What is done: quick thoughts on Brexit

What is done is done regardless of where you were on the referendum—or like most of us, outside the UK. The two questions that grab me now are what lessons can be learned and how to salvage the moment for an anti-racist, anti-austerity coalition. Instead I’ve seen too many tears shed for the EU, which after all is no huge friend to migrants (see the mass graves under the Mediterranean or the camps in Greece) and a cudgel for neoliberal reforms, combined with too much smug condescension at the “stupid” Brits.

The choice between options represented by the upper class ninny Cameron and his upper class ninny foils Johnson and Farage was always a false one. It’s eerily similar to the choice between Clinton and Trump. Smug elitism gets us nowhere beyond the right’s version of internationalized neoliberalism or nationalist xenophobia. Only a strong alternative that looks the middle finger UK voters sent elites in the face can take ground away from the political reactionaries and xenophobes who have punched above their weight.

The referendum took place after four long decades of stagnant incomes, falling expectations and austerity from successive governments. It wasn’t just evil Tories, but New Labour as well, that gleefully transformed the UK economy away from the post-war class compromise (one breaking by the 1970s) towards today’s highly unequal version drunk on globalized finance. In many ways, this wasn’t a referendum on Europe—especially since the UK is out of the Euro, the biggest stick European elites can wield—but on UK elites and the damage they have done to working people.

The problem is that the most retrograde section of those same elites, Boris Johnson, Nigel Farage and the rest of their sniveling crew, took advantage of the vacuum and made their xenophobic program the political expression of this anger. Labour’s long foray into enforcing austerity and capping living standards for the many left a long window to build and spread reactionary forces. I hope Corbyn and those around him can push a genuine alternative and pull those who can be pulled away from this misdirected anger without talking down to them. This moment cannot belong to a racist gang of Etonians like Johnson and Farage who have no interest in reversing any of the attacks on regular people and will only pit people against one another, spreading racial hatred. But that will take real work.

Read More

“Investment” versus investment

Surprise! A new investigation by the Toronto Star and the CBC found that recent treaties with tax havens like the Bahamas and Panama aimed at more “transparency” have just made it easier for corporations to evade ever more taxes. And Canadian corporations have obliged this golden opportunity. “Investment” abroad has ballooned all the while the taps on actual investment at home have run dry.

Signed under Stephen Harper and left untouched under Trudeau, Tax Information Exchange Agreements (or TIEAs) allow corporations to funnel profits through notoriously low-tax jurisdictions. For example, if a corporation only has an office in, say, Panama (of Panama Papers fame), it can pay zero taxes on profits and have the option to repatriate the money back to Canada tax-free. Here’s how the Star report describes it:

“TIEAs are a well-meaning but failed idea,” said Arthur Cockfield, a professor of tax law at Queen’s University who warned the government of the TIEAs potential for abuse.

“I don’t blame the companies. It’s kind of like a Christmas present sitting under the tree. What are you going to do, not open it?”

…Many of the leading corporations on the Toronto Stock Exchange now have a presence in tax havens and use Canada’s treaties to dramatically reduce their tax bill at home. One company, Gildan, reduced its taxes by more than 90 per cent in 2015 (see sidebar).

TIEAs have had a dramatic effect on offshore investment, and Canadian money stashed in tax havens is piling up rapidly.

Compare data on foreign direct investment in six major tax havens with charts showing a few measures of investment at home. Here’s “investment” abroad growing rapidly…

tax haven fdi

…and total investment, including that done by government, at home:

capex cda

The chart above is in nominal dollars and includes all investment to make it easier to compare to the first chart. Here’s just business non-residential investment as a percentage of GDP. The uptick due to the resource boom in the early 2000s is clear; it’s instructive to imagine what things would have looked like if the resource sector had continued to expand at it’s long-term pre-boom average.

biz gross capform

And finally, take a look at corporate tax receipts:

corp tax

The contrast is striking. Corporations are piling cash into off-shore accounts while paying less in tax and barely keeping up with investment, especially outside the resource boom. Apologists would love to have a debate about the finer points of tax incidence, that is who ultimately pays a tax. They have a point; however, if it were so easy to always fully pass taxes on to consumers, why would corporations go to all the trouble of lobbying for tax breaks and making tax evasion so much easier? The answer is that it is ultimately a question of power. There is a question of how social wealth is divided up in the final accounting, but it comes down to who has the power to influence the division. Treaties with tax havens are just one instrument in the quiver.

A key and related next step would be to draw the links to the shareholder value revolution that has sought to remake corporations into ATMs for the wealthy. Rather than reinvest their profits into growth and productivity enhancements, corporations have, since roughly the early 1980s, been under increasing pressure to return a vast chunk of profits to shareholders via share buybacks and dividends. The corporate sector in the US is the poster child for the extract-what-you-can model but it turns out, for example, that a similar logic also played no small role in breaking the Eurozone financial system after the last crisis. What kind of tangible links are there between tax evasion and shareholder value for Canadian corporations?

In fact, when Mark Carney initially coined the “dead money” meme that has become an omnipresent shorthand on the left, he was not only exhorting corporations to invest. If they couldn’t, Carney said they should dish out more money to shareholders instead. Profits can pile up in bonds, shareholder pockets, cash or offshore accounts—the reality is that corporations are strategically choosing between competing allocations of assets, not stashing cash under a rug. Corporate money is never dead, and much of it is alive and well relaxing in Panama and the Bahamas. One thing is certain, it isn’t working for the rest of us.

Read More

Podcast: Canada’s spring of occupations

 

Welcome back to the first podcast episode after a two-month hiatus! This week, three guests talk about two significant occupations of public space that have happened in Canada in the interim: the Black Lives Matter occupation of police headquarters plaza in Toronto and the occupations of Indigenous and Northern Affairs offices across the country.

In this first half, I speak with journalist Desmond Cole about the Black Lives Matter occupation of the police headquarters plaza in Toronto. Activists took over the plaza for two weeks in March and April over continuing police brutality and lack of unaccountability. Desmond reported regularly from the camp and spent several nights there. Aside from his column in the Toronto Star and his other print and radio work, he is also currently writing a book about black history and black politics in Canada.

The second half features my conversation with two activists and organizers behind Occupy INAC in Regina, Robyn Pitawanakwat and Susana Deranger. Susana is a veteran of the long struggle for justice for Canada’s First Nations, an activist for over 40 years in Saskatchewan. Robyn is from a younger generation, though as the daughter of a long-time Indigenous activist, she too has deep roots in the same fight. The Colonialism No More camp has been up for 50 days in front of Indigenous and Northern Affairs office in Regina. It started as part of a wave of occupations of INAC offices across the country in response to the state of emergency in Attawapiskat over youth suicide.

As always, subscribe via RSS or iTunes to get episodes as they come out.

Read More

r > g in Vancouver

I’m finally coming back to full functioning from a concussion so there will be less silence here (I’m still writing a book though, a strong counter-tendency). Today, I just wanted to post a revealing duo of headlines about Vancouver, the city my partner and I left (fled?) just over half a year ago.

Exhibit 1:

 

Exhibit 2:

 

In the first piece, Vancouver’s mayor offers a tone-deaf apologia for the devastating lack of affordable housing in his city. Poverty, precarity, dislocation and homelessness are unfortunate outcomes of the sins of others, little to do but wash them away with the healing waters of street festivals and food trucks. Can’t get by? Consider a delicious food truck taco!

The second piece, from long-time Vancouver columnist Ian Young, offers a devastating answer to Robertson’s question. Young reports a back-of-(data-packed)-envelope calculation showing that the rise in the value of land under Vancouver’s single-family houses was likely greater than total employment income in the city last year.

Interestingly, the sole sensible section amidst Robertson’s green elite smugness in the first piece points to why this would be so: increased commodification of housing and generalized global asset price inflation in the wake of the financial crisis. Add in a local political system run by developers — oddly missing from Robertson’s account — and you’re set.

As central bank scrambles to re-ignite global growth have managed to support r for some and left g stumbling along, Vancouver is ground central for today’s r > g.

Read More

Beware of basic income

Wouldn’t it be great to get a cheque every month just for being you? This is the sweet, fuzzy vision the Ontario and federal Liberals, are counting on to sell their latest idea, a basic income. Just this year, the Ontario government laid the groundwork for a pilot project to test the idea. Any actual large-scale program is far off into the future, however, and that’s a good thing. We need to take a hard look at the idea, especially in Liberal clothing.

Pie-in-the-sky or slap-in-the-face?

A basic income is exactly what it sounds like: a monthly cheque provided to every person by the government with no strings attached. A recent Ontario poll suggests the idea has broad support: 41% of Ontarians support it compared with 33% who oppose. Yet when people are asked whether they think a basic income is a good idea, they are never asked what they would be prepared to lose to get it. The point isn’t that basic income is pie-in-the-sky. It’s just that it could be implemented as a slap-in-the-face.

Basic-Income-posters

(more…)

Read More

Why Alberta shouldn’t look to Norway, and why that’s a reason to Leap

One of the clearest memories I have from my only trip to Norway is the repeated failures at hitching a ride. What appeared to be an unbroken string of brand new Audi’s and BMW’s whizzed by my friend and I, dirty and sweaty after a few days hiking and camping in the mountains. “Where am I that the comforts of our rich assholes are the rights of common citizens?”, I remember thinking.

You’ve probably seen at least one article saying that Alberta should be more like Norway. I don’t want to rehash that debate. But I think we’ve gone about it the wrong way and seeing why can tell us a lot about today’s sparring over the Leap Manifesto.

Comparing Alberta unfavourably to Norway for squandering its oil wealth has been a familiar trope of media and progressive organizations, especially since the oil price crash (here’s just the CBCToronto Star and Globe and Mail). The comparison has become so ubiquitous that it has also spawned a cottage industry of counterarguments from the right too. In short, Norway has been putting away the money it gets from oil in a sovereign wealth fund since 1990. The fund is now the world’s largest and worth over $1 trillion. Alberta’s fund, although older and actually the inspiration for Norway’s, is a paltry $15 billion. (Norway and Alberta have similar populations.)

The funny thing, however, is that Norway’s gigantic fund doesn’t pay for much of what the government does. Taxes do that. Take a look at the numbers. Public revenues in Norway at all levels of government are equal to over half of GDP (nearly 55% in 2014). Meanwhile, federal, provincial and local government revenues in Alberta make up somewhere around 30% of provincial GDP. That’s a massive difference. Alberta tax rates are lower: on individuals, on corporations and on consumption. In addition, the Norwegian government not only owns a majority share in its largest oil company, Statoil, but also taxes oil profits at a much higher rate. A special tax on “excess profits” takes the top marginal corporate rate on oil corporations to 78%. (more…)

Read More

Beltway Bullshit, my interview with JW Mason on Bernie’s economics

My interview with JW Mason on how wonk critics of Sanders’ economic ideas reinforce low expectations was transcribed for Jacobin under the great title, “Beltway Bullshit.”

beltway

Michal Rozworski: There’s been a big debate recently around Bernie Sanders’s economic ideas. It was precipitated by Gerald Friedman’s claim that Sanders’s plans would lead to 5 percent nominal economic growth over a certain period, substantial working- and middle-class income growth, and massive job creation. Pretty quickly, liberal economists like Paul Krugman or former chairs of the Council of Economic Advisors attacked this paper as unrealistic. What is your argument here?

JW Mason: So far, until now I think in the campaign the core questions of macroeconomic policy — whether we can or should want to see a higher level of GDP and employment or faster growth going forward — haven’t really been central on the Democratic side and Jerry’s paper really raised those issues.

Now I don’t think we want to get caught up in the specific strengths or weaknesses of that paper or the plausibility of particular numbers. I think that there are some problems with the paper. If you were to do the same exercise more carefully you would probably come up with lower numbers.

I think it would be foolish to defend the specific estimates that Friedman put out there, but I also don’t think that there is any real need to do so because the fundamental issue, as you say, is not this number or that number. Obviously things evolve under the pressure of events.

Economic forecasting is a very imprecise science in the best case. The question is whether there is good reason to think there is space for a substantially more expansionary policy. Is there good reason to think that a big expansion of public spending could substantially boost GDP and employment?

And I think that there the answers are clearly yes. This paper and the debate that it has sparked has actually been very productive in getting people to engage that question and getting a number of more mainstream Democratic-associated economists to agree that there is actually space for substantial additional expansionary policy.

What does this debate say about the diminished expectations about the economy that we have? Is this what you’re saying that it’s fundamentally about?

That is what it’s about. The position on the other side, the CEA chairs and various other people who’ve been the most vocal critics of these estimates, has been implicitly or explicitly: “This is as good as we can do.” (more…)

Read More

Jonathan Kay advises the left

Jonathan Kay knows what’s hurting the poor. Is it absurdly low welfare rates and social supports? Perhaps it is lack of access to affordable housing? Poverty wages? Food insecurity? Over-policing? No, says Kay, the honest broker of politics, the inconvenient truth-speaker, it’s the left’s political correctness that’s really keeping the poor down.

Capture4

Kay supports this claim with a jumble of obvious facts, unexamined assumptions and misrepresentations held together like the remnants of the fraying neoliberal consensus. In his most recent Walrus editorial, Kay jumps from (1) houses in Vancouver cost too much (true) to (2) it’s all the fault of the Chinese (nope) to (3) the left doesn’t care about class or the poor (wtf), all in the span of under 900 words! Here’s the punchline, complete with the obligatory reference to “things I’ve seen on social media”:

The left now has a golden opportunity to push for bold policies that would go to the heart of income inequality in our class-based society: guaranteed income, universal access to care for those suffering from mental illness, and, yes, tax and regulatory policies that discourage hot money from overinflating local real-estate markets. But from what I’ve read on social media and in Walrus editorial submissions, many activists and pundits seem far more comfortable striking positions on highly compartmentalized identity-politics issues that can be reduced to succinct, tweet-able messages.

For someone who has so much sage advice for the left on class politics, Kay is utterly oblivious to how class operates. Kay castigates Vancouver mayor Gregor Robertson for not speaking out against the real estate bubble ballooning under his watch and blames it on steadfast anti-racism. Is Robertson a bleeding heart liberal hopelessly in the clutches of radical dogmas or is it rather that he is the leader of a party that received hundreds of thousands of dollars in campaign contributions from real estate developers in the city?

There’s no point in citing the innumerable left articles, speeches, rallies, occupations, forums, talks and leaflets on the topics of “socio-economic stratification, poverty, and income inequality” that Kay claims are missing. What better proof that the left has managed to get all of these issues onto the agenda than the fact that clueless elite scribes like Kay are forced to treat them seriously?

Then again, here’s just one example, from this very blog back in 2014 on the same topic of Vancouver’s unaffordable housing:

The growth of inequality, attacks on pensions, increases in lifespans, aggressive tax cuts – all of these factors have moved wealthier Canadian households to look for new investment opportunities. Investment in real estate has been helped by low mortgage rates, a supply of new housing skewed towards small, high-end condominiums as well as existing equity available to those who lucked out and grew rich on the initial housing boom that started in Vancouver in the 1980s.

As absurd as it is to say it explicitly, it’s not a hegemonic anti-racism that’s driving millennials and the poor out of cities like Vancouver. It is the combination of record low interest rates and money pumping pushing up asset prices all over the world. Art auctions are breaking records and condos are selling like hot cakes because the rich have won—they no longer have to make productive investments that will boost the wages of regular folks alongside boosting their wealth. It is also government at all levels completely abandoning the project of house-building. The Liberals in the 1990s announced that the Canadian government was “not in the business of housing” and turned to driving private mortgage finance instead.

It is a global glut of too much money chasing too little tangible wealth. Just by virtue of proximity, money from mainland China plays some role in the housing bubbles in Hong Kong, Sydney or Vancouver. But is money from mainland China pricing people out of New York City? out of London? out of Amsterdam? Everywhere it is the wealthy who are pushing out the poor. Developer-funded crocodile tears, not anti-racism, are stopping meaningful reform that would include progressively taxing wealth, wherever its owners are domiciled.

Kay mentions that the average individual income in Vancouver is $43,000. The average for recent immigrants is about half that. The overall median is closer to $30,000. Here’s an opportunity for class and anti-racist politics; the kind already pushing for a higher minimum wage and pushing back against developers. It’s one where the poor, the working class and the racialized have autonomy over solutions rather than being told inequality is a big problem elites should solve. Maybe Kay’s protests and lamentations about Uberization or union weakness would be more believable if they didn’t come from an avid fan of Uber who “won’t go back to cabs” (and whose big solution is to cash out cabbies with a one-time payment) or someone who has wasted hundreds of column inches attacking unions of all stripes.

The truly blind to the class politics screwing workers and the poor are those like Jonathan Kay whose complaints take political cues from service to elites.

Read More

Growing the middle class or adapting the elite consensus?

Today’s federal government budget is a litmus test for the new Liberal government. They campaigned on promises of “real change” from the last regime, including a willingness to increase social spending even if it meant running deficit budgets. And, in keeping with this pledge, spending is up, and the deficit is forecast at $29.4 billion.

This is fine in the short term, but it isn’t just about how much spending will be created. The really crucial thing is what kind of spending. Since the 1990s, the Liberals across the country have been masters at implementing a slow-grinding austerity that has cut programs, given away our public services to private interests, and reduced taxes, largely for business and the rich.

More than anything else, this budget reads like new technocratic consensus. Like 1990s austerity, Canada’s Liberals are once again at the forefront of global elite policy. In an era of slowing growth and productivity, with monetary policy by central banks all but exhausted, even the OECD and IMF have called for higher deficits. The Liberals are forging the path that the global elite will try to travel to get global capitalism working again — especially for the elite. As Greg Albo remarked, with this budget the Liberals have rolled back Harper but left Chretien and Martin untouched. (more…)

Read More