Labour Party’s resurgence will have impact beyond Britain, says STU professor

Written by NB Media Co-op on June 15, 2017

Matthew Hayes, Canada Research Chair in Global and International Studies. Photo by Jacqueline Cormier/St. Thomas University.

Matthew Hayes is a Canada Research Chair in Global and International Studies, and a member of the editorial collective of the NB Media Co-op. His current research as a member of St. Thomas University’s Department of Sociology looks at North American migration to Ecuador, and its impact on receiving communities. North American retirees seek out Latin American destinations as a low cost alternative, enabling them to retire despite financial insecurity. He has argued that Western liberal democracies are being strained in new ways by growing inequalities.

NB Media Co-op: What significance does the British election have in New Brunswick?

On the surface, the 2017 British General Election has no significance in New Brunswick, but symbolically, its impact is perhaps larger than any British election since 1945—and for once in the last two years, the results are hopeful for the future.

What is clear is that over the last decade, a substantial segment of the electorate in Western liberal democracies—including in New Brunswick—has grown tired of austerity politics: social spending cuts and low tax environments that favour private business.

Those policies have led to the re-emergence of far-right and racist parties in much of Western Europe, the election of Donald Trump in the United States, and Christian-fundamentalist nationalism in parts of Canada. These political movements prey on the dashed hopes of working people, whose opportunities are drastically diminished by the same austerity policies the establishment—the media elites, the political party bosses, and owners of big businesses—promotes and benefits from.

Since the 1980s, a growing number of social democratic political movements in the Western democracies have abandoned redistributive policies, seeing it as politically untenable. Politicians like Tony Blair and Bill Clinton have instead supported the policies of the establishment consensus. Corbyn’s success as Labour Party leader in the British elections marked an end of the neoliberal compromise, and a return to social democratic policies.

NB Media Co-op: Where did this neoliberal consensus come from and what were its effects?

In the post-war period, there have been two main policy goals in capitalist countries: price stability and full employment. Both objectives are important and advantageous to everyone, but unemployment and inflation affect different social classes differently. These two main goals are highly political, and establishment interests have successfully de-politicize them since the end of World War II, to the advantage of owners of large private companies.

At the end of the war, Western governments coordinated economic activity, prioritizing high employment. But this began to change in the late 1970s, when the U.S. Treasury increased interest rates to tame inflation, forcing its allies to follow suit, or be crippled by exchange rate depreciation. The political problem of fairness for all was transformed into a technical problem of keeping consumer prices low—including the price of labour, which was very important to corporations. Low inflation had always been an important policy goal, but it affects different groups differently. Higher inflation is particularly problematic for private banks, and the interests that own them, since it reduces the predictability of profits.

From 1979 onward, the key goal of Western democratic governments was to tame inflation—the consensus sometimes referred to as ‘monetarism’ or ‘neoliberalism.’ But the cost of this has been rising unemployment. In order to prevent unemployment from running away, governments aimed to create more competitive business environments, which would support private sector job creation. In the US, the Reagan government stimulated employment by going on a massive military spending spree. This worked, but only to an extent. In the Western democracies, cyclical waves of unemployment have trended higher than they were in the 1945-1975 period. And this has been coupled with a less secure job environment, even for highly skilled workers.

Employment in lower income countries has, in general, been much worse, since there is a longer tradition of informal, low-paid work, which has not been appreciably reduced despite six decades of international commitment to ‘development.’ The costs of low employment growth have been born by less skilled workers in the Global South, contributing to higher rates of migration to North America and Western Europe. Meanwhile, the austerity measures (spending cuts) imposed by Western institutions in ‘developing’ countries destroyed social infrastructure (health care, education) that might have contributed in the longer run to higher skilled labour forces. Austerity significantly increased poverty rates in some countries, led to lost decades of development (the 1980s and 1990s) and spread despair amongst vulnerable populations. This had predictable effects: in most cases, it led to diverse forms of social violence.

NB Media Co-op: What consequences has the shift from high employment to low inflation had in Canada?

In Canada, following a period of deep social spending cuts to balance the budget, the shift to low inflation rates enabled the banks to drop interest rates to historically low levels. From the late 1990s, inflation was essentially tamed and during the Chrétien-Martin years Canada experienced relatively high levels of growth (the highest of the neoliberal period) on the back of a credit boom.

We know how this credit boom played out south of the border: credit was extended excessively fueling a speculative housing bubble, which popped in 2007-08, dragging the banking sector down with it. It nearly wrecked the global economy, and only public bailouts of the banks saved the day (in practice, governments borrowed money from private banks in order to prevent them from defaulting on their private, speculative debts). The cost of the bailout has diminished growth and prevented the public sector from stimulating infrastructure renewal, energy transitions or social policies that share the benefits of industrial growth. Moreover, the loans for the bailouts have to be paid back—effectively a transfer of public money to private banks.

Canada managed to dodge the worst effects of the 2008 crisis, and Chinese stimulus boosted demand for raw materials that sustained the recovery here. However, historically low interest rates continue to stimulate private mortgage lending—rates that can’t be increased now without threatening the viability of hundreds of thousands of mortgages, and potentially the profitability of Canada’s powerful private banks (RBC, BMO, , Scotiabank, TD and CIBC).

While the boosters of this economic model depict the expansion of credit as ‘innovative’ and argue that it has been the most efficient allocation of resources, this is patently untrue. Low interest rates have stimulated the Canadian housing sector in ways that have produced terrible inefficiencies. Banking profitability is now increasingly speculative, rather than productive. This is clear in the housing market, where even private individuals stand to make much more speculating in real estate than they ever could through their wages alone.

Moreover, the types of homes that Canadians can afford are usually on the edges of cities, where building costs are lower, and where the building industry’s economies of scale are highest. But the neighbourhood types that most Canadians now desire are walkable, amenity-rich ones, with access to public transit. Housing options like these are concentrated in ‘legacy neighbourhoods’ inherited from earlier historical periods, and their cost is out of reach for most working people, especially in major cities, which have come to concentrate most of the economic growth of the low-inflation era.

NB Media Co-op: How has speculative investment played out in New Brunswick?

In New Brunswick, we are at the margin of developments elsewhere in Canada. But we have still seen the effects of the low-inflation/low-interest rate consensus, which has benefitted the province’s powerful landowners and developers—first of whom are the Irvings. First, the consensus has produced a more casualized labour force that dominates the region. Many more workers lack the stable, long-term jobs typical of the 1945-1975 period. Jobs are not longer as plentiful, especially for less-skilled workers. And the jobs that are available are usually short-term, lack benefits, and require travel to distant labour camps in Northern Canada (Fort McMurray, for instance, as many New Brunswickers can attest).

But we also notice the inefficiencies of low-inflation in the built environment. Take Lian Street in Fredericton as an example. This is now the capital’s most dense neighbourhood, and is pumped by Mayor Mike O’Brien as a paragon of the new Bishop’s Drive neighbourhood. Demand for the condo units there, however, has been strong mainly due to the price point, roughly half that of condo units downtown, and in some cases, less than half.

Residents are dependent on costly private transportation, benefitting local car dealers, who also own land in the vicinity of the development. A fast growing number of Canadians no longer want private automobiles, but providing public transit to outlying areas will cost the public dearly.

Meanwhile, downtown, the Irving family sits on two large empty lots, speculating on rent gaps that will create new spatial exclusions in Canada’s poorest province. Amenity rich, downtown developments increasingly exclude lower income groups—including retirees. The condo buildings that have gone up along Queen Street, for instance, require high incomes, usually with full time jobs or legacy pensions.

NB Media Co-op: How do the British elections call neoliberalism into question?

Put simply, Corbyn’s Labour Party refused to issue a policy manifesto that followed the establishment consensus. Instead, he called for economic policies that would prioritize job creation and income redistribution through higher taxes on the very wealthy. He promised to end social program cuts, and instead spend more on creating a more fair society for all. He even planned to re-nationalize key parts of the economy.

The establishment ridiculed Corbyn for these policies, and party elites regularly called him ‘unelectable’. But it didn’t matter, people showed up in droves at rallies, and they voted for his policies in much larger than expected numbers. There is a sizeable constituency for these policy ideas in Britain, and as Bernie Saunders demonstrated, in much of the US as well. One can expect to find large support amongst Canadian workers too.

In New Brunswick, a similar agenda would call for higher taxation on the Irvings and McCains, in order to afford social programs—such as free university tuition, publicly funded day care and expanding hiring nursing and health—that will help sustain our population’s care needs and help people of all ages succeed at their goals in life.

NB Media Co-op: Is there a political vehicle for these policies in New Brunswick?

Currently, the Greens come closest, especially with David Coon as leader and MLA for Fredericton South, but there are divisions within the party, with some economic conservatives preferring the apparently more realistic policies of the establishment.

The People’s Alliance of New Brunswick (PANB) has no history at all of positioning themselves in favour of social spending, and support the consensus of low inflation, low debt, and low taxation policies. These are the same policies that disproportionately benefit a wealthy few, though they are often founded in the moral values of self-help and independence, which are very popular in New Brunswick, especially in rural areas that have hardly ever received much help from government. Moreover, its position on bilingualism has no traction with Acadian communities, limiting its ability to govern. Simply, there are not significant savings to be found by eliminating bilingual services, but the historic resentment of English speaking parts of rural New Brunswick against government spending (from which they have not recently benefitted) can strengthen the hand of establishment interests—so expect the Irving media to continue to make mountains out of mole hills.

The main political movement that could champion more redistributive policies is the NDP. However, under the leadership of Dominic Cardy, the NDP positioned itself as ‘The Voice of the Middle Class,’ in a bid to mark distance from its labour roots. This helped pull a small percentage of centrists towards the party. But its Left abandoned the party for the Greens, which turned out to be a sizeable and crucial portion of its support, as David Coon demonstrated in Fredericton South.

NB Media Co-op: How likely is the NDP to return to its social democratic roots?

‘The Voice of the Middle Class’ is a long ways from the more inclusive ‘For the Many, Not the Few.’ What is needed in New Brunswick now is a populist movement that is able to stand against the nihilism of the establishment consensus, which promises little more than continued austerity and a harsh labour environment for the majority. No doubt, the consensus benefits a minority of ‘middle class’ people, some of whom work for one of the Irving companies. But this is not the majority of the province. Such a populist movement is as likely at present to emerge out of the Green Party as it is from the NDP.

In the absence of a Left anti-establishment movement—one which will be ridiculed in the Irving media—there is always the possibility of a Right anti-establishment movement. The political culture of New Brunswick has given voice to such movements before, and their key ideals are ensconced in both of the province’s two main political parties.

The anti-establishment movement from the Right has already begun to champion certain goals of the Left, particularly, a more democratic management of the province’s Crown forests. But they are much less likely to be able to carry through a truly democratic revolution, since they otherwise rely on reactionary policies that mobilize people on religious or linguistic lines.

Some within the NDP would argue that the goal of a political party is to win power—this was explicitly Mr. Cardy’s vision of the party. But as David Coon has demonstrated, just being present as a critical voice can make a big difference. Sometimes political parties can play a more important role as a vessel for reshaping the conversation and ensuring social progress. Leadership candidates for the NDP should bear that in mind and so should voting delegates. Electoral pragmatism at this moment in time still means kowtowing to the establishment consensus. But that won’t build a progressive constituency in New Brunswick and it won’t solve the province’s deep economic problems.

NB Media Co-op: What are some of the bigger issues at stake, that are not addressed in the political system yet?

The bigger issues are many. They include the unequal distribution of investment between large urban centres and smaller urban and rural areas—New Brunswick has historically failed to coalesce around large urban centres, for better and for worse. But there are also broader issues than this, and political movements need to find a way to bring these into view.

One of the big problems is that our global economy doesn’t produce enough work for everyone, and while it is profitable enough without everyone’s labour, our moral notion of social belonging is still based around work. If you don’t work, you are not supposed to be entitled to a share of the benefits of social production. Even our moral sense of self-worth comes from the work we do, whatever that work might be. Access to the stuff we want is obtained through work. If you refuse to work, or don’t work hard enough, then you deserve your fate on the margins of industrial society.

Currently, many workers rely on jobs that are not terribly useful for society, and in more than a few cases, are downright destructive of our environment. Sometimes they are also soul destroying for individuals who are separated from loved ones, or who are bored or limited in their jobs, but afraid to strike out on new ventures, because there is no safety net if they fail. We are all dependent on a paycheck (materially, and also for our moral self-worth), and decent paychecks are increasingly hard to come by.

It is similar amongst the poor in many lower income countries, where the labour of rural peasant workers, for instance, doesn’t help generate profits for shareholders, but nonetheless fulfills the material and moral needs of individuals who live by the sweat of their brow. When mining or agro-industrial companies take their lands away and make them profitable for shareholders (mostly in the global North) many of these workers are forced into migration. Yet, they are prevented from searching for work in higher income regions like Europe or North America by borders, visa requirements, UN-sanctioned refugee camps and a series of other impediments, designed to ensure that a globally created surplus is unjustly and arbitrarily distributed mostly to the winners of the global economy—mostly white, and mostly in large cities.

This situation is not getting better, as the current ‘migrant crisis’ would demonstrate. It will continue to get worse, through climate change, civil wars (spawned in large part by failed Western foreign policies) and global overproduction (not overpopulation—which is a common, liberal assumption, but a horrifying way of thinking about the problems we now face). How will we share the world’s resources and the world’s employment fairly in the future? This ultimately is at stake, and Corbyn’s election results are an optimistic sign that a large number of voters are thinking about more than just their own interests.

The establishment consensus would have us settle things by excluding those who are not co-nationals and those who are not sufficiently productive (even if they are co-nationals). The crisis of this model is now upon us, and if nothing is done, it will contribute to a holocaust of the world’s poor, most of whom are not white. The establishment consensus, in important ways, is contiguous with colonial exploitation and domination, with which few people identify.

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