Tuesday, 19 November 2013

Why I Love Rob Ford

Political Allies:  Rob and Stephen    
Some years ago we moved to Saskatchewan. There was the appeal of the wide open spaces. But I was primarily attracted to the province because of its reputation for progressive democracy. The farmers and their organizations, who had dominated the political system, pushed for policies benefiting the community as a whole. They supported Crown Corporations that provided good public utility services to everyone. They backed the co-operatives, credit unions, the Saskatchewan Wheat Pool, marketing boards where the majority of producers made the decisions, and the Canadian Wheat Board, which had been strengthened at the end of World War II with the support of all the major farm organizations across Canada.

There was also the CCF-NDP government headed by T. C. Douglas. They implemented the first progressive trade union act in Canada and encouraged government workers and teachers to form unions and bargain collectively. A broad range of social programs had been implemented, including a social assistance program that provided recipients with an income above the basic needs level, the highest in Canada. They were the first to implement free hospitalization and then public medicare. The prevailing view of the mainstream churches was the Social Gospel, that of the Sermon on the Mount: I am my brother’s keeper.

But all that has changed. Saskatchewan is now known for the strong support we give to Stephen Harper’s new right wing liberal movement. Our provincial government, a group of Harper supporters, has an approval rating in the polls that reaches 70%. With this change we now have a new set of outspoken political activists who make us cringe.

We have the strongest support across Canada for the right not to register guns and for everyone to own an assault rifle. We have vocal political activists who hate gays and lesbians. There is a strong movement to oppose feminism and presses to deny women the right to control their own bodies. We are the home of Real Women, one of the last remaining women’s organizations, one which is opposed to day care and wants women to stay home and take care of the kids. It is reported that half of their members are from our province.

The mainstream religious organizations are in decline, and those of the Christian fundamentalists are on the rise. The provincial government and local school boards are now using public funds to support “faith based” private schools, where they can teach creationism. They are all in solidarity with our Prime Minister, who chose Calgary as his home, and who is an active member of the Alliance and Missionary Church, which shares their patriarchal values and believes in Armageddon and The Rapture. That is true, believe it or not.

Saskatchewan can now claim to have the strongest group of climate change deniers. Our politicians support any foreign-owned transnational corporation that wants our natural resources, which we give away for virtually nothing. The oil and mining executives who report to the Fraser Institute rank Saskatchewan at the top of the list of the best places to invest. The NDP and the trade union movement are dead in the water. This is The New Saskatchewan.

So I am overjoyed to see Rob Ford in action. He too is a strong supporter of Stephen Harper and his new version of the Conservative government. But Canadians now know that it is not only backwater Saskatchewan that produces crazy right wing politicians. There are some prominent wackos in office in Toronto, home of Bay Street and the TSX.

Friday, 25 October 2013

Fifty Years as a Canadian!

We are starting to see advertisements noting that the 50th anniversary of the assassination of U.S. President John F. Kennedy is coming up soon. These reminded me that I arrived in Saskatoon in August 1963 to begin teaching in the Department of Economics and Political Science at the University of Saskatchewan. I actually camped in the city campground for a few weeks while I sought a place to rent. My wife Betty Meyers and our daughter Delia arrived a bit later. The first year in Saskatoon we lived in a small World War II house at 909 - 8th Street East. It was a cold winter, but very little snow.

When President Kennedy was shot on November 22, I was asked to speak to an assembly of students and others at the university, giving my assessment of Kennedy and speculating on what we might expect from the new President, Lyndon Johnson. It was my first political speech in Canada. Joining me as a speaker on the podium was Fred Gudmundson, and thus began a long and close friendship. It did not take long for Betty and me to realize that we had made the right choice when we decided to become new Canadians.


Saskatchewan: The Roots of Discontent and Protest (2004)

Extract from the Preface:

  The Department of Economics and Political Science at the University of Saskatchewan was not as pure a political economy department as at other Canadian universities. But the scholarly work of its faculty was clearly in the British tradition of political economy, it had political economy courses, and there was an honours course in political economy and history. Many of the people teaching in the department also had close ties to the Co-operative Commonwealth Federation (CCF) government, the first social democratic government in North America.
    When I arrived at the department in August 1963 the first person I met was Cy Gonick. He was in the process of moving to the Department of Economics at the University of Manitoba. We discussed his plan to create Canadian Dimension Magazine, and he invited me to contribute to it and be on the original board of directors.
    The second person I met was Ed Safarian, who had replaced the deceased George Britnell as chairman of the department. Safarian, who had a doctorate from the University of California, would begin the shift in the department away from political economy and toward an eventual split between economics and political science. He introduced me to Vernon Fowke. When my wife Betty and our young daughter arrived in Saskatoon, we spent our first weekend together in Saskatchewan at Fowke’s cottage at Wakaw Lake.
    Shirley Spafford has documented the early history of this department and its political economy tradition in her book, No Ordinary Academics (University of Toronto Press, 2000). There was an early conflict between William Walker Swanson, the first chairman, and those who followed. Swanson, born in Scotland, had a doctorate from the University of Chicago, and while he did important research on the wheat economy, he was a staunch free market liberal and was hostile to the Saskatchewan tradition of populist politics and the CCF.

A tradition of serious scholarship
    The department changed under the new chairman, George Britnell. A local boy from Moosomin, he studied under Harold Innis at the University of Toronto. Vernon Fowke had been born at Parry Sound, Ontario, but his family had moved to Melville, and he attended the University of Saskatchewan. Ken Buckley, another leading figure in the department, was from Aberdeen, just down the rail from Saskatoon; he had also studied under Innis at the University of Toronto.
    The most amazing person in the department, however, was Mable Frances Timlin. Born in Wisconsin, she graduated from Milwaukee state Normal School and in 1916 moved to Saskatchewan to teach school, first in Bounty and Wilkie, and then in Saskatoon. She earned a bachelor’s degree in English at the University of Saskatchewan while at the same time reading economics and political science. In 1935 she was appointed instructor in economics. She was the real theorist in the department. She completed a doctorate in economics at the University of Washington at the age of 40, authored widely acclaimed works on Keynesian economics, was the first woman social scientist admitted to the Royal Society of Canada, and was the first woman elected to the executive committee of the American Economics Association. While she had retired in 1959, “Timmie” regularly came around the department to engage in wide ranging discussions. I well remember a conversation with her when she strongly attacked mathematical economics and neoclassical model building as contributing nothing to the understanding of the Canadian economy. It was far removed, she argued, from the reality of Canada’s integration with the United States, dependence on resource extraction industries, and enormous size and pronounced regionalism.
     It was under these four academics that the department earned its reputation as a Saskatchewan department devoted to the farm movement in western Canada and social democracy. The province was their home, they had lived here during the depression, and they well knew the problems of the farmer. They also believed that academics had an obligation to serve the people who paid their salaries. They gave lectures all around the province, worked for royal commissions, and advised governments. When Tommy Douglas’ CCF government was formed in 1944, George Britnell, Vernon Fowke, and Dean F. C. Cronkite of the College of Law served as the members of the Economic Advisory Committee. Britnell became an adviser to the leftist government of Guatemala under Jacobo Arbenz (1950-4), overthrown by a U.S. government-sponsored military coup.
     Unfortunately, Fowke died prematurely, and I only had the benefit of his kindness and knowledge for several short years. He introduced me to Innis, the metropolitan hinterland thesis of Canadian political economy, and always stressed that we should understand the power of capital in economic development. Ken Buckley’s office was across from mine, and we had long discussions about the nature of capitalism and Canadian economic development. He introduced me to duck hunting. Norman Ward, the senior political scientist and resident humourist, introduced me to grouse and partridge hunting. Ward, one of Canada’s best known political scientists at that time, was the first to tell me that George Britnell taught more political science courses than economics or political economy. Britnell insisted that “anyone can teach political science.” Ward liked to say that being an academic was the next best thing to being a bum: you got paid well for doing what you really liked to do.
    The other major influence on my development as a political economist came from Irene M. Spry, who only taught in the department for one year, 1967-8, before moving on to the University of Ottawa. She was a delightful woman, and as her office was adjacent to mine, I spent many hours there. She was still working on the Palliser books. But along with Helen Buckley, who was in the Centre for Community Studies, she was one of the very few academics who had any intellectual and political interest in the impact of the National Policy on the Aboriginal people in Western Canada. Spry was an impressive scholar with degrees in political economy from London School of Economics and Cambridge University, where she studied under John Maynard Keynes and the Marxist scholar, Maurice Dobb. She also had a masters degree in Social Research and Social Work from Bryn Mawr College. At the University of Toronto she worked with Harold Innis. She and her husband, Graham Spry, had co-founded Saskatchewan House in London. Graham Spry was the Agent-General for the province in London between 1946 and 1967. Like her husband she was a long time social democrat and member of the League for Social Reconstruction in the 1930s. It was a great loss when she moved on to the University of Ottawa. I was pleased to read that right up to her death at age 91 she was a political activist as well as a scholar. She encouraged me to be active in politics, insisting that if you hide away in the university you quickly lose touch with the views of ordinary people. I am still waiting for the book she was working on at the time of her death, From the Hunt to the Homestead, a political economy history of the prairies. She was an active supporter of the Associated Country Women of the World.
    Over the years many well known scholars taught for a short time in this department including Frank Underhill, James A. Corry, Robert MacGregor Dawson, James Mallory, Bernard Crick, Hugh Thorburn, and Gordon Thiessen. While I was there Bruce Wilkinson, Ken Rae, Elias Tuma, John Cartwright, Don Rowlatt, and Robin Neill moved on to major careers elsewhere. Jack McLeod, who switched to the University of Toronto, wrote Zinger and Me on academic life in Saskatoon.

Commitment to the Saskatchewan tradition of social democracy
    The University of Saskatchewan’s tradition in Canadian political economy was a combination of Harold Innis and John Maynard Keynes. It was liberal social democratic and materialist. In the 1960s a new political economy was emerging in Canada which looked to the traditions of continental Europe. I spent the 1970-1 academic year at Atkinson College, York University. Daniel Drache and I shared an office and a year trying to find more radical materials to include in our teaching of Canadian political economy. The older tradition identified with Harold Innis was almost completely devoid of human content. There was absolutely no discussion of social class in Canada, nothing on the development of the trade union movement or the Communist Party, and precious little on the nature of the capitalist class. There was virtually nothing on the relationship between the capitalist class in Canada and the many dominant foreign owned corporations. There was almost nothing on the relationship between the European settlers and the Aboriginal population nor on the role of women in the economy and society. All of those subjects are now very well covered by the new political economy.
    The 1960s and 1970s were exciting times to teach in university. A large number of students were not only active in politics they were actually interested in reading, learning and trying to find the answers to the bigger questions. They were not satisfied with being spoon fed the usual liberal dogma. They wanted to read Marxism and study imperialism. Today most students focus on getting good grades hoping that this will land them a job after they graduate. Most go out of their way to avoid controversy. There are no active student course unions any more. Quite a few students do have a critical approach to their studies, but they are very cynical about changing anything. But there are still some who become active in the anti-war movement, the anti-globalization movement and Green politics. In my own early work and development as an instructor, researcher and writer in the new Canadian political economy I benefitted from a close relationship with Ed Mahood and Howard Adams, both of whom taught in the College of Education. They provided the critical intellectual support that was largely absent from my rather conservative colleagues.

Moving away from political economy
      The department changed under the direction of Ed Safarian and Bob Kautz. More Americans were hired as well as more Canadians who had received their advanced degrees in the United States. A crisis developed in 1971 when John Richards, a very popular professor, was not rehired. Richards was born and raised in Saskatchewan, had gone to the University of Saskatchewan, and was completing a doctorate at the University of Washington in St. Louis. It was widely believed that he was “fired” because he was a promoter of the Canadian tradition of political economy while the majority in the department wanted to move to the American tradition of completely separate disciplines of economics and political science. Others believed that he was not rehired because he was active in the Waffle group, the left wing organization within the New Democratic Party. Indeed, in the 1971 provincial election he was elected to the legislature from Saskatoon-Sutherland. He was a close personal, political and academic friend of mine at the time.
    In any case, hundreds of students protested by occupying the department for weeks on end. Professors were blocked from getting to their offices. Student course unions demanded that Richards be re-hired. The department was deeply split, never really recovered from this conflict, chose to follow the American road, and formally split in two. A few years after the occupation I decided to leave the department and move to British Columbia. The political economy tradition disappeared from the two new reconstructed departments but re-appeared as the new Canadian political economy in the Department of Sociology.
    In British Columbia I was a fruit grower in the Okanagan, but also a researcher and writer specializing in the political economy of food and agriculture. I became involved in the environmental movement. But I never lost touch with my friends in Saskatchewan. In 1986 John Conway and Joe Roberts asked me to return to the University of Regina as a special lecturer. It was natural that when I returned it would be to the University of Regina. Academics at this university had been major participants in the development of the new Canadian political economy. I found my home in the Department of Sociology which had developed a reputation in political economy, rural sociology, and continental integration, my major fields of interest.

Saturday, 7 September 2013

Why Privatize Public Services?

NOTE:  A slightly shorter version of this post was published in the Leader Post, September 16. 

The mainstream media and our political leaders insist that the only real question involved in the building of a new sewage treatment plant for Regina is who can do it cheaper, the government or the private sector. But there are much more important issues.
Regina's Wascana Lake

In the 19th century in Canada and elsewhere basic public utility services were provided by private corporations. As we know well in Saskatchewan, the private corporations provided services only where they could make a profit. Governments were then elected that created Crown corporations on the provincial level and municipal public services on the local level. The goal was always to provide essential public utility services to all, no matter where they lived or how low their incomes happened to be. This was the co-operative democratic approach.

The Reagan/Thatcher revolution
Beginning in the mid-1970s, private capital and their organizations made it clear that they would like governments to privatize these successful public services. This was one of the major policy goals of Margaret Thatcher’s Conservative government in Great Britain and Ronald Reagan’s Republican administration in the United States. In 1989 the Thatcher government privatized the water/sanitation public utilities in England and Wales.

In Saskatchewan, the Conservative government of Grant Devine (1982-91) closely followed the model set by the Thatcher government as it privatized a number of important provincial Crown Corporations. They even used Thatcher’s advisers.

Stephen Harper’s Conservative government shares a similar political ideology and that is why the federal tax money provided to local governments for constructing new public facilities is limited to projects which involve contracting out construction and operation to private corporations.

The spread of right-wing neoliberal program
This political program, pushed by all the large business organizations, was carried over to international organizations. The World Bank, the International Monetary Fund and the World Trade Organization created a policy package known as “The Washington Consensus.” As governments in the less developed countries experienced financial difficulties, these organizations provided some monetary assistance as long as they agreed to the package of structural adjustment programs that included deregulation and the privatization and contracting out of public services.

When the housing and finance industries collapsed in 2008, governments went deep into debt to bankroll the private banking sector. As a result, we are now experiencing “austerity programs” in the advanced industrialized countries. In Europe the World Bank, the International Monetary Fund and the European Common Market provide assistance to governments with serious debt problems but insist that they adopt a package of policies which include the privatization and contracting out of basic public services. They also insist that there be major cuts in public sector employment.

The general attack on the public sector trade unions
For good reason CUPE is concerned about these developments. The neoliberal agenda of the political right includes a strong attack on the trade union movement. Where privatizations have taken place in public services, management numbers and remuneration have increased significantly while large numbers of front line workers have been sacked. Our neighbours who work for the City of Regina have every right to earn a decent income that allows them to raise a family and even buy a home. No one wants to have to work for Walmart wages and benefits.

Regina used to be an NDP town. There was always a majority on City Council who supported the NDP. The general public had greater influence over major policy decisions. Builders and developers were not in complete control. The neoliberal policies of the Romanow-Calvert NDP governments disillusioned great numbers of NDP supporters. They left the party, and it is clear that many don’t even turn out to vote. When the turnout in municipal elections falls to 25 to 33 percent of eligible voters, it is inevitable that right wing political forces will win. Numerous studies show this to be the case. That is why the Mayor and the City Council are so sure they are going to win the referendum.

Friday, 21 June 2013

The stupidity of Saskatchewan's "clean coal" project

  What happened to all the environmentalists in Saskatchewan? Are they only interested in nuclear power? Why are they all silent about Sask Power's ridiculous "clean coal" project? Are they all silent because this project was first pushed by the Saskatchewan NDP government?
Sask Power's Boundary Dam facility
   The final face of the carbon capture and sequestration project at Sask Power's Boundary Dam Station is being pumped by the mainstream media. Sask Power executives argue that we have hundreds of years of "cheap" coal to burn, why should we turn our backs on it? The NDP and the Sask Party agree. The project as it currently stands has a new coal-fired generator which is rated at 160 megawatts (MW). After the energy used to capture the carbon, it will produce between 100 and 115 MW to pump onto the grid. The total cost is reported to be $1.24 billion. What a bargain!
   The project is again being promoted by Bruce Johnstone, the financial editor of the Leader Post. Putting everything else aside, haven't these people ever heard of opportunity costs? If $1.24 billion was spent on other alternative energy projects, how much carbon dioxide would be saved? How many more jobs would be created? Since no one wants to take on this issue these days, and I am too busy to again visit the subject, here is a piece I wrote in 2007. There are very good alternatives to burning our grossly polluting coal.

“Clean Coal” is the Wrong Road to Take

by John W. Warnock

Regina Leader-Post
May 3, 2007

    Lorne Calvert’s NDP government and SaskPower seem determined to saddle the people of Saskatchewan with a new “clean coal” generating facility. The research has been done, the Estevan site has been chosen, and the project’s supplying corporations are on side. The 300 Megawatt (MW) plant will cost between $1.5 and $2.0 billion. But this is clearly not the best way to produce energy nor to reduce carbon dioxide greenhouse gas emissions.
    In the first place, coal fired generators are very inefficient, capturing only around 33% of the energy in the combustion process; the remaining two thirds of the energy produced is dissipated into the environment. This waste energy cannot be captured and used where power plants are far removed from industrial projects and population centres.
    The “clean coal” aspect of this project is the Oxyfuel system used to capture around 90% of the carbon dioxide, compress and chill it to liquid form, and then pump it deep into the ground for sequestration. Unfortunately, this is an expensive and inefficient process. Of the total 450 MW of electricity to be produced by the new plant, 150 MW will be used in the Oxyfuel and geological storage process. As many studies have argued, down the road carbon dioxide sequestration may permit the continued use of coal for power generation. But it is no solution to the current problem of greenhouse gas emissions and climate change.    
    Furthermore, the carbon dioxide extracted by the proposed SaskPower plant will be used to enhance oil recovery. The liquid carbon dioxide is pumped into the permeable oil bearing rock strata, is dissolved in the oil which reduces its viscosity, and it then sweeps the more mobile oil to the production wells. This is the system presently used by EnCana at Midale. Some of the pumped carbon dioxide escapes in this process. And of course this strategy completely undermines the goal of carbon sequestration as more petroleum is extracted and consumed, creating even more greenhouse gas emissions.
    Building a very expensive new power plant at Estevan further commits Saskatchewan and Sask Power to a highly centralized system of electrical power production and distribution. We have a great many alternative sources of energy, and their development requires a decentralized system. We must also plan for disasters which are caused by climate change. In January 1998 there was an ice storm in Quebec, and many areas were without power for several weeks. What would a similar event do to Saskatchewan?  How many people would die?

Seattle shows how it should be done
    Last January I was in Seattle doing research and I looked into the energy strategy of Seattle City Light, a municipal public utility. In the 1920s they built three dams on the Skagit River which serve as their base supply. They also contract for some power from the Bonneville Power Administration. In 1976 they opted out of the Washington Public Power Supply plan to build nuclear reactors and chose instead to promote conservation. In 2002 they contracted to purchase power from the Stateline Wind Project on the Oregon-Washington border.
    But the Seattle area has the highest annual population growth of any region in the United States. Therefore, in 2006 Seattle City Light produced an integrated plan for power development for the period 2007-2025. Over this period they will add 460 MW of electrical power. This will include 142 MW from conservation, 100 MW from geothermal development, 55 MW from additional wind sources, 25 MW from landfill gas, and 15 MW from biomass energy. The total projected capital cost of these additions is only $170 million.
    For many years Seattle City Light has been providing direct financial incentives to promote conservation and the purchase of more efficient appliances. They have a very basic demand management system: for the first 10 kilowatt hours (kWh) consumed a household pays 3.76 cents a kWh, above that the cost is 7.93 cents kWh. They are now promoting individual household and business production of solar, wind and biomass electricity. Through a net metering system households are paid market price for the energy they provide to the city grid. Households and businesses who install new generating facilities get city, state and federal rebates and tax incentives.
    Seattle City Light is only one example of how communities can shift to renewable energy. How long do we have to wait before a Saskatchewan government takes this issue seriously?

John W. Warnock is a Regina political economist and environmental activist.

Sunday, 16 June 2013

Are you being monitored by Big Brother?

It seems a bit strange that Canadians and Americans show surprise when a whistleblower reveals that the U.S. government and its NATO allies are monitoring all of their communications. This has been going on for years. Does anyone remember Echelon?

Here is a very brief description of the extent of this monitoring, from a chapter in my book, Creating a Failed State: The US and Canada in Afghanistan (2008):

National Security Intelligence  
     Paired with its new military deployment is the U.S. government’s attempt to enhance its ability to gather and use intelligence. Under the Patriot Act and similar legislation in other countries governments have expanded their ability to acquire information through wire taps. The U.S. government even monitors what books people borrow from libraries and the web sites they access while doing research.
    The U.S. military finances several key organizations which specialize in high tech intelligence-gathering, including the National Security Agency, the National Reconnaissance Office, and the National Imagery and Mapping Agency. The Defense Intelligence Agency and the Central Intelligence Agency do work in this area as well. In contrast to past systems of surveillance, there is no longer an emphasis on focusing on individual suspects. Today, the entire population is constantly under surveillance.
    Telephone calls, faxes, e-mails, Internet communications, telegrams and telexes are all sent by communication satellites under the control of Intelsat, which is ostensibly an international agency but actually  controlled by Lockheed Martin Corporation. The National Security Agency monitors all of this traffic. Communications utilizing short wave and very high frequency radio waves are monitored by a series of U.S. bases. Additional surveillance is carried out by the National Reconnaissance Office, under the  NSA, which operates a series of spy satellites. These also send back photo information. To this has been added the Space-Based Infrared System satellites which are part of the anti-ballistic weapons system.
    Using all of these capabilities, the U.S. intercepts all messages going through the copper cable and high-capacity optical fiber networks. The interception of fiber optic messages is done by a series of nuclear submarines. The United States also uses signals intelligence bases (Signit) to monitor communications. These are fields of antennas, satellite dishes placed at over 100 U.S. bases around the world.
    Many people who use the Internet are familiar with Echelon, which developed as part of the official Anglo-American political alliance that was founded at the beginning of the Cold War. The intelligence agencies of the United States, Great Britain, Canada, Australia and New Zealand have a classified agreement for the exchange of all security information. It is also known today as the “UKUSA signals intelligence alliance.” On a daily basis the Echelon program scans millions of conversations and messages for traffic patterns and key words, which are then tagged and sent for further analysis and surveillance. It is not only used for surveillance of potential foreign espionage or terrorism but also for domestic individuals and groups. Echelon operates and monitors around 120 intelligence satellites.
    The five countries not only share intelligence information; the agreement gives member countries the right to spy on each other and their respective citizens. No special advance permission is required. In one well-known instance, Prime Minister Margaret Thatcher had the Canadian Communications Security Establishment monitor the telephone conversations of her political opponents in the Labour Party.
    President George W. Bush told Bob Woodward that he was “fascinated” by the ability of the U.S. National Security Agency to listen to telephone conversations around the world and to intercept a whole range of other communications.

Saturday, 8 June 2013

Is there an alternative to the neoliberal regime?

We are now into the fifth year of The Great Recession. In all of the advanced capitalist countries economic growth rates lag and real unemployment remains high. Inequality of income and wealth steadily increases. This is the fallout from the neoliberal model of the free market and free trade. Margaret Thatcher insisted that There Is No Alternative (TINA). Is that true?

Great Britain, Ireland and the countries of Continental Europe show no signs of recovery. Governments all have consistently supported right-wing austerity policies. None of the major political parties have offered a different strategy. Surely, there must be a political alternative.

The new issue of Social Justice (Vol. 39, No.1) has some interesting articles on the struggles that are going on in Europe, “Conflicts within the Crisis.” There are several themes to these articles.

The European setting
First, capitalism in the advanced countries is now very much dominated by the FIRE sector: finance, insurance, and real estate. The central focus of the European governments, the European Union, the European Central Bank and the International Monetary Fund has been to prop up the banks at all cost. That is, of course, to defend the private investors in the large banks. The bad debt that the banks took on through real estate and the derivatives markets has been transferred to the governments. The socialization of private debt. Government programs must be cut to pay off this sovereign debt.

Second, the various European governments have been hindered in dealing with the crisis partly because of the loss of sovereignty. The European Union, the World Bank, the International Monetary Fund, and the World Trade Organization are strongly committed to defending the interests of capital and have significant powers over national governments. They are quite prepared to use their powers to punish governments which move to protect democracy and social justice.

Third, the social democratic parties and the leadership of the mainstream trade unions have adopted the same basic policies as the traditional right wing parties. Thus there is a monopoly of power in the hands of the ruling classes. It does not matter which of the major parties forms the government, the results are the same. Thus parliamentary government and electoral systems have lost legitimacy. This is reflected in the steady decline in voter turnout to around 50%.

Fourth, the existing governments have all adopted police state tactics, militarizing the police, using brute physical force against demonstrators, jailing dissenters, and moving to reduce historic civil rights and liberties. The same thing is happening in the United States and Canada.

The Crisis of Social Reproduction
The Great Recession has had an impact in Europe that has not reached North America. Unemployment has risen to levels not seen since the Great Depression of the 1930s. Youth unemployment is now over 25% in the European Union and around 50% in some of the southern countries.

There is a crisis of care, as wages for many have been substantially cut. Pensions have been cut. Unemployment insurance has been reduced. Social services have been cut. The welfare state is being steadily downsized. Who would have believed that this could happen? Only in the former Third World, under the impact of the Washington Consensus, known as structural adjustment.

Is there a future for social democracy?
Across Europe, beginning in Great Britain and Ireland, social democratic parties have joined with the rich and powerful to bail out the banks and impose the neoliberal package. Thus the traditional major party of the left, which was created by the organized working class, no longer offers any alternative. As Margaret Thatcher once said, her greatest achievement as Prime Minister was transforming the British Labour Party into another conservative party, i.e., a party of pro-business neoliberals.

In Greece and Italy, the social democrats went so far as to form an alliance with the traditional parties of the right and impose unelected pro-austerity technocrats to run the government! Who needs parliamentary elections?

The leadership of the mainstream trade unions have also lost their legitimacy. They refuse to cut their ties to the social democratic parties even when their parties, in government, cut the programs that were enacted to provide security for those working for a wage and a salary. In Greece, the trade union leadership declined to support a general strike against "their government." The rank and file was forced to take the lead.

Struggling to find an alternative
Given the paralysis in the economy and in representative government, it is no surprise that in Europe the disaffected have turned to extra-parliamentary opposition. As we have seen in Greece and the other southern countries, mass demonstrations and general strikes have become the political opposition.

The other main political development is the grass roots movements, begun by young people, tied together by the social media. In Europe there was strong support for the street movements of the Arab Spring. A similar movement was prominent in Greece. The massive occupation of city squares across Spain, the 15M and the indignados, were another example. The call for a "Democratic Revolution" reflects the disaffection of European citizens with mainstream politics, representative government and the priority of the free market. “They call it democracy, but it is a dictatorship!”

The rejection of the current political system has resulted in the determination of the youth in particular to construct “new democratic organizations and institutions.” But there are limits to “leaderless resistance,” as we have seen throughout North Africa. There comes a time when grassroots democratic dissent has to shift to formal political organization if there is going to be change.

Saturday, 1 June 2013

Cameco uses dummy corporation to avoid taxes

Cameco's operation at Cigar Lake, SK
For the past few months the media has been carrying stories on how large transnational corporations are using offshore dummy corporations to avoid paying taxes in the countries where they are actually based. The corporations identified include Apple, Microsoft, Staples, Hewlett-Packard, Starbucks, Google, Amazon, and many more.

This is nothing new. The collapse of energy giant Enron Corporation in 2001 revealed to the general public all the tricks of the modern transnational corporation. Indeed, executives from oil and gas corporations denounced U.S. government actions against Enron and its corporate officers, arguing that these practices were common to all in the industry.

Do Saskatchewan corporations dodge taxes?
What about the large corporations that have major operations in Saskatchewan? A few years back when I was researching Saskatchewan’s oil and gas industry I asked the provincial ministry of finance if any of our corporations used similar practices. I was given the brush off. This was a federal and not a provincial responsibility. No answers were forthcoming.

But now we have clear evidence that these practices are used by Saskatchewan based corporations.  In early May of this year it was revealed that the Canada Revenue Agency has challenged the practices of Cameco Corporation. While this story made the national press, it seemed to escape the attention of the Saskatchewan media and our political leaders.

Cameco as a case study
In 1999 Cameco created a subsidiary, Canada Europe Ltd., and located it in Zug, Switzerland. Switzerland is well known as one of the favourite low tax hosts for corporations seeking to avoid paying normal corporate tax rates. Cameco “sells” the uranium it extracts in Saskatchewan to Cameco Europe at the very low prices that were set in 1999. Cameco Europe then sells the uranium at the market price. CRA reports that Cameco is allocating its profits to Cameco Europe and recording very low profits for its operations in Saskatchewan.

The Ontario media reports that over the past ten years Cameco has avoided reporting income of $4.9 billion which allowed it to save $1.4 billion in federal corporate taxes. The corporate tax rate in Switzerland is 5% compared to 27% in Canada.

The Globe and Mail (May 1, 2013) reports that a study of Cameco by Veritas Research Corporation concluded that Cameco in Saskatchewan “performed virtually all operating functions” for Cameco Europe. They concluded that all of Cameco Europe’s profits should have been declared in Canada and taxed at Canadian levels.

Why pay taxes in Saskatchewan?
In Saskatchewan the uranium industry enjoys very low royalties and taxes. In recent years annual  uranium sales have exceeded $1 billion. But total royalties and taxes paid to the provincial government have averaged only around eight percent of sales.

Why should this matter? When corporations do not pay taxes to the provincial government, programs are cut or else revenues are raised by additional taxes on individuals. In this boom period for Saskatchewan, royalties and taxes on resource extraction are still among the lowest in the world, and our governments are cutting services.

 It is most important for corporations operating in the area of extraction of non-renewable resources to pay high taxes. The reality is that all the large corporations operating in the resource extraction area in Saskatchewan have a majority of their stock held by people who do not live here. In fact, most of them are majority owned by shareholders who live outside the country. A system of low resource royalties and taxes on corporate profits means the surplus rent from resource extraction does not flow to the owners of the resource, the people of Saskatchewan, but flows out of the province and the country.

Tuesday, 30 April 2013

Is Another Potash Glut on the Way?


There is a boom in the Saskatchewan economy, and economists all point to the increasing exploitation of our resource industries. A major factor has been the expansion of the capacity of the potash industry.

Over the past few years all of the potash corporations in the province have invested capital in their existing mines. These “brownfield” developments have brought thousands of workers to the province. The three existing potash corporations are presently adding new capacity which will total 14 million metric tonnes (mmt). The two new “greenfield” mines being developed by K & S Potash Canada and Western Potash will add an additional 5 mmt.

BHP Billiton has already spent $2 billion developing their Jansen Lake mine and is currently using state of the art borer machines to construct the two shafts. It is hard to believe that the corporation will actually put this development on hold. The first phase of this mine will provide 4 mmt, with capacity to be doubled down the road.

What does this mean for the Saskatchewan industry? In 2010 the existing capacity was around 20.7 mmt. Actual potash production was only 10.4 mmt in 2011 and 8.8 mmt in 2012. So why are the corporations adding another 23 mmt capacity?

This has happened before, during the administrations of T.C. Douglas, Woodrow Lloyd and Ross Thatcher. Ten corporations developed new mines, and given the world market, created significant excess capacity.

Why does this happen? Investment is enticed through government subsidies. These have included exemption from federal and provincial taxes, greatly accelerated depreciation rates, and very low royalties paid to the provincial government for the extraction and use of the resource. In the first round Saskatchewan taxpayers provided special low rates for electricity and natural gas and then built roads, a canal system to provide water, pipelines and a reservoir.

As economist Eric Kierans detailed in his famous 1973 study of mining in Manitoba, Canada has a long history of preferential treatment for this industry. The corporate taxes they paid were significantly lower than those of other Canadian industries. Nothing has really changed.

In 1969 farm prices fell on the world market, and farmers responded by cutting their purchase of fertilizer. A number of potash mines in Saskatchewan were on the verge of shutting down. Premier Ross Thatcher negotiated a classic cartel with the government of New Mexico:  a floor price was set for potash and production shares were allocated to the different corporations. The cartel was managed by the Potash Conservation Board, now known as Canpotex, which has  responsibility for all offshore sales by the existing Saskatchewan potash mines.

Today Canpotex forms an unofficial cartel with the three Russian and Balarus potash corporations. Uralkali and Belaruskali, linked through ownership, export through the Belarusian Potash Corporation (BPC).  Canpotex and BPC control around 70% of world potash sales. In this arrangement the Russian and Balarus firms follow the lead of the Potash Corporation. The corporations in concert curtail production to follow demand. Pricing of sales is remarkably similar. Recently, the three Saskatchewan corporations and Uralkali paid fines to the U.S. government to settle anti-trust charges.

In recent years the world market for potash has been between 50 and 60 mmt. Russia and Belarus have had 30% of this market. Uralkali is expanding capacity by 6 mmt. Farmers around the world are hoping that the excess capacity will result in price competition. Already China and India have managed to reduce prices to around $400 per tonne. Further reductions can be expected, and this will put a strain on Saskatchewan mines. BHP has pledged that it will not be part of Canpotex and will engage in price competition to gain their share of the world market. In a few years the government of Saskatchewan will again have to face the problem of overinvestment in the potash industry.

John W. Warnock is retired from teaching political economy and sociology at the University of Regina. He is author of “Exploiting Saskatchewan’s Potash: Who Benefits?” published by the Canadian Centre for Policy Alternatives in 2011.

Monday, 4 March 2013

How Can the NDP Get Back on Track?

Act Up in Saskatchewan
March 3, 2013

Labour delegation meets with CCF government 1961
As everyone knows, the New Democratic Party (NDP) is no longer Saskatchewan’s “natural governing party.”  In the 2011 election they won only 32% of the vote and today Brad Wall’s Saskatchewan Party government, in its second term, has an approval rating of around 70%. All four of the young men who have been seeking the leadership of the NDP have stressed the need for a serious renewal and revitalization.

So where should they start? With the disappearance of the provincial Liberal Party, the NDP will have to get close to 50% of the vote to once again form the government. In the past, how was it possible for the CCF-NDP to win 50% of the vote in a Saskatchewan provincial election?

The success of the Co-operative Commonwealth Federation (CCF)

In 1944 the CCF, under the leadership of T.C. Douglas, won the election with 53% of the vote and won again in 1952 with 54%. The CCF was actually a vehicle for a broad democratic movement which included family farmers, the trade union movement, the co-operative movement, teachers and other groups. While in office they regularly consulted with community organizations before implementing new policies.

The CCF party through the Annual Convention, the Provincial Council and the Legislative Advisory Committee exerted considerable influence over the CC F government. Furthermore, the government itself respected and encouraged this co-operation. In addition, there were other links to the grass roots of the party. Within the CCF and then the NDP, the Saskatchewan Farmers Union, the Saskatchewan Federation of Labour and the Saskatchewan Teachers’ Federation jointly met every year to co-ordinate policy approaches to present to the party and the government.

When the CCF formulated the platform for an election, they set forth policies they fully intended to implement, and they did so. In the election campaigns they would remind voters of what had been accomplished. Defend the family farm. Rural electrification. Build the grid road system. Hospitalization for everyone. A progressive social assistance program. Modernize the school system. Civil service legislation. A new Trade Union Act. Diversify the economy. And so on.

Following the 1956 election, where the vote for the CCF fell to 45%, the Douglas government feared that it was getting out of touch with its supporters. In 1958 they began a process of expanded consultation with citizen groups. As one example, they created the Rural Development Council to advise the government, with a broad membership representing rural organizations and the general public. Conferences were organized to engage the public on more specific issues. They actively sought presentations from organizations and community groups. To help them come up with programs, they created the Royal Commission on Agriculture and Rural Life.

The key issue in the 1960 election was to be the introduction of a comprehensive government backed medicare program. An Advisory Planning Committee was appointed by the Douglas government with representatives from the government, the medical profession and the general public. It eventually held hearings, received briefs, and presented an interim report, although its activities were greatly hindered by the representatives of the College of Physicians and Surgeons and the Saskatchewan Chamber of Commerce.

The political parties of the right, representing first of all the interests of big business and finance, have the advantage of access to extensive resources as well as support from the mainstream media. The only way the political parties of the left can effectively confront the power of money is through the mobilization of the broad public. Even in Saskatchewan, the CCF and the NDP have required a large body of committed activists in order to win elections. People are attracted to a party of the left when they agree with the policies they advance.

The CCF won the 1960 election with 41% of the vote and introduced the medicare program. In 1964 their vote fell to 40%; the Liberals also took 40% of the vote but won a majority of the seats in the legislature and formed government. There was a repeat in 1967, with the Liberals winning 45.6% of the vote and the CCF 44.4%. A party renewal was in order.

The NDP wins a major victory in 1971
In the 1971 election the NDP won 55% of the votes and 45 seats in the legislature. They won a solid majority of the seats in rural and small town Saskatchewan. Why did this happen?

First, it was a time of mass participation in political activities by citizens across North America. In the United States the civil rights movement was making great advances. There was broad popular opposition to the U.S. war in Vietnam, both in Canada and the USA. The women’s movement was on the rise. The Red Power movement was beginning to take form, even in Saskatchewan. There was strong public support for the anti-colonial movement in the Third World. The public mood was for the expansion of democracy.

In Canada political discussion focused on foreign ownership and control of the Canadian economy as well as American cultural domination. In 1968 the Waffle group was formed within the NDP, an organized caucus that advocated an independent, socialist Canada. The Waffle was quite strong in Saskatchewan. There was widespread debate on the key political issues of the day, both within the NDP and in the general public. Citizens were engaged in important political and economic issues.

The Waffle caucus, whose meetings were always open to all, had a major influence on the party in Saskatchewan. They contested for the leadership in 1970, won by Allan Blakeney. Through policy resolutions adopted by the party, they had a major impact on the platform for the 1971 election, A New Deal for People.

The Blakeney government (1971-82) is best known for the success of its policy of creating greater ownership and control over the natural resource sector, through Crown corporations in oil and gas, potash, uranium and the forest industry. With much higher royalties on resource extraction, the NDP government was able to introduce and fund new social programs, expand public housing for low income people, and increase services for seniors.

The Waffle was expelled from the NDP in 1971, and many activists left the party. Over the period of Blakeney’s government links with the party’s extra-parliamentary allies were weakened. The NDP was not only becoming an urban party, it was also shifting from a political movement towards a traditional political party. Part of the reason for its defeat in 1982 stemmed from a number of major conflicts with the trade union movement, a large group of traditional supporters.

Wednesday, 20 February 2013

The Saskatchewan NDP Chooses a New Leader

February 19, 2013
Ryan Meili, Trent Wotherspoon, Erin Weir, Cam Broten

The Saskatchewan NDP will meet in Saskatoon on March 9 to select a new leader. They are in dire straits. Lorne Calvert’s NDP government was defeated in the election in 2007 and received only 37% of the vote. Under Dwaine Lingenfelter they were defeated in the 2011 election and received only 32% of the vote. With the disappearance of the provincial Liberal Party, they now have to win close to 50% of the votes to form a government.

Support for the party has dropped dramatically since Roy Romanow’s NDP government moved steadily to the right to embrace the neoliberal agenda. Membership has fallen from 47,000 in 1991 to 11,000 in 2013. The vote for the NDP has fallen from 275,000 in 1991 to only 127,000 in 2011. In addition, the total vote in provincial elections has fallen from 540,000 in 1991 to 396,000 in 2011. The drop in vote has been greatest in the safest NDP ridings.

Following their major defeat in the 2007 election, the NDP had the opportunity to choose a new leader who supported a return to the progressive social democratic tradition of the past. The fact that the party caucus and a number of key trade unions backed Lingenfelter, Roy Romanow’s Deputy Leader, then from Nexen Corporation, and the majority of the remaining members chose him as the new leader, reveals a great deal about the state of the party. 

The 2013 leadership candidates
Lingenfelter disappeared on election night in 2011. The party wisely took its time to select a new leader. In the end, four young men came forward. Not one woman stood for the job. Patriarchal traditions run deep in this province.

Trent Wotherspoon and Cam Broten are both elected members of the provincial legislature and are better known among NDP members. Ideologically, they have been in the mainstream of the party’s caucus. They have been seen as the front runners.

 The strength of these two candidates is demonstrated by the long list of supporters they both have, mainstream active members of the party,  members of the caucus and former members of the caucus. The vote for the leadership by all members is by preferential ballot. If most of the voting members rank these two candidates as either their first or second choice, I feel certain one of them will emerge as the new leader.

Ryan Meili’s energetic campaign

Ryan Meili is a progressive doctor from Saskatoon with a very good record of social justice activism. He has run a very good campaign with enthusiastic supporters. In the 2009 leadership race he finished second to Lingenfelter with 45% of the vote. His friendly and sincere way of dealing with people has won him high praise. His policy position papers have been very good.

Meili has had the support of the progressive wing of the party, those who have backed Nettie Wiebe from the National Farmers Union in recent elections. However, I can’t think of any case where the left in the NDP has received more than 45% of the vote in any major contest. In the 2001 leadership campaign to replace Roy Romanow, Nettie Weibe was only able to win 33% of the vote. Furthermore, as the vote in the 2009 leadership campaign demonstrated, the remaining NDP members are primarily the party loyalists. If Meili were to win, it would be a major upset.

The left and the NDP
Finally, there is Erin Weir. He has had the disadvantage of being the youngest candidate, and he has been working out of the province for a while. Weir is known as a progressive economist, has published excellent reports on natural resources, and is an impressive public speaker and debater. On the CBC and CTV as well as in the print media he has been a strong spokesperson for the United Steelworkers and the trade union movement. From the beginning it seemed to me his only hope for winning was to bring back the NDP members who had quit. That has not happened.

The trade union movement has supported the CCF-NDP since the beginning and formally became part of the NDP after 1962. But the movement has always been marginalized by the leadership of the party. In the past few years they have been preoccupied with the general attack on trade union rights by the Saskatchewan Party government. But in addition, the trade union movement has not been seriously involved in politics since the days of the Saskatchewan Coalition for Social Justice. In the current leadership campaign, the unions divided their support among the four candidates.  

It seems likely that with either Trent Wotherspoon or Cam Broten as leader, the NDP will be in the opposition for a long time. They may not ever form government again. Times are good, and the Saskatchewan Party government now has an approval rating in the polls of around 70%, the highest in Canada. A revival of the NDP would require the economy to collapse or for the Saskatchewan Party to be caught in some major scandal. But the NDP will not get support from the voters until they can present a clear alternative to the pro-business neoliberalism we have had since 1982.    

John W. Warnock is a Regina political economist and political activist. He is author of Saskatchewan: The Roots of Discontent and Protest.

Thursday, 7 February 2013

Saskatchewan As a Mineral State

In a new book on the mining industry in Canada, Alain Deneault and William Sacher conclude that the province of Quebec is the top “mineral state” in Canada. They argue that the mining sector in Quebec “stands totally outside the logic and effective mechanisms of democratic oversight.” The authors conclude that “In spite of the billions of dollars in revenues they earn, these corporations contribute virtually nothing to the common good.” An analogy is made with known narco-states, where the governments are effectively controlled by drug cartels, and law enforcement “is effectively non-existent.” Thus, Quebec is deemed to be a mineral state, “a state entirely dedicated to the interests of the extractive industry.”

My immediate response to reading this analysis was what about Saskatchewan? How different is our province? Couldn’t we challenge Quebec as the top neo-colonial province?

How mining companies view Canada

On the other side of the issue, we could ask how the mining corporations themselves view the different Canadian provinces. One good source of information is the annual survey of industry executives made by the right-wing Fraser Institute in Vancouver. They are financed by big business.
In February 2012 the Fraser Institute released its annual survey of mining company executives. They report that 5000 companies were sent requests for opinion and 802 responded. The institute then uses these responses to create a Policy Potential Index, based on whether or not a political jurisdiction “encourages investment.” This survey passed judgement on 93 political jurisdictions which have a significant mining industry.

The Policy Potential Index covers 10 key issues including state regulations, environmental regulations, taxation, infrastructure, labour issues, geological support, and political stability. Canada was ranked very high. Of the 93 jurisdictions surveyed the results seem to indicate that Canada is indeed a neo-colonial mineral state: New Brunswick (1), Alberta (3), Quebec (5), Saskatchewan (6), Yukon (10), Ontario (13), Nova Scotia (15), Newfoundland and Labrador (16) and Manitoba (20). Manitoba was ranked (9) the previous year. The movement towards state ownership and control of mining in Latin America was singled out for criticism, reflected also in its falling ranking.

In 2010 corporate executives gave the province of Saskatchewan a 10 out of 10, the only province to get this high rating, for having the lowest cost system of regulations for the mining and mineral industries.

The oil industry loves Canada
In June 2012 the Fraser Institute released their latest survey of the oil and gas industry. It included reports from 623 managers and executives from 529 oil and gas companies operating in Canada. These representatives ranked Manitoba (5) and Saskatchewan (13) of 147 political jurisdictions as good places to invest. The worst countries listed had National Oil Corporations (state-owned and operated), high royalties and taxes, as well as most of the remaining untapped resources. 

Manitoba and Saskatchewan were given high rankings because of their very low royalties and taxes, their overall pro-business policies, and their weak environmental regulations. In contrast, New Brunswick and Quebec were given significantly lower ratings, mainly because of broad public opposition to the relatively new horizontal drilling, hydraulic fracking for shale oil and gas. But all in all, executives from oil corporations love Canada and hate Venezuela. 

Identifying a mineral state
Deneault and Sacher have identified eight key features which are characteristic of a mineral state. Here are the categories as I have applied them to Saskatchewan:

(1) A strong geological potential for extractible mineral resources. This would certainly apply to Saskatchewan where the mineral, oil and gas sectors now dominate the productive economy. While their revenues totaled $21.8 billion in 2011, they employed only 4.8% of the province’s labour force. 

(2) Public institutions transfer public mineral wealth and profits to a minority of private owners and corporations. Royalties and taxes on the mining and mineral industries in Saskatchewan are minimal. In 2011 they totaled $2,413 billion, which was only 11% of industry revenues. This may be the lowest return in the world. It should be remembered that natural resources are owned by the people as a whole, a public asset.
(3) The state uses law and military force to guarantee that private investors have access to mineral deposits. The law in Saskatchewan emphasizes private property rights over public rights. Unions are relatively weak in the mining industry, and strikes are rare. There are few confrontations with local communities, and the necessity of using police power has been very rare. Since 1991 the major political parties and their governments have put business interest first. 

(4) There is a network of infrastructure which guarantees access to human and material resources and facilitates movement of product to export markets. The province has always put a high priority on providing air transport, roads and bridges, public utilities and direct support for local communities in its northern mineral strategy. The province has actively supported pipeline construction. Reservoirs and canals were provided to serve the potash industry.

(5) It is easy for corporations to send profits abroad with little interference from the local government. There is no evidence that any government in Saskatchewan has been concerned about the flight of capital abroad or the use of intra-corporate transfer pricing and offshore tax havens to avoid paying taxes. They have all welcomed foreign ownership and control of the resource extraction industries.

(6) Regulations and standards for working conditions and environmental protection are kept to the minimum.
It is well known that the safety standards for workers in Saskatchewan are even weaker than in Alberta. Environmental regulation has always been limited. The history of the uranium industry is a good example of the determination of all the provincial governments to put economic development first.

(7) Extracting corporations are provided cheap access to energy and electrical power. A top priority of our Crown corporations, Sask Power and Sask Energy, has been to provide support to all resource developments. Rates for corporate consumption are set significantly lower than those for the general public, and they are secret.

(8) Mining industry has enormous influence over government officials and actions.
When public policy on the resource industries is changed, and when regulations, royalties and taxes are modified, this is always done behind closed doors in consultation with industry representatives. The general public is always excluded. NDP governments have been no different than the formally conservative governments. Business rules.

Seems pretty clear that Saskatchewan is a mineral state.

Thursday, 24 January 2013

NDP Swings to the Right under Roy Romanow

The CCF-NDP began as a broad popular movement of people and organizations who wanted to see the development of a more egalitarian and democratic society. They were elected with a strong majority in 1944, and down through 1964 they were able to introduce a progressive taxation regime, expand democratic and human rights, introduce a range of social policies, expand public utilities across the province, and introduce legislation to try to defend the family farm.
Political right demonstrated against Medicare

They were replaced by the “free market”  Liberal Party between 1964 and 1971. But little changed in the province. In the election of 1971, the NDP again swept back into office under the leadership of Allan Blakeney. This new NDP government engaged in “province building,” introducing policies which began to transform the ownership and control of the natural resource sector of the economy. Resource royalties were raised significantly, capturing more of the economic rent for the people of the province. A number of Crown corporations were created, demonstrating that the people of Saskatchewan were fully capable of running their own affairs.

From 1982 to 1991 Grant Devine’s Progressive Conservative Party formed the government. They reversed the course, implementing a neoliberal strategy modeled after that of Margaret Thatcher’s Conservative government in Great Britain and Ronald Reagan’s Republican administration in the United States. Devine’s government began to privatize most of the Crown corporations in the natural resources sector. But when they moved to split the natural gas sector from the Saskatchewan Power Corporation and privatize it, the general public rose in opposition. The Saskatchewan Coalition for Social Justice took a strong public stand against the Devine government, organizing actions and demonstrations, which boosted support for the NDP. The October 1991 election returned the NDP to government, backed by a majority of the voters.

The NDP Makes a Great U-Turn under Roy Romanow

The general public, and those who voted for the NDP, expected the new government to return to the progressive social democratic tradition of the Saskatchewan NDP. But the new leader, Roy Romanow and his key cabinet associates, had a very different agenda. It involved a radical departure from the policies of previous CCF-NDP governments.

First, the NDP government contracted with Westmount Research Consultants to poll the general public on attitudes on policy options. The results released in November 1991 were clear: the public expected a real change in direction from the Devine years. The top priorities were seen to be job creation and combating hunger and poverty. The majority opposed cutting public services. There was no concern expressed about the budget deficit or the provincial debt.

As former finance minister Janice McKinnon reports in her memoire, something had to be done to “curb the appetite” for new programs and spending.. The Romanow government was planning a “very tough 1992 budget,” and the public had to be warned. John Penner, the new Minister of Energy and Mines, proclaimed that there would be no increase in resource royalties and no attempt to take back public control of the privatized Crown corporations, a flat repudiation of NDP policy and campaign promises.

The Romanow government appointed the Financial Management Review Commission, headed by Donald E. Gass, an accountant with Deloitte and Touche. By employing accounting techniques never used before in an assessment of a government’s fiscal condition, Gass came up with a total accumulated debt of $8.9 billion, including Crown corporations, twice the estimate set by the Devine government. The report concluded that the economy of Saskatchewan “can no longer support the public sector infrastructure that we have built to serve the quality of life and standard of living we have come to expect.” This was just what the Romanow government wanted. The report was praised by all the prominent business organizations and the Fraser Institute.

Sunday, 6 January 2013

2013: Can the USA and Canada Break Out from Economic Stagnation?

This is the time of year when mainstream economists (and a few political economists) make their annual predictions on what is in store for the upcoming year. Last year was the first time that I took the plunge, and I did much better than the mainstream economists. Last year's predictions are on my home page: 2012: The Year the Canadian Housing Bubble Will Burst.

2012 in summary:
(1) There would be very modest growth in the USA – no real recovery from the recession.
(2) Europe would fall into a double dip recession.
(3) The U.S. housing market, deflating, would finally reach a bottom.
(4) The Canadian housing market bubble would begin its deflation process.
(5) The housing market in Regina would not start to deflate due to the steady influx of population. But I added: “This would change if the oil and potash industries were to follow the general decline now evident in world commodity prices.” This happened, and house sales in Regina dipped during the last four months of the year.
Not bad, eh? Five out of five. 

What can we expect in 2013?
Here is what I believe will most likely happen:

(1) The slow recovery in the USA will continue, with the housing sector starting to make a comeback. Most of the standard economic and financial indicators are trending up. However, mainstream economists are nevertheless predicting that real economic growth will be less than 2%. This seems a reasonable assumption.

A successful ten year “grand design” between the President and the Republicans in Congress for increasing taxes and cutting the budget deficit will once again be on the political agenda in late February. Such an agreement is very unlikely and would significantly reduce the federal government’s fiscal stimulus. However, some kind of an agreement must be reached. President Obama’s proposal of additional tax increases plus a $4 billion reduction in federal spending over ten years, if approved, might well tip the country back into recession; at the very least it would reduce growth rates to less than one percent, given the general weakness in the world economy.

(2) The European Union is in a general double dip recession. Even Germany is heading that way. With governments deeply committed to austerity programs, it is highly unlikely that this will change. The political leaders in the EU are primarily focused on preventing the failure of big banks. Political unrest will continue as unemployment and underemployment continues to increase. No solutions are in sight. A collapse in Spain would be a disaster for the EU zone. Non-mainstream political parties and movements will see an increase in their public support.

(3) Japan has now been passed by China as the second largest world economy. The new government is pledging to end the long period of deflation. But how? The value of housing has steadily declined by since the peak in 1989; concerned home owners have been paying down their debt and refusing to spend.  Zero interest rates and quantitative easing have not succeeded in stimulating the economy. John Maynard Keynes called this a “liquidity trap.” Massive public spending and government debt have also failed. Economic growth rates have been only 1%, and Japan has now slipped in another recession. Chronic stagnation continues. Is this the future for mature capitalism?

(4) In Canada, the government of Stephen Harper has been able to escape the worst of the economic decline in the industrialized world. This is primarily due (in my opinion) to their relative success in maintaining the housing market bubble. But this is starting to deflate, as it must. The price of an average house in Canada is now twice that in the United States, with median household incomes about the same. This is a ridiculous situation and cannot persist. House prices must return to their long term average, between two and three times median household income. Across Canada the average price of a house is now five times median household income. This is not a good time to buy a house. In a few years the baby boomers will start downsizing and prices should continue to decline.

Sask potash mines have excess capacity, excess production and face falling prices.
(5) The Canadian economy has also benefitted from the major increase in household debt. The average household debt is now 165% of household income, even higher than in the USA just before the housing crash. If the housing market continues to decline, as projected, it is most likely that households will start to pay down their debts. This is what has happened in the United States. A decline in consumer spending, which seems to me to be most likely, would adversely impact economic growth, which is already quite weak. I cannot foresee any improvement in the rate of Canada’s economic growth in 2013.

Friday, 4 January 2013

Making Sense Out of the Current Economic Crisis

Act Up in Saskatchewan

For several months now the mainstream media, political leaders and business commentators have focused on the “Fiscal Cliff” in the United States. President Barrack Obama and the Republicans in the U.S. Congress have been at loggerheads over how to deal with the very large federal budget deficits of the past five years. Another interim agreement was reached last night, and the stock markets have responded positively.

But it is easy to discover that nothing has really changed. The U.S. politicians have bought two months of peace; by the end of February they will once again have to face the reality of the enormous budget deficit and the fact that the United States Congress has legislated an upper limit to the debt that the federal government may undertake. The debt ceiling of $16.4 trillion was reached on New Year’s eve.

How can we make sense out of this economic and financial mess? It is difficult in that mainstream economists are committed to abstract models of the free market, focus on the current situation, and ignore the patterns of history. The mass media, owned and controlled by very large corporations, reflects this free market political perspective. 

Understanding the economic crisis
We can gain some insight into the current crisis by looking at key fundamentals which are deemed important by political economists. For those of us outside mainstream economics, they provide a basis for understanding what is currently happening.

(1) The advanced industrialized capitalist centres (often called The Triad of Japan, the European Union and the United States) are in a prolonged state of economic stagnation. From the 1960s through the period 2000-12, they have all experienced a steady decline in the rate of economic growth, increasing levels of unemployment and underemployment, and financial instability. The data on this is very clear. If in doubt, look at the World Bank figures.

(2) Manufacturing has steadily declined in all three centres, with transnational corporations shifting their manufacturing to low wage countries. Profits for these corporations have increased significantly as labour costs were radically cut. They now have a “surplus” of capital with limited options for investments which would earn an acceptable return. On a world wide basis, there is excess capacity in most manufacturing sectors. 

(3) With the steady decline in manufacturing, the three centres have all seen a significant rise in the share of their gross domestic product in the Finance, Insurance and Real Estate (FIRE) sector of the ecomony. But this sector does not create the same level of employment as the manufacturing sector, nor the same general level of income for workers.

(4) Various Keynesian fiscal and monetary policies have been implemented by governments and central banks to try to offset the stagnation of the private sector of the economy. Governments have borrowed heavily in order to increase government spending, including social services. Industrial developments are subsidized. The U.S. government is now spending $700 billion per year on the military. All of the Triad have greatly increased government debt. Since 2007, central banks have heavily subsidized the private finance industry.

(5) With the collapse of the high tech bubble in 2000-1, central bankers began to panic. In the United States, the Federal Reserve, under Allan Greenspan, began pouring money into the housing market. Mortgage rules were liberalized in order to encourage renters to buy houses. It was hoped that the construction industry would replace the failed dot.com industry as the new source of economic growth. But new speculative bubbles arose in the housing and finance sectors. These began to rapidly deflate in 2007, resulting in The Great Recession. 

(6) The other major stimulus to the economy has been the expansion of personal debt. Home mortgages, home equity loans, student loans, and credit card debt have balooned since the 1980s, and more dramatically since the financial crisis of 2001. In the USA, household debt rose from 50% of GDP in 1980 to 98% in 2007.