Category: Austerity

Categories
Austerity Canada Government

The Conservatives’ balanced budget legislation: Silly economics, smart politics

I wrote up the Conservatives’ new balanced budget law for Ricochet. In short, the law is really silly in terms of economics, but simply pointing out its economic stupidity is not enough, because the whole point is to shift the political consensus. Politically, it’s not that dumb. So rather than play games about who cut better and balanced budgets faster as many are doing, we need to look at the balance of economic power that drives these moves. The full piece is below:

The Conservative government’s balanced budget legislation is a classic attempt to shift the boundaries of acceptable public debate. In terms of economics, it is a silly exercise in arbitrary rule-making and its rules are bound to be broken. In terms of politics, it is another step in consolidating a consensus that puts punitive cuts to the many in the service of ever-larger gains for the wealthy few.

The legislation set to be introduced by the federal Conservatives along with the upcoming budget has been attacked as myopic and the result of twisted logic. Pundits left and right agree that the legislation will be unenforceable and thus unsuccessful in the long run. The problem with the law, however, is the already visible success of those pushing Canadian politics wholesale to the right.

16258234155_2e00d7cd29_zWhile details are still scant, the legislation aims to force subsequent federal governments to refrain from deficit spending except in as-yet-undefined “exceptional circumstances.”

We’ve seen this movie before. In Canada’s largest province, Ontario premier Mike Harris introduced balanced budget legislation only to have it repealed in 2004 and replaced with a softer version that does not stipulate outright balance every year. Most Canadian provinces have balanced budget legislation, but not surprisingly all suspended it at some point in the aftermath of the global financial crisis of 2008.

Even the Eurozone, the current poster child for austerity, has a limit on national government deficits (equal to 3 per cent of GDP) rather than a ban on them. Like other rules of this type, though, the number itself is not as important as the lack of flexibility and the push for spending cuts as the default response to crisis. The Eurozone rule has certainly contributed to Europe’s inability to escape stagnation and prolonged crisis since the financial crash — despite being broken by various countries, largely those powerful enough to get away with it.

Arguments like these, however, do not get at the heart of the matter. It’s good to have a few of them out there, but balanced budget legislation is most dangerous not because it’s bad economics, but because it is good politics.

Continue reading “The Conservatives’ balanced budget legislation: Silly economics, smart politics”
Categories
Austerity Europe Greece Political Eh-conomy Radio

The roots of the Greece crisis in European integration and what this means for the future

Podcast: Play in new window | Download

Subscribe: Apple Podcasts | Android | Email | Google Podcasts | RSS | More

euro-373008_640As the simmering crisis between Greece and the institutions formerly known as the Troika heats up again, it’s a good time to look once more at the roots of the European crisis and what they mean for the possibilities open before Syriza at the present juncture. Greece is being squeezed by Europe: it’s cash is about to run out, they’ve been limited from raising new funds on bond markets and are being asked for ever greater concessions in terms of the reforms. Indeed, the red lines for compromise are right under Syriza’s feet and it’s possible that Greece will be pushed out of the euro. More likely, however, Greece may attempt to issue some kind of quasi-money while staying in the Euro if the institutions do not back down. Regardless of what happens, it is important to understand the last few decades of European integration to fully grasp the costs and dangers of exit from the Euro and imagine a solidarity that could join workers across Europe.

To these ends, I’ve interviewed Riccardo Bellofiore and Ingo Schmidt this week. Riccardo teaches economics at the University of Bergamo in Italy. Ingo, on the other hand, teaches at Athabasca University here in Canada but maintains close ties with Germany, writing frequently for the press there. Both Riccardo and Ingo have written extensively about the nature of contemporary capitalism, the process of European integration and the crisis of social democracy. I’m happy to have had a chance to speak with both of them.

Ingo discusses the German economy, Germany’s role in the European crisis and the possibilities for Europe-wide solidarity. My conversation with Riccardo focuses on European integration, the roots of the Greek crisis and the costs of Euro exit — a strategy Riccardo cautions against pursuing deliberately based on an economic analysis of the degree of European integration and the tremendous social costs and risk facing a country choosing to leave.

Categories
Austerity Canada Tax

Transfers, taxes and who pays for austerity

The question of who pays for austerity and how is an enormous one. Promoters of austerity often claim that cuts to universal services are fine if they’re offset by transfers to those who can’t pay for newly-marketized services. The same goes for expanding services – why give everyone childcare if you could just give those at the bottom the money to pay for it the same as those who can afford it?

There are many arguments for why services should be public and universal that do not simply rely on whether everyone is able to pay for them privately. However, even on their own terms, the argument for ramping up transfers to the bottom of the income distribution hasn’t held up in recent times.

I was intrigued by a post from Matt Bruenig that compares the US and Finnish tax and transfer systems, arguing that while the Finnish system looks less progressive by some measures, this is due precisely to higher and universal transfers. I’ve been looking at lots of data on the latest phase of austerity in Canada that began at the federal level with the election of the Chretien Liberals in 1993. Here, I’ll steal some of what Matt does and apply it to the Canadian tax and transfer system since then.

For starters, here are average gross government transfers by quintiles in Canada. This is how much money people receive in the form of cash benefits and credits from all levels of government. This is thus only a rough picture of what’s happened at the federal level, but most transfer income is federal. The first chart is for 1993 and the second is for 2011 (the last year of publicly-available data); everything is adjusted for inflation to constant 2011 dollars.

150402 Govt transfer 1993

150402 Govt transfer 2011

What’s striking is how similar the two charts are. While the economy has grown – 35% growth in real GDP per capita between 1993 and 2011 – government transfers have essentially stagnated for everyone. The bottom 40% have actually lost in transfer income and only the fourth quintile saw any kind of sizeable increase gaining just above 10%.

Next, let’s add income taxes into the mix. Here are the same two charts, but this time showing net government transfers. This is the difference between the transfers above and income tax paid to all levels of government.

150402 Net transfer 1993

150402 Net transfer 2011

Again, we have little change over almost two decades except for a lower net transfer to the richest 20%, though this is likely a reflection of the growing inequality in market incomes, especially higher top incomes (and hence higher income taxes). Remember too, that this shows a more progressive structure than if we took all taxes including those on consumption as well as user fees (again, paying more with stagnant transfers) into account. This total tax structure is far less progressive – somewhat regressive even in some provinces.

Here is another way to look at the changes in same net transfer data, showing the trends in time over the entire 1993-2011 period.

150402 Net transfer series new

We can divide what’s happening into a few distinct periods at the federal level (provinces do more direct spending). Clearly visible are

  1. a main phase of Liberal austerity from 1993 and 2000,
  2. a short upturn after the 2000-era tax cuts (since net transfer = gross transfer minus taxes, a reduction in tax means the net transfer goes up)
  3. a general stabilization since then, only punctuated by
  4. the fall in incomes and short-term fiscal expansion after the 2008 crisis (with a clear trend back to the stabilization or lower in the last years of data).

Finally, here is a last chart that takes net transfers and divides them by market income. That is, it shows what percentage of market incomes is received on average by each quintile as net government transfers.

150402 Net transfer percentage series

This last chart is combines the picture of growing inequality with transfer stagnation. Economic growth is not translating into shared resources, whether in the form of existing or much-needed new public programs or even simply being pooled for redistribution. This certainly points to austerity falling disproportionately on the backs of the poorest.

Note: all data comes from Statistics Canada, CANSIM Tables 202-0703 and 202-0704.

Categories
Austerity Greece Political Eh-conomy Radio

Leo Panitch on Syriza and Greece

Podcast: Play in new window | Download

Subscribe: Apple Podcasts | Android | Email | Google Podcasts | RSS | More

 

Update: the transcript of this interview has now been published in Jacobin.

This week I’ve devoted the entire show to discussing the most recent developments in Greece. While there is a great deal of day-to-day drama at the level of the ongoing negotiations between Greece and European institutions, I wanted to take a broader strategic and political look at what the election of Syriza both for Greece and more broadly for the left around the world, including in Canada. To that end, I’m happy to present an extended conversation with Leo Panitch. Leo is professor of political science at York University, author most recently of The Making of Global Capitalism: The Politcal Economy of American Empire, written with Sam Gindin, and knows Greece well.

640px-20110630_Indignados_Syntagma_general_mass_Athens_Greece

Categories
Austerity Canada

Three planks for a possible anti-austerity

What would anti-austerity in Canada look like? There are really two types of questions here. There are those of analysis: what has Canada’s austerity looked like, what makes it distinctive and how does it appear in people’s everyday experience? The others are those of political strategy. These are questions that will have to wait for a social, political force ready to meaningfully take up the cause of anti-austerity. With none on the immediate horizon, I don’t intend to pontificate on what Syriza can teach Canada; best look first at what we can learn of our own situation.

When I interviewed him last week, Yanis Varousfakis, now the Finance Minister of Greece, laid out three very general planks of Syriza’s anti-austerity program. Of course, Greece is the unenviable victim of the cruelest austerity experiment in the North, but simplified to their most basic form the three planks articulated by Yanis have broad applicability. To paraphrase, they are

  1. dealing with debt;
  2. increasing social spending;
  3. generating public revenue.
Continue reading “Three planks for a possible anti-austerity”
Categories
Austerity Europe

The Greek canary in the European coalmine: An interview with Yanis Varoufakis

Over at Ricochet, I’ve transcribed my podcast interview with Yanis Varoufakis, economist and Syriza candidate in tomorrow’s Greek elections. With Syriza looking to get the most votes and possibly an outright parliamentary majority, I asked Yanis about the Greek economy, Syriza’s economic plans, his views on what these mean for Europe and how we can expect Greece to take its place in Europe come Monday. Here is the interview in full.

Michal Rozworski: I know this is an enormous topic but what is the current economic situation on the eve of the elections in Greece? Can you give a kind of snapshot?

Yanis Varoufakis: In brief, everyone owes to everyone, and no one can pay. The banks are bankrupt; they owe money to the state, to each other, to foreign banks. Citizens owe money to the banks and owe money to the state. The state owes money to everyone. So we have a triple insolvency: bankrupt banks, a bankrupt state and a bankrupt private sector. There are of course pockets, like everywhere, within society of people who are really well off. They have money in banks in Switzerland, in the city of London, on Wall Street, in Frankfurt, and even some money in the Greek banks.

But the overall situation is that — even though in the last year or so there’s been a small rebound, not in terms of income but in terms of expenditure — the economy is quite clearly still in a downward spiral that is filling everyone’s soul with negative expectations.

It’s interesting you mention that slight rebound. What I found interesting is that there seems to be a bit of a reversal of 2012. So, on the one hand, now some of the economic indicators have improved in minimum ways, if we can even use that word, but on the other hand, the population seems to be more immune to the fear-mongering on behalf of Greek and European elites against the left. What’s changed? What’s led to Syriza actually having a chance of gaining a majority in parliament? 

Well, two things mainly. Firstly, Syriza has matured over the last two years; there is no doubt about that. So it has inspired more confidence in the electorate. Secondly, and perhaps even more significantly, now it is abundantly clear that the whole narrative of a “Greek-covery” — if you remember a year ago or so — was just utterly bogus. It was a piece of propaganda, a bubble that burst and Greeks are sick and tired.…

Credit: Yanis Varoufakis.
Credit: Yanis Varoufakis.

Look, I was in a taxi this morning. The taxi driver said to me — he recognized me as a candidate — “Look, Greeks fall into two categories. There are those who are really scared of losing what little they have left. The rest don’t give a damn; they just want to vote in a way that states it in a way for everyone outside of Greece to see that we’re not interested in this vicious cycle anymore.”

Continue reading “The Greek canary in the European coalmine: An interview with Yanis Varoufakis”
Categories
Austerity Crisis Europe Government Political Eh-conomy Radio

Yanis Varoufakis on the Greek elections plus the state of the left in Poland

Podcast: Play in new window | Download

Subscribe: Apple Podcasts | Android | Email | Google Podcasts | RSS | More

 

I’ve been visiting family in Poland for the past few weeks so, fittingly, this week’s podcast deals with the situation of the left at two opposite ends of the European periphery: Greece and Poland. My first guest is Yanis Varoufakis, professor of economics at the University of Athens and candidate for SYRIZA in this Sunday’s parliamentary elections. Syriza is the main Greek left party and is poised to take the most votes, potentially even form a parliamentary majority, on Sunday. Yanis spoke with me about Greece’s economy on the eve of the elections and Syriza’s economic program.

My second guest is Jakub Dymek, Polish academic, journalist and editor. Jakub is, among other things, the Polish correspondent for Dissent Magazine and a member of the editorial collective of Krytyka Polityczna (Political Critique), the major journal of Poland’s “New Left”. Unlike its Greek counterpart, Poland’s electoral left is currently at its lowest point since the post-Communist transition. I spoke with Jakub to get a sense of this electoral decline, the situation of left social movements and the future prospects of Poland’s left.

Very briefly, I say that Greece and Poland are at the opposite ends of the European periphery for two reasons. First, Greece has undergone years of recession and brutal austerity in response to the global crisis of 2007/8; Poland, on the other hand, has managed to grow through the crisis, at least according to the major economic measures. Greece and Poland are also opposed when it comes to the fortunes of the electoral left. It is in Greece that the left has may well take government this Sunday or at least become the largest force in parliament, whereas in Poland the electoral left is currently virtually non-existent. Looking at these two lefts and the political economic conditions that led to their different fortunes makes for a fruitful juxtaposition.

syriza

Categories
Austerity Crisis Finance Political Eh-conomy Radio USA Workers

In and out of crisis with Sam Gindin

Podcast: Play in new window | Download

Subscribe: Apple Podcasts | Android | Email | Google Podcasts | RSS | More

Today’s podcast is a feature interview with fellow political economist Sam Gindin. I interrogate Sam about the political economy of the present: the exit from the 2007 crisis, the role of states, austerity, the place of finance and the possibilities of resistance.

Sam Gindin is a left political economist with a long career. He was the longtime Research Director of the CAW and later held the Packer Visiting Chair in Social Justice at York University. Most recently, Sam authored The Making of Global Capitalism with Leo Panitch, a book that has gone on to win prestigious awards and spark important debates.

Categories
Austerity Canada Climate change Government

Selling prosperity in a time of austerity: Budget days in BC and Quebec

Two very different provincial governments tabled their budgets this week. The freshly-elected BC Liberals and the seemingly election-ready Parti Quebecois both delivered what they termed “responsible” budgets. While the two governments identify with opposing ends of the political spectrum and face distinct political climates, these differences did not prevent their budgets from displaying some eerie similarities. Since these budgets tell the same stories, they are laying the ground for a common response.

Continue reading “Selling prosperity in a time of austerity: Budget days in BC and Quebec”
Categories
Austerity Canada

Another (budget) day, another dollar (cut): Canada’s slow-motion austerity

Yesterday’s federal budget was a non-event. Indeed, the no-surprises budget was itself no surprise: the Conservatives have long done their fiscal policy dirty work in omnibus bills and other dark corners scattered throughout the legislature, Crown corporations and federal agencies. This leaves the media circus of budget day a very stereotypically Canadian mix of polite and boring. Canada’s is a slow-motion austerity and the current budget is a continuation.

Continue reading “Another (budget) day, another dollar (cut): Canada’s slow-motion austerity”