Canada: Crisis of capitalism warns of turbulent future

On the surface an eery calm seems to have settled over Canadian society with an apparent absence of mass movements or major labour struggles.  But, it would be incredibly shortsighted to assume that this calm suggests an era of peace or stability.  On the contrary; Canadian society rests on a knife’s edge and almost anything could set the class struggle alight.  There is a paralysis of leadership on all sides — both from the labour movement and the capitalist class — which means that the underlying contradictions within society continue to build up.

In both the economic and political spheres, conditions in Canada appear to be at an impasse, moving neither forward nor backwards. In the realm of the economy, Canada has largely been spared the full wrath of the financial crisis, unlike Europe and the USA.  However, this is not to say that the Canadian economy is healthy, by any means, and there is increasingly vocal anxiety coming from the bankers.

This inertia is also reflected in the country’s politicians, who are unable to plot a course out of this situation of unease.  Conservative and Liberal politicians are unable to put forward the most vicious counter-reforms demanded by Canada’s bankers and business leaders, afraid of provoking a similar backlash as seen in southern Europe, the Middle East, or Latin America.  But, at the same time, the leaders of the labour movement are afraid of confronting the ruling class and are leading the working class down the path of further concessions and cuts to living standards.

What has emerged most recently is an unprecedented period of cynicism, gloom, and anger from all sides of society as people search for a way out of this mess.  The recent spate of scandals at all levels of government is simply an expression of this pent-up frustration.  The only thing keeping these contradictions from exploding and coming to the fore is the lack of a direction by which they can be expressed.  But this is not a situation that can last much longer.

Contradictions in the Canadian economy continue to increase

In the past few months, the federal Conservative government has been proudly touting all of the achievements of the Canadian economy that, in their view, has made Canada the envy of the rest of the industrialized capitalist countries.  According to the Tories, the economy continues to grow (unlike its European counterparts), the federal government is set to eliminate its budget deficit by 2015, and all of the jobs lost during the financial crisis have been recovered.

But this government optimism seems to be at odds with the gloom that continues to emanate from much of Canada’s business leaders that warn a new crisis — potentially even sharper than the one of 2008 — is just over the horizon.  Furthermore, the more far-sighted ones realize what impact a new crisis could have on an over-stretched and disenchanted working class.

The Canadian working class, too, does not feel any optimism about the current state of affairs.  Real wages are stagnant and many workers, especially young ones, are finding it next to impossible to get their foot in the door.

In terms of job creation, the Tories may be formally correct that the number of jobs that have been created since 2009 equal the number of jobs that were lost in the immediate aftermath of the financial meltdown in 2008.  But, the Tories are not accounting for population growth, nor are they necessarily accounting for the quality of jobs that are currently being created.  By these two measures, Canadian workers are doing significantly worse than before the financial crash and an increasing number of Canadian workers are in very precarious situations.  Over one-third of all Canadian workers are now living paycheque-to-paycheque.

According to a report by the right-wing C.D. Howe Institute, the percentage of the Canadian population currently employed is far lower than what it was in 2007, prior to the onset of the most recent financial crisis.  In 2007, 63.7% of Canadians were employed but today, that number is down to 62%.  Furthermore, although the official unemployment rate has remained steady at about 7% for the past year, the C.D. Howe Institute actually found that when you factor in “discouraged” workers and workers who are forced to work part-time (although they continue to look for full-time employment), Canada’s unemployment rate should sit at over 10% — a number that is much closer to those seen in hard-hit Europe.

In addition to these numbers, many unemployed workers are finding it increasingly hard to find any work at all and risk becoming a permanent sector on the margins of society.  As many as 20% of unemployed workers have been unable to work for more than six months, and a full 7% have been unemployed for over a year.  And these numbers do not even reflect workers who have given up on finding a job or have moved to self-employment in a desperate attempt to earn an income.

The future for young workers is even more bleak.  Official youth unemployment remains stubbornly stuck at over 14% across Canada, although once again that rate is rather deceiving and does not give an accurate reflection of the hopelessness facing many working-class young people.  In Ontario, youth unemployment now sits at 17%, the second-highest rate of any political jurisdiction in North America and one that is higher than even in the Rust Belt states in the USA.  In southwestern Ontario, previously the industrial heartland of the Canadian economy, youth unemployment is as high as 24.7% in cities like London, Oshawa, or Windsor.

Young workers may not even end up being paid for their labour.  More companies are increasingly relying upon internships in order to lower labour costs and maximize profits.  In some of these cases, young workers are not even paid for their internships with companies claiming that they are “furthering young people’s education and job experience”.  Not surprisingly, there has been widespread anger at this abuse, especially after a young broadcasting intern in Edmonton was killed after working ridiculously long hours that violated Alberta’s labour code.  In Ontario, the provincial labour minister admitted that unpaid interns may not even be covered by the most basic labour standards as a worker needs to be paid to be considered to be employed!

The situation for young workers does not look like it will be getting any better in the future.  The Bank of Canada has once again lowered its expectations for economic growth, calling for an increase of 1.6% of GDP for 2013 and a further increase of just over 2% in 2014.  In its own words, they do not see the Canadian economy “returning to normal” until late 2015, “at the very earliest”.  But, even if these growth rates are correct, there is no guarantee that there will be any jobs available for a new generation of workers.  Despite the federal government’s claims that the country could be facing a labour shortage as baby-boomers retire, Toronto Dominion Bank is claiming that this is not the case.  Due to stagnating wages and the attack on pensions, more and more older workers will continue to work far beyond the traditional age of retirement.

Even if economic prospects were brighter, there isn’t any guarantee that this would necessarily translate into more, or better-paying, jobs for workers.  As this article goes to print, BMO Bank of Montreal has just announced that it has shed nearly 1,000 full-time jobs in the most recent financial quarter.  This is in spite of the fact that the bank just recorded an annual profit of $4.2-billion, the largest in its history!  Recognizing the ugly optics around this, BMO chief operating officer Frank Techar admitted that “the bank may have laid off too many people at once.” (CBC News, 3 Dec. 2013)

For the more far-sighted capitalists, they recognize that there are inherent dangers in the conditions facing Canadian workers that could fan the flames of the Canadian class struggle.  Canadian inequality has increased more rapidly in the past 10 years than in most of the countries of the Organization of Economic Cooperation and Development (OECD), including the USA.  The Globe and Mail, the journalistic voice of Bay Street, has recently dedicated a full two weeks to running a series of articles that address Canadian inequality and its threats to the Canadian “social fabric”.  One such piece even revealed how increasing inequality is endangering many Canadians’ enjoyment and participation in hockey.  (And nothing riles up Canadian workers more than something that stands in their way of enjoying the national pastime.)

But perhaps the biggest contradiction facing the Canadian economy at the present moment is the disconnect between a stagnant economy, stagnant wages, and an overheated housing market that continues to grow — and the effect it will have on working-class families once the housing bubble eventually bursts.  The danger of the Canadian housing market has caught the attention of the bourgeoisie around the world.  Everyone from famous economist Paul Krugman, to the New York Times, to the Economist, to even the International Monetary Fund (IMF) have commented on the irrationality of the Canadian housing market.  Deutsche Bank has found Canadian housing prices to be overvalued, on average, by 60%, the highest amount of any country around the world. Federal Finance minister Jim Flaherty even had to take the unprecedented step of intervening and ordering Canadian banks to raise their mortgage rates in order to dissuade Canadians from taking on further onerous mortgage debts.

Despite the federal government’s attempts to take some steam off of the housing market, housing prices across the country continue to increase.  In November 2013, the average re-sale price of a home in Calgary was 8.5% higher than the year before; in Toronto, the price was up by 11.3%.

The rocketing prices of homes has encouraged many homeowners to borrow increasing levels of debt against the values of their homes.  The average Canadian family now owes 165% of annual income, a level that is higher than consumer debt was in Spain or in the USA prior to the 2008 financial crash that prompted millions of people to declare bankruptcy.

Moreover, the cost of maintaining a home in Canada is rapidly approaching an insurmountable point, especially considering how wages have largely stagnated for most middle-income earners.  A traditional barometer used by bankers and mortgage providers is that one should not pay more than 30% of one’s income towards housing costs.  Research by the Royal Bank of Canada (RBC) shows that this level is only really achievable in the Prairie provinces such as Alberta and Saskatchewan, which are being fuelled by the boom in oil, gas, and natural resources.  In Montreal, a city with traditionally low housing costs, the average family already spends 38.3% of their income on housing.  In Toronto, that number rapidly climbs to 55.6% of monthly income.  And in Vancouver, maintaining a home costs the average family a whopping 84.2% of pre-tax monthly income!

As high as these costs may appear, they could be a lot worse, and will certainly get worse once the Bank of Canada inevitably begins to raise interest rates above the present historically-low levels.  How many Canadian families will no longer be able to pay their higher mortgage payments in that sort of situation?  How many will be dispossessed of their homes?  Hundreds of thousands of Canadians will face a similar plight as their counterparts in the USA, Spain, or Ireland have already faced.

Scandals and the crisis of leadership in Canada

This discontent is being felt all over the political sphere.  The average Canadian worker does not need to see statistic after statistic to know that their situation is getting worse and that there is no light at the end of the tunnel.  Where is the expected payout after five years of cuts and austerity?

Although the depth of the financial crash was not nearly as deep in Canada as it was elsewhere around the globe, all layers of government funnelled billions of dollars of public money to prop up Bay Street.  Even today, most governments across the country are still deeply in debt from these bailouts and are demanding that the working class pay for the corporate handouts.

The problem for the ruling class is that none of the handouts and bailouts actually have helped to get the Canadian economy out of the hole.  Instead, the capitalists simply pocketed this government largesse without re-investing in the economy.  Last year, Mark Carney, the former governor of the Bank of Canada, berated Canadian CEOs for not investing in the economy, and sitting on $560-billion worth of “dead money”.  The situation is little better this year.  An economic task-force set up by the Ontario provincial government discovered that despite every business-friendly measure taken by the Ontario Liberals over the past decade, the bosses refuse to invest:

“Corporate taxes have been cut to record low levels, yet our companies are sitting on unprecedented stashes of so-called ‘lazy cash.’

“Instead of displaying entrepreneurial zeal to boost exports, our business leaders evince timidity by failing to invest in needed equipment, R&D [research and development], software, patents, and other productivity tools.

“Small businesses stay perversely small, the better to benefit from a preferential tax rate — even lower than the recently lowered corporate rate for bigger firms.” (Toronto Star, 26 Nov. 2013)

Once again, the average worker does not need an economics degree to understand the hypocrisy of the present situation.

This contradiction has led to the present political crisis facing the Canadian bourgeoisie.  Workers everywhere are disgusted by the cozy relationship between politicians and the bankers and bosses.  The so-called “moral authority” of the ruling class has never been lower.  A study by the OECD shows that only 52% of Canadians have any trust in government, a decrease of 15 percentage points since 2008.  An editorial in the Globe and Mail warned of the new shift towards “cynical contempt”, which finished, “We seem to have reached a particularly nasty and brutish period in Canada’s political climate. Let’s hope it’s also short.”

The inability of the ruling class to develop the economy and to provide any improvement in the material conditions of workers is also reflected in the weakness of the current batch of politicians and the explosion of scandals across the country.  Whether it is the mayor of Montreal being led away in handcuffs on charges of corruption, or the ongoing Senate scandal that is raising the very real possibility that the Senate could be abolished, or the increasingly bizarre soap opera that is drug-crazed Toronto mayor Rob Ford — all of these are a symptom of a regime in crisis and an inability of the ruling class to posit a way forward for society.

In material terms, this is a very worrying development for the capitalists as it is limiting their ability to put forward the agenda they desire.  Although no one will deny that the cuts and attacks of the past few years are vicious, we have to be honest and say that they could be much worse.

However, the lack of authority on the part of the ruling class could even put some of the most basic counter-reforms off of the table, at least for the immediate period.  Every government across the land is desperate to retain a shred of electorability in the face of an angry population.  In both Ontario and in Quebec, the provincial governments have done a stunning about-face in their drive to restore the financial balance in both provinces.  The PQ government in Quebec had insisted that, come hell or high water, they would eliminate the province’s deficit by March 2014 and proceeded to impose the starkest provincial budget in 14 years.  However, at the end of November, the province’s finance minister enraged the Quebec business community by announcing that the government could not justify further cuts to public spending and delayed the elimination of the provincial deficit until 2016.  In Ontario, premier Kathleen Wynne announced a new round of government spending in order to get the provincial economy going again, enraging Bay Street.  The National Post commented, “Since Ms. Wynne took over the Premier’s office in February, her government has signalled little interest, both in messaging and in substance, in continuing the austerity push that began under Mr. McGuinty.”

This is not to say that the ruling class is rolling over and declaring defeat.  Indeed, certain sectors are continuing to gear up to do battle.  Currently, the Alberta provincial government is preparing legislation that would make all public-sector strikes in the province illegal, as well as to make it illegal for unions to even talk about the possibility of going on strike.  Ontario Conservative leader Tim Hudak continues to drum up his public attacks on public-sector unions in advance of a potential provincial election in Ontario early next year.  But, there is a danger for the bourgeoisie if they take this hard line against the labour movement; this is precisely the whip that may upset the delicate balance that persists in Canadian society today and could end up inflaming the class struggle across Canada, as witnessed by the wildcat strike by prison workers in Alberta earlier this year.

“Fools to the left of me, jokers to the right…”

There is certainly more than enough combustibility within Canadian society today, but up until now there hasn’t been any real outlet for this discontent to express itself.  Smaller pockets of resistance continue to pop up — the Occupy movement, Idle No More, or the present struggle by the Mi’kmaq in New Brunswick.  However, all of these movements and campaigns have been relatively isolated, unable of forging a unity between all oppressed sectors of Canadian society, and have been unable to create a lasting resistance to the exploitation of capitalism.

Just as there is an inability for the bourgeoisie to plot a way forward out of the crisis, there is a vacuum on the left in channelling all of the anger in society.

The leadership of the labour movement is completely oblivious to the present weakness of the ruling class, or the tremendous potential that exists within the working class.  Instead of pressing the advantage, the labour leadership continues to offer concessions and compromises that embolden the bosses to ramp up their attacks, and doubly serves to demoralize the rank-and-file.  This could not have been more evident than the wholesale sell-out of Ontario teachers by their leadership at the beginning of 2013, when the union leadership reached a last-minute deal with the Liberal government despite the fact that the Liberals had taken away the right to strike and collective bargaining from the teachers.  Hundreds of thousands of teachers were prepared to go on a wildcat strike and confront a weak and discredited Liberal government.  There was a very real chance that the teachers could have emerged victorious.  And, it could have emboldened the rest of the labour movement in confronting the cuts and attacks levelled on public-sector workers as evidenced by the historically large labour demonstration in Toronto that same month.

Instead, the resistance to austerity has taken highly dubious directions — usually through appeals to the courts (who have never been big allies of the working-class movement) or making uneasy alliances with the bosses’ parties that further discredit the labour leadership in the eyes of its members.

The leadership of the political voice of the labour movement in Canada, the NDP, is showing just as little direction.  Precisely when the bosses’ parties and their politicians have been completely discredited in the eyes of most workers, the NDP is giving up opportunity after opportunity to present a road out of capitalist austerity and cuts.  In Nova Scotia, the provincial NDP government faced a tremendous defeat after four years of austerity politics that hammered the province’s hard-hit working class.  In British Columbia, the NDP gave up a 20-point lead in the polls and got swept by a reviled Liberal Party that was on the brink of implosion.  Just as more and more workers and young people are openly questioning the logic of the capitalist system, the leadership of the federal party decides to remove mention of “socialism” from the federal party’s constitution and enshrines respect for private markets!

No other force in Canadian society has the breadth and organizational ability to unite the resistance against capitalist oppression, but this shortsightedness by the labour leadership is only leading the working class down a blind alley.  It also opens up new possibilities for the bosses to launch new (and worse) attacks on the country’s workers.

There is an additional danger in the weakness of the labour leadership to point a way forward out of the crisis.  Angry workers are desperately looking for ideas and direction and in the absence of such leadership on the part of labour, they may look towards right-wing populists to fill that void.  As the old saying goes, nature abhors a vacuum.  In Toronto, it was the failures of NDP ex-mayor David Miller which allowed the drunken and drugged-up buffoon, Rob Ford, to take power.  In both Alberta and Quebec, we have seen the significant rise of the Wildrose Alliance and the Coalition d’Avenir, respectively.

However, it should be pointed out that even these new developments lack any real strength or base in society and are only arising because of the actions (or lack thereof) of the workers’ organizations.  There is every opportunity present at the current moment for a significant resistance to capitalism to arise in Canada, but there needs to be a direction given.

For these reasons, it is impossible to say when all of these contradictions will come to the fore, or in which manner they will explode to the surface.  However, this instability cannot continue forever.

The events of the past five years have demonstrated, in action, what the Marxists have said all along — capitalism cannot provide a way forward to the planet’s workers and young people.  Canada is not immune to the problems that have engulfed societies in Europe, the Middle East, or Latin America.  The only thing that has kept things in check so far is a lack of direction in which to channel and harness the bubbling discontent emanating from the working class.  However, the contradictions of a system in crisis will have to eventually manifest themselves.  Canadian society is on a knife’s edge and any little spark could be the ignition point that sets the Canadian class struggle alight.

Help us hire a Montreal Marxist organizer!

Young people, students, trade unionists, and all those wanting to fight the system, looked with inspiration to the struggle of the Quebec students in 2012. Hundreds of thousands came out on the streets to oppose austerity. In the aftermath of this movement, thousands more are looking for an answer to the global crisis of capitalism. There is a ferment and questioning amongst the youth who are looking for clear ideas. In this context Marxism can make a rapid advance, and indeed has been advancing, especially on university campuses.

In order to promote and consolidate this advance, Fightback — united with our French-language sister paper La Riposte — is launching a campaign to hire a Marxist organizer in Montreal. This will allow the comrades to bring forward revolutionary ideas in a more coordinated manner on campuses, on the streets, and in the workplaces. This will allow La Riposte to progressively increase its quality, regularity, and circulation — helping us aid more workers and youth in struggle, while generalizing the lessons for the movement.

We are making an appeal to our supporters to help us find the funds to hire a Marxist organizer in Montreal. We are asking those who want to build the revolutionary movement in Quebec to pledge $10, $25, $50, or any other amount, on a monthly basis. We believe the conditions are ripe for the movement, but as we have seen many times in history, organization is key. Our supporters should also understand that the success of this campaign is a fantastic example of building the revolutionary unity of the working class in French and English Canada.

On the one side, the federal bourgeois Canadian state seeks to violate the right of the Quebec people to self-determination. On the other, the bourgeois-nationalist Parti Québécois seeks to divide the working class with its racist charter of “Quebec values”. We, on the other hand, have confidence that the workers and youth who support us are willing to make a modest sacrifice to end the division and exploitation inherent in capitalism.

As a bonus, every contributor to the Montreal Marxist organizer campaign will get a free subscription to La Riposte and a free subscription to Fightback. That way you can keep track of the movement that your donation is helping to build.

History has shown us that the movement of the students is frequently just the harbinger of the movement of the organized workers. Please help us to build the revolutionary movement now, so that Marxism can be an organized constituent part of the struggles to come!

To help us in our goal, please send a void cheque with your desired monthly contribution to:

Fightback

PO Box 65141

RPO Chester

Toronto, ON  M4K 3Z2

For more information, please contact us at fightback@marxist.ca, or (416) 461-0304.