Free Trade Benefits Canada, eh?

General Motors in Oshawa

Every time I pass through Oshawa, Ontario I think of the Free Trade Agreement between Canada and the USA. Oshawa is the home of General Motors of Canada, the largest producer of motor vehicles in Canada. Not that long ago Canada was the fourth largest producer of cars and trucks in the world.

During the government of John Diefenbaker, the Canada-US Auto Pact was signed. For every car that the US Big Three sold in Canada, they had to build one car here. That agreement preserved the manufacturing industry in Canada. It was replaced by the Canada-US Free Trade Agreement of 1988. Canadians, we were told, should have the option of buying any car wherever it is built, without any government interference.  With the adoption of the North American Free Trade Agreement in 1994, Mexico was added. The Big Three began shifting production south to take advantage of Mexico’s low wage economy.

The goal of the “free trade” agreements was never to free trade. Trade was already free for most products with only a few having low tariffs. Quotas were virtually unknown. As the organizations of big business all stressed, what they really wanted was freedom for capital. Freedom of business organizations to invest in any country without government interference and the freedom to repatriate their profits as they so wished.  

The auto industry today
Michael, a friend of Susan’s, has worked on the assembly line at GM in Oshawa for 25 years. Working conditions have steadily gotten worse. Now they have two 10 minute breaks per shift and only 20 minutes off for lunch. New workers start at $20 per hour, a reduction from previous contracts. Pension contributions from the company have been cut. Now it is nearly impossible for a new worker to buy a house; down the road they may be able to save enough for a down payment on a one-bedroom condo for $350 grand in one of the new 50 storey high buildings.

GM will not say what its plans are. The production of its Camaro automobile is presently being shifted to Lansing, Michigan which will result in the loss of around 1,000 jobs. It is also rumoured that GM plans to shut down its CAMI assembly plant located at Ingersol, Ontario. Within the industry, it is widely believed that GM plans to shut down the Oshawa operations in 2019. Michael says the workers in Oshawa are expecting this.

All the automobile companies now demand  handouts from federal, provincial, state and local governments before opening new plants. They get additional government grants and loans by threatening to close existing operations. We know that only too well in Canada.  Between 2010 and 2013 automobile corporations have invested $29 billion in the USA, $20 billion in Mexico, and only $2 billion in Canada. We are, as one editor of Maclean’s Magazine once pointed out, “Puerto Rico North.”

Free trade and the NDP
I lived in the Toronto area in 1971. Oshawa was a thriving city. The auto workers’ union was strong. Wages and benefits were very good. The city was represented in Parliament by Ed Broadbent, MP for the New Democratic Party.  In 1988 he was leader of the New Democratic Party. In the famous “Free Trade Election” that year Broadbent and the NDP were virtually silent on the proposed FTA. The opposition to the agreement was led by John Turner, leader of the Liberal Party.

I remember well that election. The trade unions linked to the NDP set up an election headquarters where the unions called their members, urging them to support the NDP. They reported that their members overwhelmingly stated that the proposed Canada-US free trade agreement was the number one issue, and that they were opposed to it. But Broadbent and the leadership of the NDP ignored this issue and instead stressed environmental issues.

The NDP has never opposed free trade agreements. At best, like Thomas Mulcair, they ask for some modifications. But free trade agreements are bad news for working people, and they know it.

These days we take the Go Train to Toronto. A Go Train bus (a city bus no less) takes us from Peterborough to Oshawa, where we switch to the commuter train that goes to Toronto. We travel from Oshawa (150,000) through Whitby (130,000) and Ajax (110,000). When I lived here before they were independent cities. They are now suburbs of Toronto, part of the six million people crammed into this area of southern Ontario. Endless massive high rise condos. Nothing that could be described as a community. Bedrooms for Toronto workers. This alienating mess, tied together by the 12-lane 401 highway, travelled by over 500,000 vehicles every day, is the result of capitalist planning. It is hard to believe that we live in one of the largest countries in the world with endless open space.

Capitalism and Climate Change

On Sunday I entered Beit Zatoun community centre on Markham Street in Toronto to sit in on a discussion of Naomi Klein’s new book:  This Changes Everything; Capitalism vs. the Climate. Around 300 people were stuffed into this nice older building, mostly long time left wing political activists.

A three-person panel kicked off the meeting. Umair Muhnammad argued that this was an important book, for Naomi Klein, now an internationally known journalist, had legitimized the role of socialists in this debate on the disaster of global warming and climate change. Klein had made it clear to a wider audience that capitalism must have constant growth and the production of profit to survive. At present, those dominating the system were deeply committed to the continuation of the fossil fuel economy. Climate change could not be brought under control without confronting capitalism.

Beit Zatoun Toronto

Building alliances for change
Ellie Perkins stressed that a popular movement for serious change had to be tied to all the broad issues concerning social justice. She pointed to the leadership provided by the Aboriginal and women’s movements. There had to be a clear link with the anti-war movement. Broad based alliances were necessary.

Many of the criticisms I had when reading Klein’s book were emphasized by Sam Gindin. Klein’s book had left out the reality of the enormous power of the political state, which was closely aligned to the capitalist class. There was no discussion of the modern version of capitalist imperialism, the U.S. government leading NATO’s world wide crusade in opposition to all popular efforts for change.

Gindin stressed that Klein’s book had opened the door for us. It was time to boldly put forth the egalitarian and democratic alternative to capitalism in all our discussions. Capitalism has not served the interests of the people we represent. He noted, as one example, that under the free trade agreements the number of employees at General Motors had declined from 800,000 to 100,000.

Much of the discussion from the audience focused on how to try to build coalitions. I recognized a number of people in the crowd from the days of the Coalitions for Social Justice and the national coalition formed to oppose the free trade agreements. We had some successes back then. Central to that effort was the trade union movement, which had the resources, the organizations and the base to give the coalitions. Could this be revived?

Gindin was refreshingly frank on the issue of organizing for change. We have to recognize that since the onslaught of neoliberalism beginning around 1980 we have faced a long period of steady defeats. At the federal and provincial level the welfare state is being whittled away. The free trade agenda had resulted in the loss of a great many manufacturing jobs. Real incomes have declined for most workers. Income and wealth inequality was steadily rising.  People were discouraged, with a growing percentage not even wanting to vote. As Gindin argued, “it is as if we are having to start all over from the beginning.”

No one mentioned the fact that the political parties that we used to support, and who brought us the welfare state after World War II, now fully embraced the broad neoliberal agenda and U.S - led imperialism.



Can capitalism save the planet?
One member of the audience rose to put forth an alternative view. He declared that the science is clear on global warming, and there are many studies showing what has to be done and how to do it. We do not have to have a socialist alternative: the capitalists can make the changes. After all, we all know that capitalists can make major adjustments, as they did to deal with the Great Depression. Leo Panitch agreed that it was possible for capital to make the necessary changes, but it would just lead to other contradictions. He cited one example: Germany is praised for bringing in a green program for producing electricity, but no one mentions that they have expanded their export of coal.

I didn't agree. It might be possible for the capitalists in the G-7 countries to accept a plan to shift to Green Capitalism. But would it be possible to get the rest of the world’s capitalists to take a similar stance? Gindin asked: "What would happen if the North agreed to shift wealth to the South? The mass of people in the South want the consumer lifestyle that they see in the North. In addition, most of the governments of the states in the South seem to be worse than ours. Would they agree?"

One problem I had with Klein’s book is that the alternative strategy she promotes is the model we associate with the Occupy movement. But these spontaneous actions all seem to fade away rather quickly as they have no structure. Capital yielded on trade unionism and the Keynesian welfare state after World War II because they were confronted with the mobilized power of the popular classes through their organizations and political parties



Will Greece show us the way?
Naomi Klein wrote this book over the past five years during which a mass struggle was going on in Greece. Yet there is no mention of this in her book. But that is exactly where we need to look to see what strategies work. The mass struggle in Greece, characterized by a great many general strikes, served to educate and politicize the general population. It has resulted in the rapid rise in support for Syriza, the Left Green opposition party, which now has a chance of winning the general election on January 25.

On the bus trip down to Toronto, my colleague, Susan Ferren, who went with me to the meeting, remarked at the major change that had occurred in the Greater Toronto Area since she had lived here in her youth. From Oshawa through to Toronto there is now one great alienating example of market-designed suburban sprawl, the home to six million people, many forced to live in sky high condos. The 401 highway is twelve lanes wide with seemingly millions of vehicles going back and forth, 24 hours a day. She asked: “How could this be sustainable?”

As we walked down Bloor St. West to go to the meeting, we saw where the capitalist class does its shopping. She reminded me that “consumerism is the ideological essence of personal capitalism, and it is deeply entrenched in our culture.”

Before we headed back to Peterborough we went to the cinema to see Selma. Don’t miss it. I remember this struggle well. We have won battles in the past. It is possible to mobilize people. Organization is essential. Martin Luther King knew how to do this.  As Sam Gindin pointed out at the meeting, it is through local struggles on important issues that people come to understand how the system works. Not through reading books.

Peterborough Is Not Regina

Quaker Oats on the Otonabee River

I am spending part of the winter in Peterborough, Ontario, a city of 80,000 just outside the Toronto commuting area. It snowed last night, and by 8 am this morning our residential street had been plowed. Within the next  hour  machinery came and plowed and then sanded the sidewalk. By 9 am a city truck had sanded the road. All streets receive this service. The city has a budget for snow removal  and expect it to snow every year. This is a hockey town.

The city has a vibrant downtown, the result of city planning and the domination of the city council by traditional conservatives (not Harperites) who use their political power to support small Canadian-owned businesses. They have excluded the big American and Canadian chains from the downtown area.  They required the Galaxy Theatre, the only movie theatre in the city, to be in the core area.

Special tax incentives were given to encourage local businesses in the core area and to create residential rental spaces in their second and third floors. The downtown area has two large grocery stores, three large venues that host live stage events (former movie theatres), two boutique hotels,  a wide variety of small retail stores, restaurants, bookstores, coffee shops, and numerous pubs. There are 20 places in the downtown area which have live music.

The big box stores are here, stretched out in a line on a highway leading out of town. But there is not the congestion and despair that one gets when being forced to drive through the free market mess that is found on the east end of Victoria Avenue.

Everything is not rosy, however. The North American Free Trade Agreement (NAFTA) hit the city hard. Many of the large American corporations downsized as they shifted production back to the United States and then abroad. Canadian General Electric, the largest employer, saw its workforce drop from 6,000 to 1,500. Quaker Oats, bought by Pepsi Cola, downsized to 700. Outboard Marine Corporation of Canada, once the second largest private employer, shut down. The major employers are now government services, Trent University, and Fleming college. 

One result is that Peterborough has one of the highest unemployment rates for cities of its size. It also has one of the highest poverty rates and the problem of inadequate low income housing.

One final positive note: I have yet to find a pot hole on a city street.

Looking Forward to 2015

    Yes, as a political economist I tend to be more of a skeptic than my friends the economists. But I have no fundamental commitment to capitalism as an economic system. I see it as the primary barrier to the development of a democratic and more egalitarian society.

    So given the state of the world, it is not surprising, to me, that my predictions for 2014 were more on the mark than those who used to share an academic department with me. And there is no reason to expect that there will be any significant change in 2015.

Flood waters moving up towards our house.

    (1) The European Union remains in economic dire straits, and the governor of the European Central Bank is now about to desperately try to avoid a collapse into deflation. Everyone expects the ECB to begin quantitative easing, even though there does not appear to be any legal basis for doing so. Placing economic sanctions on Russia has only made things worse; a recession in Russia, which appears to be certain, will have a very negative impact on the EU.

    (2) Japan still is fighting deflation. Nothing that the government has done has made any difference. One still has to ask, is this the future of mature capitalism?

    (3) China. Last year the general concern was a slowdown in their economy and the large debt in the housing market. Those issues remain. What is new is the decision by the Chinese high command to shift the general direction of the economy away from the focus on providing cheap manufactured exports to serving the needs of the domestic market.  China is also taking a strong lead in building a political-economic alliance with Russia. This includes developing a new currency exchange system to bypass the U.S. dollar.

    (4) Commodity prices continue to be in decline. The major story for 2014 has been the collapse of the price of oil and gas. Analysis indicates that this is not due to a USA/Saudi conspiracy to stick it to Russia, but in general is due to the decline of consumption, the result of the general stagnation in the world economy.

    The one good news story for 2014 was the economic recovery in the United States. So the $4.5 trillion of quantitative easing created by the Federal Reserve did have some impact other than just boosting the stock markets and lining the pockets of those who were already rich. The USA has the advantage of “Military Keynesianism,” as defined by Joan Robinson: massive government spending in a country which claims to be a “free market.”

    The US economy has sagged in December, but overall economic growth will be close to 3% rather than the 2% that I suggested. Can the USA continue to grow with the world economy going in reverse?  It should be noted that the recovery has not been great in the employment area, and wages and salaries of workers have not been rising anywhere near 3%. In the past, lower gasoline prices have not led to increased consumer spending. A significant correction in the stock markets, predicted by many business economists, would likely lead to a decision by Americans to pay down their debts and reduce spending.

    Canada. And then there is Canada. Economic stagnation is the general trend. It is hoped by everyone that the recovery in the USA will have a positive benefit, given the fact that we are now even more dependent on exports to that market.

    But there is the major collapse of the oil economy. And as many people know, over the past ten years the manufacturing industry in Canada has been in decline, while there has been a shift to depending on petroleum and other raw material exports. No one these days mentions the term Dutch Disease. It is hard to see how this development will be a positive benefit for the country as a whole. Alberta, Newfoundland and Saskatchewan will feel the hit. The experts believe that the low oil prices are to be around for a good while – at least a year.

    As for me, the biggest concern is the flooding that is happening on the Canadian prairies. It has been a hard reality for the past three years. The last thing we want to see is a heavy snow fall this winter. Like yesterday.