our “leaders” have any long-term policy at all? Do they think it’s all just a game?

We rarely hear from military intelligence on these matters because by its nature only the government has access to it. But it would be fascinating to know what they think of this endless provocation of Russia. We now have, thanks to David Pugliese of the Ottawa Citizen, a window onto how the military felt about another reckless Canadian enterprise — the overthrow of Libya’s Moammar Gadhafi. According to Pugliese, just days before Canadian planes began bombing, the military warned the government: “There is the increasing possibility that the situation in Libya will transform into a long-term tribal/civil war. This is particularly probable if opposition forces received military assistance from foreign militaries.” They further warned that removing Gadhafi (a staunch ally in the fight against Al Qaeda) would “play into the hands of” Islamic militants.

The warnings were ignored. Then foreign affairs minister John Baird demonstrated the Harper government’s contempt for professional analysis and advice in his prediction of the future, declaring: “The one thing we can say categorically is that they couldn’t be any worse than Col. Gadhafi.” If by “worse” we mean a failed state, dozens of heavily armed militias fighting for control and ISIS now planning to use Libya as a launch pad for attacks on Europe then I guess Mr. Baird was wrong.

We are left to speculate what warnings the Canadian military are giving the Harperium regarding sophisticated weapons for the Ukrainian government.

You know things are really dangerous when one of America’s pre-eminent warmongers is worried about U.S. policy. Henry Kissinger recently wrote in The Huffington Post, “Far too often the Ukrainian issue is posed as a showdown: whether Ukraine joins the East or the West. But if Ukraine is to survive and thrive, it must not be either side’s outpost against the other — it should function as a bridge between them.”

Hubris and a contempt for analysis and history played out quickly Libya. There is still a chance that the world can step back from the brink in Europe. If it doesn’t we will know who to blame.

Which will the NDP put first: party or country?

Anyone who really wants to get the country back from the grim reaper now in charge of Canada – and who knows our political history – would look to the NDP as their best hope. They are the only party that is not completely in the pocket of big business and the political elite and that also has a chance of making a difference in Parliament. A lot of people want to believe the NDP can actually make a difference.

Regrettably the party and its leader Tom Mulcair aren’t making it easy — which is why fewer people support the NDP now than they did three years ago or even last year. A fundraising letter that arrived last week shows why. The envelope declares “Are you ready to elect Canada’s first NDP government?” No one outside the confines of the NDP’s castle-under-siege actually believes this is remotely possible and that can’t help but have an impact on the party’s credibility. If the party and its leader are so disconnected from political reality that they think they are going to double their current 20 per cent support in the polls by October, then how can we trust them to be connected with us regarding a vision for the future?

The party and its brain trust drank the “we are going to win” Kool-Aid under Jack Layton and they’re still drinking it.

Don’t misunderstand me here. Of course parties run to win. They run to persuade people that they are the best bet for making the country a better place.

But you can run to win without appearing delusional. That means running on a platform that connects intimately with your constituents’ deeply held values. A platform which also addresses their fears — manufactured fears generated by Stephen Harper (terrorism and crime) and real fears about what he will do with the country if he gets four more year.

Success for the NDP must also mean dealing intelligently with the reality of the first-past-the-post system. That means grasping that the best way — perhaps the only way — for the NDP to “govern” is to be part of a coalition/accord with the Liberals.

At this point at least such co-operation seems like a very faint hope.

The Liberals and NDP hate each other even more, it seems, than they hate the Harper Conservatives. That puts them off side with all those Canadians whose singular political desire is to rid the country of Harper and his wrecking crew.

As a friend commented to me the other day, the closer the NDP comes to the Liberals in its policies (now offering tax cuts to small business without a shred of evidence that this would create jobs) the more determined it becomes to have nothing to do with some kind of agreement that could get rid of Harper.

Unless something changes, come election time there will be two battles: the Harper Conservatives will be running to win, and the NDP and Liberals will be fighting their own private war. It is a recipe for disaster for the country.

The conversations that lead the NDP to this apparent abandonment of the country’s best interests clearly take place strictly within the confines of the party bureaucracy. Because if the party’s brainiacs actually talked to its supporters, members and progressive Canadians in general, it would know just how terrified people are of the prospect of another Harper majority.

The divide between the NDP leadership’s thinking and the political sentiment of its potential supporters has never been greater. This disturbing disconnect suggests that unlike the majority of Canadians who are almost paralyzed by fear and loathing regarding the future of their country, those who run the NDP simply aren’t driven by the same fear. Effectively, they care more about their party than they do about their country. It begs the question of whether a progressive party can even make a legitimate claim to the title if the people who run it actually care less about their country than the average citizen does.

Of course the same and worse can be said of the Liberals but nothing more can be expected of them. They are a party of big business, committed to the (ever-worsening) status quo with a long history of appealing to Canadians progressive instincts during elections while dutifully serving the interests of the economic elite. The classic example, of course, was the Liberal Red Book of promises waved ceremoniously at every rally by Jean Chrétien in the 1993 election. It was beyond cynical that not a single one of the promises was ever kept. Instead Paul Martin distinguished the Chrétien government with two record-breaking accomplishments: the largest cuts to social spending (40 per cent) in Canadian history and the largest tax cuts ($100 billion over five years) in history. Yes, larger tax cuts than Jim Flaherty’s.

But this doesn’t mean that these two parties, despite their different histories, cultures and loyalties, could not form some kind of alliance to stop the bleeding. It is done all the time in Europe where nominally strange governing coalitions are formed all the time. Perhaps the best example is the recent victory of the left-wing Syriza party in Greece. It rejected any governing alliance with the fatally compromised old-left parties and teamed up with a right-wing party which agreed with its position opposing the “austerity waterboarding” imposed by the European Union and IMF.

Greece faces a historic crisis that called for an extraordinary political response. It can be argued that Canada faces a historic crisis as well: the threat of providing Stephen Harper with four more years. These are decidedly not normal times. For the first time in our history we actually have a government that is committed to dismantling the best aspects of our country.

That cries out for an extraordinary response. And if the NDP can’t propose an accord of some kind based on principle (let’s see if the Liberals have the jam to refuse) then why not do it based on opportunism? It would hardly be a departure given its myriad compromises over the years (and its opportunistic defeat of the Liberals in 2006, handing Harper power). Oddly, the NDP claims to want power yet demonstrates with its intransigence on co-operation with the Liberals that it is not actually serious.

It is obvious to all progressive Canadians that if either the Liberals or the Conservatives win a majority the country is in deep trouble. The Liberals will not commit themselves to reversing all the damage done by Harper. They are interested in power for the sake of it and would happily administer the status quo inherited from the Conservatives.

Our only hope is a minority government. If the Conservatives win the Liberals and the NDP must be prepared — and say so — to force a vote of non-confidence in the government and form a new government based on a limited number of initiatives. If the Liberals win a plurality the same holds true: co-operation has to be on the table as part of the election.

But if the NDP, in its preoccupation with competing with the Liberals to “win” the election, gets closer and closer to their policies, its risks giving the Liberals a majority.

So far, the NDP are a mixed bag on the policy front. They propose good stuff like the $15 minimum wage, child care, proportional representation and protecting medicare funding. But they are extremely weak on the economy, as evidenced by the party’s pandering to small business, refusing to tax wealth and lack of a clear industrial development strategy.

The economy will be the defining issue in October and the NDP has the opportunity, given the rapidly deteriorating economic situation, to dramatically distinguish itself from the other parties. But so far it has been unable to escape the economic policy straitjacket it placed on itself decades ago. Time is running out.

It’s running out, too, for getting Canadians accustomed to the idea that a coalition is the best way to save the country. [Tyee]

Downsize Democracy for 40 Years, Here’s What You Get

If you are searching for significant anniversaries for 2015, one that you might find illuminating is the publication of a book 40 years ago entitled The Crisis of Democracy.

The title would seem fitting today but that’s not the crisis its authors had in mind.

The book was commissioned by a new international boys club of finance capitalists, CEOs, senior political figures (retired and active) and academics from Europe, North America and Japan. The Trilateral Commission (TLC) could be said to be the birthplace of neoliberalism, a political theory that suggests progress depends upon “liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade.”

Alarmed by the spread of the liberal state and its economic and social interventions, the TLC was founded to reverse the welfare state and re-establish capital to its “rightful” place at the pinnacle of economic and political power. (It still exists but has been supplanted to some extent by the World Economic Forum.)

The TLC book concluded, in the words of its American co-author Samuel Huntington, that the industrial countries suffered from “an excess of democracy.” He wrote “the effective operation of a democratic political system usually requires some measure of apathy… on the part of some individuals and groups.” He bemoaned the fact that “Marginal groups, as in the case of blacks, are now becoming full participants in the political system.”

The TLC was just one of a growing number of institutions — forums, think-tanks, academic clusters, major media outlets — focussed on the same theme: that expectations of what government could provide had risen to a level that was now threatening the proper functioning of capitalist democracies. In Canada the most prominent and aggressive of these would be the Fraser Institute (FI), headed up Michael Walker (retired).

Walker told a group of worried corporate CEOs from B.C. that “if you want to change society you have to change the ideological fabric of society.” In short, you had to launch a culture war against the activist state. It would be a war against democratic “excess.”

The Fraser Institute (founded in 1973, the same year as the TLC) has been engaged in that process ever since on countless fronts and funded generously by well-endowed foundations and corporations. The guru for the FI was Milton Friedman, eventually the world’s pre-eminent neoliberal economist. At an FI forum on democracy, Friedman declared: “I believe that a relatively free economy is a necessary condition for a democratic society. But I also believe that… a democratic society, once established, destroys a free economy.”

At the time these political declarations were widely ridiculed, dismissed even by conservative politicians and writers. After all, the West was characterized by mixed economies (government and private investment) that were doing very well in terms of growth and profitability. High taxes on wealth did not prevent the rich from investing, government revenues were robust, unemployment was low, social strife in Canada was rare.

Fast forward 40 years and any new book with the title The Crisis of Democracy is likely to be chronicling the result of four decades of systematic assaults on the liberal/social democratic state. Indeed in contrast to Huntington’s “excess of democracy” complaint, the phrase “democratic deficit” has now been used by scores of writers and commentators. It is easy enough to chronicle the long list of attacks on democracy carried out by Stephen Harper as many have, and in the U.S. the domination of corporate money (backed by the U.S. Supreme Court) and outright theft of elections has democracy in that country on the ropes.

But it is the consequences of this decline and erosion of democracy that should be the most important focus of critics and citizens alike. The exceptionally successful four decades campaign to change the “ideological fabric” of society has put western civilization on a track to irreversible collapse according to a major study sponsored by NASA’s Goddard Space Flight Center. The study focused on population, climate, water, agriculture and energy as the interrelated factors that determine the collapse or survival of civilizations going back 5000 years.

According to a Guardian report on the study, these factors can coalesce and lead to civilization’s collapse if they create two critical social features: “the stretching of resources due to the strain placed on the ecological carrying capacity… and… the economic stratification of society into Elites [rich] and Masses (or ‘Commoners’) [poor].”

According to the study these two developments played “a central role in the character or in the process of the collapse” in the demise of the Roman, Han, Mauryan, Gupta and multiple Mesopotamian Empires as well as the Maya. The study provides convincing “testimony to the fact that advanced, sophisticated, complex and creative civilizations can be both fragile and impermanent.”

How far down the road to collapse are we? For my generation not so far that we will see the worst of it. But what is alarming is that all the signs are so dramatically obvious. And while the mainstream media isn’t yet talking about the end of our world, the issue of grotesque inequality and unsustainable resource depletion are somewhere in the media almost every week. Indeed inequality in particular has been a hot topic ever since the Occupy movement briefly swept the planet. Yet if you monitor the political debate in this country the two most important trends in our society and the world are virtually never mentioned except rhetorically. There are no serious policy prescriptions. Mass denial reigns. Or, as Freud stated, we are “knowing without knowing.”

Regarding income (and wealth) inequality, a 2010 study by the Canadian Centre for Policy Alternatives revealed that the top one per cent claimed close to a third of all income growth during the decade from 1997 to 2007. “That’s a bigger piece of the action than any other generation of rich Canadians has taken,” said Armine Yalnizyan, CCPA’s senior economist and author of the report. “The last time Canada’s elite held so much of the nation’s income in their hands was in the 1920s. Even then, their incomes didn’t soar as fast as they are today. It’s a first in Canadian history and it underscores a dramatic reversal of long-term trends.”

Internationally, the picture is just as bad or worse. Earlier this month Oxfam released a report revealing: “The combined wealth of the world’s richest one per cent will overtake that of the remaining 99 per cent by 2016…. ” The wealthiest one per cent — amounting to 72 million people — already owns 48 per cent of all global wealth. This trend continues to accelerate, flying in the face of all the evidence that it could ultimately be fatal for capitalism.

Is this really what the geniuses at the Chicago School of Economics like Milton Friedman had in mind? Did he really believe that “a democratic society, once established, destroys a free economy”? Would he have had any qualms about his policy prescriptions resulting in capitalism devolving into neo-feudalism or into Plutonomies? The term Plutonomies was first used by analysts at Citigroup in 2005 to “describe a country that is defined by massive income and wealth inequality.” The analysts singled out the U.K., Canada, Australia and the United States.

Theoretically, of course, neoliberalism says the state should not intervene in the efficient functioning of the market — resulting in prosperity for everyone. But the theory, according to neoliberalism authority David Harvey, was simply hijacked by the elites to fleece the system — bailing out the financial sector with trillions of taxpayers’ dollars and failing to re-regulate, while gutting labour and environmental regulation. Government actions reveal neoliberalism as “more of a practical attempt to restore elite class power than as a theoretical project driven by the works of [Friedrich von] Hayek or Friedman.”

The NASA study is not optimistic about our chances of avoiding eventual collapse given the failure of other civilizations. It says “collapse is difficult to avoid…. Elites grow and consume too much, resulting in a famine among Commoners that eventually causes the collapse of society.”

Warnings go unheeded. The NASA reports says “historical collapses were allowed to occur by elites who appear to be oblivious to the catastrophic trajectory (most clearly apparent in the Roman and Mayan cases).”

How close are we to collapse? The study points out that the process can extend over decades and even centuries. Yet some of the supporting empirical studies (by KPMG and the British Office for Science) suggest a perfect storm that involves food, water and energy could occur within 15 years.

The NASA study highlights two trends — resource depletion and inequality — as the key factors in civilization collapse. But there is a third and it explains why historically elites have been “oblivious” to their unfolding catastrophes. That factor is the political system of the particular civilization. Designed to govern and manage social and economic life before it became corrupted, and still in the hands of the benefiting elites, these governing systems were simply incapable of incorporating the idea of collapse into their thinking.

What would have to happen for us to escape the same fate?

Canada’s choice: Austerity or prosperity

Imagine for a moment two societies living side by side. One has discovered the wheel and uses it. The wheel makes life easier for workers and boosts the economy for everyone. Prosperity reigns. The society next door is well aware of the wheel and watches as its neighbours move inexorably ahead, becoming wealthier, more efficient and healthier while creating more leisure time for cultural activities.

But the ones who reject the wheel aren’t those who do the work in this society. Those who refuse it are the governing elite, the priests, the official advisors and scribes who have incorporated a moral objection to the wheel into the state religion.

Use of the wheel is thus proscribed by faith, not reason. All practical arguments in its favour are rendered useless.

While Canada is not exactly a next door neighbour to Norway and other Scandinavian countries, there is no excuse for not knowing and emulating the proven success of those nations. What’s their open secret? Replace the wheel in this story with robust government engagement in the economy and you have pretty much all you need to understand about why Norway, Sweden and Denmark are doing so well economically and socially. And why Canada is destined for inexorable decline.

Indeed, Canada’s government is so dedicated to the religion of austerity that it could easily appear to some future anthropologist that our civilization declined in relentless pursuit of downsizing itself. Unlike the Maya, who apparently outgrew their social and economic structures, we seem determined to deliberately dismantle ours.

Canada and Eurozone countries are suffering from what Martin Wolfe, writing in the Financial Times, calls “chronic demand deficiency syndrome.” It is not that governments are unaware of the problem of deficient demand. John Plender, another Financial Times economist, focuses on the Eurozone, which, he writes “is being driven towards deflation by a moralistic drive for austerity which does nothing to arrest rising debt as a percentage of gross domestic product… ” He could just as easily be talking about Canada where collapsed oil prices are poised to accelerate a deflationary situation already threatening because of weak demand.

A recent study on Norway, Sweden and Denmark, titled “How Can Scandinavians Tax So Much?,” demonstrates how national governments can actually address underlying structural demand weaknesses — or rather, in their cases, how to prevent such weaknesses from developing in the first place. The key is not just high government spending but a dedication to revenue collection that comes as close as possible to eliminating leakage in the tax system.

The top marginal income tax rate in the three countries is between 60 per cent and 70 per cent compared to 43 per cent in the U.S. and about 50 per cent in Canada. Add in other taxes like consumption and payroll levies and the average Scandinavian worker gets to keep just 20 per cent of her paycheck. In the U.S. that same employee keeps 63 per cent.

How can such high tax rates (which would be denounced as ‘punitive’ here) result in some of the best economic outcomes on the planet?

How can the Scandinavian countries studied produce such high standards of living, high labour participation rates, highly profitable corporations and high placements (all higher than Canada) in the world competitiveness sweepstakes?

Here is how. Unlike in Canada, where Prime Minister Harper openly demonizes taxes (“I don’t believe any taxes are good taxes”), Scandinavian governments have totally committed themselves to collecting all the revenue due to them.

According to the study’s author Henrik Jacobsen Kleven: “First, the Scandinavian tax systems have very wide coverage of third-party information reporting and more generally, well-developed information trails that ensure a low level of tax evasion. Second, broad tax bases in these countries further encourages low levels of tax avoidance…. Third, the subsidization or public provision of goods that are complementary to working — including child care, elderly care, transportation and education– encourages a high level of labour supply.”

With the governments pumping billions of dollars into the Scandinavian economies there is no “chronic demand deficiency syndrome.” They do not rely on debt-financed consumer demand and the reduction of private consumer spending makes for more rational economic decision-making overall.

The U.S. has accomplished what appears to be a stable recovery by also rejecting the austerity obsession and engaging in repeated rounds of quantitative easing — artificially pumping money out into the economy though bond purchases. Canada meanwhile is actually sucking billions out of the economy through tax cuts to sectors (corporations and the One Per Cent) who aren’t spending it.

The dominant view of taxing and spending in this country has been carefully constructed over a period of 30 years. It is that taxes take money out of the economy and undermine investment. This claim is now revealed as nothing less than an outright lie.

But it should surprise no one. A 1985 book, Government Limited by John Calvert, revealed just how much government spending stimulates the economy and bolsters the private sector. Calvert pointed out that most government spending ends up in the coffers of private businesses: police departments buying cars, hospitals buying pharmaceuticals, governments buying paper, building ships, constructing highways, bridges and ports. Fully 12 per cent of private sector employment in 1984 was directly attributable to government spending on goods and services.

But that doesn’t even count the direct spending of government employees whose salaries represented 22 per cent of non-investment income. That translated into 12 per cent of total spending on private goods and services. Transfer payments — welfare, family allowance and pensions — accounted for 13 per cent of spending on goods and services. The tax revenue for these expenditures came largely from individuals rather than corporations so that rather than a drain on corporate investment, government spending is in fact a subsidy to business. Withdraw it and thousands of businesses would simply go bankrupt.

Of course we have withdrawn billions since 1985 — over $60 billion a year in abandoned revenue at the federal level if you go back and count Paul Martin’s huge tax cuts in 2000-2005. If we had that money back to spend, the vast majority of it would ultimately end up being spent in the private sector. And that might actually convince Canadian corporations to invest some of the $626 billion in idle cash it is now sitting on. (An IMF report recently chastised Canadians corporations for accumulating idle capital at a faster rate than any other country in the G7.)

Around the world the religious orthodoxy of unfettered capitalism is being questioned on many fronts. But not in Canada. The 2008 financial crisis had the effect of throwing into question the neoliberal orthodoxy of the gradual disappearance of the nation-state as a key player. Conflicts between states now abound and citizens in EU countries are demanding actions that conflict fundamentally with the EU collective wisdom. As the Financial Time’s Mark Mazower states, “… by discrediting the more mythical idealisations of the market, [the crisis] has encouraged the restoration of state power as a goal in itself.”

It is a trend vigorously resisted by the Harper government at every turn.

Some in the financial world have even begun talking about taking an old tool out of the state tool box that would allow deficit spending without going into hock to the banks and international lenders. That tool is monetizing government debt. In other words, ending the absurd “independence” of central banks and using them to create the money supply, allowing governments to borrow effectively from themselves at near zero interest rates (as they once did). This would have the added benefit in Canada of ending the irresponsible practices of the Canadian private banks and their reckless creation of a housing bubble.

But that’s a radical solution that is beyond the pale in Harper’s world.

Another global trend that Harper has been trying to avoid is the ending of tax evasion by corporations and wealthy individuals through the global harmonization of corporate taxes. This objective, being pursued most seriously by EU nations, also has its roots in the revival of nation-state power: countries are desperate for revenue to fund national democratic governance.

None of these trends is universal but the spectre of another crisis, much worse than the last, is challenging free market orthodoxy everywhere. Those countries that take up the challenge first and most effectively are the ones that will survive the next disaster.

In other words, the “wheel” is now a known to be powerful invention and the only question remaining is who will embrace its use first or last.

So far, Canadians must continue to watch their Scandinavian neighbours use the wheel and prosper while we remain captives of the free market priesthood.

Norway is the logical choice of neighbour to compare ourselves to, if you can stomach it.

In Canada we have virtually given away our energy heritage through criminally low royalty rates over a period of some 70 years. Norway bargained hard with oil companies to develop its relatively new-found resource — and kept ownership of it. The result, as reported in The Tyee, is a heritage fund of (as of a year ago) CAD$909.36 billion. That puts tiny Norway $1.5 trillion ahead of us and while each Canadian has a $17,000 share of our $600 billion debt national debt, each Norwegian has a $178,000 stake in their surplus. Norway puts aside a billion dollars a week from its oil resource.

But all that oil money aside (literally), Norway actually funds its government services through taxes which its citizens gladly pay. And why not? As The Tyee’s Mitch Andersen reported: “Norwegians enjoy universal day care, free university tuition, per capita spending on health care 30 per cent higher than Canada and 25 days of paid vacation every year.”

We on the other hand live in a country where a third of citizens believe in Harper’s fiscal self-flagellation, in an extremist religion that calls upon us all to deliberately impoverish ourselves. Hallelujah.

Why Canada’s Job Future Is Sinking like a Stone

Canada’s economy is increasingly at the mercy of a risk-averse, inept corporate elite addicted to government tax breaks. They are enabled by an ideologically addled government which is incompetent.

It is a deadly combination — a dumb and dumber team dragging us backwards at a time when the world is hoping there won’t be another economic collapse.

Recent media reports reinforce what we have known for decades about the Canadian corporate elite. One highlighted Canada’s dismal performance when it comes to research and development, the other our pathetic efforts at broadening our markets for exports. More and more evidence piles up that we are de-industrializing — reminding me of the Star Trek episode where the whole crew starts devolving. Captain Picard is destined to become a pygmy marmoset. I wonder what the end point for Canada might be?

An OECD study reported in the Globe shows that Canada has dropped out of the top ten in R&D spending and now ranks 12th. While we de-industrialize and fall back on raw resource exports, previously underdeveloped countries — Taiwan, India and Brazil — are now outspending us as they industrialize.

We continue to decline in the World Economic Forum’s World Competitiveness Index as well. For 2014-2015 we rank 15th.

Even worse, in the category of “innovation and sophistication factors” we rank 25th.

In 1998 our overall rank was sixth. Some of the countries that now beat us: the United Arab Emirates, Taiwan, Hong Kong and Singapore.

Canada’s dramatic decline in R&D has a continuing negative impact on labour productivity as well. According to OECD figures for the year 2012 we stood at 73 per cent of the U.S. benchmark of 100. This failure to increase labour productivity through investment in new machinery and innovation has a huge impact on our standard of living and the domestic economy: as wages stagnate and personal debt increases domestic consumption starts to flatline — and that further suppresses investment.

The other media report that reveals the pathetic level of government and corporate leadership on the economy focused on our complete failure to look to India as a potent export market. It is the fastest growing economy on the planet yet Canadian corporations and their government partners seem asleep at the switch.  Kevin Carmichael in the Globe and Mail quotes the president of Canada-India Business Council: “We’ve got to get in here fast or we’re going to miss the boat. You’ve seen a rush to the gates [from other nations]. We seem to be taking a slow walk.” Currently exports to India account for a minuscule .63 per cent of Canadian exports — and just under half of that is raw materials.

Canada scarcely does better in other emerging nations: our top three destinations for goods: the U.S. takes 74.5 per cent, China 4.3 per cent and the UK 4.1 per cent. Australia, a Pacific nation we compete with is far more diversified: China 29.5 per cent, Japan 19.3 per cent, South Korea 8 per cent, India 4.9 per cent.

For decades, alarms about lagging productivity

Where I live, in Powell River, B.C., the evidence of our race to the bottom is stark. An endless stream of huge log booms go by my window, most headed to China which not too many years ago bought one of the local mill’s paper machines, packed it up and sent it home — to process our trees.

The more things change the more say the same — especially when it comes to corporate leadership. Two studies on Canadian competitiveness by Harvard Business School’s Michael Porter, one in 1991   and one in 2001, concluded: “The absence of intense local rivalry combined with customers who were not demanding produced weak pressures for firm productivity and upgrading…Research uncovered key weaknesses in the sophistication of company operations and strategy.”

Canadian firms that did “compete” internationally took the easy way out — exporting almost exclusively to the U.S. and relying on “natural resource advantages or lower labour costs than other G7 competitors instead of sophisticated products and processes.”

Is it even possible to change corporate culture or at least engage in a little behaviour modification? Do we — that is the government — have to treat our (ridiculously over-compensated) CEOs as adolescents to get them to deliver?

After all we have given them literally everything they have asked for starting with the original free trade deal with the U.S., deliberately suppressed wages, a shredded safety net, and the gutting of regulations.

None of it has had any impact. Their performance has been getting worse for almost two decades.

What’s Harper got against manufacturers?

So what does Stephen Harper do? He rewards corporate ineptness and irresponsibility by providing one of the lowest corporate tax rates in the 34-nation OECD. It doesn’t matter that all this free money just goes into the cash reserves of the country’s largest companies (now totaling over $600 billion). Why doesn’t it matter? Because Stephen Harper doesn’t actually care if they invest in anything. The point of his tax cuts was never to stimulate investment — it was to jettison government revenue in aid of dismantling the activist state and making it impossible for future governments to act.

The only sector Harper even thinks about is oil and gas. If that seems a bit over the top have a look at the Carol Goar’s Toronto Star story on the phantom $200 million fund to stimulate Ontario manufacturing. The money, formally announced a year ago, was slated for something called the Advanced Manufacturing Fund and it was first mentioned in February last year. The goals were laudable, including: “To support transformative technologies and foster collaboration between universities and the private sector.”

The problem, says Goar (using information dug up by the NDP’s Peggy Nash) is that “To date, not a single project has been approved. Not one dollar has been released. Not one job has been created.”

Two hundred million might sound like a lot of money to promote manufacturing in one province but the fact is that given Canadian corporations’ appalling record of investment in innovation and “sophistication of company operations and strategy” government engagement is absolutely critical. The manufacturing and high tech sectors are in desperate need of the kind of guidance that can only come from a smart industrial strategy. Otherwise Canada faces a continued decline in its value-added sectors and export markets. Ontario has lost 300,000 manufacturing jobs in the last ten years — that’s more than one in four.

If the goal is to create “transformative technologies” (the word green comes to mind) then $200 million is just lunch money. But the Harper government is so opposed to government intervention it can’t even bring itself to spend the money it actually allocated.

Everything oil wants

Imagine if even 10 per cent of the largesse and free passes showered on the oil and gas sector was used to create what the Advanced Manufacturing Fund was established to do.  According to the IMF Canadian subsidies to the oil sector, in real dollars and avoided externality costs, amount  to $34 billion a year.

If you have been taken in by the spin that this sector creates thousands of jobs in other provinces then think again. The entire resource sector accounts for only 7 per cent of the economy and is one of the worst job creators we have. Two reports, one by the IMF and another by the Canadian Energy Research Institute in 2011 revealed just how little the oil and gas sector contributes to jobs and GDP growth.

Commenting on the reports, Frances Russell highlighted the fact that “Canada’s energy sector created only 1.7 per cent of all new jobs in Canada from 2007 to 2012.” That was just 13,000 jobs. Compare that to the 22,000 jobs created in a single month, December 2013, in health care and social assistance. “The energy sector accounts for only 0.1 percentage point of the average 2.25 per cent annual GDP growth over the last decade,” according to the IMF.  As for the alleged benefits accruing to other provinces, a dollar invested in the tar sands boosts manufacturing in the rest of Canada by three cents and GDP in Ontario by four cents. And if none of the pipelines from the tar sands were built? The economy would grow 0.5 per cent less by 2020.

The potential for Canada to be leading in many new areas of innovative green growth has been squandered for years and continues to be ignored.

Instead Canadian governments shower the oil and gas sector with obscenely large subsidies and allows risk-averse and timid added-value sectors to languish in the ferocious competition for global markets.

To add insult to injury we hand over billions in tax cuts that could be used to become genuinely competitive.  Dumb and Dumber was a bad movie. But this one’s worse.


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