A worthy read

The Neo-Cons Are Conning Us

By Frances Russell | August 14, 2013

"Canadians understand and are very proud of the fact that Canada's economy has performed so much better than other developed countries during these challenging times," Prime Minister Stephen Harper told the House of Commons last May. He was responding to Liberal leader Justin Trudeau who had asked how he justified spending $100 million on "feel good" Economic Action Plan ads in a time of government cutbacks and restraint.

In fact, Canada's growth was surpassed by the U.S. in 2012. Other smaller developed nations, including Australia and the Scandinavian countries, have also done better.

Much has been made and will continue to be made by Conservatives of the prime minister's master's degree in economics from the University of Calgary. The implicit message is who could be better-placed to steer the country through ta major and lingering global recession than an economist?

The answer depends on from whose school of economics the person hails. There's no doubt anywhere that Canada's prime minister is a proud and leading member of the low-tax, small-government Margaret Thatcher-Ronald Reagan neo-conservative school that has dominated the world since the 1980s.

His first act as prime minister was to cut the GST from seven to five per cent and then embark on a multi-year plan to reduce corporate income taxes.

Then, at the peak of the global meltdown caused by the Thatcher-Reagan orthodoxy, Harper made it official, He told The Globe and Mail in July, 2010 that there were only two schools of economics. "One is that there are some good taxes and the other is that there are no good taxes. I'm in the latter category. I don't believe that any taxes are good taxes."

Ottawa collected $40.6 billion in corporate taxes in the 2007-08 fiscal year, a record high. That was also the year the Harper government began a schedule of corporate tax cuts that saw the federal rate fall from about 22.1 per cent to the current 15 per cent.

Government revenues have yet to recover from the successive slashes, even in non-inflation adjusted dollars. The three years following 2007-08 saw corporate tax revenues shrink to $29.5 billion, rise slightly to $30.4 billion and then inch back down to $29.9 billion.

By the end of the 2012-13 fiscal year, the Harper Conservatives had reduced the cost of government by $220 billion, according to the Toronto Star. Meanwhile, corporations are sitting on about $250 billion more in cash than they had in 2006.

Economist Jim Stanford of the Canadian Auto Workers says the Harper government is repeating the disproved supply-side Laffer curve argument popularized by Reagan in the 1980s that governments increase revenues by cutting taxes - in other words, starve themselves into prosperity.

"It's absolute statistical nonsense," Stanford says. "The end result has been on one side a reduction in government revenue and on the other side, an additional increase in corporate cash hoarding."

It's important to remember that over the same period, Ottawa has run up a cumulative $169-billion deficit. It is projecting another $18.7 billion deficit for the current fiscal year of 2013-14.

It's even more important to remember that Harper inherited a modest $13.8 billion surplus from Paul Martin's Liberals in 2006.

A year ago this month, the Canadian Auto Workers held their first constitutional and collective bargaining convention in preparation for their merger with the Communications Energy and Paperworkers to form Canada's biggest union. The theme was A Better World Is Possible and delegates heard from a panoply of guest speakers including Bank of Canada Governor Mark Carney (now governor of the Bank of England) and former Parliamentary Budget Officer Kevin Page.

The convention published a 150-page analysis ofthe Canadian economy. Beginning with the elections of Thatcher in Britain and Reagan in the U.S., the push was on to dismantle the post-war social contract and create maximum freedom for capital, the analysis said.

"If there was ever a moment in history when the rich and privileged of society should be on the defensive, it should be right now," the introduction to A Better World begins. "The whole economic and political regime which they've been constructing for the past three decades has proven incapable of managing the pressures and problems of the modern economy. And their fundamental promise that everyone would share in the 'trickle-down' benefits of prosperity, if only we tighten our belts and get the 'fundamentals' in place has been proven utterly false."

The "painful irony," the introduction continues, "is that these same entrenched forces who profited so richly while the 'bubble' was expanding, are now taking advantage of the current grim political and economic environment to reinforce their own power and privilege. They are the ones -- financial wheelers and dealers, ruthless global corporations and the conservative politicians who do their bidding -- to blame for the widespread human hardship we see in Canada and around the world every day...

" The worse global capitalism performs, the stronger and more aggressive its proponents seem to become."

The main elements of today's global capitalism, the analysis says, include controlling inflation at low levels even if that means tolerating high unemployment; free trade agreements that give maximum global freedom to private businesses; big cutbacks in income security, especially employment insurance and welfare; creating a more 'disciplined' labour market where workers are permanently insecure and hence compliant; focusing public spending on areas the benefit business while cutting taxes for high income individuals and businesses; attacks on unions, collective bargaining, minimum wages and other policies which support workers and help redistribute income, and special freedoms and subsidies for the financial industry."

But this free-wheeling, business-friendly environment did not create more wealth for all. In fact, it did the exact opposite. Even before the 2008-09 crisis, living standards were stagnant for most people while the incomes of the richest one per cent took off.

In Canada, the richest one per cent captured one-third of all new income generated in the ten years ending in 2007. Then with the 2008-09 financial meltdown, working people suffered. Canada's true unemployment rate is over 12 per cent, not the 7.2 per cent official statistics claim.

The current stagnation of the world economy is very reminiscent of the 1930s, the CAW warns. "We are now four years into an economic crisis with still no clear sign of a light at the end of the tunnel."
Frances Russell was born in Winnipeg and graduated from the University of Manitoba with a Bachelor of Arts degree in history and political science. A journalist since 1962, she has covered and commented on politics in Manitoba, Ontario, B.C. and Ottawa, working for The Winnipeg Tribune, United Press International, The Globe and Mail, The Vancouver Sun and The Winnipeg Free Press as well as freelanced for The Toronto Star, The Edmonton Journal, CBC Radio and TV and Time Magazine.

She is the author of two award-winning books on Manitoba history: Mistehay Sakahegan - The Great Lake: The Beauty and the Treachery of Lake Winnipeg and The Canadian Crucible - Manitoba’s Role in Canada’s Great Divide. Both won the Manitoba Historical Society Award for popular history.
She is married with one son and two grandsons and lives in Winnipeg.