Part 13 - Only Management, Labour and the Public Working Together Can Solve Our Country's Socio-Econo-Fiscal Crises

Inadequate Solutions to the Current Crises

Considering the gravity of the current socio-econo-fiscal crises that are seriously affecting a large segment of the population, the current establishment needs to realize that it's not enough to just:

• Confide in the financial institutions, the stock markets and the investors' good vibes, hoping that they will take care of the financial, and by extension, the economic affairs of our country. Historical evidence totally discredits such belief.
• Seek out only the views of the business class and their proxies, in the course of the decision making process. In a democratic country, the interest of all segments of society should be equally considered.
• Cut the prime interest rate and keep it low for a few years, trusting that entrepreneurs will borrow to expand their operations or invest in new ventures. In this way everything will somehow turn out all right. The reality is, in the absence of significant increase in consumer demand, business has no compelling reasons to expand, let alone hire more employees.
  By the way, the current low interest rate policy runs contrary to earlier calls for reduced spending and increased saving. In fact, this ‘policy’ destroys the value of guaranteed investment certificates, including retirement income and savings plans, and thus impedes economic growth.
• Let the financial institutions practice unreasonably strict ­money-lending policies to a point that they are even refusing to bridge-finance important projects, even when 100% collateral is offered.
• Sit by and claim that there are no precedents to draw applicable lessons from. No valid solutions for how to climb out of the proverbial quagmire. This attitude results in a "wait-and-see" approach.  Let's allow the entrepreneurial class decide on how far a "cut and slash" and outsourcing style of modus operandi will be tolerated by the public. 

Moreover, it sounds incredible that amidst the grim socio-econo-fiscal climate -- evident by increasingly high unemployment, under-employment, poverty, debt, deficit and bankruptcy rates -- the establishment still keeps on defending these hard-line policies. That is to say that:

• Governments, obsessed with decreasing expenditures, are cutting essential social programs, thereby punishing the victims of this fiscal crisis, by selling out major, publicly owned assets and resources, and offering tax havens for internationals whose interest is global, not local.
• Businesses, in pursuit of maximizing their bottom line, keep on reducing their operational costs by laying off personnel and slashing wages and benefits. They are not realizing that lower wages result in less consumer spending, which in turn will decimate sales and revenues. Let alone that this latter process will further increase poverty and the already looming unemployment rate.

Come to think of it, one can only wonder, what is the definition of "enough" in corporate circles? Especially, in terms of top executive compensation vs. the average worker's pay. While most industrial countries may be characterized by a 75 to 1 ratio, this figure is over 400 to 1 in Canada. But apparently, even that is not enough.

The Key to Recovery: Economic Expansion

In view of Canada's very gloomy state of affairs, and in the absence of an effective recovery plan, the Premier of Ontario or the Minister of Finance should urgently call an Economic Conference. They should invite five delegates each from Corporate, Labour and Public Affiliates -- representing all major sectors of the economy -- and seek out their brief solutions to the ever-deepening socio­-econo-fiscal crises.

It's important to keep it mind that, within the framework of the free market economic system, the key to recovery from these periodic crises is economic expansion. This can only be achieved through significant reductions in poverty, caused by low wages and high unemployment/underemployment rates. In doing so:

• Consumer spending will increase and so will the volume of tax revenue; then, automatically
• Governmental expenditure will substantially decrease along with the size of the deficits across the board.

In order to make the conference meaningful at all, delegates should:

• Redefine the meaning of the 'new economy'. Is it "a system of producing and distributing the material needs of society?" Or, is it "a system of transferring goods, produced in low-wage-paying countries to relatively high-income-earning countries, primarily for monetary gains?"
• Prepare and present a series of mathematically proven practical proposals -- along the lines of our analytical summary in the article, "Full Employment Without Any Loss of Income is Not a Pipe Dream"  -- aimed at:
• Creating full employment without any loss of income; and
• Eliminating poverty by:
• Raising the purchasing power of poverty line wage earners
• Providing affordable housing based on home ownership, utilizing the power of volunteerism in the process.
• Keep in mind that paying low wages, and ignoring high unemployment and poverty rates invariably will continue to result in;
• Low purchasing power and diminishing sales revenue, on the one hand, and;
• Decreasing tax revenue, increasing budgetary expenditure, deficit and debt, on the other hand.

Once the summit has reached a consensus, a special legislative procedure should ensure that a series of realistic, remedial proposals will be enacted, without further delay.

In Summary: There is an urgent need for a Comprehensive Economic Expansion Program to counter Canada's Socio-Econo-Fiscal Crises.

Further Food for Thought

• Deloitte Centre for Financial Services on this country's millionaires: "In Canada there are 1.7 million millionaires, whose collective possessions amount to $3.3 trillion, not counting real estate." - The Globe and Mail, Page A15, October 31, 2011
• Dr. Jim Stanford, economist on Canada's Billionaires: "While the average billionaire became $100 million richer in 2010, the average Canadian became $524 richer." - October 14, 2011
• Jeffrey Immelt, CEO of General Electric, and Chairman of U.S. Presidential Job Council, on who we all work for: "We all work for the investors." 
• Federal Reserve Bank chairman Ben Bernanke‘s take on the high U.S. unemployment ratio: "We need to do whatever we can to move toward maximum employment as long as the tools are efficacious."
• Pierre Lassonde, co-founder of Franco-Nevada Mining Corp., on the subject of international competition: "If you try to compete against China on wages, you are gonna be a poor oountry."
• Dr. R. L. Heilbroner, Professor of Economics, regarding the issue of the maldistribution of income: "Incomes paid out to the lower-paid strata of the labour force do, indeed, return to the stream of purchasing power, for the worker tends to spend his or her wages quickly, but profits or high individual compensations may not."
• Christine Legarde, IMF Managing Director, on how to recover from the socio-econo-fiscal crises: "We need growth that produces jobs and that is inclusive." - The Toronto Star, Page N6, November 12, 2011
• Paul Krugman, MIT Professor, on the issue of competitiveness: "Competitiveness is a meaningless word when applied to national economies. And the obsession with competitiveness is both wrong and dangerous."
• Jennifer Granholm, former Governor of Michigan, on lowering taxes for corporations: "I have offered 0% corporate tax for corporations as an incentive to settle in Michigan. They said, we already have that in Mexico along with $1.50 an hour labour cost!" - CNN, GPS, November 13, 2011
• Tom Gorman, MBA, Author and Consultant on poverty and its effects on society: "It's income inequality that creates poverty in an economy. Poverty generates crime, broken families, drug addiction, illness, illiteracy and more poverty."
• Mickey Drexler, CEO of J.Crew in reference to economy and competition: "The economy now is zero sum. The only way you're going to get business today is to take it away from somebody else"

 Recommended Reading

• "Canada has more University Graduates earning very low incomes than any other country in OECD." - The Globe and Mail, Page A4, September 26, 2011
• "The sad demise of the one-income family." - The Globe and Mail, Page B2, October 19, 2011
• "Standard of Living; A generation under pressure" - The Globe and Mail, Page A3, October 19, 2011 
• "ls this the new normal?; Staying on the job" - The Globe and Mail, Page A3, October 27, 2011
• "Canada must address economic threats" - The Globe and Mail, Page B9, October 20, 2011
• "A millionaire's tax is all the rage, but it's another thing to collect." - The Globe and Mail, Page A15, October 31, 2011
• "Full Employment Without Any Loss of Income is Not a Pipe Dream" - Straight Talk About.., August 8, 2011
• "Rescuing the Canadian Economy" - Straight Talk About.., August 8, 2011
• Part 12 - Hope for Upcoming Graduates - The Cooperative Business Model
• Part 14 - Mr. Scrooge Can't Fix the Economy