Leader-Post
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.
Tuesday, 30 April 2013
Monday, 4 March 2013
How Can the NDP Get Back on Track?
Act Up in Saskatchewan
March 3, 2013
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.
March 3, 2013
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| Labour delegation meets with CCF government 1961 |
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
Rabble.ca
February 19, 2013
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.
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
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.
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.
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| 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.
(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.
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. |
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.
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.
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