Unfinished Business: Economic Repercussions of Austerity

Presentation for Conference on The Global Economic Crisis & Canadian Austerity

Ryerson University, TorontoMarch 23, 2012

Toby Sanger, Canadian Union of Public Employees

This time WAS different

-24 -21 -18 -15 -12 -9 -6 -3 0 3 6 9 12 15 18 21 240%

5%

10%

15%

20%

25%

Bank of Canada Interest Rate in Recessions

1981/82 Recession 1990/91 Recession 2008/9 Recession

Months before and after start of recession

1981/82 recession

1990/91 recession

2008/09? recession

Post recession decline in real wages19

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0%

1%

2%

3%

4%

5%

6%Inflation and Average Wage Increases - large collective agreements

CPI Inflation Public Private

Declining share to wages, increasing share to business profit

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0%

10%

20%

30%

40%

50%

60%

70%

Income shares of economy

Wages, salaries and other income Corporate profits and business income

Unprecedented shift in surpluses from households to corporate sector

19

61

19

63

19

65

19

67

19

69

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

-100

-80

-60

-40

-20

0

20

40

60

80

Surpluses and Deficits by Sector

CorporationsPersons and unincorporated businessesGovernments

Bill

ion

s o

f d

olla

rs

2008/9 Great Recession was different

• First global economic contraction since 30s• Coordinated global response– Unprecedented monetary stimulus: interest rates

at all-time lows, extraordinary credit measures– Far more expansionary discretionary fiscal policy

focused on public capital investment and tax cuts– Spending largely temporary, tax cuts permanent

• Few business bankruptcies, slow jobs recovery

Real debt crisis at household level

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

40%

60%

80%

100%

120%

140%

160%

Debt Ratios by Sector 1990 to 2011

Household debt to personal disposible incomeCorporate credit market debt to equityTotal gov't gross debt to GDP

Limited prospects for recovery

• Lower interest rates can’t save us• Housing bust imminent• Households at record debt levels• Business not investing• Export expansion limited to resources• Fiscal policy—gov’t spending—contractionary

Another lost decade, “seven lean & ugly years”

Government debt ratios manageable

Cana

da

N&

L

PEI

NS

NB

Que Ont

Man

Sask

Albe

rta BC

0%

2%

4%

6%

8%

10%

12%

1.9%2.9%

2.1% 2.3% 2.2% 2.2%1.5% 1.4%

0.7%0.1%

1.1%

Debt Interest Charges as a Share of GDP

Max (1987 to 2010)

Latest (2010/11)

Sources: Finance Canada Fiscal Reference Tables, Statistics Canada.

Public spending recently at 30-year low

20%

30%

40%

50%

60%

Total public spending as share of economyFederal, provincial and local government

Manufactured recessionsNo need for austerity to balance budgets

• Federal government will soon be in a structural surplus (PBO, TD).

• Austerity measures will slow down economy and could another recession, as in UK, Europe.

• Fed and provincial deficits could be quickly eliminated with a few fair tax measures

• Spending cuts and austerity measures will increase inequality.

Rising inequality, slowing economy19

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

07

0%

4%

8%

12%

16%

Top 1% income share Real GDP growth (7 yr average)

Upcoming budgets: selective austerity

• Wage constraints, program, public service, transfer & regulatory cuts

• Corporate tax cuts, stimulus directed at private sector and widespread commodification of public services: privatization, asset sales, contracting out, P3s, competitive bidding, social enterprise partnerships

Public sector wage constraints aimed at reducing wages in private sector too

Affadavit of Paul Rochon, federal ADM Finance, November 2010

Conservative class-based agenda

Attack on working people• Selective austerity• Cuts to social supports, OAS, pensions, later

retirement• Intensification of contingent and precarious work,

both directly and through privatization• Undermining labour rights & protections• Business control over immigration, disposable

temporary foreign workers

Conservative class-based agenda

Strengthening power of capital• Corporate tax cuts• Commodification of public services: privatization,

contracting-out,P3s, SIBs, privatization of foreign aid• Environmental deregulation to aid faster capital

accumulation through resource exploitation• Investor protection “free trade” agreements

Conservative class-based agenda

Suppressing democracy• Elimination of federal funding for “advocacy”

activities, cuts to NGOs• Bill C-377 to hamstring labour unions from engaging

in advocacy• Vilification of opponents• Elimination of constructive political dialogue • Growth of security state apparatus• Electoral fraud, “shenanigans”

How to respond?• Class perspective 99% vs 1%• Expose contradictions– Failures of neo-liberalism & trickle-down– Costs of privatization, market solution– Fiscal: fair taxes

• Resist commodification and advance expansion of public services

• Broaden alliances & strengthen solidarity• Strikes & actions maintain public support• Mobilization through democratization