CANADIAN TEACHERS FEDERATION

CANADIAN TEACHERS FEDERATION

PRESIDENT’S FORUMEdmonton, 12-13 July 2010

FORCES FOR CHANGE:EDUCATION FINANCE

Profiles of a crisis:

Phase 1: Early warnings 2006 - 7

Nouriel Roubini (as far back as September 2006 – forecast the end of the real estate bubble)

Poul Nyrup Rasmussen’s book: “In a Time of Greed” 2007

Joseph StiglitzAmartya SenPaul Krugman

Phase 2: Pressure builds: 2007 - 2008Profiles of a crisis:

AUGUST 2007

Sub-prime mortgages

Structured financial products

Where are the toxic products?

Inter bank lending freezes

THE PARTY STOPS !

DECEMBER 2007

Central banks start to easecredit and money supply

AUGUST 2008

US Fed bails out Fannie Maeand Freddie Mac

15 SEPTEMBER 2008

Lehman Brothers collapses

16 SEPTEMBER 2008

US bails out AIG

Phase 3: Saving the financial sector

G20 Leaders Washington, USA Nov. 2008

G20 Leaders London, UK April 2009

Profiles of a crisis:

Phase 3: (2)Profiles of a crisis:BAILOUTS

AIG Banks Auto companies

STIMULUS PACKAGESMonetary Stimulus

Reducing cost of credit (interest rates) Increasing money supply (UK, US, Japan)

Fiscal StimulusIncrease spending Cut taxes

IMF ESTIMATED IN JANUARY 2009 THAT 2% OF GLOBAL GDP WAS NEEDED FOR RECOVERY

NATIONAL STIMULUS PLANS SHOULD BE COORDINATED TO HAVE BEST IMPACT

PUBLIC SECTOR SPENDING, INCLUDING EDUCATION, WILL HAVE TWICE THE IMPACT OF TAX CUTS

Phase 4: Saving the real economy

G8 L’Aquila, Italy July 2009

G20 Leaders Pittsburgh, USA Sept. 2009

G20 Labour Ministers Washington, USA March 2010

Profiles of a crisis:

Phase 5: A rush to the exits

Greece, Spain, Portugal, Ireland, the Euro Zone sovereign debt crisis

OECD Ministerial CouncilParis May 2010

G20 Finance Ministers Busan May 2010

Severe budget cuts Germany, France and UK

G8/G20 Leaders Muskoka/Toronto June 2010

Pascal LAMY, DG WTO: “THE SHRINKING AGENDA”

Profiles of a crisis:

Stocks in companies traded on regulated stock markets

TRADITIONAL CAPITALISM

Corporate bonds Government bonds

Banking system

• Pension Funds Private/Commercial property

Shareholders Employees

Personal and corporate taxation on

• companies raise capital • finance for infrastructure(roads, schools)

Circulates credit

•revenues• assets• capital gains• consumption (VAT)

• Recurrent spending• Debt service on capital/

infrastructure investments

Public sector

CASINO CAPITALISM HEDGE FUNDSPRIVATE EQUITY STRUCTURED FINANCIAL

PRODUCTS

house extensions; car; holiday; college fees

OFFSHORE HAVENS

PPPs

Corporate bonds replaceGovernments bonds

Often funded by private equity

for which a major source of finance

MORE BONUSES

HUGE BONUSES ! MINIMIZE TAXES !

MORE COMMISSIONS

PROPERTY SUB-PRIME MORTGAGES

Unlisted on stock markets Off bank balance sheets

Escape banking Regulations

Buy a house (110% mortgage)Raise your mortgage to finance:

PENSION FUNDS

GLOBAL IMBALANCES

The United States No 1 economyFrom balanced budget (Clinton)

Coming out of « the lost decade »

EU/Euro zone No 3 economyGrowth slowing

Oil/gas producers

Emerging economies

Developing countries

Exchange ratesUSD, Euro, Yuan

Japan No 2 economy

SWFs

To record public deficits (Bush: taxcuts and Iraq war)

Higher unemployment

Russia, Gulf States, Nigeria, Venezuela, Norway

= Financial flows

Big trade deficit

Other OECD countriesEg Australia: Commodities

China

India, Brazil, Chile, South Africaoutsourcing

big trade surpluses

Africa, Asia/Pacific, Central/South America, Caribbean

The next phase?D. Strauss-Kahn, IMF, Vancouver, 22 June: “A road along a cliff”

Heavy sovereign debts Double-dip recession

Consultation with Stephen Harper 18 June

Letter by US President Obama to G20 Leaders, 18 June

G20 Statement 26-27 June

The risk down the road:

DSK again in Vancouver, 22 June

“The taxpayers bailed out the banks once. They won’t do it a second time.”

IF banks and other financial actors (hedge funds, etc.) continue to speculate …IF the financial sector is insufficiently regulated …IF regulation lacks global coherence …andIF there is no reserve for a future bail-out

The global economy could reach …. the end of the road

March 2009 – March 2010

Financial markets had recovered significantly

Upswing continued to March 2009

An indicator of global trade:The BDI shows increasing signs of stress 

June 23, 2010, 3:58 PM GMTDon’t Panic, But The Baltic Dry Is Down Again

5 July 2010: 25,900,000 hits for "recession is over“

Radio Canada, 22/4/2010:Rapport du FMI: la récession mondiale est terminée!!

BBC News, 23/5/2010:Is the recession definitely over now?

OECD has predicted a jobless recovery

Unemployment increased steeply in Industrialized countries

OECD does not project much improvement in employment in 2010 - 2011

TUAC trade union advisory committee to the OECD CSC commission syndicale consultative auprès de l’OCDE

Global Economic Prospects for 2010 – according to the IMF

The World Bank: 6 July 2010

Many are still being left behind

43 poor countries are suffering effects of the global recession

They face $11.6bn shortfall in core spending for health, education, etc

Global economy is showing signs of recovery, but

64 million more people will fall into extreme poverty in 2010

30-50 thousand more babies may die in Africa this year

1 billion people could go chronically hungry this year

The World Bank: 6 July 2010

The crisis is jeopardizing years of progress in fighting poverty

The World Bank: 6 July 2010

The poorest countries have been hit hard in 2009

The crisis increased poverty rates in comparison to what they would have been without the crisis. This is the case for all these four countries.

Source World Bank

While the global focus on food prices has waned, domestic staple food prices in several countries have experienced double digit increases in 2009, particularly in Sub-Saharan Africa.

Source World Bank

THE ILO:

THE FINANCIAL AND ECONOMIC CRISIS:A DECENT WORK RESPONSE

Dominique Strauss-Kahn, London 23 November

“The old growth model is dead”“The old model under which households in the USA and elsewhere propelled the global economy with their voracious appetite for consumption, is dead – or at least on its last legs”

“This shift would be helped by stronger social security systems and higher spending on health and education”

“Exit too soon, and you kill the recovery. Exit too late, and you sow the seeds for the next crisis” “Exiting too early is costlier than exiting too late”

Repeated in Peru 22 June 2010.

PARADIGM CHANGE

From: Global imbalancesInequityCasino capitalism

To: Decent workJust transition to green jobsEquityHealth and education

A paradigm for sustainable recovery

THE UNWANTED PARADIGM

Back to:A new cycle of massive profit-taking

Monetary easing of Oct – Dec 2008 created liquidityStimulus packages were financed by banks

So: “Bank bonuses make a come-back”

The Wall Street Journal, 14 Oct 2009:23 firms will pay $140 billion this year – back to 2007 levels

A new round of speculation – until the bubble bursts againAnd this time, no more room for monetary easingor fiscal stimulus !

THE BIG THREAT TO PUBLIC EDUCATION

Declining public revenues

“Exit strategies” toreduce deficits

CTF-FCE Research

Chart E.Share of Consolidated Provincial/Territorial and Local Government Spending in Canada Allocated to Elementary-Secondary Education Drops to Lowest Level in Two Decades in 2007 08e‑

1 4 .2 %

1 4 .0 %

1 4 .1 %

1 4 .4 %1 4 .6 %

1 4 .1 %

1 4 .3 %

1 3 .9 %

1 4 .1 %

1 3 .9 %

1 3 .4 %

1 3 .1 %

1 2 .9 %1 2 .8 %

1 2 .7 %1 2 .5 % 1 2 .5 %

1 2 .7 % 9

1 2 .2 %

1 1 .8 %

1 9 8 8 - 8 91 9 8 9 - 9 0

1 9 9 0 - 9 11 9 9 1 - 9 2

1 9 9 2 - 9 31 9 9 3 - 9 4

1 9 9 4 - 9 51 9 9 5 - 9 6

1 9 9 6 - 9 71 9 9 7 - 9 8

1 9 9 8 - 9 91 9 9 9 - 0 0

2 0 0 0 - 0 12 0 0 1 - 0 2

2 0 0 2 - 0 32 0 0 3 - 0 4

2 0 0 4 - 0 52 0 0 5 - 0 6

2 0 0 6 - 0 72 0 0 7 - 0 8

0 %

1 1 %

1 2 %

1 3 %

1 4 %

1 5 %

EDUCATION FINANCE IN CANADA

CTF-FCE Research

Chart D.Shares of Consolidated Provincial/Territorial and Local Government Spending Allocated to Elementary-Secondary Education in 2007 08e‑

1 4 .0 %1 3 .8 % 1 3 .7 %

1 2 .8 % 1 2 .8 %1 2 .5 %

1 2 .1 % 1 2 .0 %

1 1 .5 %1 1 .3 % 1 1 .2 %

1 0 .7 %

9 .7 %

C a n a d a = 1 1 .8 %

Sask. Nun. Man. O nt. A lta . N .L . P .E .I. N .W .T. N .B . N .S . B .C . Yn. Q ue.

8 .0%

9 .0%

1 0 .0 %

1 1 .0 %

1 2 .0 %

1 3 .0 %

1 4 .0 %

1 5 .0 %

EDUCATION FINANCE IN CANADA

FOUR KEY MESSAGES

1. DEFEND AND DEVELOP QUALITY PUBLIC SERVICES

2. CLOSE THE FINANCING GAP FOR EFA

3. PROMOTE A “SURGE” IN VOCATIONAL EDUCATIONAND TRAINING

4. ETABLISH A NEW GLOBAL PARTNERSHIP FORTEACHER EDUCATION AND PROFESSIONALDEVELOPMENT

REASSERTING VALUES

VALUES

EI’s VISION FOR EDUCATION AND SOCIETYEducation is a public good not a commodity.Education is central in our societies in many ways;

Quality education requires quality teachersEducation unions should be key actors

Education is a human right.

• social and economic;• building and defending democracy;

• individual fulfillment;• community development;

Education should promote

• equity• non-discrimination• understanding among peoples

CTF PRESIDENT’S FORUM

Edmonton, July 12, 2010

Gracias Merci

Thank you

Bob HarrisEducation International

bob.harris@ei-ie.org

www.ei-ie.org/handsup

http://fundingeducation.blogspot.com/

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