Two recent stories out of Ottawa underline the ongoing political and economic assault on ordinary Canadians. More Canadians are now working for low wages than at any time in decades, continuing a trend that began in the early 1990s, and Stephen Harper has announced major changes to retirement benefits — including delaying Old Age Security(OAS) eligibility to age 67. What kind of society beggars those of its citizens who worked all their lives and now want to retire in dignity while privileging the rich and super-rich by slashing their income taxes and allowing them to transfer their wealth to their children untouched?

Since the mid-1980s, and accelerating with the signing of the Canada-U.S. “free trade” deal, the guiding principle of neo-liberalism seems to have been, “Ask not what your economy can do for you, ask what you can do for your economy.” This re-framing of the relationship between the economy, society and democracy has been largely successful with most Canadians accepting this personification of the economy and willing to adjust their lives to accommodate it. The economy is now defined as the narrow interests of global corporations. The old notion that economy should serve the national interest and that of workers and their communities now seems almost quaint.

But the results of this re-making of the world of work are increasingly disastrous for working people and the economy — even using capitalism’s own measures. Capitalism has to grow just to survive and the fact that the biggest firms in Canada are sitting on up to half a trillion dollars of cash that they cannot or will not invest does not bode well for growth. Ultimately that’s a good thing as the obsession with growth is at the root of climate change and the rapid depletion of resources. But until we have governments which recognize this, we are all trapped in a growth paradigm and suffer when it fails.

Yet there is precious little recognition that deregulation and the endless promotion of the interests of capital are at the root of the problem. The half trillion in unusable capital represents part of the distortion of the economy caused by policies of labour flexibility and the suppression of wages and salaries. That much and more has no doubt been accumulated by the wealthy as their share of annual income continues to grow — from 7 per cent in the 1970s to close to 15 per cent today (just above the level of 1929). Like the cash-bloated corporations, the wealthy will only spend so much — the rest gets squirrelled away in stocks and bonds.

This inequality train is picking up speed, according to the OECD, which in a recent study pointed out not only that the wage gap here is at a record high (and well above the 34-country OECD average) but acknowledged its impact on stable economic recovery. Nations with high levels of income inequality experience shorter, less sustained periods of economic growth.

But neo-liberal ideology is immune to rational analysis and mere facts. There is no interest shown by governments or corporations in the question of inequality. The federal government is set to fire some 30,000 federal public employees (How many will end up “self-employed”?) and Caterpillar Inc. feels completely at ease demanding an almost 60 per cent roll-back in wages and benefits at its Electro-Motive plant in London.

So having succeeded in giving capitalists everything they asked for (and some things they didn’t ask for) what do we have? Keep in mind that the object of consumer capitalism is to sell stuff. It seems that the captains of industry have forgotten this. But while the advertising and marketing of more and more stuff goes on apace, the facts facing working- and middle-class families paint a totally unsustainable spending picture: some 60 per cent of wage and salary earners state that they are one pay-cheque away from financial insolvency; the Canadian savings rate is the lowest it’s been for decades; the debt to income level is the highest it’s ever been as people try to maintain their standards of living through borrowing; the net real increase in average pay between 1980 and 2005 was a grand total of $51.

And, of course, the criminal greed of the financial industry is still threatening the world economy. Its aftermath here has resulted in Canadian un- and under-employment which averaged 10.6 per cent in 2011, and for youth aged 15-24, a brutal 19.7 per cent.

But it is not just private sector income that has declined. The social wage — public services provided by our taxes — has also been dropping thanks to labour flexibility policies and spending cutbacks. Cuts to EI eligibility and social assistance were made in the mid-1990s on the unsupported assumption that they provided a disincentive for workers to work. By 2005 a quarter of Canadian workers were putting in 50-hour weeks, often for no extra pay. Again, these measures enhanced the corporate bottom line and filled corporate coffers — with the money they now can’t invest because there is no new demand.

The rationale for these policies in the 1990s was to enhance Canada’s competitiveness in its trading relationship with the U.S. Indeed, Paul Martin made it clear that pushing international trade was the country’s only economic development strategy. But when the country you want to export to is pursuing the same policies of driving incomes down, exports decline just as domestic consumer spending does.

There is a solution to this ideological insanity, but don’t hold your breath for any Canadian government, federal or provincial, to implement it any time soon. If private capital refuses to invest because its policy preferences have snuffed out demand then governments must do two things. First, they must reverse labour flexibility policies and return the social safety net to at least its previous state. This goes beyond providing dignity for ordinary Canadians. For tens of thousands of small and medium businesses it actually means more money being spent in their stores.

Secondly, if the private sector refuses to invest the money they have accumulated (with the help of government policies) then this is the time to massively increase public investment. This cannot simply be temporary stimulus but a permanent policy shift back towards a coherent and creative — and high wage — industrial policy that directs the economy rather than assuming allocation of capital can only be done by the market.

Public investment must also bring back some dignity to working people in the form of child care, home care, pharmacare and accessible post-secondary education — all measures that would also enhance the economy.

Public investment could also begin address the crisis of over-production by gradually exploring a long-term de-growth strategy (including a different kind of growth) which addresses climate change and the rapid depletion of resources that scientists tell us is threatening the planet. Only by radically reducing the role of private capital can such an outcome even be imagined.

Murray Dobbin is a guest senior contributing editor for rabble.ca, and has been a journalist, broadcaster, author and social activist for 40 years. He writes rabble’s bi-weekly State of the Nation column, which is also found at The Tyee. He is the curator of rabble’s Reinventing democracy, reclaiming the commons series.

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Murray Dobbin

Murray Dobbin was rabble.ca's Senior Contributing Editor. He was a journalist, broadcaster, author and social activist for over 40 years. A board member and researcher with the Canadian Centre for Policy...