inconvenient facts

Where is Henry Ford when you need him?

You may remember Henry — the ruthless industrialist who nonetheless
refused to be hobbled by suicidal ideology when it came to doing business. He
realized as his workers cranked thousands of new cars off the assembly line
that none of those workers would likely ever own one, because he didn’t pay
them enough. So he dramatically increased their wages. It was such a good idea
that most industrialists followed suit and his practical approach was dubbed
Fordism. It was the foundation of a high-wage economy, it lasted a very long
time and it produced incredible real wealth for decades.

Until something called neo-liberalism decided to kill the goose that
laid the golden eggs. And the perpetrators of this ideology — and the
catastrophic damage it has done to the global economy, nations, communities and
workers — are so wedded to it that they seem determined to pursue its goals and
accept its preposterous assumptions until the ship truly does go down.

The new set of goals and assumptions of neo-liberalism mandated that
workers’ wages and salaries had to be constantly driven down in a new global
system of competition for high share prices. Not a competition to achieve
growing companies, or economic stability, or balanced growth, or even profits,
but share prices.

Now, the vast majority of working people in Canada are up to their
eyeballs in debt, hundreds of thousands have no jobs, families are hunkering
down in survival mode and not buying much of anything beyond food and clothing,
and everyone is waiting for the inevitable bursting of the housing bubble — the
only thing keeping the rusting, rudderless hulk afloat. Someone should tell
Canada’s finance ministers that consumers account for 60 per cent of our GDP.
Choke the consumer (by choking her wages) and you choke the economy.

Last fall, the Canadian Payroll Association reported that 59 per cent
of Canadians “said they would face financial difficulty if their pay cheque was
delayed by even just one week.” Twenty-seven per cent of working Canadians
aren’t saving at all.

The faux “financial economy” where nothing needs to be produced, has
devastated the real economy but the same policies are still being pursued:
fight wage increases, eliminate or down-size pensions, lay off workers to
enhance.. you got it, the share price. Insanity: doing the same thing over and
over again and expecting different results.

Today, the five-thousand-ton chickens are coming home to roost. Chicken
number one is already home. Working people, whose real (after inflation)
increase in pay between 1980 and 2005 was $51, maintained their middle class
lifestyle (and corporate profits) by going into debt. In June, household debt
hit a record $1.5 trillion. Averaging it out means a two-child household owes
about $176,461, including mortgages.

Cheap goods produced by off-shoring manufacturing helped keep the
working family afloat, too. But of course the trade-off was the loss of the
best private sector jobs in the country. Now Canada boasts the second highest
percentage of low paid jobs in the OECD. And with labour costs in China rising,
those cheap goods will get more expensive.

Corporate Canada had a lot of help in keeping wages and salaries flat.
Starting in earnest with Paul Martin’s finance regime, the federal government —
followed by the provinces — has ruthlessly implemented what it euphemistically
calls a “labour flexibility” policy. Vicious cuts to EI eligibility, the
slashing of welfare rates, the virtual abandonment of labour standards
enforcement — all in the service of corporations, er, sorry, the economy. Where
working people once had an option of quitting a bad employer (one that, say,
demands you work overtime for nothing to prove you want the job), that option
has now all but disappeared. It’s an employer free-for-all in denying workers’
rights.

Too bad all the geniuses now occupying the dismal science haven’t
figured out that a cheap labour economy ultimately means a low consumption
economy.

Yet we are still burdened by the gross incompetence of Conservative
Finance Minister Jim Flaherty. He wants to pursue a deficit reduction strategy,
taking even more money out of the pockets of Canadians at exactly the time that
the economy’s survival depends on a core of stable jobs. Just when the economy
is desperately looking for demand, Flaherty will be taking $11 billion off the
table.

Even worse, Flaherty insisted before and throughout the last election
on moving ahead with another unconscionable round of corporate tax cuts —
resulting in a $6 billion increase per year in the deficit. The rationale? It
will stimulate investment.

Who will save us from this incompetence? In the first quarter of 2011,
corporations were sitting on $471 billion of capital — awash in cash they have
no idea what to do with. Why? Because they and their political flunkies in
Ottawa and the provinces have screwed the worker/consumer so badly that demand
has flatlined. No CEO in his right mind invests just on the basis of lower
income taxes. There have to be customers with money to spend. Henry would be shaking
his head.

The Washington Consensus — the name given to neo-liberalism and its
agenda of privatization, deregulation, free trade, cuts to social spending and
massive tax cuts for the wealthy — was not just a call to moderate state
intervention in the economy. It was determined to gut it, to return to that
period where the economy (by which they always mean capital) was somehow hived
off from society and government and allowed to run effectively without
regulation or direction. Thirty years of amazing growth and prosperity based on
a complex system of mutual dependence between state and capital was tossed
aside. It was a sort of revenge of the nerds — we’ll show those uppity workers.

But now the evidence is in. More chickens are coming, and they will be
even more gargantuan. Still no one in authority or the business press gets it.
No one is listening. But Will Hutton, writing in the Observer, said it
succinctly in an article headlined Our Capitalist System Is Near Meltdown.
“Markets are beset by mood swings and uncertainty which, if not offset by
government action, lead to violent oscillations. Capitalism without
responsibility or proportionality degrades into racketeering and exploitation.
The prospect of limitless pay is an open invitation to bad, or even criminal,
behaviour. Good capitalism cannot happen without referees to blow the whistle
or robust frameworks in which markets can function.”

So-called “good” capitalism was bad enough and only marginally good to
the extent that organized resistance forced it to be. That resistance, in
combination with the spectre of Soviet communism, kept capitalism a bit
circumspect regarding notions of social responsibility. It is no coincidence that
“bad” capitalism really took off with the collapse of the USSR. With the
communist “competitor” out of play, all restraints were off. Former Soviet
premier Nikita Khrushchev famously predicted that communism would bury
capitalism. But instead, that job is now in the hands of capitalists themselves
— in the hands of madmen who, insanely, keep doing the same thing over and over
even though the same grim results accrue. I would happily cheer the demise of
that capitalism. But it would be a really ugly death. And we need to be talking
about what would replace it.