Canada’s Economic Existential Crisis

A New Direction for the Economy

Part One: Problems in the Manufacturing Sector

A modern economy is a complicated organism. Without all its parts functioning in harmony, the organism collapses in crisis. Canada’s economy cannot survive and meet the needs of the people when any one or more of its basic sectors are not in good shape. With this in mind, the consistent downturn in Canadian manufacturing for several decades, amongst other issues, is signalling that the economic organism is in serious trouble and needs repair and a new direction.

No one would argue that a heart attack must be addressed with medical care or otherwise the patient may die. The heart attack requires scientific medical attention. The patient may need radical medical intervention and a conscious new direction in lifestyle to repair the damage to the heart and guarantee survival.

The economy is our most precious collective asset serving the well-being of the people and their security and survival. The data on Canada’s manufacturing sector indicate the economic organism is suffering something similar to a heart attack that requires scientific care and intervention, and a conscious new direction to repair the damage if it is to survive.

Austerity Is Not a Solution

In the face of the economic problems, the neo-liberal calls for austerity are not solutions; the people cannot consider austerity a serious proposal. Austerity and its measures to attack the well-being of the people and the economy arise both from a subjective desire on the part of the owners of social wealth to retain their hold on power and class privilege and from the objective conditions of the concentration of wealth and power in fewer hands. Owners of social wealth use their power, control and class privilege to serve narrow private interests rather than deal with the problems faced by the economy in a broad, objective and scientific manner.

The owners of social wealth want their private interests protected and served, and dominate the state institutions to fulfil their aim. They do not see or want to see the organic connection between their particular problems and those in other sectors of the economy. They do not want science and the human factor intervening with remedies for any part of the economy that may be seriously sick and affecting the whole. Public meddling in the economy with real solutions that restrict monopoly right is unjustified they say, because it interferes with their private ownership of the various parts of the overall organism and their aim to send privately-controlled social wealth all over the world in search of the greatest returns. The organs of the economy and its social wealth are owned privately, the neo-liberals bleat, and should serve private interests not public interests. Those different parts or organs have to fend for themselves. Privately-owned social wealth demands the highest return without any broad view for the health of the whole. Privately-owned and controlled social wealth does not want restrictions on monopoly right nor any application of private social wealth to solve economic problems or those of society.

If the heart or the liver fails, to use an analogy, the body will just somehow carry on without it goes the neo-liberal refrain and fantasy. Of course, this would be ridiculed if it pertained to a human organism but somehow justified and given serious consideration when dealing with our most precious collective asset, our economic organism. This has to change; our lives depend on our brains analyzing and intervening to cure the collective economy and its interrelated parts, and set the whole on a new consciously pro-social direction. Real problems require real solutions not monopoly right and its demand for austerity that just makes the situation worse.

Manufacturing Sector in Consistent Decline

An item in Blacklock’s Reporter, entitled “End Of The Factory ‘Heyday'” reports, “Canada has lost so many bread-and-butter factory jobs it’s flattened incomes for the entire middle class, says the country’s former chief statistician. The research follows a bleak Employment Canada report that concluded ‘the “Canadian dream” is a myth’ for millions of households.

“Factory closures in the past sixteen years have cost nearly 477,000 jobs that paid under $12 an hour, according to a report by the University of Calgary’s School of Public Policy. ‘This was the heyday of the low-wage model of Canadian manufacturing when a low Canadian dollar fuelled rapid growth in low-wage industries such as textiles, clothing and furniture,’ said the report Caught in the Middle.

“The research noted only high-paying manufacturing work, with wages over $20 an hour, has grown since the 1990s. […]

Caught in the Middle said the loss of hundreds of thousands of jobs disproportionately hurt factory workers with ‘lower skill and education’ — typically high school graduates — resulting in lower middle class income overall: ‘Growth in middle class incomes in Canada has not kept pace with growth in higher incomes over the past three decades.’

“‘In the post-war era people with only a high-school education had a chance of factory employment at average pay,’ the study noted; ‘The largest source of downward pressure on middle-class incomes has been the decline of Canada’s manufacturing industry.’ […]

“Statistics Canada earlier reported that, for the first time, retail sales eclipsed manufacturing as the nation’s leading job creator in 2013.”

The relative growth of the retail sector means more than just replacing low-paying manufacturing jobs. Retail jobs are notoriously insecure and without benefits. Also, anecdotal evidence from the working class in industrial areas would dispute the findings that only low-wage manufacturing jobs have disappeared. Factory after factory with jobs paying over $20 per hour have closed. Some of those lost jobs in the basic industries of steel, auto, forestry manufacturing, heavy industry and food production may have been replaced with an increase in high tech manufacturing, especially in research and development and in construction of energy projects and condos. This possibility does not change the reality for thousands of workers in higher-paying manufacturing jobs who have lost their livelihoods and have not found new employment in similar paying jobs for various reasons, one of which is simply location.

Apart from the individual pain from loss of livelihood, the transfer of higher paying manufacturing jobs from one sector to another combined with absolute losses in the low-wage manufacturing sector have pushed down the relative strength of manufacturing within the economy and the value workers produce. The decline in manufacturing is a factor in intensified and longer-lasting economic crises.

This series of articles will explore the decline of manufacturing and compare it with the relative rise in importance of the resource, financial and retail sectors. The lack of development of a harmonious all-sided economy rooted in internal exchange with vibrant manufacturing, resource extraction and construction sectors, and public services and social programs to meet the needs of the people and economy does not bode well for Canadians’ security and well-being, and may well pose an economic existential crisis.

“Are Canadian Factory Doors Being Locked for Good?”

An item in PressProgress also notes the long-term downturn in the manufacturing sector. The article called “Canadian manufacturing jobs plummet to near record low: Statistics Canada” asks, “Are Canadian factory doors being locked for good? The country lost 20,000 manufacturing jobs in February — the single-largest decrease in any sector. This plunge drove total employment in manufacturing down to 1,690,700 — the second-lowest level ever recorded by the Statistics Canada Labour Force Survey, which dates back to 1976. […]

“United Steelworkers economist Erin Weir explains: ‘Many had hoped that lower energy prices and a lower exchange rate would boost manufacturing. While no one expected these factors to instantly create more manufacturing jobs, it’s hardly encouraging that manufacturing employment is now pushing a record low. A possible explanation is that Canada allowed its manufacturing capacity to erode so much in recent years that it will take not only time, but also supportive public policy, to rebuild.’

“According to Weir’s analysis of StatsCan data, Canada’s manufacturing employment levels have only dipped below 1.7 million during six months since 1976 — the lowest month being 1,689,200 in October 2011.

“The new Labour Force Survey is reinforced by RBC’s latest Canadian Manufacturing Purchasing Managers’ Index — a comprehensive indicator of manufacturing sector trends — which, in March, recorded its lowest level in the history of the survey.

“Craig Wright, chief economist of Royal Bank of Canada, told the Globe and Mail, [manufacturing] ‘staffing levels have now declined for two months in a row, and the rate of job shedding accelerated to its fastest pace in almost 4 ½ years.’ […]

“Last October, Bank of Canada governor Stephen Poloz gave Canadians a “national the-dog-has-died-talk,” explaining that capacity in the manufacturing sector ‘has simply disappeared’: ‘Permanent structural damage has been done. It can’t be rebuilt, it needs to be replaced — and that’s a harder, longer, less certain task. It’s why the Bank of Canada is so adamant about the importance of getting businesses back investing in new capacity — that’s how we replace what we’ve lost.’

“But the latest numbers indicate that rebuilding the sector might not happen without concerted political will, money and time: As Canadian Labour Congress economist and Broadbent Institute fellow Angela MacEwan points out: ‘Most surviving manufacturing exporters are still operating at or below capacity… This permanent loss of capacity isn’t truly permanent, we can rebuild, but doing so will take more time, and will wait until conditions are much more certain. This has disastrous consequences for workers.'”

(Next: Part Two — What Statistics Canada Says About the Downturn in Canadian Manufacturing)

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