- The Corporations, which are still operating in a nomadic mode. They continue being heavy-handed on downsizing, shutting down entire plants, warehouses and stores, fleeing the country, leaving behind devastation, cutting hours and wages, nixing social benefits for temporary employees, and unduly outsourcing jobs to low-wage-paying countries. Not surprisingly, these maneuvers have enabled many corporations, during the past 12 months, to hold onto and further increase their collective stockpile of "dead money" from $526 billion to nearly $0.6 trillion.
- The Federal Government, which remains seemingly detached. The government is willing to wait out the aftermath of this never-ending – what it amounts to – socio-econo-fiscal "transformation" process, no matter what. As if this hands-off style of governance does not cause enough damage, governments are still sticking to their "stay the course", "balanced budget commitments", "austerity", "left to fend", "spending lapse", "deferred maintenance", "do more with less", and "do-away-with regulations" policy dicta. All of this because, "now is the time for fiscal discipline" along with additional corporate "tax-reductions". As a result, just in 2012 alone, the feds reportedly amassed $13 billion in "discretionary" and "EI benefits" savings. Were we to add these savings to the mysterious flight of $3.1 billion, it's all but enough to balance the budget.
- The Bank of Canada, as a credit and currency regulator, is still sticking to its 1% prime interest rate policy – and toying with the idea of further reducing it – to encourage further borrowing, hoping to stimulate economic development. However, the downside of such a "top-down" strategy penalizes the 25% of taxpayers (i.e. RRSP/RIF and other annuity beneficiaries) who are losing billions of dollars worth of their purchasing power each year. This line of action has put the brake on much-needed "bottom-up" economic activities that could have been initiated if this "low prime interest" policy had not been implemented in the first place.
- The Ontario Government, recently retreated for its 10th Ontario Economic Summit (OES) – meeting on November 6, 2013 at Niagara-on-the-Lake for three days – to seek consensus as to how to "lead and shape" its economic agenda for the future. Julia Salzman – in her Public Policy Publication – a few weeks ago summed up the event as follows: "This year's summit played host to an impressive lineup of speakers including the Minister of Economic Development Dr. Eric Hoskins, the President and CEO of the Ontario Chamber Of Commerce Allan O' Dette, the President and CEO of MaRS Innovation Raphael Hofstein, and Premier Kathleen Wynne. These leaders, along with other industry visionaries, initiated insightful discussions (at the latest) OES theme of Convening for Success."
Potential Remedies to Resolve the Ongoing Crises
The OES, along with the many previous federal and provincial top-level conferences, have not yet been able to resolve this province's or country's socio-econo-fiscal crises. Therefore, it is worthwhile to list the myths and facts, along with their supporting evidence, in order too figure out what remedies could be applied to the "modus operandi" of each of the aforementioned "parties-in-management" of the economy, to obtain the desired results.
- The Corporations
- Myth: To remain competitive, corporations must reduce costs and move to wherever the road to the "highest return on investment" takes them, otherwise their shareholders will abandon them.
- Facts: Corporations and their stockholders, even according to "maximalist" standards, are doing very well. Since the year 2008 alone, corporations have accumulated $0.6 trillion of "dead money". So far they have yet to find a way to spend it.
- Evidence: Throughout the past three decades, corporations have imported practically all consumer products at between 1/10th to 1/75th of the price that Canadian sources could produce locally. (Therefore, it may be said that corporations have created a success story on the "supply side" economics and now need to work on how to resolve the issue of "diminishing demand", caused by the fact that about 50% of taxpaying consumers receive less than $30,000 gross yearly income.)
- Remedy: Establish a "Save the Economy" relief fund. This should be managed by a combined private and public consortium. The fund could be quietly built up by canvassing holders of the $0 .6 trillion of "dead money", with the aim of amassing $60 billion within the next 24 months (one might call it a "voluntary corporate tax" for the purpose of eliminating poverty and resurrecting the deathly economy). The objective of this "relief program" would be to issue monthly cheques of $2,000 payable to each of the about 1.25 million unemployed individuals in Canada, until they become full-time employees, or for a maximum of two years.
- Results: The entire economy would be gradually resurrected by the infusion of this allowance within just a few months, and subsequently the corporate bottom line would also experience a gain due to the "multiplier effect". Let alone that such a gesture would rebuild the public's confidence in the private enterprise system.
- The Federal Government
- Myths: During recessionary times, austerity measures are necessary to halt public sector deficit-based expenditures and to curb private, credit-based spending that could further jeopardize the country's econo-fiscal stability.
- Facts: By curbing public and private spending, consumption is reduced. Reduced consumption leads to cutbacks in production. Cutbacks in production, in turn, create a domino effect that causes further layoffs across the entire economy. Historical evidence suggests that there is no end to this downward spiral, as long as austerity remains in place. Only increased productive spending and consumption can lead us out of this econo-fiscal debacle.
- Evidence: Comparable examples – verified by independent experts – indicate that countries that were subjected to a lesser degree of austerity, or to no austerity measures at all, fared far better than those who were. Furthermore, even the most enthusiastic abettors of austerity are now backtracking on it. Instead, they either introduce a "proper minimum wage", or raise the existing ones, aimed at increasing the buying power of the low-wage earning masses. Proactive leaders of the latter countries also recognize that the advantages of exporting to other countries no longer exists, therefore they focus on producing for their respective domestic markets.
- Remedies: Targeted spending, and massive productive job-creation programs aimed at rebuilding the crumbling infrastructure. This would expand and modernize the public transit systems to ease traffic congestion. These activities – due to the resulting increased earnings and consumption – have the built-in capacity to resuscitate the ailing economy.
- Results: Balanced public-sector budgets and reduced expenditure due to: the lower demand on EI and welfare benefits; the increased tax base and tax revenue; and the diminished need to rely on private, risky, credit-based spending.
- The Bank of Canada
- Myth: Prime interest rate must be kept low to allow corporations and other businesses to access affordable credit.
- Facts: Corporations are saturated with unproductive cash. Private businesses do not need, or want, more loans, they are most likely in deep debt already due to slow consumer traffic. What is collectively needed is millions of customers who were long on cash. At the same time, the folks who have been diligently saving for their retirement years, are seeing their RRSP/RIF etc., being diminished or evaporated by many years of low prime interest rate policies.
- Evidence: A large segment of seniors are overwhelmed with bearing the costs, and being coerced to take responsibility for the debts of their insolvent offspring. A whole generation of young people – who after graduation are faced with tens of thousands of dollars of unpaid student loans and unable to find steady employment – are now adding an extra layer to the underprivileged class of this country.
- Remedy: A return to a standard currency and regulatory policy-making role, and the formulation and implementation of a mechanism to control real estate speculation, a traditionally causative factor in endangering this country's econo-fiscal stability for many decades.
- Results: Econo-fiscal stability.
- The Ontario Government
- Myths: Employers cannot afford to pay higher wages. Employers would be forced out of business and many jobs would be lost if the minimum, or living wage, let alone livable wages, were to be paid to employees (a frequently repeated, but never proven and unsupportable, self-defeating argument that needs to be publicly refuted).
- Facts: there is not enough purchasing power left in half of the employees' wages, who earn less than $30,000 gross annually, which is the reason for the cyclic economic stagnation, the rampant poverty, the unemployment, along with the high rate of youth underemployment. These are caused by corporations that withhold hundreds of billions of dollars from their employees' payrolls.
- Evidence: Henry Ford shattered the previously described myth a century ago, by demonstrating that the economy is not a "zero-sum" game. He decided – to the chagrin of his business advisors – to raise the minimum wage at all of his plants from one dollar a day to five dollars a day. The automaker's calculated decision enabled his employees to buy a Model T for $650 in under a year, and to even own their own home in just a few years. One might also add that Ford had actually proven that employees have two functions: they are not just workers, but also consumers, and low-wage earning employees are meager consumers. So, through his action, Ford ultimately revitalized the marketplace, and as a result, he contributed to a more just society.
- Remedy: Increase all annual wages of employees earning below $35,000 a year by 5% to 30% in a reversed order of the "income scale". (Refer to our blog article on this topic for full details).
- Results: Improvements due to a "multiplier" effect on consumption, and an expansionary feedback of 3.5% on the economy, along with gains in business and government revenues.
Is Labour an Underclass in a 'Classless' Society?
While not much is known as to what exactly went on at the 10th OES, and for that matter at the previous gatherings, the sessions were attended by typical Corporate and Government leaders to the exclusion of Labour representatives. This is unfortunate since Labour is the largest socio-econo-fiscal and political factor in the country. Hence, the 10th OES could not have been a true consensus, could it? This has become a very systemic problem. Perhaps a reminder of the fact that, in certain circles, the spirit of slavery is just waiting for its chance to return.
Message from the 10th OES
According to an independent analyst, there was a common thread running through the message given by the speakers, visionaries, and leaders at the OES. This message was, "Invent, innovate and export, or you will all be left behind" by the global economy.
Is Ontario and Canada Really Fit to Become an Exporter?
To provide a credible answer to this question, it is necessary to consider the following facts:
- 30 years ago we used to be a well-to-do, exporting country. All the provinces used to have their own multifaceted, nearly self-sufficient economies. However, after 30 years of intensive "technological transfer", a.k.a. dis-industrialization process, currently with a few exceptions – such as agricultural, forestry products, and minerals – this country totally, or some would say dangerously, relies on imports. And now, export is offered as the only option for our survival?
- No matter what, Canada as a whole has lost its entire industrial culture. It would take way more than a decade to rebuild it from the bottom up, at a prohibitive cost.
- Furthermore, how could the workforce of this country compete with their counter-parts that work for less than two dollars an hour and have no Social Security and no corporate tax system in place?
- Since about 60% of the workforce in Ontario and Canada regularly live on borrowed money, the question is: Are lenders – along with everyone else up the food chain– willing to devalue these debts? Otherwise, the entire country becomes bankrupt.
So, What Does the Future Hold?
No one seems to know, or at least no one is willing to talk about it. If the previously described scenarios were not disturbing enough, consider what a few futurists are suggesting as the reality for the vast majority of the public: By the year 2025 – just a mere decade from now – all jobs will disappear. Does this mean that everyone in Canada will be on the dole? And, where will the funding come from? From oil or LNG? (Clearly a series of all-inclusive, public consultations are imperative!)
Are There Some More Realistic Options?
Of course there are, but each of these options are antithetical to the prevailing, unmitigated free-market-based ideology, namely:
- First, the economy could be restarted anytime simply by initiating a huge, well-planned public works program. We could rebuild the crumbling infrastructure of this country and modernize our age-old transit system, having it funded by the $20 billion EI budget. In fact, the Bank of Canada could even directly finance such a program, analogous to the financing of World War I and World War II.
- The second option is a program that has the innate capacity to provide "full employment without any loss of income to everyone willing to work". (A validated, self-financing program, that is already in the hands of the government, but apparently due to ideological reasons, they are hesitant to act on it. In this context, one might ask the following legitimate questions: Do government officials have the right to refuse proven proposals that have the innate capacity to resolve the problem of unemployment? Isn't this a borderline case for malpractice?).
- The third option is a much needed and highly cost effective "Affordable Housing Construction Plan". This plan could be financed by reverting funds From a $7 billion per year government program – that provides temporary shelter for between 30,000 and 200,000 homeless people across the land – and construct permanent homes.
Labour: Servants or Decision-Making Partners?
Several experienced researchers "in the know" – having spent decades on closely studying the various socio -econo-political systems around the world – have found that in Denmark, France, Germany, Norway, Sweden, and Switzerland, public participation in the decision-making process to various degrees is constitutionally guaranteed by referendum and/or by other means.
Among these aforementioned countries, Germany's "Basic Law", enacted in 1949, is probably the most comprehensive and unprecedentedly democratic model. It not only protects Labour Rights, via the "Works Constitution" and the "Codetermination Law", but also renders Labour and Corporate participants as equal partners in the decision-making process.
Yet, on this side of the pond, while we are in the midst of endless socio-econo-fiscal crises, only two entities are present at the table, namely Corporate Business (employers) and Government, with the latter acting more like a timid "aide-de-camp", rather than a decision maker vis-à-vis its "partner-in-management".
For all intents and purposes, even now in the 21st century, Labour is being considered by many to be like those servants who had served at gentry estates during the Dickensian era,
Simply because only the enactment of a Codetermination Law has the innate capacity to:
For all intents and purposes, even now in the 21st century, Labour is being considered by many to be like those servants who had served at gentry estates during the Dickensian era,
Why Do We Require a Codetermination Law?
Simply because only the enactment of a Codetermination Law has the innate capacity to:
- legally close the door on the era of slavery once and for all, and prevent the possibility of a facsimile system being reinstated, albeit gradually step-by-step.
- Render Labour/Employees – the largest socio-econo-fiscal and political factor – an equal partner with Business/Employers as decision-makers and thus empower the two to cooperatively pull our province and country out of its ever-deepening, economic quagmire. (After all, some might say that these days, the contrast between employees and employers can be measured by more of the latter group's financial standing than by anything else.)
- Convert Democracy into a meaningful, socio-econo-fiscal and political system; potentially under a Coalition System of Governance, wherein the views of every faction are proportionally represented, equitably considered and implemented, and the exploitation of Labour/employees is outlawed.
Summary
- Austerity has proven to be the wrong remedy for resolving the socio-econo-fiscal crises of our province and country; analogous to administrating a weight reduction diet for dangerously underweight individuals, and a weight inducing diet for overweight ones.
- Independent analysis of the "modus operandi" practiced by the current "partners-in-management" of the economy, indicates that they are clearly guided by faulty dogmatic assumptions, Serving a narrow, special interest as to what the purpose of the Ontario and Canadian economy is.
- Studying and adopting Henry Ford's proven theories Could prove to be beneficial to all, namely that:
- The economy is not a "zero-sum" game; and that
- Employees have two functions. They are not only workers, but also consumers. Therefore not paying a livable wages to all employees is a self-destructive socio-econo-fiscal and political strategy.
- It is time to convert democracy into an all-inclusive, meaningful, socio-econo-fiscal and political system by:
- Tabling and enacting a "Codetermination Law", thereby granting Labour/Employees a coequal status to participate in the process of managing the Economy; and
- Introducing a Coalition System of Governance that the Public Affairs of this province/country is managed for the benefits of the entire society equitably.
Must Reads for Every Socio-Econo-Fiscal and Political Officeholder
- "The Economic Problem", "Understanding Microeconomics", and "Understanding Macroeconomics", by Dr. Robert L Heilbroner, Professor
- For more information regarding the "Works Constitution" and "Codetermination Law", refer to the European Foundation for the Improvement of Living and Working Conditions website or obtain a copy of "Facts about Germany", available from the Consulate of the Federal Republic of Germany in Toronto, Ontario.
Food for Thought
- "Europe's 'austerians' need a lesson in macro economics", by Christopher Ragan, Associate Professor of Economics at McGill University – The Globe and Mail, July 17, 2013.
- "What Canada Really Needs Are More Inquisitive Minds", by Todd Hirsch, Chief Economist and Author – The Globe and Mail, September 12, 2013.
- "The next time some business lobby bleats about a government policy that is anti-business, ask the speaker why business itself hasn't delivered despite very favourable government policies." by Jeffrey Simpson, Columnist – The Globe and Mail, January 10, 2014
- "How safe is your job?" by Chris Sorensen – Maclean's Magazine, January 13, 2014.
- "Our ways of democratic governance, invented long ago and resistant to change, do not seem up to the modern world's challenges. We need version 2.0", by Gordon Gibson, Columnist – The Globe and Mail, January 2, 2014.
- "Canada finished the Second World War with public debt equal to over 150 percent GDP … We should accept the growing international consensus that more public debt is helping the recovery, not hurting it. To paraphrase FDR, we have nothing to fear from debt – except an ideological fear of debt itself", by Jim Stanford, Economist with Unifor – The Globe and Mail, October 16, 2013.
- "In 2024, all homes will be 'dream' homes", by Rob Carrick, Columnist – The Globe and Mail, January 9, 2014.
- "A job should keep you out of poverty, not keep you in poverty", by Lambert Villaroel, Chef – Source: "Working for nothing: Canada joins global wage debate", by Tavia Grant, The Globe and Mail, January 27, 2014.
- "I have to decide if I'm going to pay for rent, hydro or buy food. It's not enough to take me out of poverty." by Amelia White, Earning minimum wage. – Source: "Ontario hike widens wage gap", by Adrian Morrow, The Globe and Mail, January 31, 2014.
- "It's time for Canadians to shift gears from managing homelessness to ending it." by Tim Richter, President of the Canadian Alliance to End Homelessness. – The Canadian Press, June 19, 2013.
