Harper-nomics Is Recipe For Global Depression & Trade Wars

I feel like I'm repeating myself, having just written that the global crisis is not a crisis of debt but, rather, that the debt is a symptom of the long term decline in the rate of profit. Now, I read Stephen Harper and British Tory Prime Minister David Cameron blathering on about how "This is not a traditional, cyclical recession, it’s a debt crisis," as Cameron put it. The only logical conclusion, if that is the case, is to attack the deficit. And, sure enough, the prescription that they're offering is precisely that.

[Cameron[ urged action on three fronts: • Tackle debt and restore credibility and confidence; • Make it easier to do business and create jobs by freeing up economies; • Work together to boost world trade, starting with the Doha Round.

The translation of those innocuous words is rather more disastrous than they seem at first glance - austerity, de-regulation and more de-regulation. But, as the saying goes, doing the same thing over and over and expecting different results is a sign of mental health problems. The present expression of the crisis was precisely the result of relying on debt to solve underlying structural problems - many of them the result of declining living standards that arose as either a direct result or side effect of past austerity that saw the chipping away at public services. When public services are cut, working people have to pick up the slack with stagnating or declining wages. They can only do so by going deeper into debt or, following the lead of the banks, by trying to boost income by taking advantage of speculative bubbles, either through various types of investment plans disguised as pensions or by cashing in an illusory increase in equity on their homes. In both cases, the chickens ultimately come home to roost - home prices stop rising as they reach the limits of what people can afford and, ultimately leading to a bursting of the price bubble, which causes more foreclosures, leading to a further price collapse and so on. And their pension plans - both private, corporate and, increasingly even public plans - go into crisis, having bet the farm on speculative bubbles and phoney investment "opportunities" sold by investment banks as collateralized debt obligations and other exotic and impenetrable "financial products" that were really just bags of shit painted with a smiley face on them. As far as deregulation is concerned, this is precisely what led to the financial crisis in the first place - as banks were able to package and sell garbage as well as themselves investing heavily in this toxic junk. Deregulation of the financial sector led (combined in many districts with previous cuts to taxes on the wealthy) directly to the present high levels of government (aka sovereign) debt. In other areas, deregulation means more Enrons - which combined with other electricity companies to jack up utility prices in California by illegally choking supply - or more Walkertons, where people died as a result of a water treatment system that was privatized to unqualified companies whose only interest was making money. With that kind of record, do you think that we'll be better off if we remove regulations from pharmaceuticals - which already buy positive research results - or nuclear energy (cough, cough, Japan), or the auto industry, or the food processing industry or... No, at best we'll end up with an economic recovery that is built on more danger and misery for ordinary people as companies produce what they want how they want with no reference to the quality, or safety of their goods. But, more likely the result will be that the Herbert Hoover Re-enactment Society will drive the global economy into a Great Depression Redux. You don't have to be a Marxist to know that smashing consumption at a time when business investment is contracting is about the most stupid thing that you can do. The great lesson of the Great Depression was exactly this: Hoover responded to the onset of the Depression with austerity, making it worse than it had to be. Roosevelt prematurely tried to rein in the deficit in 1937, leading to a steep decline in the economy until the approach of war led the US - and almost everyone other country - to pour resources into re-tooling entire economies towards war production, thus re-inflating consumption. Ultimately, the lesson from the Great Depression is that the real goal of idiots like Harper was to massively devalue the cost of commodities as a way to restore profits. Unfortunately for the mass of the population the main target of depreciation was wages and working conditions. The elephant in the room is China, with its decades long growth rates approaching (or surpassing) ten percent. Manufacturing is drawn to China like a moth to a backyard bug zapper because of the cheap price of labour, making it the envy of every corporation on the planet. And, for governments in developed countries, unwilling to invest in new infrastructure by raising taxes as an alternative way to compete, the idea of out-sweat-shopping China is appealing. Certainly China's living standards are rising at rates that would make western workers, with their stagnant living standards, drool. But they are rising from such a low rate that even after more than two decades of constant growth - at rates lower than the overall rate of growth, it's worth saying - they are still a fraction of living standards in the west. And that presents a problem not only for western workers who can't compete with such low wage rates. It also presents a problem for western capitalists. If the rise in China's living standards aren't enough to meet those of western societies in time to save their economies, then the living standards of western economies must be depreciated rapidly in order to compete with Chinese labour. This is the real meaning of calls to "boost world trade." They will boost world trade by making goods from the west cheaper and they will be made cheaper by reducing labour costs. While that seems horrific if you happen to be a member of the working class - i.e. of the majority - it would seem to a blinkered pro-capitalist politician to make a lot of sense. The trouble is, it won't work. It's an unbendable rule in physics that every action creates an equal and opposite reaction. China has a ruling class perhaps more cognizant than most about its long term interests. It is their intention to allow a slow and controlled rise in living standards as their economy approaches "development", rather than being a "developing economy". Their recent acceptance of a rise in their currency is an expression of this goal. But not only will the immediate effect of Harper's & Cameron's austerity recipe increase the possibility of a series of profound financial and economic collapses, they will be met be a reaction from China that will attempt to neuter the effect of a rapid decline of living standards in the west. History never repeats itself exactly but, in this case, austerity must be understood as a trade war by other means. AFTERWORD: As a side note, another option to which ruling classes have traditionally turned has been protectionism. At present the dominant thrust - with memories of World War Two, which emanated from protectionist responses to the Great Depression - has been towards austerity and deregulation as an alternative to protectionism; a sort of race to the bottom model. But the protectionist model is also a dangerous game to play and so it is deeply disheartening that the Ontario NDP in the present provincial election has made "Ontario first" a central plank of its job creation platform. First of all, on its own this will have negligible effect. But secondly, it's not the case that a government gets to impose protectionist measures and there is no reaction. Of course the WTO would step in but Ontario gets significant inputs and products from countries around the world and a trade war with a minor economy like Ontario's would be economically and politically devastating. It also suggests that the problem is a regional and not a class one, as though Quebec train manufacturing workers are less deserving of work than Ontario train manufacturing workers. It is fundamentally a politic built upon a passive acceptance of the status quo. It is not left wing at all and has no role for working people - across provincial, let alone national boundaries - struggling together to defend their living standards from the corporate predators and their representatives like Stephen Harper. That is, of course, the perspective of union bureaucrats who would rather the NDP pass meaningless legislation than mobilize their members but it is a disaster for working people.

Toronto: Mayor Ford Retreat, Tory Vote Meltdown

Ah, I love the smell of self-inflicted Tory panic on a Monday morning. It seemed only a year ago that things were heading towards Tories at all levels of government. Harper was riding high - and would soon win a majority - Ford won a majority of votes in the mayoral election, while the left candidate (can you even name him?) won less than 15%, and shiny, new provincial Tory leader Tim Hudak was going to crush Liberal Premier McGuinty like a badly matched UFC brawl.

What a difference a year makes.

Sure, Harper got his majority but he didn't really improve his vote. And the NDPs vote went through the roof, representing a big shift to the left, particularly in Quebec. After years of enduring Liberal sycophancy in the face of Tory policies - and Ignatieff's poor efforts as posing as a fighter - the arrival of the NDP will put much greater pressure on the Tories. It's worth noting that one of the first acts by the NDP was to challenge the Tory's punitive back to work legislation against the postal workers, who were locked out by management.

Here in Ontario Hudak's Tories were riding high as late as June, with projections that they could win up to 20 Toronto area seats. But it's been all downhill since then.

In a Forum Research poll from June, when the PCs were leading by a wide margin in Ontario as a whole, Mr. Hudak’s party stood at 33 per cent in Toronto, ahead of the Liberals (31 per cent) and the New Democrats (25 per cent). In a space of three months, the Tories have lost about one-quarter of their support in the province’s largest city.

The Tory meltdown has yet to gather the same kind of momentum in the rest of the province but there is a pattern emerging that hints at the potential to deal a serious hammer blow to the Tories in Canada's industrial heartland. A big defeat here would damage Harper's chances of repeating his majority next election and open the door to a potential NDP federal government.

It's certain that the key is bumbling Rob Ford's endless stream of screw-ups and the possibility of really putting a stop to his austerity agenda. As today's Globe & Mail points out, Ford is ready to back-off on library closings and eliminating daycare subsidies - even though he was still touting them as late as last Tuesday. This partial, humiliating climbdown is a result of the unprecedented outpouring of anger over the fact that Ford lied during his campaign that there would be no service cuts and his and his brother's shocking arrogance and cavalier attitude to popular public services. The solid campaign by the library workers union to publicize opposition to the cuts - and the recent massive Toronto poll that showed Ford's popularity in freefall with anti-cuts sentiment pushing 75% - have deepened the crisis at Ford HQ. Even mainstream newspapers and right wing radio hosts are laying the boots in.

The growing campaign against the cuts - including a recent mass meeting in Dufferin Grove Park that drew 600 - and the likelihood of a big demonstration on Monday, September 26 increases the possibility that we can push Ford from climbdown to meltdown. And a meltdown of the Ford administration will undermine the Hudak Conservatives in a big way. It will help to spread the anti-Tory sentiment beyond the city's boundaries, demonstrating an alternative to austerity and phoney calls to "respect taxpayers" - really code to coddle and subsidize the rich. All of which makes it that much more important that September 26 is massive. Spread the word, invite your friends and family, your co-workers, your neighbours and plan to be there yourself. This could be the moment we begin to turn the tide - and that's something that you don't want to miss.

Toronto Mayor Ford to retreat from controversial cuts - The Globe and Mail:

Killing The Bob Rae Myth

Watching the Ontario election you'd think that there was nothing of much import going on in the world. Why else would there be so little difference in the platforms of the three major parties in this election? For instance, you'd never know that a majority of Ontario's workers live pay cheque to pay cheque with 40% expecting that they will have to retire later than they had planned.

A major contributing factor to the low savings rate [i.e. retirement savings - rbh] is that many Canadians are living close to the line. The CPA survey found that the majority of Canadian workers continue to live pay cheque to pay cheque, with 57% saying they would be in financial difficulty if their pay was delayed by even a week.
The numbers were even higher for younger Canadians aged 18 to 34 (63%) and single parents (74%). The regions with the highest percentage of workers living pay cheque to pay cheque were Ontario (60%) and the Atlantic provinces (64%), which may be the result of their slower recovery since the last recession.
Financial planners generally recommend that people have approximately three months of expenses (rent, mortgage, bills, groceries, etc.) as an emergency fund.

How is it that this fact never gets mentioned? We know why the Tories never mention it - because they helped contribute to it. Ditto the Liberals, particularly at the federal level. But why hasn't the NDP said a word about the decline in living standards amongst working people? We can get some idea from the present media onslaught on the legacy of the Bob Rae government in Ontario. Federal NDP president - and leadership hopeful - Brian Topp made sure to take a dig at Bob Rae this week, contrasting the Ontario NDP government with the "successful" governments in Manitoba and Saskatchewan. And Andrea Horwath made a point of attacking the government of Bob Rae in the early 1990s.

“I know there are probably many different opinions out there in this room about the NDP’s record in government. So I’m here to set that record straight. Contrary to what my opponents may tell you, New Democrats across Canada have a very good track record when it comes to managing books and balancing budgets,” Horwath said during comments at Mayor Jim Watson’s breakfast speakers series, which is held at City Hall by the Ottawa Chamber of Commerce and Ottawa Business Journal.
“I’ve got to say here, straight out: That not every NDP premier has had a stellar record. But since the premier with the absolute worst record is campaigning for another party nowadays, I am not going to take any lectures from my opponents,” Horwath said, laughing.

On the one hand, I'm loathe to defend Bob Rae for reasons that ought to be obvious. However, it is not at all for the same reasons as Horwath and Topp. The problem with the Rae government wasn't that it ran up a deficit trying to fight the recession of the early 1990s. In fact, I remember being impressed when Floyd Laughren, the then-finance minister, announced that with his 1991 budget he was faced with "fighting the deficit or fighting the recession - we're proud to be fighting the recession." Of course, the business media went insane, attacking Ontario's first labour government - Ontario's credit rating was downgraded and there were even bankers and businessmen demonstrating on the lawn at Queen's Park. Now, when Stephen Harper runs up a deficit nobody says boo. It was and is about a class war on Canada's party of the labour movement, an attempt to tame them into operating in the interests of the business class. So, when Horwath - who was supposedly the "left" candidate for ONDP leader - and Brian Topp laud the governments of Saskatchewan, Manitoba and Nova Scotia, what they are really celebrating is the fact that those governments capitulated utterly and completely to the agenda of big business. Oh, sure, they had some reforms here and there but, like the NDP in this election, their vision was so pathetic and pedestrian that business didn't need to protest - as long as they got the big picture right, which was to discipline the economy (i.e. the working class) and to orient towards business profits.

One look at Horwath's policy platform reveals just how low the NDP has set its sights. Whereas Rae's "Agenda for People" election platform called for nationalizing auto insurance, legislation to prevent the use of replacement workers (scabs) during strikes, better social assistance, and tax reform - Horwath's "Plan for Affordable Change" offers very minor reforms like reducing the use of consultants, forcing the government to buy Ontario goods, freezing transit fares and cutting HST on home heating. Not only is this basically indistinguishable from the Liberal platform - in fact, the Liberal platform appears more bold, promising 50,000 green energy jobs compared to the NDP's plan of creating jobs with a "buy Ontario" law - it appears on the surface to be indistinguishable from the Tories' platform. Our choices in the election have been reduced to a choice between brands rather than any substantive difference in political direction. Even the possibility that there might be a voice for something off-message needs to be stomped out - as we've seen this past week with the Ontario NDP's overturning of the democratic election by the riding association in Thornhill to run well-known socialist Barry Weisleder as the riding's candidate.

All of this speaks to the collapse of post-war social democracy into neo-liberalism - which is precisely what Bob Rae's government represented. Elected on a - by today's standards - bold platform of reform, by the end of their term the NDP government had firmly laid the groundwork for the Tories. They attacked public sector workers with a "Social Contract" that imposed unpaid work days. They demonized welfare recipients and began the war on the poor that Mike Harris took up in earnest. They eliminated grants for poor students attending post-secondary education. And they completely capitulated on public auto insurance, making it the last time that a serious proposal for nationalization would cross the lips of an NDP leader (not quite true - Horwath is talking about re-merging the Ontario hydro utilities and keeping big electricity producers publicly owned). By the end of their tenure, the majority government of the NDP couldn't even pass same sex spousal legislation, which wouldn't have cost the government a dime. Disappointment, betrayal and cowardice in the face of right wing, business opposition ought to be viewed as the mistakes of the Bob Rae years. The lesson ought not to be that we need to surrender having a big vision for a better society. If the point isn't to change the world, what's the point in having an NDP? If we accept that there is nothing we can do in the face of autocratic corporate power, what's the point of elections? My guess is that many people are asking themselves similar questions during this election campaign - or, perhaps more likely, they're just bored.

What is your most important provincial issue of concern? - The Globe and Mail