For a New Direction for the Economy

The amount of debt the federal and other governments are incurring under the conditions of the pandemic is alarming as both the lenders and governments expect Canadians to pay back the debts incurred at great cost to themselves. Ruling elites can achieve this only if they succeed in disempowering the working people from having any say whatsoever on the decisions which affect their lives. Towards this end they are concentrating more decision-making powers in ever fewer private hands to increase their ability to dictate wages and working conditions, destroy unions and collective decision-making bodies and any remnants of public institutions at every level. At a time Canadians are demanding an end to "business-as-usual" post-pandemic, already governments are preparing to implement more so-called austerity measures and anti-worker restructuring because that is the neo-liberal mantra on the basis of which the rich get richer and the poor get poorer.

The brutal anti-social offensive unleashed in the early nineties of the last century after free trade was launched in the mid eighties has always been justified under the claim that there is no alternative to paying the rich. At the beginning of the wave of anti-social measures taken under neo-liberalism, the claim was made that deficits and the resulting debts were incurred due to bad policies of governments that were on a spending binge to finance the social welfare state. The logic was that Canadians were "living high off the hog" and that, as a result, they now had to pay for their middle class lifestyle. Today, the conditions of pandemic are cited to justify the borrowing and not a few are fooled into believing that the borrowing by the state is to finance "public spending on social programs." Some go so far as to say "Keynesian measures" are required to face the current crisis which they compare to the crisis of the 1930s, or that we need a new "New Deal" to create jobs and save the economy and so on.

The fact is that deficits and borrowing were incurred in the past to pay the rich and programs to "eliminate the deficit and pay down the debt" had the same aim. Today both the lenders which represent colossal narrow private interests and the borrowers in their service consider the current crisis a windfall of unprecedented proportions for which they believe the people will happily pay.

In discussing the borrowing and new debt which is being incurred in conditions of the pandemic, it is useful to review why debts are incurred in the first place and what they finance.

The National Debt

The national debt is the total financial liabilities of the federal government. In 1998 it stood at over $583.2 billion. This translated into a debt of $19,250 for every man, woman and child in Canada. If the debts of the provincial governments are added to that total, then every child born in 1998 came into the world burdened with a debt of over $26,000. Since 2007-08, combined federal and provincial debt has grown from $837 billion to a projected $1.5 trillion in 2019-20. This is equal to 64.3 per cent of Canada's Gross Domestic Product and represents a debt of $39,483 for every man, woman and child.

From 1997 to 2008, through broad cutbacks in the financing of social programs and other measures of the anti-social offensive, the federal government managed to pay down its debt by $92.7 billion. But from 2008 to 2019, it has nearly tripled the amount of debt that it repaid in the mid-1990s to late 2000s.

Since 1946, the government of Canada has paid more every year on debt servicing than the annual deficit. It has paid $523 billion in debt service charges from 1946 to 1998 and an estimated $620 billion from 1998 to 2017.

It will be important to go to the heart of the matter today as governments incur stupendous amounts of debt in the name of protecting the well-being of Canadians and saving the economy.

This article was published in

Volume 50 Number 23 - June 27, 2020

Article Link:
Pay-the-Rich Schemes to "Revive the Economy": For a New Direction for the Economy

Website: www.cpcml.ca Email: editor@cpcml.ca