A Second Look at the Recent Canadian Election.

 

Trans Mountain Pipeline Protest

Five parties won seats in the election. Neither the Liberals nor the Conservatives were able to get a majority of the seats. Many people attributed this to strategic voting.  But a second look reveals the deeper issue. The  five parties who won seats share of similar view on the overall nature of  the Canadian political economy.

First none of the  five parties see anything wrong with the fact that the general direction of the Canadian economy is determined by large corporations and their financial associates. None of the five parties  find anything wrong with the free-trade agreements even though they have virtually destroyed the automobile industry in Canada. The free-trade agreements all see Canada naturally as a primary producing and exporting country and our  fate is to import manufactured goods.

From time to time one of the parties will note that the inequality of wealth and income in Canada is getting more and more skewed.  But none of them are willing to propose that we go back to the progressive income tax, wealth taxes  and corporate taxes that we used to have during the period of the Keynesian  political economy. None of them are even willing to propose that we shut down the off shore tax havens used by wealthy individuals and corporations to avoid paying taxes in Canada. Yet a recent poll done for the Toronto Star found that 94% of Canadians want these practices made illegal in Canada.

Most of the parties see the housing crisis as the inability of young people to buy a house without major financial support from their parents. Yet everywhere you look there are people sleeping in the rough and communities across Canada are having a hard time dealing with the impromptu tent cities that are popping up everywhere. The fact of the matter is that probably the bottom one third of Canadians by income can not find appropriate housing. The only way for the government to solve this problem  ls to build significant amounts of new rental housing for the poor and those with low income. That means going back to the basic democratic ideal that housing is a basic human right.

Then there is the fact that none of the parties would stand up in opposition to anything that the US government says we should do.  Whenever Washington calls on us to bomb somebody we always say yes..Not even the Green party will say no.

Is there a climate crisis The young woman from Sweden says to read the science . But it seems in Canada our political leaders do not believe the science. Canada is number one in per capita greenhouse gas emissions but the small carbon tax being implemented now by Canadian governments is a sick joke. I would have thought that Canadians cared more for their children and grandchildren than they show. None of the political parties are willing to endorse the Green new deal for Canada not even the Green party .

The  original New Deal in the United  States ended the  depression and created hundreds of thousands of very good jobs. Similar programs now around green energy and conservation might even allow the indigenous population of Canada to break away from its historic position of marginalization and poverty. 

There is much talk of reconciliation in Canada. But this has to start with Canada and our political parties recognizing the United Nations declaration on indigenous rights and that begins with the right sovereignty over traditional lands which were occupied by the indigenous populations for thousands of years before European settlers arrived . But none of the parties  are willing to do that.  This would give indigenous peoples and nations the right to determine their own economic development.

Canada’s five parties have basically agreed with the neoliberal revolution that began with the election of Margaret Thatcher’s government in Britain in 1979 and then Ronald Reagan’s government in the United States in 1980.   In Canada Brian Mulroney’s government was elected in 1984. 

The new political economy was not limited to formally right-wing parties. It was not long before it spread to the social democratic parties as well, beginning with Sweden in 1982, Australia in 1983, and New Zealand in 1984. The new policies included major cuts to all  progressive taxes, cuts to social programs, deregulation, and privatization of state owned assets. This came with a broad attack on organized labour. The push for “free trade”  was to come a little later.  

There was no political party in the recent Canadian election to oppose this broad agenda.

Equalization is Back in the News

Here is a paper I wrote a few years ago on the subject, It is still valid today.

Undermining Equalization

by John W. Warnock

Leader-Post (Regina), June 14, 2006

            Premier Lorne Calvert’s government is undermining the federal principles of equalization, which are now entrenched in the Canadian Constitution. With the general support of the opposition Saskatchewan Party, they are insisting that revenue from non-renewable resources be excluded from any new formula assessing a province’s capacity to raise revenues. This is not in the general interest of the people of Saskatchewan nor Canada as a whole.

            What is equalization? During the Great Depression of the 1930s a number of provinces, including Saskatchewan, faced financial bankruptcy and had to be bailed out by the federal government. Under the BNA Act, provinces were given the responsibility for the key areas of education, health and social services, but they were not given the taxing authority to carry out this mandate. Furthermore, many of the less industrialized provinces, including Saskatchewan, did not have the economic base to provide services equal to those available in the more prosperous areas of the country.

            In 1937 Mackenzie King’s Liberal government created the Royal Commission on Dominion-Provincial Relations, better known as the Rowell-Sirois Commission after its two chairmen. Unlike other Royal Commissions, this one held hearings all across Canada, even in small towns. A wide variety of people gave evidence at these hearings, not just “stakeholders.” Furthermore, the commissioners actually listened to what the people told them. Their report  recommended that the federal government adopt a system of “National Adjustment Grants” provided to a provincial government whenever it “could not supply Canadian average standards of service and balance its budget without taxation (provincial and municipal) appreciably exceeding the national average in relation to income.” This was necessary in order to guarantee “a national minimum standard of social services” across Canada. John Diefenbaker’s government gave strong support to this policy in 1957, and it was included in the Constitution Act of 1982.

            The people of Canada told the Rowell-Sirois Commission that family, friends and community were very important. People should not be penalized because they live in rural and remote communities or hinterland provinces. Canadians demanded at least equality of opportunity if not social justice. The goals of the equalization program were to reduce regional disparities, create national standards for basic public services, assist the mobility of people across provincial borders, create a sense of Canadian identity, and even share the wealth across provincial borders. It was also established that basic public services should be considered a citizenship right. This set Canadian confederation off from that of the United States. These principles have always been opposed by those who insist that we should allow the economic free market to determine what is best for all of us.

            Implementing these principles has been difficult. However, from the beginning it was agreed that in creating a formula for federal equalization grants the criteria should be the “fiscal capacity” of all provincial governments. To be fair, all potential sources of revenues must be included. Under the existing formula, thirty-three sources of revenues are covered, including most resource revenues. There are some exceptions. Water is excluded because it is often given to industry as a free subsidy, as in the development of the Alberta tar sands. Rents for water power are not adequately assessed, as they usually take the form of a general subsidy to consumers through low rates and special low rates for industrial enterprises.

            Almost every country in the world regards natural resources as a national resource. This is logical because the geographic placement of natural resources is an outcome of nature and not human endeavor. The failure to take that position in Canada has led to significant political and economic problems. To exclude non-renewable natural resources from equalization would completely undermine the basic principles of equalization.

            The application of any equalization formula is a difficult political task. For example, when Lorne Calvert’s NDP government reduces taxes on corporations and people with high incomes, should this be offset by equalization grants from Ottawa? During the NDP government of Allan Blakeney resource royalties and taxes were increased. Saskatchewan became a “have province” and for a few years did not receive equalization payments. The last three provincial governments have all steadily reduced the royalties and taxes on the use of natural resources. This has reduced provincial revenues. But is it fair that this pro-business policy be offset by equalization grants?

            On a number of occasions officials in the NDP government have told me that they had no intention of raising royalties and taxes on natural resources back up to the levels they were during the Blakeney government. They could instead get roughly equivalent revenues from the federal government under the equalization program.

            However, the federal government is not that stupid. In 1994 they introduced an amendment to the equalization program called the “Generic Solution.” This was specifically designed to deal with the Saskatchewan policy, the “distortion” of the program which occurs when a province reduces its tax rates knowing that equalization would compensate.

            In January 2003 the NDP government feigned surprise when there was a reduction in the equalization grant from Ottawa. Instead of continuing to assess Saskatchewan’s mining tax base on the value of mineral production, it shifted to the use of “net profits.” Saskatchewan’s mines produced 13 percent of total Canadian mineral sales but 55 percent of mining company profits. This was a result of the steady reduction of provincial royalties and taxes on the mining industry.

            There is no money tree in Ottawa. Equalization payments come from the taxes we all pay to the federal government, most notably income taxes. The policy of the NDP government is to cut the royalties and taxes on corporations extracting our resources and instead collect revenues from federal equalization payments. This policy of taking from the poor and giving to the rich does not serve us well.

           

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


























i