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.

Domesticated Animals

The Agricultural Revolution also created a revolution in the production of meat for human consumption. According to recent estimates, the world can now boast of more than a billion cattle, about a billion pigs and sheep, and around 25 billion chickens. This past summer I was given the opportunity of watching some of these animals domesticated by us Homo sapiens.

In late September I was walking through a pasture about a mile east of our place, land owned by our neighbour Marianne. There were about 40 cattle on this quarter. There had been lots of rain and snow in our area over the past four years, and the grasses are high and the sloughs are overflowing. The animals had not seen a human being since they were dropped off there in April. They stood in a group and all stared at us. Who were these intruders? I was a bit edgy, but there were no bulls around and Marianne had run cattle for many years. This must be much like it was before humans took control of the world.

As I drive into Bulyea to check the mail and go to the co-op, I pass a pasture where there are six cows and one horse, always very close together. I used to wonder of the horse now thought he was a cow.

On the Saturday drive into Regina, I pass a farm where two miniature burros always hang out in a field with six cows. They are the best of friends, never separated. After the wheat was harvested this year, the farmer put the cows in the adjoining field to clean up but left the burros in the pasture. The burros and the cows stayed right next to each other on each side of the barbed wire fence.

Marianne, who has been running the farm since her husband died about fifteen years ago, raises goats and sheep. Out in the middle of one pasture there is a fox den. Early in the summer this year’s small foxes emerged. They soon began to play with the new born sheep and goats, chasing each other around. Being of the older generation, we did not have our I-phones to record this event.

Among the goats and sheep is one black steer. He is distressed when put in a different pasture by himself. One day I drove by the farm and saw the steer in the small pasture next to the barn. The only other animals with him were the chickens and ducks. He was running back and forth along a barbed wire fence, doing his best to try to keep a fox from coming into the farm yard.

A pair of domestic geese had been living on my neighbour’s farm for a few years, hanging out around the dugout and the farm yard. One of them disappeared this summer, most likely a victim of a coyote or a fox. The remaining goose now waddles out every morning with the sheep and the goats and spends the day with them in the pasture.

Norm, who has the farm behind us, runs cattle on the adjoining quarter. He also has four horses there, as he and his daughter ride. The four horses are rarely seen except standing together, no more than two or three feet apart. They ignore the cattle.

A short way down the grid road I had a very productive garden on Dale’s farmstead. It is surrounded with barbed wire fence as the neighbour would run some of his cattle there before and after harvest. One day I drove into the yard and there were around a dozen cows next to the fence as well as three cows on our side of the fence, in the garden. I walked towards the animals as I was going to open the back gate and let them out into the field. They freaked, as they did not know me and feared the worst. An older Holstein milking cow and one of the calves ran and jumped over the fence. The heifer ran and scooted under the barbed wire fence.

I am currently reading Yuval Noah Harari’ Sapiens: A Brief History of Humankind. He argues  that “domesticated chickens and cattle may well be an evolutionary success story, but they are also among the most miserable creatures that ever lived.”

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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.

Why I Love Rob Ford

Political Allies:  Rob and Stephen 

 

 

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

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

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

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

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

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

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