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Is there a democratic alternative to austerity?

By: | April 2, 2016

Other places have experimented with austerity, so we don’t have to. Here’s how Newfoundland and Labrador can avoid known mistakes and put itself on a path to a brighter, more equitable, future.

Robert Sweeny
Politics by Numbers: graphically raising issues

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The Acropolis of Athens. Photo: E-A Malischewski.

I write from Athens, the birthplace of democracy. The complex legacy of classical Greece is everywhere in evidence, from the many evocative ruins to all those streets named for the philosophers, mathematicians, poets and playwrights who laid the basis of western culture 2,400 years ago.

So too, however, are the effects of Europe’s most drastic austerity program. People are homeless and sleeping on the streets. People of all ages are begging. Graffiti is everywhere — and I mean everywhere. Even in the few surviving bourgeois enclaves the crisis is visible in the numerous closed shops and the general decay of public infrastructure.

Homeless shelters for the winter on Ermou, Athens' main commercial street. Photo: E-A Malischewski.

Homeless shelters for the winter on Ermou, Athens’ main commercial street. Photo: E-A Malischewski.

There is an important lesson for Newfoundland and Labrador here. In the contradiction between democracy and austerity, democracy always loses, because any form of austerity necessarily increases inequality. And the reason is simple: Cuts to social, health and educational programs can never affect the wealthy the way they affect the rest of us.

The wealthy need the state too, but for quite different reasons. Much of their wealth and privilege comes from their disproportionate influence on government policy or, as in the case of doctors, lawyers and other professionals, thanks to the monopoly the state has granted them over key aspects of knowledge and practice in a modern economy. The wealthy support austerity programs here and abroad not because they fear deficits, but because they want to ensure public policy continues to serve their interests despite the changed economic circumstances.

Outlining an alternative, and where to start

What might a provincial government do that would encourage economic and social development in an equitable and sustainable manner? 

The way this question is formulated in fact provides key elements of the answer. All provincial government programs should be the subject of a rigorous cost-benefit analysis, but not the type envisaged by either Liberals or Tories. We need to ask of every existing program and every new government initiative two simple questions: Does it reduce economic, social and gender inequality? Is it sustainable?

The provincial government has control over important aspects of our economy and society. Some of the changes we need may take time, while others we can begin to implement immediately.

The cornerstone for an equitable and sustainable future is to replace our current minimum wage with a living wage. We can quibble over numbers, but I think clarity and economic sense for once coincide. We should move immediately to $15 an hour and raise that at the end of each year by a dollar until we reach $20 an hour, when it should become fully indexed. 

This 2020 vision sees the people of the province as our most important resource and pays them accordingly. This will effectively eliminate the working poor, while substantially improving the living standards of most families. It will have its greatest effect on women, as they have come to occupy quite disproportionately the low-income service jobs created in the wake of the non-renewable resource boom of the past decade.

 In the contradiction between democracy and austerity, democracy always loses, because any form of austerity necessarily increases inequality.

The provincial government has within its powers the ability to reduce dramatically two of the highest costs facing working families — daycare and auto insurance. Here we can learn from the best practices in other jurisdictions.  

Our neighbouring province of Quebec has had a provincially-funded, low-cost, largely co-operative, daycare system in place since the late 1990s. Though they are a target of the Couillard government’s austerity budgets, studies from groups as diverse as the Toronto-Dominion Bank and IRIS have found this program to have substantially increased women’s access to the job market, resulting in a two-thirds reduction in single-parent mothers on welfare and a halving of women in poverty, and to have improved early childhood education — all at little or no net cost to the public purse.

No-fault car insurance has long been the norm in New Zealand, parts of Australia, Manitoba, and Quebec, while variants are practiced in 15 American states and two other provinces. It reduces by more than half the annual cost of car insurance. It would, of course, also cut into many lawyers’ lucrative practices, which is why the legal profession has everywhere opposed it.

With the boom, housing costs went through the roof, particularly in St John’s. Newfoundland and Labrador was once a North American leader in the development of social housing. We can be again. Instead of underwriting wasteful, private suburban development with public infrastructure spending and the systematic misuse of our provincial land bank, we could use those funds and resources to finance the creation of co-operative, democratically controlled housing across the province. 

These are measures that can be initiated immediately. They would ensure that working people have more money in their pockets, and unlike the wealthy who so benefited from recent tax breaks, these people spend their earnings primarily on local goods and services. These measures don’t just improve equity, they will develop the economy along more sustainable lines.

Over the medium term

A provincial strategy of equitable and sustainable development must address the structural problems in health, social services and education.

We call it a Ministry of Health, but what we have created is a ministry of sickness. We employ a limited number of doctors and highly expensive machinery to cure sick people. We do very little to promote health. In large measure, this is because the structure of power in our healthcare system accords inordinate influence, along with excessive salaries, to a very narrowly defined group of medical professionals. Doctors, like lawyers, enjoy a provincially-granted legal monopoly over their practice. This is a legacy of the 19th century.

A modern medical system is not a question of the latest equipment, it is a system that recognizes the value and importance of all the differing groups within healthcare. Only the provincial government has the ability and the power to bring this about. It is only by insisting that our government assumes its responsibilities in healthcare that we can hope to bring about the changes so needed in home care and mental health, and to introduce genuinely humane assistance for those with disabilities.

The social determinants of health are so important you might wonder why we treat health and social services separately. The answer is historical. Doctors fashioned a medical system that placed themselves at the top, which we then only partially socialized, whereas our social services are largely derivative of church-based solutions constructed on an even older distinction between the deserving and the undeserving poor. This poor law mentality denied the significance of the social by placing primary responsibility for poverty on the individual. Top-down reforms and centralisation have, like the socialisation of medical payments we call medicare, made a difference. But the legacy remains, as the stigma and appallingly low rates on welfare so clearly show.

When graffiti rises above to speak to us all, Exarchia neighbourhood of Athens. Photo: E.A. Malischewski.

When graffiti rises above to speak to us all. Exarchia neighbourhood of Athens. Photo: E.A. Malischewski.

Poverty is experienced by individuals and particular groups. It is not, however, as our provincial government conceives it, merely the absence of a particular bundle of goods and services. It is fundamentally a form of social exclusion. The only ethical response here, as with other forms of social exclusion such as racism, misogyny or homophobia, is zero tolerance. We do not need to reduce poverty, we need to eradicate it. This will not be simple, but we cannot make progress unless we are clear about what it is we are talking about. Personally, I like the UK definition. It’s clear, it’s social, and most importantly it recognizes that this is an ongoing process. Someone is in poverty if they have less than 60 percent of the median income.

Our public education system also suffers from serious structural and conceptual problems. We have too narrowly defined education. We have cut schools off from the communities they serve. We have singularly failed to develop a system that meets the needs of our widely dispersed population. Indeed, the unprecedented levels of centralisation ensures that school board administrators remain aloof from any of the actual problems in home or school.

 We do not need to reduce poverty, we need to eradicate it.

We sanctioned a private college system to develop to the cost of many and profit of only a few, while allowing the public College of the North Atlantic to chase a corrupting dream of Gulf state wealth. We have mistaken technical and professional training for a university education, where we have encouraged administrators to manage the university as if it were a business. We have sanctioned a cherry-picking of programs by government. We have bought off university professors with high salaries, while doing nothing to ensure that a quality education is taking place in the classroom. We have sanctioned the massive and systematic recourse to precarious and underpaid sessional lecturers to subsidize these follies. 

Most importantly of all, we have ignored the fact that Newfoundland and Labrador has one of the highest rates of functional illiteracy of any advanced capitalist society. Adult basic education available at no cost in all of our communities should be our priority, and this requires investing in 21st century centres of learning, co-operation and exchange. I even have a name for them: libraries.

In the longer term 

We need to break free from our dependency on carbon fuels. It’s self-evident, but when governments continue to bank on future improvements in oil prices, it needs re-asserting: economic development strategies based on non-renewable resources are simply unsustainable. Indeed, for Newfoundland and Labrador, given the impact that acidification is already having on our oceans, such strategies are suicidal. 

A carbon-free economy means a radically different type of economy. Such a transformation goes well beyond the powers and responsibilities of the provincial government. That said, there is still much municipal and provincial governments can do — from public transit to decentralised generation of electricity, to be sure. But we also need to rethink every aspect of how the day-to-day functioning of these, our largest institutions, impact the environment.

This long term work needs to start right now.

Paying for it all

I have been one of the most strident critics of provincial government fiscal policy for more than a decade, so you might be wondering why I have not mentioned taxes. Well, the reason is simple: we don’t need to roll-back the tax breaks of the Williams government. We need to completely revamp how we finance both our municipal and provincial governments. 

The present system is a strange hybrid of century-old practices along with literally hundreds of special privileges for particular groups. The purpose of the tax regime should be to finance government. If there is a policy concern in health, social services, or education, or anywhere else, then develop an appropriate policy response. We should not be using the tax system to achieve what we are unable or unwilling to achieve by open and accountable means.

 The fact that we have done something for a long time, or that certain people and groups have long exercised power, is not a reason to continue. The past was a very unequal place, and historical claims to authority are generally rooted in inequality.

Back in the 1960s, there was a federal Royal Commission on taxation — the Carter Commission — and it recommended a simple, indeed elegant, solution: a dollar is a dollar. It does not matter how you earned that dollar, whether it came from dividends, rents, wages, tips, commissions, salaries or capital gains. It is worth a dollar and it should be taxed as a dollar. This went over like a lead balloon, for as Solomon Lozovsky the Profintern leader remarked way back in 1919: examine a country’s tax system if you really want to understand its class structure.

Currently municipalities depend on a property tax that dates from the 18th century, while our provincial government earns as much from ‘sin’ taxes on tobacco, lotteries and alcohol as it does from our forests and mines combined, and more from consumer taxes than it does from income tax. Anti-social transfers — i.e. various programs that subsidize the wealthy with public funds — have doubled in value in the past decade and now cost us half of the much better known social transfers. These socially skewered modes of taxation are not simply wrong — they contribute to making our society more unequal and lead to really bad policy choices at the local, regional and provincial levels.

We need to restructure how we finance public services in this province, and although I do not have a blueprint I do know that we cannot do this adequately within a system that has us piggy-backing on the federal tax system. We need a ‘Made in Newfoundland and Labrador’ tax regime so that we can make a better life for Newfoundlanders and Labradorians.

The Athenians describe their achievement of democracy as the overthrow of tyrants. Theirs had much fancier names: Pisistratus and his sons Hipparchus and Hippias in the sixth century BCE, and then a century later Theramenes, Critias and Chricles. In our own time, Thomas Piketty called the tyrant we face ‘Capital’, while Philip Mirowski calls it neoliberalism. As this column suggests, I think we need to add the cumulative weight of history to that list.

The fact that we have done something for a long time, or that certain people and groups have long exercised power, is not a reason to continue. The past was a very unequal place, and historical claims to authority are generally rooted in inequality.

Achieving a more equitable and sustainable society is now more possible than ever before, but it will require struggle and more than a little imagination. A different type of world would mean one where it is those with entrenched privileges who have to justify their position, rather than working people seeking a living wage. One where the real environmental costs of developments are not only calculated but charged. Indeed, one where there is a future for Newfoundland and Labrador.

Robert Sweeny is a Professor of History at Memorial University and an early but infrequent columnist with The Independent. His book ‘Why did we choose to industrialize?’ was recently short-listed for the Governor General’s award in history, the Macdonald Prize, by the Canadian Historical Association. He is currently on a half sabbatical in Europe.

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