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.

Will We See the End of Economic Stagnation in 2014?

NOTE: It is quite evident that I have been neglecting my blog. There have been few postings in the past six months. The problem is that I am working full time on a new book. It will take a couple of years to research and write. The subject is the rise of agriculture and the development of class society. My approach is that of political economy and sociology. My extensive reading over the past six months has only made me more pessimistic; the steady advance of capitalism seems to have made it unlikely that there will be a shift back to a more democratic and egalitarian social system. As one looks at the rapid onset of climate change, and the unwillingness of any governments to take this crisis seriously, we seem most likely to be headed to some sort of catastrophe. Happy New Year!

This is the time when once again economists and their pretenders make their annual predictions of what we can expect in the coming year. I did not do badly last year; these were my predictions:

(1) The U. S. economic recovery would be weak.
(2) The European Union would experience a double dip recession.
(3) In spite of the pledges of the new Japanese government, deflation would continue.
(4) There would be only weak economic growth in Canada, due to a large extent to the all time high level of household debt to income (165%).
(5) The Canadian housing bubble would begin to deflate.

I was off on the last prediction. There are some indications in some markets that the peak of the bubble has been reached, but what is happening is not general. All the powers that be still insist that there is no bubble; they all have a very large stake in preventing it from happening, the politicians, the banks, the media, the realtors, etc. The Bank of Canada takes the position that we should see a slight decline in sales and prices, a “soft landing” of perhaps 10% over a few years.

The Housing Market Today
However, the fact remains that the average price of a house in Canada is twice that of the United States. Over history the price of an average house has ranged between two and three times household income. It is now still over five times household income, on a national basis. It is over ten times in Vancouver. This can’t continue.

Of course all commodity bubbles collapse, and housing is no different. It will come, sooner or later. The bubble has been created by the lowest mortgage interest costs in history, the role of Central Mortgage and Housing Corporation in guaranteeing lenders (not home owners), the willingness of banks to lend (guaranteed) money to poor risks, and the policies that have been taken by Stephen Harper’s Conservative government. [Remember CMHC guaranteed mortgages for 40 years with no money down?]

Incidently, the International Monetary Fund, Germany’s Deutsch Bank and the Organization of Economic Co-operation and Development (OECD) have recently argued that the housing bubble in Canada is the largest in the industrialized world. The OECD and Deutsch Bank argue that the price of housing is overinflated by 60%. They base this analysis on historic trends, the ratio of buying a house to renting, and the ratio of house prices to household income.

What Can We Expect in 2014?
Well of course all the smart people at the top are predicting an economic recovery in the USA which will benefit Canadian exporters and the Canadian economy. My view is that the rate of economic growth in the USA will be closer to 2% than the 3% - 3.5% anticipated by business economists.

In all the western countries, the central banks have set interest rates close to zero. The Fed in the United States is still printing money (Quantitative Easing) at a rate of $75 billion a month; this now totals over $4 trillion since 2008. One results has been a bubble in the U.S. stock market, as almost all this free money floats up to the top 1% of income earners.Corporations are hoarding cash as they do not see any profitable investments.

Unemployment and underemployment remain high. In Canada we have an official unemployment rate of 7%. But if you add in the workers who have dropped out of the labour market and those who are working involuntarily part time it rises to 17%. Then you have to add in the significant rise in the number of people in precarious work: part time, contract, temps, etc , who are paid much lower than regular workers and who have no benefits. This is a major trend in the labour market. Throughout the western world, youth unemployment has been steadily rising. A look at what new jobs are being created reveals the high concentration in the areas of food service, personal care aides, retail sales, waiter and waitresses, unskilled labourers, and office clerks. The wages for these jobs range between $9 and $11 per hour.

With the move to neoliberalism, we have seen a major shift away from progressive income taxes and taxes on wealth. As a result, over the past ten years most workers have experience no increase in real income. Wealth and income is being concentrated at the top. In 2013 in Canada the top 1% of income earners received $381,000 in income, this was ten times the Canadian average.

Problems in the World Economy
There are few signs that the economic stagnation that the Great Recession started in 2008 is about to end. The European Union is still trying to get out of its financial and economic funk, and few are predicting that the overall rate of economic growth will exceed 1% in 2014. The rate of inflation in Europe is now below 1%, and there are growing fears that this could tip into deflation. There are also a number of elections scheduled for this year, and commentators are worried about the rise of the new rightist parties. Great Britain is very close to falling again into recession; they have their own housing bubble crisis.

The Japanese economy remains in deflation. The BRICS – the more advanced developing countries – are no longer the successful capitalist economies; their domestic and international debt levels are forcing the introduction of austerity programs.

The big question mark is the state of the Chinese economy, now the second largest in the world. Over the last ten years the Chinese government has used credit to keep the economy growing at a rate above 7%. Between 2008 and 2013 government directed credit rose from $8 trillion to $24 trillion. Commentators warn of the extensive debt taken in by governments at the local level. How long can this be sustained?

World commodity prices are in decline. This is bad news for Saskatchewan, which has experienced a booming economy with the expansion of the oil and potash industries.

So overall, the picture of the world economy is not that great. Everyone seems to be placing all their hopes on a recovery in the USA. But our southern neighbours are not what they used to be. Corporations have moved their manufacturing overseas to low wage areas. The top 10% of income earners dominate the economy. But how much can they buy? How much debt can those on wages and salaries afford?

Yes, there is a difference between the economists and the political economists.

The Regina Municipal Election: A flood of candidates is one sign that residents are fed up

Act Up in Saskatchewan

The Regina municipal election will take place on October 24. In contrast to the election three years ago, there has been a remarkable increase in the number of candidates running for seats on City Council. Furthermore, there are nine candidates running for the position of Mayor. We may see a much higher turnout of voters this time and perhaps a different city administration.

Regina used to be a solid NDP town. But in the last municipal election the turnout of voters fell to 25%, which always benefits those with higher incomes. As a result, the political right re-elected Mayor Pat  Fiacco, a known Stephen Harper and Brad Wall supporter. Judging by their voting record on key issues, it quickly became apparent that the political right also swept City Council. However, a revolt against the incumbents began in 2011 when the Mayor and his business friends produced a plan to build a new football stadium.

The fallout from Regina’s boom economy
Over the past five years Regina has experienced a major boom, a reflection of the fact that people  have flooded into the province to work at the major expansions being undertaken by the existing potash mines and the new Bakken oil play. This has resulted in a serious housing shortage. The market price of existing single family dwellings has doubled over this time period. New houses are being build in new subdivisions, but almost all of them are in the range of $500,000, which is unaffordable for the majority of families and individuals.

Furthermore, rental alternatives are virtually non-existent, with the city having the lowest vacancy rate (0.6%) in the country. With virtually no direction from city planners, builders have constructed very few apartments over the past 20 years. Many existing apartments have been converted to condominiums. As a result, rental rates have skyrocketed, and it is now virtually impossible to find a one-bedroom apartment for less that $850 per month.

On top of this, the number of social housing units available has been declining for a number of years, as both the provincial and city housing authorities have been selling them off. There is now a desperate need for social and affordable housing. But this crisis situation has not led the Mayor and his passive supporters on City Council to take any serious action.

The media has named the stadium design "The Toilet Bowl."

We Need a New Football Stadium!
On the other hand, the Saskatchewan Roughriders want a new football stadium. Mayor Pat Fiacco needs a legacy project as he is not seeking re-election. The builders and developers want more land on which to build houses. Realtors want more houses to sell.

On April 19, 2011 Mayor Fiacco surprised everyone, including planners at City Hall, by announcing his own project, the Regina Revitalization Initiative. This was to include a replacement for Mosaic Stadium, expected to have a retractable roof. It would be built on the CP Rail lands on Dewdney Avenue, with links to the downtown area. Mosaic Stadium would be torn down, and the private sector would begin to build market housing on the Mosaic land sometime within the next fifteen years.

2012: the Year the Canadian Housing Bubble Will Burst

January 6, 2012

This is the time of year when all economists (and some political economists) are called upon to make their forecasts for the year which is beginning. From the recent data it appears that the USA will have a very modest increase in economic growth, not enough to significantly reduce the number of people who are unemployed, working part time while wanting full time work, or who have given up looking for a job and have left the work force. The European Union has an enormous pile of debt to deleverage, is already in a double dip recession, and all forecasts are for an overall negative growth rate for the year. This can only be bad news for the economies of the USA and Canada.

The housing issue
However, it does seem likely that the average price of a house in the USA will finally reach the bottom of the collapse of their housing bubble. As I write this prices have fallen back to where they were in 2000, the beginning of the formation of the bubble. We can see this in the graph of the trends in house prices tracked by the most respected sources of data, reported here by Calculated Risk.

As most people know by now, the housing market in the USA took off when the government deregulated the finance industry, drastically reduced the interest rates on mortgages, lifted the requirement for buyers to have 20% equity when buying a house, and instructed the federal chartered housing corporations (Fannie May, Freddy Mac, Federal Housing Authority, etc.) to insure all the marginal mortgages. This created what became known as the “sub-prime” mortgage market.

These very risky mortgages were then bundled together into mortgage backed securities (MSBs) which were then sold on the bond markets around the world as top rated investments. This  Ponzi scheme collapsed when many of the new homeowners could not keep up the payments. There are still over four million houses in the USA in some phase of the foreclosure process.