Ours to own, not theirs to profit

It seems the public sector is under attack from all directions these days. Despite historically low public financing costs, despite proven efficiency and innovation, the public sector gets a bad rap in the public eye—something all manner of politicians from hardened right-wingers to cosmpolitan neoliberals take advantage of, letting markets further seep into the very functioning of health, education and other basic services.

I have two guests today to talk about the threats to public services and how to combat them. First, Chris Parsons, Coordinator of the Nova Scotia Health Coalition, talks to me the problems with public-private partnerships (P3s), and takes us on a tour of bungled P3 schools in Nova Scotia. Second, Adrienne Silnicki, National Coordinator of the Canadian Health Coalition, discusses the state of public healthcare in Canada, both the threats from the private sector and the ways to fight for a better public system.

As always, remember to subscribe using the links below the player to get new episodes as they appear (you can also donate to help keep the show going).

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No, Canada’s economy will not collapse if Trudeau stands up to Trump

Trudeau met Trump on Monday but voiced no criticism. He stayed mum on Trump’s racist travel bans for Muslims and refugees—silent even about Canadian Muslims being arbitrarily denied entry at the US border. Many commentators in the media were quick to jump to Trudeau’s defense, excusing his total lack of spine with considerations of real economik: Canada’s trading relationship with the US is too valuable for us to go even mildly criticizing Trump.

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Of course, Canada’s economy does rely heavily on the United States. But while over 75% of Canada’s exports go to the US, our trade relationship looks different than what many imagine it to be. And, in fact, the economy is much less of an excuse for Trudeau’s cowardice than it seems at first glance.

Here’s how Canada’s exports to the US break down:

20170215 Trudeau and trade

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Trudeau’s Growth Council is back with more bad ideas

Justin Trudeau’s friends in finance, consulting and big business dominate the grandly named Advisory Council on Economic Growth. A few months after recommending a giant privatization scheme, the gang is back with more ideas, many very good for them but very bad for you and me.

The biggest news: a recommendation to increase the retirement age from 65 to 67. Trudeau has been breaking promises and sticking with Stephen Harper’s policies left, right and centre, so it’s no surprise to see his economic advisors raising another Conservative corpse from the dead—despite the fact that Trudeau actually rolled back Harper’s shift of the retirement age up to 67 in his first budget. Of course, when Harper proposed it, it was mean-spirited, when Bay St. wants it, it’s the bleeding edge of innovative growth strategy!

Beyond this one terrible idea, the Council’s report is full of warmed-over buzzwords and overblown market-speak. Recommendations will “re-imagine the role of government (specifically, as a convener/catalyst and as an investor)” and “catalyze the formation of business-led ‘innovation marketplaces.'” There’s a bit of Sheryl Sandberg feminism for the 1%: gender inequality ameliorated via “a corporate gender diversity challenge.” Yet elsewhere the ideological bent is more transparent: “much of our potential is untapped, held back due to policies (e.g., excessive regulations).” Chamber of Commerce talking points shouldn’t be a surprise in a document prepared in the C-suite, but they’re being sold as “inclusive growth.”

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#RealChange wearing thin: A look back at Trudeau’s first year

We’re one year into Justin Trudeau’s government of #RealChange, yet it’s mostly the rhetoric not the policies that have changed. Some of the shine is finally wearing off. Whether approving pipelines, settting electoral reform up to fail or privatizing airports and transit, the Liberals are showing themselves to be the good capitalist managers they’ve always been, not the anti-austerity crusaders of the last election campaign.

Today, three guests—Derrick O’Keefe, Clayton Thomas-Müller and Luke Savage—take a look back at this first year of the Liberal government and look forward to how opposition to it can develop. Derrick is a journalist, author and editor at Ricochet Media. He’s based in Vancouver and currently working on a book on BC politics and history. Clayton Thomas Muller is a climate campaigner with 350.org based in Winnipeg. Luke Savage works for the Broadbent Institute at its Press Progress media outfit and writes frequently on US and Canadian politics.

All the best to you and yours! Back in the New Year!

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Trudeau’s economic model is clear and it is not good

Last week gave us a good idea of the economic model that Trudeau’s Liberals are gradually putting forward and it is business-friendly to the core. The infrastructure bank privatization scheme was the big news item in the fall fiscal upate (see my post from last week), but there are far more goodies to make business happy tucked away in the update and in news from recent weeks. The Liberals plans for the economy are not just about being business-friendly today but about integrating government with business ever further, in ways harder for future governments to unwind. Theirs is a tweaked neoliberalism for an age of stagnation. The mantra remains the market and the state is there to support it.

Here’s the broad strokes of how the Liberals’ plans are shaping up on economics.

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The great rentier give-away

With today’s fiscal update, the Trudeau government has really shown itself to be at the forefront of global left neoliberalism. Taking nearly all his cues from his business-dominated Advisory Council on Economic Growth, the Finance Minister announced a new Canada Infrastructure Bank as the centerpiece of the fiscal update and the Liberals’ economic strategy. Don’t believe the fanfare that is bound to come from the Canadian and international press, this isn’t anything progressive. It’s a new elite consensus that might become one of our main exports, pumped via virtual pipelines across the globe.

Here’s how Dominic Barton, the managing director of McKinsey Global, one of the world’s largest business consulting firms and head of the Advisory Council, framed the impetus behind the new bank:

Barton said infrastructure aimed at improving productivity will be of huge interest to foreign investors in search of steady returns with record low or negative interest rates in many parts of the world. “Infrastructure is the new fixed income,” Barton said in a speech over dinner at the conference. The mix of public and private capital has the potential to “jolt the system.”

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How not to fund infrastructure

Recycling is supposed to be a good thing, so when the federal Liberals quietly announced that “asset recycling” would be part of their strategy for meeting their much-ballyhooed infrastructure promises, not many eyebrows were raised. They should have been. Asset recycling is an obscure code word for selling our public goods for private profit. It’s privatization by another name.

Don’t have the taxes to pay for new buses? It’s okay, you can sell your electricity utility to pay for them instead. In fact, this is precisely what the Ontario Liberal government is doing. Already 30% of the profitable Hydro One have been sold and another 30% will be sold before 2018. A public Hydro One could more directly fight climate change, lower energy costs for the poor or work with First Nations on whose lands generation often happens. A private Hydro becomes an instrument for profit first with other goals secondary.

What the Liberals have started in Ontario will soon be rolled out across Canada. Here are the problems with these schemes. (more…)

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“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.

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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.

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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.

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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…)

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