Austerity, Shock Doctrine, Newfoundland, Canada and Liberals

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jerrym
Austerity, Shock Doctrine, Newfoundland, Canada and Liberals

I originally posted this yesterday under Newfoundland and Labrador Political Pot Pourri but I then realized it has implications for all the governments in Canada, especially in the age of Covid when virtually every government is carrying a large debt load. Many have argued that Covid has shown that debt doesn't matter when a great crisis like Covid hits, much as was the case during WWII when the elites themselves were under threat from the Nazis and the Japanese militarists. People expect the government to act without worrying about the debt when literally thousands are dying every day. Many who went along with the conventional argument of it being necessary to keep the debt low or even wipe it out have seen that at least sometimes, such as during the Covid crisis, that that is highly problematic. However, at some point we will be out of the Covid crisis, even if it sticks around from year to year like the influenza. Free market parties will want to re-establish the necessity of keeping the debt low and re-establishing austerity. 

What happened in Newfoundland looks like what Naomi Klein called a dose of the Shock Doctrine for Newfoundlanders. "Klein argues that neoliberal free market policies (as advocated by the economist Milton Friedman) have risen to prominence in some developed countries because of a deliberate strategy of "shock therapy". This centers on the exploitation of national crises (disasters or upheavals) to establish controversial and questionable policies, while citizens are too distracted (emotionally and physically) to engage and develop an adequate response, and resist effectively." (https://en.wikipedia.org/wiki/The_Shock_Doctrine) Newfoundland could be a model for other governments in Canada to follow. 

What has happened in Newfoundland during and since its election this year shows that a government can do this even during the Covid crisis by initially misleading the people on what it intends to do. It. Liberal Premier Andrew Furey turns out to be Liberal Premier Dwight Ball redux on steroids.  Less than two months after the election where Liberal Premier Furey painted a things are okay going forward and denying that there was a hidden agenda the Big Reset was published. It was supposed to be released on February 27th, after the original February 13th election date, but on the eve of its supposed release the Liberals said that it wasn't finished and would be released after the election. Nothing to worry about. How convenient the original release date was fine until it was no longer convenient for election purposes. And of course we now get a report from Canadian business woman Moya Greene, who was the onetime CEO of Canada Post and later CEO of Royal Mail where she oversaw its privatization.

Of course how could Premier Furey have ever forseen that Greene would report things need to be reset in the Newfoundland economy, reset in a BIG RESET way? After all, "Greene was named as Financial Times Person of the Year in 2014. Judge Luke Johnson said "She did a fantastic job managing the unions, politicians and media and floating the business last year. It was an almost impossible task to reconcile demands from all the competing stakeholders – and sell a declining business such as post and parcel delivery to the stock market – but she pulled it off." And she did very well by herself although she when a minor slip "In August 2013 she repaid £250,000 in expenses she had claimed to fund buying a house, after Business Secretary Vince Cable objected to the payment". Who would have guessed the report would recommend "sweeping cuts" and a "radical reform of the public sector". (https://en.wikipedia.org/wiki/Moya_Greene)

However, not to worry, business people like Greene and their political allies like Furey, always do well personally in these situations.

Schools with no students. Ferry runs with no passengers. A 22-year freeze on university tuition. A population that is lower than it was 50 years ago. A bloated public service. Soaring deficits and debt loads. A devastated fishery. Tourism on its knees because of COVID. Declining oil and forestry sectors. 

There’s nothing much positive to say about the economic situation in Newfoundland and Labrador. All that was made clear last week with the publication of The Big Reset, the comprehensive report of the economic recovery team tasked by the provincial government to set a future path for the province.

Chaired by Moya Greene, the onetime CEO of Canada Post and later CEO of Royal Mail in the U.K., the task force report pulled no punches, pointing out that the province already is hanging over the precipice, teetering on the brink of a crisis that could lead to it running out of cash if interest rates rise and the province can no longer borrow to keep the lights on. 

Greene noted that the province has Canada’s oldest population, highest jobless rate, highest per-capita health spending along with the weakest health outcomes in the country.

And with a constantly rising level of debt, the generational inequities which are evident throughout Canada after deficit spending to fight the pandemic, are even more evident in Newfoundland, where the elderly are leaving a massive bill to a shrinking population of young people.

Reacting to the report Thursday in a special televised statement to the province, Premier Andrew Furey admitted that the province was spending “more than we have,” noting that the province was borrowing $1-billion a year simply to pay interest on its debt. “Our credit card debt is out of control.”  

The task force proposed a series of sweeping measures, including big cuts in spending on health and post-secondary education, a series of increases in taxes and fees, a radical reform of public sector pensions and consolidation and privatization of provincially-owned businesses. 

The report calls for the abolition of Nalcor, the provincial energy firm responsible for the disastrous Muskrat Falls hydro-electric project in Labrador, an always iffy project whose construction costs were wildly over budget, leaving the province with a debt it can’t repay and residents with looming rises in electricity costs.

Furey pointed to the need to act urgently on several proposed measures, including higher taxes, deciding on the future of Nalcor, merging health authorities and making a new arrangement with heavily-subsidized Memorial University. ...

Though it’s tempting to make comparisons with another troubled island that’s beset with bad finances, poor political leadership and demographic decline, Puerto Rico, the situation isn’t comparable. Puerto Rico was even more of a basket case but its unique relationship with the U.S. Congress could make its financial reorganization, essentially a managed default, a one off affair.

If Newfoundland were allowed to default, it could prompt lenders to look at other weak jurisdictions in the Atlantic and wonder who’s next? And in any case, Ottawa is on the hook for billions of dollars of Muskrat Falls debt, having foolishly given the province a loan guarantee during the Harper years. 

https://ipolitics.ca/2021/05/13/newfoundland-on-the-brink-will-it-be-dif...

jerrym

And now here is the Furey agenda in all its full glory. Too bad he couldn't see it coming during the election and only realized how bad the situation was when the Greene "Big Reset" report that was delayed and delayed again when the election that Furey was in such a hurry to hold had its own Big Reset due to Covid so the people never got to vote on the hidden Furey Liberal agenda. Of course it was not planned out this way. That would prove the Shock Doctrine of Naomi Klein is true. It just happened in such a convenient way in terms of not having any detailed questions on what was coming during the election. It's strange how Furey couldn't see what was coming when, in his own words, ""This situation predates the pandemic and it has been compounded exponentially by Muskrat Falls."

And how convenient to propose all of this in a video and take no questions and give no specific details of how it will be done. A true master politician.

Newfoundland and Labrador Premier Andrew Furey says the province's financial circumstances are unsustainable and the total provincial debt of $47 billion is an unbearable load for residents.

In a video released Thursday evening, Furey offered his full thoughts for the first time about the recently released, and blunt, Moya Greene report, which outlines the province's dire fiscal situation.

"Our province is spending more than we have. We are borrowing just to pay interest on what we owe. Over a billion dollars a year with nothing to show for it. Our credit card debt is out of control," Furey said.

Furey touched on a number of highlights from the report, from his appointed economic recovery team, including the need for the provincial government to quickly rein spending in to match revenue, and the fear of losing control of the province's future if nothing is done.

The premier said "urgent actions" include:

  • Raising taxes on people "who can afford it."
  • Reviewing public sector salaries and eliminating bonuses.
  • Evaluating the future of Nalcor and the province's future position in oil equity.
  • Investing in technology innovation and the green economy.
  • Amalgamating health authorities.
  • Reaching a new deal with Memorial University.
  • Examining "the purpose of a school district that continues to keep empty schools open."

The premier provided no specifics about how the provincial government would implement the actions he mentioned. Furey also didn't take questions from the media Thursday evening, but has scheduled an availability for Friday morning.   ...

Memorial University political science professor Russell Williams called Furey's statement "surprisingly vague," adding that it's not clear what Furey is specifically planning to do with the report's recommendations. "Some of those vague areas were made worse, obviously, by the fact that there was no opportunity to ask him questions about it afterwards," said Williams.

Williams also said it's not clear what Furey meant by "a new deal with Memorial University. I have no idea. There's some recommendations about that in the Greene report, but the premier hasn't really said what he means by that," said Williams.

"I think if I was to boil to one simple point, this was a huge missed opportunity for the premier to actually tell us either what he thinks about the substantive recommendations in the Greene report, or to tell us what his plan is for a process going forward as to how he's going to choose what to implement." 

https://www.cbc.ca/news/canada/newfoundland-labrador/andrew-furey-pert-r...

jerrym

While the Newfoundland Furey Liberal government appears set to go ahead with massive cuts to public sector services and salaries, healthcare and education from elementary to university, including eliminating school districts, there is no mention of cutting back on oil production or shifting resources towards offshore wind energy, using the ocean's strong winds as a driving mechanism, as Britain, another island, has done.  By putting resources into this energy source "By 2018 Great Britain was building 50% of all offshore wind energy capacity in Europe." (https://blueocean.net/great-britain-leads-in-offshore-wind-energy/)

Instead Newfoundland Furey Liberals, with the assistance of the Trudeau Liberals, has poured ever more resources into its failing oil industry, even as the industry is abandoning the province. The Trudeau Liberals gave $325 million in subsidies to Furey last fall to keep the oil industry afloat and then added another $41.5 million giveaway for half the cost of building an oil refinery that Husky Oil was about to close. When they got the money the company said they would consider finishing the refinery, without making any commitment to do so. In other words, both the provincial and federal Liberals are pouring big subsidies into a failing industry at the same time the Furey Liberals proclaim they don't have the resources to maintain major current education, healthcare and other services. Its a classic case of applying austerity through the Shock Doctrine, while still subsidizing the world's most profitable industry to the hilt. 

We may well see similar austerity programs in the future, distinguished by the particular circumstances in a province or at the federal level, with the justification being that the debt load for the government has just become too too great, while saying that corporate sector needs government to build the economy.

Federal Natural Resources Minister Seamus O'Regan called a strategic investment in the oil industry. When a company cancels a 60% complete project you know its in very bad shape. A strategic plan would actually be to stop throwing good money down the drain trying to keep alive an industry in a slow death spiral. The $41.5 million investment came a few days after Cenovus bought Husky for $4 billion. Cenovus quickly said that all options were on the table and a quick shutdown of the project was possible. Cenovus even admitted that it might walk away from the project as soon as the merger is complete. 

On the other hand provincial NDP leader Coffin, facing reality, said " 'We're putting money into an industry that I don't think is sustainable at all. We're hearing time and time again that the oil industry is in decline.' — Coffin commenting on the $41.5 million in federal funds handed to Husky Energy on Dec. 3, 2020.(https://www.kamloopsthisweek.com/alison-coffin-newfoundland-and-labrador...)

The West White Rose project was about 60 per cent complete when construction was halted. (Husky Energy)

Husky Energy is getting $41.5 million from the Newfoundland and Labrador government to keep the idled West White Rose offshore oil project going, particularly to "protect the option of restarting" in the next year — although there is no guarantee that will happen. ...

O'Regan called the announcement "one heck of a Christmas surprise for Newfoundlanders and Labradorians and their families." He said the announcement was not merely a government handout but instead called it a "strategic investment" in the offshore oil industry, which was thrown into turmoil this spring when the COVID-19 pandemic caused oil prices to plummet. ...

That Oil and Gas Industry Recovery Fund was announced Sept. 25, with the federal government allocating $320 million for the N.L. government to support direct and indirect employment. 

The announcement is the latest development in a saga that started in April, when Husky announced it was stopping construction on the project, as the global pandemic battered oil markets. Hundreds of workers were laid off. At the time, the project was nearly 60 per cent complete. ...

That news came just days after Cenovus Energy announced it would buy Husky Energy in a deal worth nearly $4 billion. In a statement, Cenovus said regarding Husky's operations in the province "the WWR [West White Rose] project is key to extending the life of the White Rose field. As we have said before, all options are on the table and accelerating abandonment remains a possibility." 

https://www.cbc.ca/news/canada/newfoundland-labrador/west-white-rose-1.5...

jerrym

The following article discusses how Premier Furey set in motion his austerity plan. The article notes "If such a deep austerity plan can be implemented in Newfoundland and Labrador, it will be attempted in other provinces in the years to come."

The pandemic has thrown the budgets of governments across Canada into the red as they increased spending to protect their populations from COVID-19 and expand the social safety net, while the economy slowed and revenues declined. But not every province was in the same situation heading into the pandemic, and for Newfoundland and Labrador, despite successfully managing the spread of COVID-19 for much of the past year, it appears the time of reckoning has arrived.

Last October, just two months after taking over the leadership of the governing Liberal Party, Andrew Furey appointed the Premier’s Economic Recovery Team (PERT), chaired by Moya Greene, and tasked it with crafting a plan to “respond to the Province’s immediate fiscal challenges and plot a new course forward.” 

On May 6, the PERT delivered its report, and recommended a harsh austerity plan that includes deep cuts to provincial spending and the handing of more power to the private sector. If implemented, Greene’s plan will forever alter life in the province. It draws from long-discredited ideas about public spending and the role of government that make it feel like it belongs in the ’80s or ’90s. There is no positive future if Furey chooses to go down this path. ...

In 2014, oil prices collapsed, leaving a massive hole in the provincial budget right as construction was starting at Muskrat Falls. In the following years, the project that was once hailed as key to the province’s economic future brought it to the edge of bankruptcy after the cost soared from an estimated $6.2 billion in 2010 to more than $13 billion in 2021. 

A public inquiry’s report released in 2020 found that while elected officials made bad decisions, executives at Nalcor, the provincial energy company created to oversee the project, had held back details about cost increases and was plagued by bad management, among a range of other issues.

On Mar. 20, 2020, as the country was in lockdown, Furey’s predecessor, Dwight Ball, sent a letter to Prime Minister Justin Trudeau laying out the state of the province’s finances. Ball wrote, “We have no other recourse to raise the necessary funds to maintain the operations of government, including our health-care system, especially at this critical time.” 

It was in that context that Furey tasked Moya Greene, and a panel dominated by local businesspeople, to develop a technocratic plan for the province’s future.

https://readpassage.com/the-big-reset-proposes-deep-austerity-for-newfou...

jerrym

The history of Moya Greene, the person Premier Furey appointed to head the task force to examine the province and government's economic situation, predicted the kind of report she would write and of course Furey knew this: a deep austerity program based on orthodox neoliberal economics. Her career path from PC PM Mulroney assistant deputy minister at Transport Canada to helping drive PM Chretien's neoliberal agenda in the department, including deregulation of the airline industry, to mangaging director at TD securities, to Bombardier, to CEO of Canada Post where she “modernized” the postal service by "by cutting costs, bolstering automation and attacking labour", to overseer of the privatization of the British Royal Mail, made it clear where her report would go. In my next post I will give a detailed examination of her "Big Reset" austerity report for Furey. Greene is always referred to by as Dame Greene by Furey, reflecting no doubt the fact that she is a member of the aristocracy at the intersection of neocons and neoliberals. 

Moya Greene, or Dame Moya Greene, as the provincial government insists on calling her, will likely be unknown to most Canadians, and is even a mystery to many Newfoundlanders and Labradorians. Yet, she has been at the centre of implementing neoliberal policy in Canada and the United Kingdom for decades.

Greene is from St. John’s and grew up in the province before moving to Toronto for law school in the ’70s. In 1991, Greene became assistant deputy minister at Transport Canada and was part of the team that fundamentally altered Canada’s transport networks during Liberal Prime Minister Jean Chrétien’s neoliberal transformation. In that role, Greene was involved in the deregulation of the airline industry, the commercialization of Canadian ports and the privatization of CN Rail, which involved mass layoffs and abandoning rail lines to prepare it for sale.

After leaving Transport Canada in 1996, Greene joined TD Securities as a managing director focusing on infrastructure finance and public-private partnerships. P3s, as they’re known in Canada, were gaining popularity at the time as a means to save governments money in the short-term by availing of private finance, but it has become clear that many of those projects ended up costing far more over time as private financiers extracted ongoing revenue from public assets.

After a stint at Bombardier, Greene became CEO of Canada Post in 2005 and set out to “modernize” the postal service. While she pushed for privatization, not even Conservative Prime Minister Stephen Harper would endorse it. 

Instead, Greene increased the company’s profits by cutting costs, bolstering automation and attacking labour. In her last year in the job, the head of the Canadian Union of Postal Workers said, “If you compare the four years before Greene with the four years under Greene’s management the numbers show that injuries have gone up 15.4 per cent and grievances have gone up 59.3 per cent.”

Having taken on Canada Post, she was hired by the Conservative-led British government in 2010 to oversee the privatization of the Royal Mail, which was floated on the stock market in 2013. Greene laid off workers, cut costs and increased automation ahead of the sale, while taking a massive pay package that amounted to £1.9 million in 2017 alone.

She was at the centre of a scandal where postmasters were charged and even jailed for allegedly stealing money, but it was later found to be the result of a faulty IT system. Even after company directors were told the computer system could be to blame, Greene continued prosecuting them. The postmasters’ names were finally cleared this April.

Meanwhile, more jobs have been lost since privatization, delivery centres have been closed, prices have increased and rural mail delivery has gotten worse. The company has also been selling off its valuable land for shareholder benefit, even as 69 per cent of the public want it to be renationalized. The outcomes of these policies should be considered before Newfoundland and Labrador rushes into any kind of similar plan.

https://readpassage.com/the-big-reset-proposes-deep-austerity-for-newfou...

jerrym

ETA: Here is just a sample of the recommendations in Moya Greene's 338 page Big Reset austerity report to Premier Furey, giving him exactly what he was looking for. 

The Provincial Government should:

  •   Bundle and sell all or a majority interest or create a long term concession in its motor vehicle and registry of deeds system;

  •   Revise legislation to require that all unregistered land be registered within eight years. After this period, all unregistered land would revert to the Crown;

  •   Sell all or a majority interest in the Newfoundland Labrador Liquor Corporation, and review how the Provincial Government taxes alcohol; and

  •   Sell Marble Mountain ski resort and related assets.

The Provincial Government should:

  •   Reduce its core expenditures by five per cent, with no expenditure growth for six- years;

  •   Reduce its operating grants to Memorial University and the College of the North Atlantic by five per cent per year over six years, for a total reduction of 30 per cent;

  •   Reduce its operating grants to the Regional Health Authorities by 4.15 per cent per year over six years, for a total reduction of 25 per cent;

  •   Reduce administrative costs for the K-12 system and allocate these additional funds to classrooms, to support the teaching of math, technology, science, computer science, and the promotion of entrepreneurship;

  •   Reduce operating grants to Newfoundland and Labrador Housing and Legal Aid bytwo per cent; 

  •   Reduce operating grants to other government agencies by 20 per cent.

The Provincial Government, working with public sector unions, should develop a new compensation package. Key elements should include:

  •   Pensions to be converted to a collective defined contribution plan in three years3;

  •   Measures to reduce the payroll base, such as a four-day work week for certain

    positions and creating seasonal positions targeted at peak demand periods;

  •   Wage freeze;

  •   Alternative service delivery models; and

  •   Development and promotion of work-from-home policies.

    In the event that a negotiated settlement is not possible, the Provincial Government should use legislation that will be effective. ...

The Provincial Government should redefine its role in the economy, the services it offers and how these services are delivered, with a focus on accelerating new technology adoption. The private and not-for-profit sectors should deliver services where appropriate. ...

Government must look critically at its current approach to determine which services it should continue to provide, which services it can discontinue, and which services, existing or future, could be offered by the private or not-for profit sectors. Many services offered by government can be delivered in a different way; some may be more responsive if customized for local needs. ...

Many Provincial Government services could be offered by private and not-for-profit sector enterprises more effectively and at lower cost. Moving some services to the private and not-for-profit sectors could create new businesses. ...

This expertise can then be exported to other parts of Canada and the world and help build a larger market base for local businesses. ...

  • Raise capital through the following measures:

o Offer transmission and distribution assets to the private sector to either own or operate;
o Offer the sale of island generation assets to the private sector;
o Sell the Provincial Government’s oil and gas equity interests when oil prices increase; and
o Sell the Bull Arm Fabrication Site, currently owned by the Oil and Gas Corporation; ...

  • Apply any monies raised from electrical and oil and gas assets to rate mitigation, the provincial debt, and the Future Fund; ...

The Provincial Government should:

  •   Review its petroleum royalty and local benefits structures in 2021-22 to ensure they encourage exploration and development of new activity in the offshore, with net-zero targets wherever possible;

  •   Request the Federal Government reinstate the Atlantic Investment Tax Credit for offshore petroleum projects and for green mining projects; ...

The slow and laborious government processes faced by businesses are often referredto as “red tape.” No one is suggesting that governments should make decisions that are unsafe for people or the environment, but governments need to make quick decisions.The Provincial Government’s decision making is not competitive with other parts of theworld that develop oil and gas assets. The Province must remove the red tape associated with development in all sectors.  ...

The regulatory framework for oil and gas has slowed progress, and the Province has not always been a good partner. ...

To ensure that Canada and Newfoundland and Labrador have a regulatory approach competitive with the rest of the world, the Provincial Government should work with the Federal Government to:

  •   Streamline regulatory processes to improve timelines and adjust regulatory approaches that make Newfoundland and Labrador uncompetitive; and

  •   Give direction to the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) that the development of the offshore area is a priority function and offshore management must be consistent with the principles underpinning the Atlantic Accord.

To ensure that Canada and Newfoundland and Labrador have a regulatory approach competitive with the rest of the world, the Provincial Government should work with the Federal Government to:

  •   Streamline regulatory processes to improve timelines and adjust regulatory approaches that make Newfoundland and Labrador uncompetitive; and

  •   Give direction to the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) that the development of the offshore area is a priority function and offshore management must be consistent with the principles underpinning the Atlantic Accord.

The Provincial Government should encourage mining exploration through:

  •   Expansion of airborne geoscience surveys in priority areas of Newfoundland and Labrador;

  •   Increased funding for the Junior Exploration Assistance Program;

  •   Commencement of work related to geotechnical information with Québec, as provided for in the 2018 bilateral agreement with Québec; and

  •   Implementation of a five per cent provincial flow through shares mechanism to attract new investment.

The Provincial Government should: streamline the regulatory decision-making processes for aquaculture licences and site approvals; ...

  1. The Provincial Government should:

    •   Promote investment opportunities globally and with local entrepreneurs to increase lumber production, value-added manufacturing, and alternative heating technologies, such as biofuels, wood chips, and wood pellets;

    •   Review the forest royalty and fee regime to maximize access to forestry resources; ...

  1. The Provincial Government should:

    •   Streamline the administrative structure by eliminating the two school districts with a goal to spend less on administration and reinvest that money directly at the school level;

    •   Place program administration within the Department of Education and adopt a shared services model for HR, IT, payroll, maintenance, etc.;

    •   Ensure principals, vice principals, and other supervisory staff are not members of the Newfoundland and Labrador Teachers Association (NLTA);

    •   Dissolve volunteer school boards and replace with one volunteer Provincial School Advisory Council. This Provincial Council will be connected to existing School Advisory Councils to link parents, families, and communities more strongly to the school system to enhance collaboration and greater accountability;

  •   Change school opening and closing hours to an eight hour day for teachers so that they can use some non-teaching time during the work day for professional upgrading and collaboration; ...

The province provides a high level of subsidy to Memorial University and CNA andkeeps tuition rates low. Given the province’s fiscal situation, the cost of the post- secondary education (PSE) system must be addressed. ... 

Newfoundland and Labrador’s current level of investment in its PSE institutions is not sustainable. As an example, immediate efficiencies could begained by consolidating the province’s three nursing schools into one. The Provincial Government should create one nursing school for the province.

Being known as the “cheapest” university in Canada carries the implication of it beingthe lowest quality. Nothing could be further from the truth. Memorial University could deliver the same or better outcomes if PSE funding came from other sources. ...

The Provincial Government should institute a moratorium on building new long-term Care facilities; ...

The Provincial Government should: review the current structure and consolidate the four Regional Health Authorities into one; ...

The Provincial Government should: modify programs to eliminate disincentives for individuals to take-up employment opportunities when they become available; and revise funding programs based upon analysis, with a focus on partnering with community-based organizations to ensure responsive program and service delivery that is efficiently and effectively customized for real and changing needs and has measurable outcomes. ...

The Provincial Government should:

  •   Increase all personal income tax rates by one percentage point and introduce tax credits for the lowest income group to offset the increase;

  •   Increase the corporate income tax rate by two percentage points;

  •   Increase the HST by one percentage point and consider expanding the base;

  •   Increase the gasoline tax by 1.5 cents per litre;

  •   Increase the payroll tax by 0.5 of a percentage point;

  •   Increase the tobacco tax by 5.5 cents per cigarette; and

  •   Increase fees and fines by 15 per cent;

https://thebigresetnl.ca/wp-content/uploads/2021/05/PERT-FullReport.pdf

jerrym

Insanity is doing the same thing over and expecting a different result. But that is exactly what Liberal and Conservative governments have been doing in Newfoundland during the last decade. Now Liberal Premier Furey, using the Big Rest report by Moya Greene that is outlined in the last post, plans to do austerity and Newfoundlanders to a much greater extent. Professor Lori Lee Oates from Memorial University in Newfoundland describes the history of previous Newfoundland austerity programs, why they will fail again and what is needed instead in the article below.

Don't be surprised to see Furey's model copied elsewhere in Canada by first grooming citizens with a dose of the Shock Doctrine, with a we have to get the debt piled up by Covid under control strategy. This centers on "the exploitation of national crises (disasters or upheavals) to establish controversial and questionable policies, while citizens are too distracted (emotionally and physically) to engage and develop an adequate response, and resist effectively." (https://en.wikipedia.org/wiki/The_Shock_Doctrine)

Austerity can be defined as a series of policy initiatives that seek to reduce deficits through tax increases and spending cuts.

Certainly since 2015, much political economy analysis has come to the conclusion that austerity does not work. It generally hurts the working class the most, even though it is the elite political class that creates our financial problems.

It is a neoliberal idea. Even the International Monetary Fund has said for some time it does not work.

Austerity takes away the spending power of people who need to go out and buy if there is going to be an economic recovery. It imposes fees and consumption taxes on those who can least afford to pay them.

In times of economic distress, governments need to put disposable income into the hands of working-and-middle-class people. Note that our provincial government has cut welfare payments to those receiving CERB, the Canada Emergency Response Benefit. ...

Because Newfoundland and Labrador has not developed into the global service economy, most of the jobs in this province are in government sectors, be it provincial, federal, municipal, health care, or education.

In 2013, the Dunderdale government cut 1,200 public service jobs. In 2015, the Davis government delivered what was called "one of the most austere budgets in recent times." It included $1.1 billion in deficit spending, a plan to shrink 1,400 government jobs, and tax increases for those in the highest brackets.

Everyone remembers the provincial budget of 2016 with its fee increases and consumption taxes. It was one of the least popular budgets in the province's history. Some of its impacts have been reversed but it was followed by job cuts, mostly at the management level of the public service. ...

The Ball government has also realigned government departments. The province used to have separate departments of Business; Tourism, Culture, and Recreation; Innovation, Trade and Rural Development. Those are now the single Department of Tourism, Culture, Industry, and Innovation. Who needs rural development in a mostly rural province? There used to be the Department of Municipal Affairs, and the Department of Environment and Conservation. They are now the Department of Municipal Affairs and Environment. Who needs a conservation branch when there is a global climate crisis coming over the next 10 years? It is hardly a wonder that our leaders have been so bad at preparing for it.

If you think public service jobs are bad for the economy, wait until you see what natural disasters, record levels of climate refugees, and a crashing oil industry does to the province. There are very real costs to cutting investment in public policy. There are few things that are more costly than years of bad planning.

We must acknowledge that with so few options to achieve professional level employment in this province, people who are cut from the public service almost inevitably leave the province for other jurisdictions.

Cuts to public services lead to lower quality of life, which is another motivation for leaving. This in turn leads to cuts in federal transfer money that are based on population.

Austerity is a very dangerous downward spiral. We have been caught in that spiral for some time.

The province has long failed to invest in technology, cultural industries, renewable energy and development of our tourism product. Instead, we have continued to rely largely on natural resource sectors, while service sectors have been the dominant sectors for growth globally.

As we move closer to a climate crisis, it is becoming increasingly clear that natural resources sectors will have to change and even disappear. ...

Our province has not developed sectors to replace royalty revenue. Depending on natural resources for economic development has had mixed results at best. We have known about the "resource curse" since at least the 1990s.

What our province needs most, as we manoeuvre through this financial crisis, is leadership that understands the need to put money into the hands of the working and middle classes. ...

Economists have argued that the COVID-19 recovery, in particular, will require funded daycarebecause women have been very hard hit by this crisis.

Our economic recovery must be grounded in the well-being of citizens and our natural environment. We need to look to the Wellbeing Economy Alliance for guidance on how to pursue more sustainable public policies.

https://www.cbc.ca/news/canada/newfoundland-labrador/austerity-nl-oates-...

jerrym

ETA: Here's more on Furey's austerity program as outlined in the Big Reset report by Moya Greene he comissioned: classic austerity with a touch of green added to it.

Greene, who is best known for privatizing the British postal service, has proposed an austerity program that combines political and social reforms with a far-reaching economic restructuring plan premised on slashing state expenditures, across-the-board fee and tax increases, privatizing public assets, and breaking public sector unions.

“The Big Reset,” according to the report, proposes “a transformational plan for Newfoundland and Labrador that attempts to tie all aspects of the economy and society together to meet some of the biggest challenges and opportunities ever faced by the province.” ...

The six-year plan is anchored in a proposed shift to a green economy based on offshore oil, hydropower, mining, technology, and hydrogen within 20 years. It also proposes restructuring the education system to encourage jobs in the science, technology, engineering and mathematics (STEM) sectors, modernizing governance of both Memorial University (MUN) and College of the North Atlantic (CNA) while reducing operating grants, and amalgamating all four Regional Health Authorities into a single entity and reducing their operating grants by 25 percent. ...

“Spending is out of control,” Greene writes. “The Government of Newfoundland and Labrador is facing an unsustainable fiscal situation that requires immediate action.” Her refrains are familiar: “[T]he fiscal challenges are entirely of the province’s own doing,” the report says, and “expectations placed on government have to be more realistic.” ...

Including both the gross debt of the Province itself alongside its Crown corporations—Nalcor Energy, the Newfoundland Labrador Liquor Corporation, and Atlantic Lottery Corporation—the Greene Report pegs provincial gross debt at roughly $44.5 billion. (This does not include the nearly $3 billion in new borrowing for 2020-21.) ...

Reflecting on the experience of the 2016 Budget—when protests across the province erupted following the introduction of an austerity budget—the Greene Report notes that “the election cycle hampers mapping long-term visions and the decision-making to support them.” 

A number of remedies are proposed for this. One major recommendation is mandatory balanced budget legislation for all departments, public institutions, agencies, boards, and commissions—with a percentage of ministers’, deputy ministers’, and assistant deputy ministers’ compensation withheld to ensure that departments and other entities meet established targets. This would also include “an external advisory group of experts established to review annual budgets.”

Significantly, the Greene Report proposes that the provincial government must renegotiate compensation packages with public sector unions. The “key elements” it demands are converting pensions “to a collective defined contribution plan in three years” on the model of the United Kingdom; “measures to reduce the payroll base, such as a four-day work week for certain positions… a wage freeze; alternative service delivery models; and development and promotion of work-from-home policies.” 

Greene writes that “in the event that a negotiated settlement is not possible, the Provincial Government should use legislation that will be effective.” ...

The report itself acknowledges that “The Big Reset” will rest on the shoulders of the upcoming generation. 

“It is unreasonable to expect the next generation to fund the current system,” Greene writes. “Newfoundland and Labrador’s systems must change in order to address the poor outcomes and high spending across so many areas.”

In a plan to provide more ‘efficient’ healthcare, the report recommends merging the four regional health authorities and expanding the use of telehealth and distance medicine. It also recommends reducing operating grants to health authorities by roughly 4 percent per year as part of the six-year plan. 

The proposed operating grant reductions to MUN and CNA would include the provincial government creating a single nursing school for the province, and having CNA develop technology upgrade programs. Included is the suggestion that the post-secondary institutions establish a joint “Centre of Excellence in Green Technology,” which would be financed in part by the province’s Future Fund.

These grant reductions should total $103.9 million over the next six years, with MUN shouldering most of the cuts, the report says. The projected loss to MUN would be $82.3 million by 2027. “A reduction in funding will likely result in higher tuition,” Greene writes. ...

According to the report, immigration retention is one of the key factors in the province’s plan to lean towards STEM employment (and industry), and future immigration programs could be tailored to target high-skilled individuals in this area. 

“The Provincial Government needs to act and demonstrate that it is focused on its finances,” Greene writes. “With a thoughtful, balanced, and well-developed implementation plan this province should be successful in the global competition that is underway for the billions of private sector dollars of capital redirected to green projects, technologies, and creating a forum of expertise.”

The report proposes a 2:1 ratio of expenditure reduction to revenue increases. Despite proposing to sell public assets, slash expenditures, and raise taxes and fees across the board, Greene was emphatic that “this is not an austerity program.”

Some of the “modest” tax raises recommended are increases to the tobacco, gasoline, and payroll tax, as well as an increase to the HST of one percentage point. All personal income tax rates would be increased one percentage point, with an introduction of tax credits for the lowest income group to “offset the increase.” Fees and fines would be increased by 15 percent. The corporate income tax rate would increase by two percentage points. 

Wealth taxes are also proposed, with an annual tax of one percent on “wealth exceeding $10 million or an agreed upon threshold.” The report also recommends implementing a minimum property tax on all residences outside of incorporated municipalities, and a separate tax on second residences (outside of the primary residence) valued at $100,000 or more. A tax on luxury vehicles was proposed too, with exemptions for electric vehicles. ...

It proposes reducing operating grants to MUN and CNA by 30 percent over six years; reducing operating grants to the Regional Health Authorities by 25 percent over six years; “[reducing] administrative costs for the K-12 system and [allocating] these additional funds to classrooms to support the teaching of math, technology, science, computer science, and the promotion of entrepreneurship;” reducing operating grants to Newfoundland and Labrador Housing and Legal Aid by two percent; and reducing operating grants to other government agencies by 20 percent.

“The Big Reset” also recommends the province privatize a number of its other assets in whole or in part. It suggests bundling, and either selling or creating, other long-term concessions in its motor vehicle and registry of deeds systems; selling all or a majority interest in the Newfoundland Labrador Liquor Corporation (as well as reviewing how the province taxes alcohol); and selling the Marble Mountain ski resort and all related assets.

https://theindependent.ca/news/politics/pert-pushes-big-reset-for-nl/

eastnoireast

thanks for this jerrym.   

huge implications; a society-wide rewrite and pillaging of newfoundland and labrador (first).  which they'll probably get away with, more or less. 

back to normal, in other words.  new and improved.

on the other hand, if the changes they seek come to pass, as covid continues on in some manner, and certainly the economic and social fallout from covid will continue; overstep? 

that's a lot of upheaval and people with nothin left to loose.  not hard to shut down transport, say, if enough folks are hungry.

either way, the next 5 years are sure going to be nasty if you're under ~$60k/yr, let alone if you're under $30k.  or if one gives a damn about society. 

Aristotleded24

eastnoireast wrote:
thanks for this jerrym.   

huge implications; a society-wide rewrite and pillaging of newfoundland and labrador (first).  which they'll probably get away with, more or less. 

back to normal, in other words.  new and improved.

on the other hand, if the changes they seek come to pass, as covid continues on in some manner, and certainly the economic and social fallout from covid will continue; overstep? 

that's a lot of upheaval and people with nothin left to loose.  not hard to shut down transport, say, if enough folks are hungry.

either way, the next 5 years are sure going to be nasty if you're under ~$60k/yr, let alone if you're under $30k.  or if one gives a damn about society.

With the federal and provincial treasuries absolutely gutted in the last year, why wouldn't governments unleash brutal austerity on the people?

Aristotleded24

jerrym wrote:
What has happened in Newfoundland during and since its election this year shows that a government can do this even during the Covid crisis by initially misleading the people on what it intends to do. It. Liberal Premier Andrew Furey turns out to be Liberal Premier Dwight Ball redux on steroids.  Less than two months after the election where Liberal Premier Furey painted a things are okay going forward and denying that there was a hidden agenda the Big Reset was published. It was supposed to be released on February 27th, after the original February 13th election date, but on the eve of its supposed release the Liberals said that it wasn't finished and would be released after the election. Nothing to worry about. How convenient the original release date was fine until it was no longer convenient for election purposes. And of course we now get a report from Canadian business woman Moya Greene, who was the onetime CEO of Canada Post and later CEO of Royal Mail where she oversaw its privatization.

That's pretty audacuios to not only openly advocate the hypercapitalist public policy transformation advocated by the World Economic Forum, but to use essentially the same description and language.

Aristotleded24

Aristotleded24 wrote:

jerrym wrote:
What has happened in Newfoundland during and since its election this year shows that a government can do this even during the Covid crisis by initially misleading the people on what it intends to do. It. Liberal Premier Andrew Furey turns out to be Liberal Premier Dwight Ball redux on steroids.  Less than two months after the election where Liberal Premier Furey painted a things are okay going forward and denying that there was a hidden agenda the Big Reset was published. It was supposed to be released on February 27th, after the original February 13th election date, but on the eve of its supposed release the Liberals said that it wasn't finished and would be released after the election. Nothing to worry about. How convenient the original release date was fine until it was no longer convenient for election purposes. And of course we now get a report from Canadian business woman Moya Greene, who was the onetime CEO of Canada Post and later CEO of Royal Mail where she oversaw its privatization.

That's pretty audacuios to not only openly advocate the hypercapitalist public policy transformation advocated by the World Economic Forum, but to use essentially the same description and language.

To make things even more cringeworthy, Trudeau actually used the word "reset" in a recent speech on covid.

Watching recent clips of Trudeau on video, I get a very disturbing vibe from him. It absolutely reminds me of Harper's open contempt for democratic norms and his desire to use authoritarian power whenever he was allowed. With Trudeau, it is exactly the same. Remember that under Trudeau, the Liberals voted for C-51, so that should tell you all you need to know about Trudeau's authoritarian, power-hungry instincts. Unfortunately the "opposition" parties in Parliament are just controlled opposition at this point.

jerrym

ETA: Premier Furey's Liberal government brought down its 2021 budget in the wake of the Big Reset report described above that proposed austerity, extensive privatization of government services, and the threat of government imposed contracts on unionized workers in the public sector. In the other words, the full austerity program driven home with the Shock Doctrine, which is "exploitation of national (or provincial) crises (disasters or upheavals) to establish controversial and questionable policies, while citizens are too distracted (emotionally and physically) to engage and develop an adequate response, and resist effectively." (https://en.wikipedia.org/wiki/The_Shock_Doctrine)

The good news first: in an analysis by the Independent, a reader financed blog, "a better than expected price of oil has generated more revenue and that has decreased the size of the deficit." However, even this projected more than $1 billion increase in government revenue from oil resources leaves the province tied to this highly volatile commidty price, in a world starting to move away from fossil fuels (more about that in later posts). It would have been hard to go full austerity after this unexpected revenue windfall, but the promise of achieving a balanced budget within five years helps lay the groundwork for more austerity in order to achieve this goal. 

The bad news: there are already major austerity measures in this first budget of the new elected Liberal government with more to come. This reminds me of the Chretien Liberal government which started out with relatively mild austerity measures in its first budget, then spent a year grooming the public for ever worse austerity measures, thereby getting many voters to aceept them. 

The Newfoundland and Labrador budget delivered Monday, May 31, reads like a first gentle step on a hike that will gradually get harder as the journey moves forward over fiscal craters, hoping for fair economic growth weather along the way, and gradually dropping the weight of yearly deficits to end with a longed-for view of a revenue surplus expected in 2026-27. The budget documents indicate the province’s net debt is anticipated to reach $17.2 billion in 2021-22. ...

But the Premier’s Economic Recovery Team (PERT), led by Dame Moya Greene, calculated the province’s net debt as gross debt minus financial assets to be $47.3 billion. Greene said the net debt also does not include all of the other financial exposures of the provincial government, nor its entities, including Nalcor Energy, the liquor corporation, and Atlantic Lottery Corporation. ...

Some good news in the budget is that a better than expected price of oil has generated more revenue and that has decreased the size of the deficit. “Revenue projections for 2021-22 are $8.5 billion, an increase of $1.4 billion over 2020-21,” the budget states. “This increase in revenue is primarily attributed to increased oil royalties and additional federal government-related revenues.” Projected borrowing for 2021-22 is $1.7 billion. ...

Finance Minister Siobhan Coady said the budget sets the course to achieve fiscal stability by ensuring the government spends within its means. To enforce that, the province will introduce balanced-budget legislation to ensure current and future governments are held to that requirement. “It reins in and tightens control of the public purse,” she said in her budget speech. ...

Coady said the first intention of the budget is to streamline government services and curb spending before additional tax measures such as increases to the HST would be considered. But she’s not expectinging layoffs. ...

Coady said government is embarking on a process to maintain and improve service delivery through joint solutions, in partnership with business, social enterprises or other organizations.

One item listed is the provincial ferry system. “Ferries in the province are heavily subsidized, some as much as 95 per cent, and costing the people of the province more than $80 million annually,” Coady said. “Clearly improvements are required. Therefore, we will invite joint solutions for a more effective way to maintain and improve the delivery of ferry service, taking into consideration the perspectives of the people who use it.”

Coady said provincial investments in real estate, offshore oil and gas projects, Marble Mountain, and in the Newfoundland and Labrador Liquor Corporation will be reviewed. “These assets are for the benefit of us all,” Coady said. “Considering our financial challenges, we will now start a process to review these assets. The analysis will guide our decisions as to how best to proceed.”

https://www.saltwire.com/atlantic-canada/news/newfoundland-and-labrador-...

jerrym

As I noted in the last post, what is happening in Newfoundland with their grooming the population for more severe austerity measures reminds me of the Chretien and Martin Liberal governments. Part of how they could implement austerity measures far more severe than those of the Mulroney Progressive Conservatives was in part of the public that if the Liberals, as opposed to the Conservatives, are doing this the situation must be really bad. 

 A Newfoundland and Labrador Furey Liberal government implementing austerity must be mean the situation is horrendous. After all, these guys are Liberals, just like Chretien and Martin. The Trudeau Liberals wouldn't do this after the next election, even with the record deficits thanks to Covid. They couldn't possibly be going to do it again, could they, just like Chretien and Martin led a whole Red Book of promises and then implemented austerity.  

This 2015 article tells us how the Liberals under Chretien and Martin implemented austerity. 

How exceptional is Prime Minister Stephen Harper and his crop of Canadian conservatives? For not just large- and small-l liberals, but also some leftists, the last decade has been an aberration — particularly compared to the alleged synthesis between responsible government and economic expansion that occurred during the 1990s. Yet while both public and elite consensus has shifted even further to the right since the ’90s, too often Harper and the current Conservatives are portrayed as an anomaly rather than a continuation.

The ultimate irony of the last two decades of austerity may be that Harper’s Conservatives have been able to rest comfortably on their laurels because of previous attacks on working-class power and livelihoods, even temporarily increasing public spending to save a system in crisis.

While the 1980s had laid some of the groundwork in Canada, the Right’s counterrevolution was not as successful as it had been under Ronald Reagan in the US or Margaret Thatcher in the UK. It was up to Canada’s Liberal Party, the centrist, “natural governing party,” to cement it.

In his 1994 budget speech, Paul Martin — then the finance minister, later the prime minister — encapsulated the Liberal message:

It is now time for government to get its fiscal house in order. For years, governments have been promising more than they can deliver, and delivering more than they can afford. That has to end. We are ending it . . . Over the next three years, for every one dollar raised in new revenues we will cut five dollars in government expenditures.

The subsequent austerity drive was one of the most severe in the Global North, and remains the foundation for the Right’s strategy of death by a thousand cuts. ...

As the 1993 election approached, Canada was just starting to exit its longest recession since the Great Depression, and elites faced the prospect of both populist right-wing upstarts in the West and separatists in Quebec gaining popularity. The mass media stepped in and set a centrist tone, asserting the need for a new “responsible” government. As the Wall Street Journalwarned Canada would soon become a “banana republic,” more than a million Canadians watched a panicky episode of the investigative news program “W5” about New Zealand’s debt.

With the disintegration of the ruling Progressive Conservatives, the Liberals, led by Jean Chrétien, won a resounding electoral victory.

The economic environment the Liberals inherited was a product of the tight monetary policy carried out in the late ’80s. Modeled after Federal Reserve Chairman Paul Volcker’s high-interest approach during the early Reagan years, it was intended not only to dramatically cut inflation, but to restore power to capital. Unemployment jumped from 7 percent to 11 percent. What’s more, the public debt accumulated during the elevated-interest-rate era, as well as during the 1990–92 recession, provided a pretext to reshape Canada’s public sector.

On issues of the economy, much in the Liberals’ 1993 campaign platform was developed with the help of private-sector experts. Billionaire Paul Desmarais Sr, on good terms with large segments of the political class, including both Chrétien and former Progressive Conservative Prime Minister Brian Mulroney, was a mentor to Martin and left his imprint on economic policy of the time as well.

A consensus developed that economic and employment growth on their own would not be enough to get Canada out of the recession. On the other hand, the Liberal experts were not in favor of the restrictive zero-inflation experiments that briefly held influence in the Conservative Party. Thus, monetary policy could be loosened, but the screws would have to be put to fiscal policy in order to make Canada more “competitive” — in other words, to make labor more pliant.

The monetary loosening that followed the early ’90s recession pushed interest rates downward and spurred lagging investment and profits. Low rates also meant the Canadian dollar depreciated against its US counterpart, jumpstarting a lagging export sector. Both profits and investment rose as a percentage of GDP through the late ’90s and 2000s, all the way up to the 2008–9 crisis.

Similarly, starting in 1993 and ending only in 2008, Canada consistently exported more than it imported, accumulating a current account surplus, primarily with the US. Canada was thus further integrated into the US-led global surplus recycling mechanism that Greek Finance Minister Yanis Varoufakis has called the “Global Minotaur.”

This economic pattern paralleled the integration of Canadian elites with their US counterparts. NAFTA, signed in 1992 by Mulroney and implemented in 1994 under Chrétien, was not a case of the US imposing its will on Canada, but rather of large sections of capitalist elites across the continent securing their common interests over the working class in both countries.

Free trade reconfigured coalitions within elites as well as between them and the Canadian state. Of course, some sectors were negatively impacted, but in general the agreement was a win-win for continental capital: rationalized supply chains not only cut costs but put more workers in competition with each other.

This was the context in which the Liberals began their cutbacks, initially quick and deep. A greater share of government expenditures redirected towards debt repayment created additional false scarcity of funds for direct spending. Spending on federal government programs and transfers to provinces, cities, and individuals fell by over 5 percent of GDP from 1993 to the turn of the millennium. Spending growth did not just slow: absolute expenditures decreased.

Reduced fiscal transfers to provinces put the squeeze on local governments. Since the 1990s, Canada has seen provincial governments — not just governed by Liberals and Conservatives, but also by New Democrats — impose austerity further down the line. Since provinces are responsible for many basics like health, education, and welfare benefits, shrinking transfers have further eroded the working class’s social wage. Privatizations, workfare schemes, tuition increases — all were applied (unevenly) across the country.

Overall, the sharp turn to austerity created a more punitive welfare state. While Canada’s economic growth in the mid to late ’90s fed off that in the US, the character of its reforms was also in line with the Clintonite agenda. There was a similar push to create conditions for business expansion even less encumbered by working-class demands. A major strategy was an attack on the social wage. ...

One major social program that is the responsibility of Canada’s federal government — and provides a good example of the transformations wrought by austerity — is unemployment insurance. The Liberals ate into the real value of benefits and made eligibility requirements more restrictive. While just over 80 percent of Canada’s unemployed received jobless benefits during the early 1990s, this percentage fell to about 45 percent by the early 2000s. Most unemployed workers no longer received any benefits. ...

The OECD’s measure of real unit labor costs grew at an average rate of just 0.5% per year between 1993 and 1999 and 2.1% in the first decade of the 2000s, both down from an average of 6.6% over the previous two decades.

Decreased labor costs were reflected in stagnant real wages for most workers throughout the ’90s and 2000s. The depreciating Canadian dollar further cut into wages with higher prices for imported consumption goods. Finally, the social wage provided by public programs and transfers fell under Martin’s austerity budgets.

How was austerity mitigated once the ’90s boom ran out of steam? In short, debt and housing wealth. The fall in government borrowing as a result of Liberal deficit-fighting was offset by a rise in household borrowing, reducing the public debt but increasing private debts. (Rolling back the welfare state means more people borrow to stay afloat and spend more on basic services.)

As in many parts of the world, including the US and the UK, Canada’s housing sector took off after the 2000 bust. This divided the working class. For those who owned homes, housing became a crutch, a valuable asset to borrow against or downsize, making up for the lower social wage and stagnant incomes left after the ’90s expansion. For those who did not own a home, rising prices and rents became a further source of daily struggle. ...

The 1990s in Canada are often held up as an example of “expansionary austerity” — austerity that is not only accompanied by but causes growth. If this sounds a bit nuts, it is. In fact, even economists from the International Monetary Fund have thoroughly debunked the idea: the growth that occurred during most of bouts of “expansionary austerity,” including Canada during the Liberal-led ’90s, would have happened anyway.

Indeed, crediting austerity for sparking Canada’s 1990s growth ignores several factors: first, Canada benefited from strong US expansion, especially given the strength of export growth; greater integration through NAFTA only solidified how closely Canada followed the US boom of the mid- to late ’90s. Second, fiscal austerity was accompanied by an aggressive monetary loosening that resulted in low interest rates and a depreciation of the exchange rate; alongside more flexible labor policies, these improved profits, investment, and growth. Resource booms also played a role in driving wage growth and reducing unemployment in some regions. ...

The austerity implemented by the Liberals, starting with the 1994 budget, helped shift the political consensus sharply to the right. The Conservatives, riding a wave of public resentment against the Liberals due to corruption scandals, were first elected to a minority government in 2006. After five years of governing with the tacit support of the Liberals, the Conservative Party finally gained a majority in 2011.

https://www.jacobinmag.com/2015/04/canada-austerity-stephen-harper-conse...

jerrym

Below is a 2020 article that further updates the picture on austerity by also discussing the Covid pandemic. By making cuts in transfer payments to the provinces as their main austerity vehicle, Chretien and Martin were able to transfer much of the ire of the public over the cuts to the provinces.  Could the Trudeau Liberals do this again?

The following article also discusses how the Chretien and Martin cuts made the Covid pandemic worse by leaving our health care system underfunded, and how social housing cuts fueled our housing crisis as well as how federal health care cuts heavily impacted provincial education spending.

The history of the Liberal government of Jean Chrétien and his finance minister Paul Martin is often framed as one of rescuing the Canadian economy from a growing government debt load. It consciously forgets the reduction in unemployment insurance, the elimination of rail subsidies, and the cuts to the CBC. The deficit has remained a political and media obsession ever since Chrétien’s time in power, but that focus ignores the social costs of his and Martin’s agenda and how cutting federal spending created an escalating crisis on the provincial and municipal levels—not to mention fuelling growing levels of household debt.

The COVID-19 pandemic has forced Canadians to reckon with the growing social problems in our society, which are, in part, the product of an underfunded welfare state. From the lack of hospital beds and public housing units to the lack of access to unemployment insurance and other social supports, these problems are not new; they have simply been easy to ignore while the going was good for many Canadians. These programs were not adequate even before the Chrétien years and cuts had already begun under Brian Mulroney’s Progressive Conservatives, but the Chrétien-Martin austerity budgets of the mid-1990s were a significant turning point for the Canadian welfare state. ...

The Conservatives might try to claim the mantle of small government, but it was under Chrétien that, according to William Watson, federal spending was cut, “not just in real terms, after inflation is accounted for, which is rare enough, but also in nominal terms, something that had not been seen since before the Second World War.” That was achieved through significant rollbacks in social spending by the federal government, particularly through the unilateral reorganization of health and social transfers to provinces, which administer much of the Canadian welfare state. ...

Before Chrétien, the federal government would share the cost of social assistance programs administered by provincial governments, along with providing funding for provincial health care systems. However, the Liberals replaced that with a series of block grants called the Canada Health and Social Transfer. In the words of Michael J. Prince, a contributor to The Chrétien Legacy, this “delivered … sudden and deep absolute cuts in transfer payments to the provinces,” where “1993 levels of federal spending on health care were achieved again only in 2004, following Chrétien’s retirement.” In the same book, historian Gerard W. Boychuk explains that this change in how the federal government funded social programs meant that the “shortfall in cash transfers … by the time Chrétien left office was over $26 billion in 2003 dollars.” That’s money that was taken out of provincial budgets for health care and social spending to reduce the federal deficit—and it’s had real consequences for Canadians. ...

As the threat of COVID-19 became apparent, governments realized a shortage of hospital beds and ventilators could mean the difference between life or death for people infected with the virus. Since the Chrétien years, however, both the total number of hospital beds and the number of acute beds per 1,000 inhabitants has steadily fallen. It has reached the point that Canada ranks near the bottom of OECD hospital-bed rankings. Boychuk writes the cuts to health spending created “the illusion of health care as a rapidly growing fiscal burden relative to the ability of governments, as a whole, to bear this burden.” ...

Through the 1960s and 1970s, the federal government expanded the Canadian welfare state, including providing support to provincial governments for public, cooperative, and non-profit housing. However, in the 1980s Mulroney scrapped the support for cooperative housing, and Chrétien followed by withdrawing the federal government from social housing entirely in 1993, making it the responsibility of provincial and municipal governments. But given the additional financial pressures placed on the provinces by the federal government, many responded by cutting their own support for social housing, including in Ontario and Alberta. ...

In The Chrétien Legacy, University of Ottawa professor Caroline Andrew writes that the cuts to social programs by the Chrétien government, “particularly the elimination of social housing as a federal activity, has been one factor in the increased polarization within Canadian cities and the deterioration of conditions for vulnerable and marginalized groups.” For a long time, the increase in homelessness has been accepted, but as the pandemic hit Canada, it became clear to many more Canadians that having so many people living on the streets is a collective failure.

Across the country, governments have been housing more of the homeless people in their cities—but that only became a problem because they were neglected for so long. The federal government introduced the Canada Emergency Response Benefit (CERB), in part because the limits placed on Employment Insurance since the Chrétien years have made it too difficult to access for many Canadians (and low payouts would be unlikely to cover their bills). But even the CERB required Canadians to have had previous income and a job, locking out those experiencing long-term unemployment. ...

Nearly three decades after Chrétien and Martin gutted federal support for the Canadian welfare state, the pandemic has made it clearer than ever that was a mistake. A federal role in health and social programs is necessary not only to make sure they are adequately funded, but also to be certain that the quality of programs and services is maintained across the country. And while provincial and especially municipal governments face ever more revenue constraints, the federal government does not have the same limitations, as its response to the crisis has shown.

Instead of continuing to abandon the welfare state and the vulnerable Canadians who most rely on it, this must be a moment for the federal government to step back up the plate and reassert itself. To build a more equitable society, the federal government should finally expand public health coverage to include pharmacare, something Chrétien promised to do all the way back in 1997, along with dental, vision, long-term care, and other health care services. With the pressures placed on provinces, much of the funding for that expansion should come from the federal government.

https://canadiandimension.com/articles/view/jean-chretiens-austerity-mad...

jerrym

Another Liberal party that often failed to get a full critical analysis of its real agenda and its implementation of austerity is the Ontario Liberal party. While the Liberals did implement some social issue reforms, there was a continuity in many ways with the Ontario Progressive Conservative regime on the fiscal side of the ledger. 

Hmm. There, looking at this series of Liberal governments, seems to be a pattern forming here. 

There is an emerging orthodoxy, rooted more in fiction that fact, that the 15-year regime of the Ontario Liberals somehow swung the ideological and policy spectrum sharply to the left. But this is a gross misinterpretation of actual history. While the Liberals did indeed implement a hodgepodge of policies that might selectively register as 'progressive', their time in power was never about a wholesale repudiation of the Common Sense Revolution but rather about deepening and extending it in ways that were more palatable to a public increasingly fed up with the uncompromising and aggressive style of their Conservative predecessors. In other words, it was continuity, not change, that defined the Liberals time in power.

Those at the centre of this historical reimagining are increasingly recasting the Liberals time in government as an extreme left interregnum inconsistent with the 'progressive' conservative values of Ontario. They point to all day kindergarten, the expansion of prescription-drug and dental benefits, the subsidization of tuition fees for some postsecondary students, proposed pension reform, modest increases to high-income earners' taxes, changes to labour legislation, and some investments in new infrastructure and social programs as key illustrations.

But these new investments barely made up for inflation and population growth, let alone a reversal of the fiscal legacy of the Harris Conservatives....

Through their first term (2003-07), modest savings were made through the privatization of services formerly covered by OHIP like chiropractic therapy, physical rehabilitation and optometry exams. The McGuinty government also spearheaded the expansion of private health care clinics, introducing a graduated health care premium that ranged from $60 to $900 per year depending on income level. But this was the calm before the storm.

The "crowing irony" for the Liberals was that after a decade in power they had succeeded in cutting the size of government down to when they had taken over from their Conservative predecessors.

As the tailwinds of the 2008 recession swept across Ontario, the Liberal government responded with a plan outlining a decade of austerity. The major policy plank of this program was the Open Ontario Plan (OOP), which called for, among other things, tax relief, the privatization of public assets and services, and wage concessions from public sector workers. To give a few examples, the general corporate income tax (CIT) rate was cut 28 per cent, the preferential small business CIT rate was cut 36 per cent, and the tax rate on the first $37,106 of personal taxable income was reduced by more than 16 per cent, while those earning up to $80,000 per year saw a tax cut of 10 per cent. Altogether, tax cuts during this time eroded some $500 million in annual revenue generation making Ontario's tax regime among the lowest across the OECD.

The omnibus Open for Business Act introduced over 100 amendments to legislation across ten ministries whose stated objective was to create a more competitive business climate. The Liberals solicited CIBC World Markets and Goldman Sachs to come up with a plan to monetize the province's $60 billion worth of public assets. The idea behind "SuperCorp" was to combine Ontario's Crown assets, including nuclear power plants, power generation facilities, 29,000 kilometres of electrical transmission and distribution lines, six-hundred plus liquor stores and gaming operations.

The Liberals also established the Commission on the Reform of Ontario's Public Servicesheaded by former TD Bank chief economist Don Drummond. The Commission recommended cuts deeper than those of the 1990s followed by the sale of public assets and privatized service delivery. In following through on some 80 per cent of the Drummond Commission's recommendations, the Liberals eroded an additional $300 million in public revenue by 2015-16. The "crowing irony" for the Liberals was that after a decade in power they had succeeded in cutting the size of government down to when they had taken over from their Conservative predecessors. ...

Kathleen Wynne emerged as new party leader and Premier of Ontario, positioning herself as the "social justice" and "activist" premier against the old guard. In practice, however, much of the Harris-McGuinty legacy continued. Public-private-partnerships proliferated, even though the Auditor General found that Ontario could have saved up to $8 billion through traditional public procurement. Premier Wynne launched a blue-ribbon panel headed by president and former CEO of TD Bank, Ed Clark, to advise the government how to privatize public assets such as the OLG and LCBO, which together bring in more than $4.5 billion annually.

Catching her own party off guard, Kathleen Wynne kickstarted the asset sell-off with Hydro One, which was estimated to bring in close to $750 million in annual public revenue. Under Wynne's plan, the Liberal's sold-off 60 per cent ownership stake bringing in roughly $4 billion in one-off monies while maintaining a 40 per cent public ownership. The FAO found that the sale of Hydro one was roughly equivalent to five years of continued public ownership. ...

Far from progressive public policy, it has been tax cuts and austerity that has prevailed in Ontario over the last decade. Little wonder then that Ford and Co. have stoked the fires of deficit hysteria given the reluctance of the Liberals to deal with the revenue side of government expenditures. The reality is that when it comes to the provinces context matters, perhaps more than anywhere else in the world.

2018's election saw Wynne herself boasting that Ontario was now "the leanest government in Canada" when it came to per capita program spending. What wasn't mentioned though was that among the provinces, Ontario was dead last when it came to per capita public revenue, second smallest when it came to the per capita size of Ontario's public sector as measured by employees, and second-lowest in North America (after Alabama) when it came to corporate tax rates.

https://www.huffingtonpost.ca/carlo-fanelli/progressive-liberalism-ontar...

bekayne

jerrym wrote:

On issues of the economy, much in the Liberals’ 1993 campaign platform was developed with the help of private-sector experts. Billionaire Paul Desmarais Sr, on good terms with large segments of the political class, including both Chrétien

https://www.jacobinmag.com/2015/04/canada-austerity-stephen-harper-conse...

"On good terms"? They were in-laws!

jerrym wrote:

The austerity implemented by the Liberals, starting with the 1994 budget, helped shift the political consensus sharply to the right. 

https://www.jacobinmag.com/2015/04/canada-austerity-stephen-harper-conse...

I think that's backwards. The 1995 budget was a response to a shift to the right.

Aristotleded24

bekayne wrote:

jerrym wrote:

On issues of the economy, much in the Liberals’ 1993 campaign platform was developed with the help of private-sector experts. Billionaire Paul Desmarais Sr, on good terms with large segments of the political class, including both Chrétien

https://www.jacobinmag.com/2015/04/canada-austerity-stephen-harper-conse...

"On good terms"? They were in-laws!

jerrym wrote:

The austerity implemented by the Liberals, starting with the 1994 budget, helped shift the political consensus sharply to the right. 

https://www.jacobinmag.com/2015/04/canada-austerity-stephen-harper-conse...

I think that's backwards. The 1995 budget was a response to a shift to the right.

And at the time Stephen Harper, of all people, praised this change in direction for public policy.

jerrym

bekayne wrote:

jerrym wrote:

On issues of the economy, much in the Liberals’ 1993 campaign platform was developed with the help of private-sector experts. Billionaire Paul Desmarais Sr, on good terms with large segments of the political class, including both Chrétien

https://www.jacobinmag.com/2015/04/canada-austerity-stephen-harper-conse...

"On good terms"? They were in-laws!

jerrym wrote:

The austerity implemented by the Liberals, starting with the 1994 budget, helped shift the political consensus sharply to the right. 

https://www.jacobinmag.com/2015/04/canada-austerity-stephen-harper-conse...

I think that's backwards. The 1995 budget was a response to a shift to the right.

The full first quote is  "Billionaire Paul Desmarais Sr, on good terms with large segments of the political class, including both Chrétien and former Progressive Conservative Prime Minister Brian Mulroney, was a mentor to Martin and left his imprint on economic policy of the time as well." What it shows is the incestuous relationship of  political and business elites at the time. 

Whether Chretien initiated a major shift further to the right or followed the zeitgeist there is debatable. What is not debatable is that he, Martin and the Liberals went far further than the Mulroney Conservative government did moving from spending restraint to strong austerity: " Billionaire Paul Desmarais Sr, on good terms with large segments of the political class, including both Chrétien and former Progressive Conservative Prime Minister Brian Mulroney, was a mentor to Martin and left his imprint on economic policy of the time as well." Martin himself said "It is now time for government to get its fiscal house in order. For years, governments have been promising more than they can deliver, and delivering more than they can afford." (https://www.jacobinmag.com/2015/04/canada-austerity-stephen-harper-conse...)

What is also not debatable is the severity of the cuts and the damage they did to the social fabric: "The subsequent austerity drive was one of the most severe in the Global North ... A greater share of government expenditures redirected towards debt repayment created additional false scarcity of funds for direct spending.Spending on federal government programs and transfers to provinces, cities, and individuals fell by over 5 percent of GDP from 1993 to the turn of the millennium. Spending growth did not just slow: absolute expenditures decreased. ...While just over 80 percent of Canada’s unemployed received jobless benefits during the early 1990s, this percentage fell to about 45 percent by the early 2000s. Most unemployed workers no longer received any benefits. ...Since provinces are responsible for many basics like health, education, and welfare benefits, shrinking transfers have further eroded the working class’s social wage. Privatizations, workfare schemes, tuition increases — all were applied (unevenly) across the country." (https://rabble.ca/babble/canadian-politics/austerity-shock-doctrine-newf...) Social spending as a percentage of GDP fell from 20.35 percent in 1993, to 18.35 percent in 1995, eventually falling to 16.94 percent in 1997 and 15.76 percent in 2000. ...The government began a program of deep cuts to provincial transfers and other areas of government finance. The cuts resulted in fewer government services, most noticeably in the health care sector, as major reductions in federal funding to the provinces meant significant cuts in service delivery. Moreover, the across-the-board cuts affected the operations and achievement of the mandate of most federal departments." (https://en.wikipedia.org/wiki/Jean_Chrétien)

The Ontario Liberals during their 15 years in office from 2003 to 2008 were involved "the privatization of services formerly covered by OHIP like chiropractic therapy, physical rehabilitation and optometry exams. The McGuinty government also spearheaded the expansion of private health care clinics, introducing a graduated health care premium that ranged from $60 to $900 per year depending on income level." They then implement a decade of austerity involving "tax relief, the privatization of public assets and services, and wage concessions from public sector workers. They implemented ...tax relief, the privatization of public assets and services, and wage concessions from public sector workers ... [that] succeeded in cutting the size of government down to when they had taken over from their Conservative predecessors. [All of this meant] Ontario was dead last when it came to per capita public revenue, second smallest when it came to the per capita size of Ontario's public sector as measured by employees, and second-lowest in North America (after Alabama) when it came to corporate tax rates. (https://rabble.ca/babble/canadian-politics/austerity-shock-doctrine-newf...)

And now they Furey Liberal Newfoundland government is heading down a similar path. The question also arises as we hopefully near the end of the Covid-19 crisis whether we will see other Liberal governments do the same thing after they get elected, claiming they have to do it to deal with the debt generated in the fight against Covid.