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1/3 Toby Sanger: Unfinished Business
The document summarizes the economic impacts of austerity measures in Canada. It argues that [1] austerity will likely lead to another recession as it has in other countries, [2] government debt ratios are manageable and deficits could be eliminated through fair tax measures instead of spending cuts, and [3] austerity disproportionately impacts working people and increases inequality. The response should expose the failures of neoliberalism and privatization, advocate for fair taxes, resist commodification of public services, and build alliances through mobilization and democratic participation.
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1/3 Toby Sanger: Unfinished Business
- 1. Unfinished Business: Economic Repercussions of Austerity Presentation for Conference on The Global Economic Crisis & Canadian Austerity Ryerson University, Toronto March 23, 2012 Toby Sanger, Canadian Union of Public Employees
- 2. This time WASdifferent Bank of Canada Interest Rate in Recessions 25% 1981/82 recession 20% 15% 1990/91 recession 10% 5% 2008/09? recession 0% -24 -18 -12 -6 0 6 12 18 24 Months before and after start of recession 1981/82 Recession 1990/91 Recession 2008/9 Recession
- 3. Post recession declinein real wages Inflation and Average Wage Increases - large collective agreements 6% 5% CPI Inflation Public Private 4% 3% 2% 1% 0% 1990 1995 2000 2005 2010
- 4. Declining share towages, increasing share to business profit Income shares of economy 70% 60% 50% 40% 30% 20% 10% 0% 1981 1985 1989 1993 1997 2001 2005 2009 Wages, salaries and other income Corporate profits and business income
- 5. Unprecedented shift insurpluses from households to corporate sector 80 Surpluses and Deficits by Sector 60 Corporations Persons and unincorporated businesses 40 Governments 20 0 Billions of dollars -20 -40 -60 -80 -100 1966 2001 1961 1971 1976 1981 1986 1991 1996 2006 2011
- 6. 2008/9 Great Recessionwas different • First global economic contraction since 30s • Coordinated global response – Unprecedented monetary stimulus: interest rates at all-time lows, extraordinary credit measures – Far more expansionary discretionary fiscal policy focused on public capital investment and tax cuts – Spending largely temporary, tax cuts permanent • Few business bankruptcies, slow jobs recovery
- 7. Real debt crisisat household level Debt Ratios by Sector 1990 to 2011 160% 140% 120% 100% 80% 60% 40% 1990 1995 2000 2005 2010 Household debt to personal disposible income Corporate credit market debt to equity Total gov't gross debt to GDP
- 8. Limited prospects forrecovery • Lower interest rates can’t save us • Housing bust imminent • Households at record debt levels • Business not investing • Export expansion limited to resources • Fiscal policy—gov’t spending—contractionary Another lost decade, “seven lean & ugly years”
- 9. Government debt ratiosmanageable Debt Interest Charges as a Share of GDP 12% 10% Max (1987 to 2010) 8% Latest (2010/11) 6% 4% 2% 2.9% 2.1% 2.3% 2.2% 2.2% 1.9% 1.5% 1.4% 0.7% 0.1% 1.1% 0% NS BC PEI NB Que Ont Man Alberta Sask Canada N&L Sources: Finance Canada Fiscal Reference Tables, Statistics Canada.
- 10. Public spending recentlyat 30-year low Total public spending as share of economy Federal, provincial and local government 60% 50% 40% 30% 20% 1982 1987 1992 1997 2002 2007
- 11. Manufactured recessions No needfor austerity to balance budgets • Federal government will soon be in a structural surplus (PBO, TD). • Austerity measures will slow down economy and could another recession, as in UK, Europe. • Fed and provincial deficits could be quickly eliminated with a few fair tax measures • Spending cuts and austerity measures will increase inequality.
- 12. Rising inequality, slowingeconomy 16% 12% 8% 4% 0% 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Top 1% income share Real GDP growth (7 yr average)
- 13. Upcoming budgets: selectiveausterity • Wage constraints, program, public service, transfer & regulatory cuts • Corporate tax cuts, stimulus directed at private sector and widespread commodification of public services: privatization, asset sales, contracting out, P3s, competitive bidding, social enterprise partnerships
- 14. Public sector wageconstraints aimed at reducing wages in private sector too Affadavit of Paul Rochon, federal ADM Finance, November 2010
- 15. Conservative class-based agenda Attack on working people • Selective austerity • Cuts to social supports, OAS, pensions, later retirement • Intensification of contingent and precarious work, both directly and through privatization • Undermining labour rights & protections • Business control over immigration, disposable temporary foreign workers
- 16. Conservative class-based agenda Strengtheningpower of capital • Corporate tax cuts • Commodification of public services: privatization, contracting-out,P3s, SIBs, privatization of foreign aid • Environmental deregulation to aid faster capital accumulation through resource exploitation • Investor protection “free trade” agreements
- 17. Conservative class-based agenda Suppressingdemocracy • Elimination of federal funding for “advocacy” activities, cuts to NGOs • Bill C-377 to hamstring labour unions from engaging in advocacy • Vilification of opponents • Elimination of constructive political dialogue • Growth of security state apparatus • Electoral fraud, “shenanigans”
- 18. How to respond? •Class perspective 99% vs 1% • Expose contradictions – Failures of neo-liberalism & trickle-down – Costs of privatization, market solution – Fiscal: fair taxes • Resist commodification and advance expansion of public services • Broaden alliances & strengthen solidarity • Strikes & actions maintain public support • Mobilization through democratization
Editor's Notes
- #3 Canada’s previous post-war recessions were both explicitly and intentionally caused by the federal government raising interest rates to slow down the economy and reduce the pace of wage increases, ostensibly to reduce inflation.In the two years prior to the recessions, the Bank of Canada doubled its short-term interest rates, which also pushed up medium and long-term interest rates. This hiking of interest rates to over 10% slowed down investment, increased personal and business bankruptcies and pushed unemployment to double-digit rates. In these previous recessions, the economic decline, lower revenues, higher social spending and high interest rates also caused large increases in government deficits. Coming out of these recessions, Canadian governments embarked on deficit-cutting crusades, largely through cuts in program spending also involved public sector wage freezes or constraints to “share the pain” with public sector workers .Despite the contractionary fiscal policies, the economy was able to ultimately grow coming out of these recessions because the federal government ran expansionary monetary policies. Following both the 1981/2 and 1990/1 recessions, interest rates were reduced by more than half.
- #4 The consequence of successive contractionary monetary policies for the private sector and contractionary fiscal policies, as well as direct wage suppression, in the public sector was a steep decline in the rate of wage increases.
- #5 Following these effectively orchestrated recessions and wage constraint measures, the share of the national income going to wages and salaries declined on a long-term basis as the share going to profit increased substantially.There are blips and dips of the wage and profit share during recessions, but what’s notable about this recent recession is how little corporate profits declined in total and as a share of the economy. Wages also includes income from farm operators and investment and interest incomesCorp profits plus unincorpbusines & rents income
- #7 Overgrown and out of control financial sector and household debt-financed growth masked a stagnant underlying economy. Interest rates were reduced to all-time lows, in some cases negative, contradicting previous assertions that governments had limited control over them. Despite the severe credit crunch in the private sector, there were far fewer business bankruptcies in this recession than in previous post-war recessions because of rock-bottom interest rates, extraordinary provision of credit to business and much lower corporate debt ratios. Discretionary fiscal policy was far more expansionary than in previous recessions: gov’t capital investment increased at a far faster pace than in previous recessions. In Canada, and other countries, stimulus measures were unbalanced: spending measures and those benefiting workers or households were temporary, while tax cuts for business were made permanent. Following this close brush with worldwide depression there was hope among many that it would lead to some positive structural measures to stabilize the economic system and at least marginally reduce inequalities, as had eventually happened after both the 1870s Long Depression and the 1930s Great Depression.
- #9 Overgrown and out of control financial sector and household debt-financed growth masked a stagnant underlying economy. Interest rates were reduced to all-time lows, in some cases negative, contradicting previous assertions that governments had limited control over them. Despite the severe credit crunch in the private sector, there were far fewer business bankruptcies in this recession than in previous post-war recessions because of rock-bottom interest rates, extraordinary provision of credit to business and much lower corporate debt ratios. Discretionary fiscal policy was far more expansionary than in previous recessions: gov’t capital investment increased at a far faster pace than in previous recessions. In Canada, and other countries, stimulus measures were unbalanced: spending measures and those benefiting workers or households were temporary, while tax cuts for business were made permanent. Following this close brush with worldwide depression there was hope among many that it would lead to some positive structural measures to stabilize the economic system and at least marginally reduce inequalities, as had eventually happened after both the 1870s Long Depression and the 1930s Great Depression.
- #12 Carlo & Chris Hurl put it well: “Janus” or two faced austerity”
- #14 Carlo & Chris Hurl put it well: “Janus” or two faced austerity”
- #19 Neo-liberal economics clearly failed and growth prospects limited—even proponents now questioning long-held beliefs.Class divisions are deepening and becoming more apparent.Occupy movement brought 99% vs 1% to the foreOpportunity to move beyond diverse alliance-based extra-parliamentary politicsSome, but limited potential at parliamentary level to articulate progressive alternatives: constrained by NDP caution & aim to form opposition, attract the middle groundUnions adopting more class-based language, approachBoth commodification of public services and of public goods, natural wealth. Real problem is lack of time among workers, potential activists. Students, families working ever harder, no mass army of unemployed.Momentum behind Occupy movement both expression of gross inequalities and desire to express voice by diverse people feeling disenfranchised by economically and politically.