The Challenge for Progressives

Neoliberalism a colossal failure -- it mustn’t be continued
June 1, 2010

Once upon a time there was a global economic crisis.  

It was followed by a World War.

Once upon a time we realized that, if we could make that kind of a mess together, we might be able to get together to do something better, too.

Who doesn’t want a better life? Less risk. More opportunity. The promise of economic mobility. That’s what my parents’ generation fought for, in a thousand different ways; and the sum of these parts forged a new direction.

Those struggles fit into a new way of thinking:  Keynesianism. After years of reflecting on the causes of the Great Depression, John Maynard Keynes showed -- in 1936 -- how governments can offset wild fluctuations in the market and intervene in ways that create a foundation for even greater growth. What’s not to love? Less uncertainty, less instability, less inequality, more growth. It was an approach widely adopted by industrialized nations after the Second World War ended, and it worked for decades. 

Then along came the 1970s, a decade wracked with high inflation, high unemployment, and plummeting profits. The neoliberals rode in from the west, with the Chicago School of Economics trumpeting, “There’s not enough growth! Here’s how to get it!” They shifted the frame of thinking. 

Keynesians focused on people’s demand for things, managing uncertainty and the boom-bust cycle by stabilizing purchasing power in domestic economies and coordinating international exchange. Neoliberals focused on business’s supply of things, lowering prices and growing global markets by “freeing” corporate investment and lowering taxes.           

Liberate capital, they told us, and create greater wealth. Government regulations and taxation are just big pointless bothers, getting in the way of money’s natural flow to where it gets the biggest return. They sold that bill of goods on the promise of trickle-down prosperity and a dazzlingly simple guideline for policy: Less government, more market. 

But the “less government” nostrum didn’t end with simply liberating capital. It meant reducing public services and supports, privatizing public assets, and getting rid of rules that protect workers, consumers, and the environment. And the “more market” prescription wasn’t just about the globalization of capital; it was about taking advantage of poor nations with undeveloped capital and legal systems, writing new global rules for the ownership of property and ideas, dreaming up new ways to create credit, and encouraging ever more risk. After all, no pain, no gain. Trouble was, the pain and the gain were asymmetrically delivered. Bargaining power shifted from workers and communities to corporations. 

We bought into all the slogans: a bigger economic pie; a rising tide lifts all boats; trickle-down economics; more stuff more cheap; because the lowest price is the law.

But, after three decades, the evidence shows the neoliberal game-plan just didn’t deliver, at least for most of us. Still, we were running too fast to gripe much about it, or perhaps we were distracted by our ridiculously cheap baubles and toys… when along came a global financial meltdown. That turned the “less government, more market” mindset on its head -- at least for a time.

But now that we’ve spent $66 billion in Canada stabilizing what we have repeatedly been told is the world’s best financial system, that damn mantra is back – “less government, more market” – just in time to tell the people who are the collateral damage of neoliberalism what we can’t afford to do: help them.

What we really can no longer afford, however, is the discredited, corrupt idea of neoliberalism. It didn’t deliver prosperity to the majority of Canadians. Instead, it brought:    

  • a huge tax shift -- from corporations to households, from richer people to poorer ones; from taxing incomes to taxing spending; from taxing income flows from savings and capital gains to shielding those forms of income;
  • the lowest rates of spending and revenue collection by the federal government since late 1940s (as a share of the economy);
  • a vastly smaller safety net, and more expensive basic services like education and housing;
  • less collective action through governments, and less collective action outside governments (unionization rates today are at same level as 1961, 31.4%; the peak was 36.5% in mid-1980s; today only about 18% of private sector workers are covered by collective agreements, about 75% of public employees);
  • a shrinking share of jobs from the two traditional sources of middle-class employment, manufacturing and public sector;
  • median wages stagnant for 30 years;
  • greater inequality: the bottom 40% of Canadian families raising kids are worse off now than their predecessors 30 years ago, though they are better educated and working more; only the top 10% have seen significant gains;
  • record household indebtedness;
  • less regulation and oversight on investments and credit creation;
  • more foreign ownership of our enterprises (and more Canadian capitalists owning stuff offshore);
  • climate change (and a disregard for it);
  • economic collapse; and
  • workers hating other workers more than the people who wrecked the system: ("I don't have what you have, so why should you have it?")

How we respond to the insane idea that we should stay on this track is our choice: A race to the bottom or a battle (admittedly an uphill battle) for a decent life for all.

It’s true we may not reverse the relentless pursuit of globalization, privatization, and deregulation. But we can certainly kick up more of a fuss about the upside-down redistribution that neoliberalism breeds. 

We should not quietly accept that it is normal for the rich to take the lion’s share of economic gains and tax cuts. We should raise concerns about where the next generation’s middle class will come from. We should protest loudly as a growing number of Canadians get thrown into the ranks of the working poor. After all, isn’t a job supposed to be the best social policy? It certainly is close to the only social policy these days.

We should raise these challenges, and right away, because the corporate agenda is far from completed. The global economy is hurtling towards greater corporate consolidation. Whether mining, banking, media or retail, the number of players is shrinking, and their market share increasing. The growing concentration of resource ownership and power means bigger risks, greater instability (ironic, because it’s about increasing control), and less choice for us all.

The unfolding global dynamic produces more jobs (and consumers) every year in emerging nations while actively eroding the standard of living of many workers (and consumers) in older industrialized nations.  

Whether they run multinational companies or not, Canadian bosses are telling their workers to tighten their belts and “get real” about what they can expect in this new global order. 

Class warfare has morphed into workers pitted against other workers. Public sector workers, with their relatively good job security and benefits, are perhaps the easiest targets for envy and resentment. 

“Why spare them the pain just because they had nothing to do with the disaster?” the logic goes. “After all, I just lost my job/my house/my retirement savings, and my taxes pay for their privileges of decent wages, benefits, and pensions.”  

It’s as if losing is all we should have in common.

Meanwhile, bonuses at Canada’s Big Six banks soared by 18% in 2009, to a record $8.3 billion. Finance Minister Jim Flaherty was quick to reject calls by Britain and France for a new international tax on banks and bankers. If there was a class war, the rich clearly won.

We’re fighting with ourselves as we tighten our belts, while the rich get much richer. But the fact is that there's enough money sloshing around for everyone to live a better life. We’re the ninth largest economy on the planet. Our economy is six times bigger than a half-century ago, when we built the Canada we are still coasting on. We can do better -- but only if we stake our claims -- as consumers and as citizens. That means organizing as workers, as communities, as activists.

It means demanding living wages for all – which will mean significantly more money for those at the bottom.

It means resisting the two-tiering of benefits and pensions, which sets the next generation of workers against established workers, and fighting for better public pensions. 

But it’s not just about wages and benefits; it’s about the affordability of a decent quality of life. It’s about better public transit; it’s about high-quality early learning and child care; it’s about more preventive measures to improve health – from food security and a good place to live, to free dental check-ups at school and timely access to counseling. 

     It’s about cheaper access to post-secondary education.

It’s about having the time, the place, and the resources to play.

     Let’s raise our expectations, show what is possible.  History reminds us how: Divided we fail. United we get what we need and deserve.

We made huge gains when we were united in purpose, whether money was tight or the economy was soaring: Unemployment insurance in the 1940s; Medicare and the Canada Pension Plan in the 1960s; pay and employment equity in the 1970s and ‘80s. But major gains since then have been scarce.        

What will be our next big achievement? National child care? Pharmacare? Adequate public housing and public transit? These social gains have eluded us so far, but we don’t have to accept defeat if we act together.

We’ll be told we can’t afford the world we want. That’s a lie. What we can’t afford is reckless tax cuts, mainly to those who need them the least. At the federal level alone, the corporate income tax rate is scheduled to drop to 15% in 2013 from 19% last year and 22.5% in 2007. That whole exercise will take a $13.7 billion bite out of our annual revenue base by the time they are done. Think of what we could do with that money! 

Simply not implementing the next phase of the corporate tax rate reduction plan would keep $2.8 billion in federal coffers next year. We could have another 35,000 registered nurses providing acute care services, as just one example of what that money could buy.  

Corporations are leading us down one path of globalization. But there are many different ways of defining and following the course of global change. If progressives around the world link up, we can do more than just offer a different vision of globalization. We can shape it.  

There is no time like the present to look past the dangling carrot of more economic growth. Canadians and people all over the world are longing for a spirit and purpose more forward- looking than more stuff and more money. We know that, when we stand together and pull together, we can change our world.  

At least, once upon a time we knew that. It’s time to start writing our own story again. 


(Armine Yalnizyan is a senior economist with the CCPA. This article is based on a speech she delivered at a recent public sector meeting of the Toronto Labour Council.)