On Markets and Democracy: Harper is Dangerous

Yesterday on BNN, Stephen Harper said that financial markets don’t like the “kind of instability” that goes with confidence votes on such matters as the Speech from the Throne and the budget that could bring down his minority government.

The prime minister’s decision to prorogue parliament actually created the necessity for a Speech from the Throne when the House returns. That’s what automatically follows a period of prorogation. His very action is setting up the kind of confidence vote that he said creates instability.

But that is not what is most important about what Stephen Harper said. In his brief remarks, he showed that he believes that the normal operations of our parliamentary democracy promote financial instability. Sessions of parliament always involve votes of confidence. That is true whether there is a majority or a minority government in office. Canadians chose to elect a minority government. In doing so, they were instructing the parties in the House to work with one another to govern the country. They were saying that they did not have confidence in any single political party to govern on its own.

To serve as prime minister a political leader must respect and defend our system of government. He or she must begin from the premise that to remain in office a government must enjoy the confidence of the majority of the members of the House of Commons. That is the essence of our system.

Stephen Harper was not directly elected by Canadians to serve as prime minister. He is not our president. He and the members of his government are in office solely when they enjoy the confidence of the House.

This is not an academic point. It goes to the very heart of our democracy. It was what Canadians fought for, and some died for, in the 19th century. Before that, the struggle to make parliament supreme went on for centuries in Britain.

Stephen Harper poses a threat to our democracy. If he understands it, he doesn’t respect it.

He would be much more dangerous as the leader of a majority government.

The classic justification for undemocratic rule has always been that it promotes stability. Autocrats have always complained that democracy is messy and unpredictable. Markets can suffer when votes of confidence are held----THAT’S WHAT THE MAN SAID.

Harper’s got to go. The members of the opposition parties should see to that at the first opportunity.

The Next Step: Challenging Harper’s Agenda

Having underestimated the acuity of the Canadian people, the Harper government has been placed on the defensive. While the mainstream media cheered them on and their pollsters reassured them that they were on a winning path, Stephen Harper and his ministers blithely assumed that Canadians were not interested in the Afghan detainees scandal and the environment, and that they couldn’t care less about the prorogation of parliament. The accepted narrative of recent months was that Stephen Harper was on the cusp of a majority and all he had to do was to trigger an election while appearing not to want one.

Now, however, there is a full-scale political revolt going on in the country. Canadians are mad as hell about the decision to prorogue parliament. They see it for what it is, a blatant maneuver to stop the questioning of government ministers about the Afghan detainee issue.

In the eyes of Canadians, Stephen Harper is a dictatorial leader, who does not respect the role of parliament in our political system. Even during a minority government, he is incapable of sharing the reins of power with the members of the other parties in the House of Commons.

Now that the people are against him---the Conservatives received the support of only 33.1 per cent of voters in the latest Ekos poll---Harper’s next move will be to try to divide the opposition parties and put the popular movement that opposes him in the ditch.

He’s going to make the case that it is now time for the government to shift gears on economic policy----to abandon stimulus for severe cuts to government spending. For Harper, this will not be a surprising development. He will be returning to type. He was always unenthusiastic about stimulus. He believed instead that economic recovery ought to be achieved by slashing government programs and cutting taxes.

It was a tell-tale sign of where this government’s heart really lay that Finance Minister Jim Flaherty went on proclaiming as late as the end of October 2008, after the federal election was over, that Canada would not have to run a deficit to cope with the economic crisis. By then the stock markets of the world had crashed and the U.S. government (with George W. Bush still in the White House) and that of the UK had undertaken massive programs to bail out failing firms and reflate the economy.

The Harper government’s stimulus budget last winter---a half-hearted one at that---was a political ploy to stave off defeat in the House of Commons. Now that the stock market has recovered, although not to the highs on the eve of the crash, the Conservatives want to return to their small government ways. They want to take the road favoured by the re-energized, right-wing Republicans south of the border.

Just as the free-market economics of the political right got us into the economic crisis in the first place, Conservatives in Canada and Republicans in the U.S. now advocate policies that will prolong it, and that run the risk of making this a double-dip recession.

What we are going to see when the House of Commons reconvenes in early March will be a Speech from the Throne and a budget that lay out an austerity program. The Harper government will declare that the battle for economic recovery has largely been won---a claim that is palpably false---and that it is now time to abandon stimulus for cuts.

That’s where the opposition comes in. The Liberals and the NDP need to challenge the core of Harper’s policy agenda. When they go back to work on January 25, they need to come up with a set of proposals to continue the stimulus required to create jobs so that the recovery involves more than Bay Street. Beyond that, they should point to a broad set of policies to refashion Canadian economic policy, so that the country can adapt to the realities of a world in which the United States will, of necessity, play a less central role. Those policies need to abandon the Harper government’s singular attachment to the petroleum companies and the dead-end concept of Canada becoming an “energy superpower” on the strength of growing oil sands production and exports. The new agenda will have to centre on environmental sustainability, on nothing less than the rebuilding of our cities and transportation systems for a world in which climate change and Peak Oil are the compelling realities. Such an agenda carries with it the promise of job creation. It can place Canada at the centre of the establishment of the green global economy of the 21st century.

The opposition parties should challenge the Conservatives to take up this approach, thereby making the minority parliament work. Should the Conservatives refuse to do so, the Liberals and the NDP should vote no confidence in the government. That would trigger an election, but it would be an election forced by the unwillingness of Stephen Harper and his ministers to adopt an agenda that would allow all of the parties in the House to have a genuine say in the shaping of government policies.

Such an election would be worth fighting. Stephen Harper would lose it.

Canada's Stolen Democracy: Welcome to 2010

Stephen Harper has an aversion to Parliament. When the House of Commons sits, he and his ministers have to answer questions. The body language of the Prime Minister and his ministers, and their surly, disrespectful attitude to those on the other side of the aisle tells the story.

The styles vary. When Harper stands up to answer a question, he does up his jacket in the manner of a butcher securing his apron before he gives an animal the chop. Peter MacKay adopts an unctuous manner at the start of an answer and concludes by sliming an opponent. John Baird bullies and spews contempt. And Jason Kenney plays the jackal, preferring to sink his teeth into dead meat left behind by the others. He’s the one who claimed that York University is such a hotbed of anti-semitism that what goes on there can be compared to “pogroms”. As the grandson of a rabbi who has taught there for the past 38 years, I guess I’m lucky I’m still alive.

The members of the Conservative cabinet are not very bright guys. And they don’t see why they should have to be subjected to cross-examination. Replying to critics is not their strong suit. When the questioning gets too hot as it did before Christmas on the Afghan prisoner abuse issue they don’t shoot the messengers, they just shut them up.

By the time the House rose the Conservatives were dropping in the polls to about 36 per cent, down from the 40 per cent range they occupied about six weeks earlier, and down from their score in the 2008 election. The favourite narrative of the supine mainstream media that Harper is a brilliant political strategist, headed for a majority in the next election, was a little patchy by the time the pundits were going out for eggnog in early December.

Harper does have one golden rule. When the going gets tough, prorogue the House. He did it a year ago to avoid the certain defeat of his government in the Commons. This year he’s done it to get the parliamentary committee investigating the torture scandal off his back.

Before Parliament reconvenes with a new Speech from the Throne on March 3, the Vancouver Olympic Games will have showcased Canada to the world, with Harper playing the genial (for him) host. His strategists believe that this will repair the reputation the nation earned at Copenhagen, as the “colossal fossil”. By then, as well, these geniuses are confident that the ugly tableau of cover-up, the smearing of Richard Colvin and the constant changing of the government story on the prisoner abuse scandal, will have faded from memory.

Stephen Harper likes to think of himself as the manly leader of a sporting nation. Perhaps in the reflected glow of gold medals, the Prime Minister will acquire the warmth he lacks within to endear him to the forty per cent of Canadians he needs to win a majority in an election in 2010.

Harper would not be the first leader in history prepared to enhance his own power by hiding the savaging of his country’s system of government behind the laurels of young athletes.

A year ago, the Prime Minister was prepared to mislead his fellow citizens about the essence of our system of government---the requirement that the ministers of the crown must enjoy the backing of the majority of the members of the House of Commons---to retain power. To stay at the helm, he was quite happy to delude Canadians into believing that the PM is directly elected and that the members of parliament from Quebec aren’t quite equal to the others.

When the history of this era is written years from now, the story is likely to be that of a not very talented gang with values distant from those of the Canadian mainstream, holding onto office longer than they should have because the opposition couldn’t figure out how to unite to deal with them. Some will bear more responsibility for this sorry state of affairs than others.

Just don’t blame the large majority of Canadians who continue to have the sense to reject Harper and his boys, medals notwithstanding. Yes, Canadians care about the economy, the environment, and the prisoner abuse scandal. They are concerned about the reputation of their country in the rest of the world. Give them a way to rid themselves of Harper in the next election and the people will do the rest.

Canada’s Lost Decade

Canadians headed confidently into the new millennium, but they are limping out of its first decade uncertain about the future and what their country stands for.

Living on the northern edge of Manifesto Destiny felt comfortable enough for most Canadians with Bill Clinton in the White House, notwithstanding his philandering ways. The 1990s was the age of the Dot.com bubble, a decade when American economic pre-eminence was reasserted against Japan and Europe, and China had not yet staked out its role as a rising superpower.

But America lost its way in the succeeding decade, as did Canada.

In March 2000, with Clinton still in office, the Dot.com bubble burst, succeeded by the housing bubble, to be swollen to the bursting point by the encouragement of the sub prime mortgage market by the administration of George W. Bush. Bush compounded his foolishness with a giant tax cut aimed principally at the rich and the invasions of Afghanistan and Iraq.

The United States was en route to the crash of 2008, which engendered the widespread recognition around the world that the U.S. was no longer the power it had once been. Despite the inspired choice of Barack Obama to succeed Bush at the end of the decade, the U.S. was condemned to years of economic crisis, layers of indebtedness, military overstretch, and a permanently diminished role in the world.

North of the border, Canadians floundered into protracted and enervating political deadlock.

It was not supposed to be that way. Paul Martin, Jean Chretien’s long-serving finance minister and deadly rival, had been waiting restlessly in the wings to move into 24 Sussex Drive. It seemed all but inevitable that Martin’s succession would lead to one or two fresh majority mandates for the Liberal Party. But the Sponsorship Scandal, one of those self-consuming orgies in which Liberals indulge from time to time, gravely wounded the newly crowned leader. In the 2004 federal election, Martin clung to office at the head of a minority government that was under fire from day one. The following year, with a push from Jack Layton’s New Democrats, the Martin Liberals were flung into another election.

The door was open for the arrival of the former head of the National Citizens Coalition, a man who had journeyed through the Reform Party and the Canadian Alliance to lead the newly founded Conservative Party of Canada.

Stephen Harper is as strikingly different from all of the former prime ministers of Canada as is Barack Obama from the U.S. presidents who preceded him. An ideologue who is as fiercely committed to his brand of neo-conservatism as Pierre Trudeau was to his rationalist-federalist liberalism, Harper is the most dictatorial prime minister in our history, even surpassing the tight-fisted R.B. Bennett who ruled during the Great Depression.

It is not difficult to imagine, with a different roll of the dice, Stephen Harper having ended up leading the forces of Alberta separatism. In Copenhagen, where dined and kept his mouth shut, he was not merely playing the role of the leader of the party that is the natural home of climate-change skeptics, he was being true to his conviction that Canada’s vocation is as an energy superpower catering to the needs of a petroleum thirsty America. Not even his personal philosophy that privileges the entrepreneur at the expense of the wage and salary earner is more important to Harper than his fealty to the petroleum industry. Doubling, trebling or even quadrupling the annual output of petroleum from the Alberta oil sands is the future to which he is devoted. Hundreds of billions of dollars are on the line. Harper and the petroleum companies are determined not to let environmentalists who worry about polar bears and melting glaciers stand in their way. No wonder the Conservative leader favours intensity targets---reducing the CO2 output per barrel of oil produced---to a hard cap on greenhouse gas emissions.

He has a two-winged approach to the economic crisis: cut government spending, bringing stimulus outlays to a speedy end, and letting nothing impede the rapid expansion of oil sands projects so that as U.S. demand for oil resumes and rises there will be plenty of product to export. Manufacturing, cities, green energy and technology, education, culture and the arts---all elements in the economic agendas of other people---are marginal concerns to this prime minister, matters best left to market forces to sort out. Stephen Harper prefers to limit direct government spending to the expansion of the military and the construction of prisons.

Harper once famously urged Albertans to construct a “firewall” around their territory to shut out the baleful influences of Canada, which he once wrote “appears content to become a second-tier socialistic country…led by a second-world strongman [Jean Chretien] appropriately suited for the task.” Now he proposes to enfold the whole country within the embrace of his firewall.

Not only will oil sands exports solidify the link with the U.S.---Harper’s spiritual homeland---the revenues from the oil sands will drive the reshaping of the Canadian economy and even its political system.

Harper’s Canada, as was the case with so many of the Canadas of the past, will centre on the latest staple product. Before the oil sands came the cod fishery, the fur trade, lumber, wheat, nickel, pulp and paper, and conventional oil and natural gas. This time though we are face to face with the staple that is generating North America’s funeral pyre---no more water, the fire next time---the energy source that uses natural gas and clean water in the pollution spewing industrial process that separates the bitumen from the sand. The dirty oil will keep SUVs on the road and will aid in pushing the global climate toward the tipping point.

Meanwhile, the opposition parties, still wounded by Michael Ignatieff’s decision to shaft the coalition, generate few ideas and less hope. Despite holding the majority of seats in the House, these parties have let Stephen Harper rule the roost as though he has a majority. The Liberals and their leader deserve the lion’s share of the blame for this unhappy state of affairs. It was, after all, Ignatieff who chose to support the Harper government in preference to the coalition.

A word about the NDP, the party I support. In past decades, when Tommy Douglas or David Lewis spoke, Canadians listened with respect. Even if they didn’t always agree, people felt that these were the progressive voices of the nation, pointing the way toward the future as it ought to be. If I tried to suggest to my students, most of whom are progressive, that Jack Layton and the NDP, remain that kind political force today, they’d smile indulgently, thinking their aging professor was living in the past, or worse still, had lost it completely. The NDP is now seen as a party like the others, more devoted to playing games in the House of Commons, than espousing a vision for the future.

Canadians entered the new century confident that theirs was a cool, progressive country, widely admired abroad. As the decade ends, Canada has become infamous as a polluter, more interested in oil industry profits than in the future of the planet. A year ago, I spoke with a young woman at a market in Edinburgh who was seeking signatures on a petition in support of a bill on the environment then before the Scottish Parliament. I explained to her that I couldn’t sign because I was from Canada. Without a pause, she mentioned Alberta, the oil sands and Stephen Harper, and looked at me with a hard, flinty gaze that said: “We don’t admire your country.” Make no mistake, they know about us. Gone are the days when people in other countries thought of Canada as the great land of lakes and forests that was inhabited by genial, generous-hearted people.

On the crucial global question of our age, we are the bad guys.

At the beginning of the last century, Prime Minister Wilfrid Laurier proclaimed that “the 20th century belongs to Canada.” He exaggerated, of course, but Canada did rise over the century from a semi-colony of five million people to a nation of thirty million, the country’s population and the size of its economy growing twice as quickly over the hundred years as the U.S. population and economy.

Now, however, we are unclear about whether we retain the capacity to do great things together as Canadians, the ability to conceive a new economy that is sustainable and meets the needs of the many, not the few. It’s up to us to shake off this pall. We can and will do better.

INCOME AND WEALTH INEQUALITY: AN UNDERLYING CAUSE OF THE CRASH

(In a question posted on my blog, Bill Bell asked me to explain why I believe that one of the basic causes of the economic crash of 2008 was the widening income and wealth gap between the rich and the rest of the population. Drawn from excerpts from my book Beyond the Bubble, here is my answer to that crucial question.)

The last thirty years have been the golden age of inequality. While that inequality was the incubator for multitudes of new billionaires, it was, as well, a principal cause of the Crash. In large part, the meltdown of the financial sector flowed from the labour market model that was the very heart of neo-liberalism. The financial meltdown flowed directly from the reckless decisions of financial managers to mine the economy for enhanced profits through the promotion of various kinds of debt and the promotion of variety of financial products whose common aim was to heighten the leverage of investors.

In sharp contrast to the period from 1950 to 1970, when the real incomes of the families of wage and salary earning Canadians, adjusted for inflation, doubled during the last several decades, real incomes in North America have remained essentially flat for most wage and salary earners.

In the period 1980 to 2006, what happened to the incomes of younger U.S. full-time, full-year wage and salary earners aged twenty-five to thirty-four is telling. Here is what happened to the incomes of younger full-time, full year wage and salary earners in the United States, aged 25-34 over the period 1980 to 2006. This cohort is extraordinarily important because it is made up of people already solidly in the work force for whom the pattern has been set and whose life journeys will be crucial in coming decades. In constant 2006 dollars, the median annual income of this crucial cohort in 1980 was $36,700; in 2006, it was $35,000. For men in the cohort, here are the median wage and salary figures for 1980 and 2006: $43,700 and $37,000 respectively; for women: $29,400 and $31,800; for whites of both genders: $38,200 and $37,400; for blacks of both genders: $29,400 and $30,000; for Hispanics of both genders: $33,000 and $28,000.

The median incomes for working-age U.S. households over the period from 2001 to 2007---the years in the lead-up to the crash---are also revealing. Household incomes are crucially important to economic well-being, including as they do the incomes of single-income households and the larger number of households that have more than one earner. In constant 2007 dollars, the median income of working-age U.S. households was $58,721 in 2001; in 2007, it was $56,545.

In Canada, the median wages and salaries of Canadian workers, adjusted for inflation have not grown for the past three decades. A study published by the Canadian Centre for Policy Alternatives resolves the different ways Statistics Canada has categorized the data to show that average real wages for Canadian workers, have not increased since the end of the 1970s. In constant 2005 dollars, the average weekly wage was just under $800 in the early 1980s, where it remained in 2005, with those working overtime earning more than those who did not. While there were minor fluctuations over the decades, what is remarkable is how little things changed. Rising levels of productivity in the economy were not passed on to the average worker in the form of higher wages. The study concluded: “Astoundingly…real wages have been stagnant for 30 years running.”

In recent years the relative income gap in the United States between the rich and the rest is wider than at any time since 1928 (the eve of the Great Depression.) In 2005, while the total reported income in the United States grew by nearly 9 per cent, the average incomes for those in the bottom 90 per cent of income earners actually declined slightly, by $172 or 0.6 per cent. The top 300,000 income earners took home a total remuneration that was nearly equivalent to the combined incomes of the bottom 150 million Americans. The privileged 300,000, per person, received 440 times as much as the average person in the bottom 150 million---the gap between the two cohorts having nearly doubled since 1980. In 2005, the top ten per cent of American income earners took home 48.5 per cent of all reported income, compared with roughly 33 per cent in the late 1970s. The all time peak for the top ten per cent was 49.3 per cent in 1928. The top one per cent took home 21.8 per cent of reported income, more than double their share of income in 1980. In 1928, the top one per cent peaked in its share of income at 23.9 per cent. In 2005, the top tenth of one per cent reported an average income of $5.6 million, and the top hundredth of one per cent an average income of $25.7 million. The word “reported” used in this paragraph is very important. The U.S. Internal Revenue Service (IRS) has reported that it is able to accurately tax 99 per cent of income from wages, but that it is only able to tax about 70 per cent of business and investment income, most of which goes to upper income earners. What this means is that the IRS doesn’t really know how much business and investment income is being earned in the United States. The consequence is that the real income gap is greater than reported in the figures above.


During an epoch when the top one per cent of income earners were squeezing ever more out of the economy for themselves, employers and governments, with the full support of neo-liberal economists and social scientists, were implementing a labour market model that marginalized an ever larger proportion of the work force. Particularly in the Anglo-American world and in countries that adopted the Anglo-American model, the dominant idea was to establish an ever more “flexible” labour market. The word “flexible”, chosen to seem modern and progressive, meant that the labour force would be segmented so that while its inner core would be made up of wage and salary earners with full time employment, benefits, and a degree of job security, around this core there would be an ever greater secondary labour force, made up of part-time or contractual employees, whose rate of pay was lower, a work-force with few benefits, without pensions, and with little or no job security. Over the past quarter century the rise of this secondary or precarious labour force has transformed the economies of the advanced countries.

For the most part, the precarious labour force has been made up of women, immigrants, people of colour, migrants to cities from rural areas and small towns, and those with limited education. The workers in the precarious labour force cost employers, whether they are in the private or public sectors, much less than do their employees in the inner or permanent labour force. Savings accrue in a number of ways. The hourly or weekly rates of pay of precarious workers are lower. Reduced benefits and the absence of pensions result in enormous savings. Of great importance, the members of the precarious work force can be hired or laid off at the pleasure of the employer, or to use the in-word, in the most flexible possible way. As the demand for goods and services rises in particular sectors, people can be hired, without long-term commitments being made to them, so that when demand declines, these people can be shown the door with little difficulty.

The rise of the precarious or secondary labour force also puts immense pressure on the permanent labour force, by threatening it with a less costly alternative. The permanent labour force is highly expensive for employers. Wages and salaries are much higher than in the precarious zone, benefits are substantial and costly and so are pensions. In addition, depending on labour laws in particular jurisdictions, as well as union contracts, dismissing an employee can be an expensive affair, often involving costly severance payouts. Highly significant, the permanent labour force is much more often unionized than is the precarious force.

Unions manage to increase the wage and salaries and the benefits as well as the job security of their members. All of these effects of trade unionism are thought to be undesirable by the proponents of a flexible labour market. Business school students are taught that trade unionism is old-fashioned. While it once played a useful role in winning higher wages and better working conditions for employees in the days of the rough and ready capitalism of the past, capitalism has been modernized and humanized and no longer needs unions, the story goes. Instead, students learn, unions are barriers that stand in the way of efficiency, increased productivity and the smooth evolution of the market economy toward ever more highly sought goods and services.

Neo-liberal economists contend that too much job security holds an economy back. Job security can block a company’s move into cutting-edge sectors of the future, tempting the enterprise to remain in mature sectors that may already be in decline. Over the long-term such a company is bound to lose out to more innovative companies that do not have to operate according these rules. In addition, job security, these analysts contend, forces enterprises to keep mediocre and aging employees on their payrolls, when they would do better if they could rid themselves of such workers and hire younger, better educated, more highly motivated people.

There is no doubt, as well, that competition and negative feelings between those in the permanent labour force and those in the marginalized work force act to the benefit of both private and public sector employers. Part time workers who are not unionized and who have little job security are often resentful of workers with full-time jobs who have substantial job security and the protection of union contracts. In neo-liberal societies, the media regularly depicts the elected officials of trade unions as “union bosses”, suggesting that their members work for the union rather than the reverse. In the public service, which is now relatively highly unionized, especially in Canada, employees are routinely described as lazy and inefficient, highly resistant to change and devoted to short-work weeks and long holidays. One consequence of neo-liberal assaults against unions is that many of those who work in the precarious sector resent full-time, unionized workers. When unionized workers go on strike, it is not difficult for the media to find lower paid part-time workers to complain that fat-cat union members should have to contend with the insecurities that are the lot in life of the majority. Employers have always benefited from resentments between different segments of the work force. Today’s division of the work force into the inner segment and the precarious segment suits them to a tee.

Important as well in dividing workers into competitive sub groups that bear resentments against one another, is the highly diverse character of today’s labour force. Race, ethnicity and gender are crucial lines of demarcation in the contemporary labour force. Resentments among workers on the basis of race, ethnicity and religion is no new thing.

The history of struggles within the working class is not pretty story to gladden the hearts of trade union militants. Resistance to immigrant workers who threaten to compete with and reduce the remuneration of the existing working force is a recurring part of the history of working people. Resentment among workers against the Chinese labourers who played a central role in constructing the railways in both Canada and the United States resulted in numerous brawls, beatings and lynchings and in popular support for laws restricting Chinese immigration to Canada and the United States.

The impact of the neo-liberal social model is one of the chief causes of the crash of 2008. This is because the suppression of wage and salary increases---the heart of the neo-liberal model---both in the advanced countries and throughout the world, has had the inexorable effect of limiting the size of the market for goods and services and consequently for increased profits. This is the old capitalist conundrum. While individual capitalists benefit from keeping the wages and salaries they pay as low as possible, collectively they benefit from making wages and salaries as high as possible. Keeping its own wage bill low obviously directly enhances a company's profits. There is simply more left over for the shareholders or owners. Paradoxically, a company is aided if its competitors have high wage bills for the simple reason that this means there will be more money in the pockets of consumers to purchase the goods and services of firms in general, including those determined to keep their own wage bills as low as possible.

This is an insoluble dilemma. Individual firms, concerned exclusively with their own results, are not prepared to raise wage and salaries as a way to serve the general interest, including the interest of other private firms. Indeed, they only raise the wages and salaries they pay in response to effective pressure from unions or from the existence of labour shortages to raise them. They also raise wages if forced to do so as a consequence of minimum wage legislation or as a consequence of full-employment state policies that succeed in keeping the pool of surplus labour as small as possible. During the Keynesian age of the post-war decades, wages and salaries did rise for a variety of reasons. Under pressure from electorates with keen memories of the privations of the Great Depression and the war, as well as of the effectiveness of wartime economic planning, governments made job creation and full employment top priorities.

Under conditions in which the pool of surplus labour was minimal, unions undertook highly effective drives to organize the unorganized. During the post-war decades, the trade union movements reached the peak of their economic and societal influence in Western Europe, Canada and the United States. In a period often described as a golden age, wage and salary earners achieved greater influence than ever before in the history of capitalism. Real wages rose, social programs were expanded, educational opportunities were widened. For the first time in history, the majority of wage and salary earners in the advanced countries were no longer poor.

During the period of the “great social compromise”, while corporations remained at the helm in directing the economy and reaping the benefits, workers had to be taken in consideration as never before. Of critical importance to the stability of these arrangements, this was also an era of national capitalism within the framework of the American centred Bretton Woods economic system. In this period of fixed exchange rates, as opposed to the system of floating exchange rates, with which we live, the U.S. dollar was the reserve currency of the world, exchangeable for gold at a rate of $35 an ounce, and exchangeable as well for other currencies. Despite rising trade and investment abroad on the part of multinational corporations, this was also an age of national capitalism, with the state in each advanced country playing a seminal role in steering the system. It was the age of the so-called “mixed economy”, a term that acknowledged the predominant role of the private sector but also the power of the state and its responsibility to steer the economy to achieve broad objectives, the most important being full employment.

Following the intermediate decade of the 1970s, whose economic storms and shocks led to the collapse of the Keynesian consensus, rising government deficits and debts, slower economic growth, and the existence of high inflation alongside high unemployment, the transition was rapid to the new age of globalization, de-regulation and neo-liberalism. The leading political stars of this new age of the right were Margaret Thatcher, elected to lead a Conservative government in Britain in 1979, and Ronald Reagan, who was elected President of the United States the following year.

Neo-liberalism dismantled the regulatory systems that had been in place during the post war decades. In the Anglo-American world, and in other nations as well, the doors were thrown open to the free movement of capital internationally. National governments lost their ability to control capital flows. Gigantic new corporate investments outside the developed countries tore away at the balance of power that existed between capital and labour. Able to access much cheaper labour on an enormous scale, corporations threw workers and their unions onto the defensive.

From the early 1980s to the present, corporations have been running away from labour in the advanced countries. …..In the United States and Canada, the income of the average worker, adjusted for inflation, has hardly grown over the past quarter century. In the United States, only 12 per cent employees were unionized in 2006; in Canada, the proportion is much higher at 31.4 per cent in 2007, but it too has been declining…..


How then has the neo-liberal model played a key role in triggering the crash?

The widening divide between a tiny minority at the top, especially in the Anglo-American world, and the rest of the population has limited the growth of the market for goods and services. When those at the top keep too much for themselves and hold wages and salaries down, they set themselves up for an economic crisis. The same was true in the 1920s on the eve of the Crash of 1929. This time, the financial capitalists who were at the centre of the meltdown spent the first decade of this new century trying to stave off the crisis---in the aftermath of the bursting of the dot.com bubble---with a whole series of new initiatives, in sub-prime mortgages, in the promotion of personal debt, and in the sale of a long list of financial products under the headings of securitization, credit default swaps and other derivatives.