February 29, 2016 • No. 6 | PDF Previous Issues
Finance Minister’s Economic Projections
Finance Minister Bill Morneau held what the new Liberal government calls a “town-hall style” press conference on February 22 to announce the government’s updated estimates for Canada’s GDP growth and federal budget deficit. The “growth projections” of economists employed by the biggest financial interests, which the government uses as its reference, have been reduced along with steep declines in projected public revenue for the 2016 federal budget, due in part to the drop in oil prices, Morneau said. According to these economists, international oil prices will average $40 per barrel this year, Morneau said, up from the current price of $31.5 per barrel. He said that economists expect Canada’s GDP to grow at 1.4 per cent in 2016, down from an earlier 2 per cent on which the government based previous budget projections.
Besides the loss of projected revenue due to international commodity prices, the Department of Finance says the federal budget deficit will be used to “make targeted investments that accelerate growth in the short run, create jobs and raise Canada’s long-term growth potential.”
Morneau has now placed a “deficit cap” of $30 billion on the federal budget. This is three times as much as announced by the Liberals during the 2015 federal election.
The Department of Finance said the government’s “plan to achieve its objectives will be in Budget 2016” and that the budget will be tabled in the House of Commons on March 22, 2016.
Finance Minister Bill Morneau used his “town-hall style” press conference on February 22 to promote what he called “a different approach to economic and fiscal policy.” The “different approach” is said to include “a commitment to strengthen the middle class and create conditions for economic growth that benefit all Canadians.” Morneau calls this a “new direction for Canada’s middle class.” What this means however is clouded in phrases and buzzwords. To interpret the deliberate obfuscation Canadians need a new urban dictionary of neo-liberal terms and phrases. What is clear, however, is that they are punch-drunk with their clever scheming and phrases and that they have not embarked on a new direction at all. They are continuing the pay-the-rich policies of previous governments but on an even grander scale.
A Department of Finance news release said Morneau “reaffirmed his belief that when you have an economy that works for the middle class, you have a country that works for everyone.”
“By strengthening the middle class and growing the economy, Canadians who work hard can look forward to a good standard of living, a secure retirement, and better prospects for their children. It also helps to ensure that the government has the resources it needs to lift the vulnerable out of poverty, invest in research and innovation, and provide economic security to all Canadians,” the press release said.
It continued repeating the same words and phrases over and again. “The new government will take action to ensure that economic growth is shared equally with the middle class and those working so hard to join it. In challenging economic times, the government has an important role to play. Now – more than ever – is the time to make investments to build a stronger middle class and foster sustainable, clean growth.”
In this way, Canadians are on their own to piece it all together. Buzz phrases about “town-hall style” announcements seem designed to make it sound as if Canadians are being included while talk about the middle class is cheap in light of the continued assault on working conditions, wages, pensions and benefits of unionized workers as well as the plight of the unemployed, the youth, seniors and the working poor. Not only has Morneau not elaborated anything helpful thus far but what has been revealed does not look at all promising for any Canadians except a select few.
In this issue, Renewal Update carries a commentary on the remarks by Don Pittis, senior business editor for CBC News, on the prospects of higher deficits than originally promised. This issue also reports on the announcement that a new council has been created to advise Finance Minister Morneau on long-term growth, whose Chair is a big promoter of monopoly interests being put in the dominant position.
Deficits represent “an enduring shackle to an unknown future,” writes Don Pittis, senior producer at CBC’s business unit. “Just like maxing out your first credit card, running a government deficit is easy. Paying it off is not,” he says. So far so good, but what is he proposing?
“Most economists agree there is nothing wrong with carrying a federal debt of between 25 and 35 per cent of GDP, especially while interest rates are so low. But running repeated deficits larger that the growth rate of the economy, popular as it may be while governments are doing it, can quickly accumulate into something far less manageable,” Pittis says. He elaborates this further saying that “conventional economics” says that “governments have two options to get rid of debt. Both require a cutback in spending. One is to freeze spending while waiting for the economy to outgrow the debt. Unfortunately a freeze feels like a cut, since spending must be reduced by the amount of the previous year’s deficit.
“The more urgent way to reduce debt is to take an axe to spending — as we saw after the federal debt peaked in 1997 at about 65 per cent of GDP — or raise taxes. As politicians have learned time and again, there is never a good time to slash spending or raise taxes.”
Despite the experience of the working people with the disastrous consequences of the assault on their standard of living to pay the rich, Pittis does not discuss the consequences of either option on the economy, or what else can be done to change its direction so that it puts the needs of Canadians, not the money-lenders, in command. Instead he says that the problem with both “options” is that “[i]t makes voters mad.”
Pittis then talks about the aging of “baby boomers” and a “shrinking workforce” and asks whether robots “will help pay off the debt.” But talk about baby-boomers being replaced by robots has nothing to do with the real state of Canadian demographics and nor does it shed light on the state of the economy. For instance, Canada’s population has doubled as a result of immigration since World War II and it relies on some 200,000-plus new immigrants/migrants/guest workers/refugees per year to maintain its population and workforce. Talk about baby boomers and robots adds muddle to what is already muddled but little else.
The CBC’s business authority then purports to deal with Minister of Finance Morneau’s dire warning that a balanced budget could lead to recession but he does not deal with that either.
“Morneau tells us that without deficit spending, Canada may head into recession. Of course that begs another question: What will the government do if a much more serious crisis arises? Saying, “[t]here are plenty of possible choices on the horizon,” his crises of choice seem to be the fall in bank profits [!], the low price of oil, a shrinking workforce, the possibility of a housing crisis and other apparent looming disasters. Pittis writes:
“There are new worries about the stability of global banks as they set aside more money to cover expected bad loans. So far this week, Canadian bank results have not been up to their previous stunning standards.
“Renewed hopes for an oil rebound were shaken yesterday as the Saudi Arabia’s oil minister told Texas oil executives that his country could live with $20 US a barrel oil. He said he was willing to let prices stay low until high-cost producers [read: Canada’s oilsands producers] were driven out of production.
“Even if oil prices bounce back eventually, it won’t do the federal books as much good if Canada’s industry has been decimated.
“Oh yes, there is still the danger of an impending housing crisis, another fall in the loonie and the ever-present danger of a U.S. recession relapse. Over a long future, interest rates, now low, cannot be predicted.
“It may be that we can replace the productivity of a shrinking workforce with automation and robotics, allowing a return to four-per-cent growth. But unless something changes in Canada’s current demographic trends, loans taken out by the government now will have to be repaid by a smaller working population.”
His conclusion? “Millennials may look forward to getting all those great boomer homes and well-paying jobs. But unless our finance minister is prudent in his budget deficit spending, those millennials may also have the doubtful pleasure of inheriting the boomers’ burdensome national debt.”
The calibre of the thinking of the senior producer at the CBC’s business unit does not instill much confidence that any of these expert economists know what they are doing or want to contribute to solving any problems of the economy. The only thing that emerges clearly is that all of it is intended to make sure the anti-social offensive and its program to pay the rich continue and that is all there is to it. It is high time Canada’s workers step forward to show how an economy can be organized which meets the needs of the people, not the rich.
(For original article, “Bill Morneau’s budget challenge: Deficits and the difficulty of planning for a long future,” click here.)
Finance Minister Bill Morneau’s February 22 press conference “set the stage for a longer-term growth strategy, which will be delivered by the end of the calendar year,” a press release by the Ministry of Finance informs. The “longer-term growth strategy” will be supported by a new Advisory Council on Economic Growth, the Ministry said.
“Advisory Council on Economic Growth?” “Longer-term growth strategy”? What is this all about?
Morneau said that the Council, which will answer to his office, will be chaired by Dominic Barton. Its other members have yet to be announced but Dominic Barton is Global Managing Director of McKinsey & Company which just happens to be the world’s largest management consulting monopoly. Barton’s connections are with the highest echelons of the international financial oligarchy and military establishments in various countries. Prime Minister Trudeau referred to him in his speech at the World Economic Forum 2016 meeting in Davos, Switzerland as follows: “I know at least half of this room has employed Dominic Barton at one point or another.” An article by former Globe and Mail columnist Lynne Everatt says, “Every day Dominic Barton makes a point of speaking to at least two leaders–CEOs or heads of government — asking what’s on their minds.”
According to the Department of Finance the council “will provide advice on policy actions to help create the long-term conditions for economic growth with a focus on the middle class.” The issue of “long-term” or “longer-term” growth and investment is allegedly one of Barton’s preoccupations, about which he has authored a number of articles and delivered speeches. What does it mean?
His activities shed some light on the matter. Barton is co-chair of an organization called “Focusing Capital on the Long Term.” The other co-chair is Mark Wiseman, President and CEO of the Canada Pension Plan (CPP) Investment Board. Wiseman was previously responsible for the private equity fund and co-investment program at the Ontario Teachers’ Pension Plan. Other members include CEOs and executives at French multinational insurance firm AXA, investment management firm BlackRock, investment firm GIC, Harvard Business School, investment firm E.L. Rothschild LLC, the holding company Tata Sons, British-Dutch consumer good monopoly Unilever and British multinational banking and financial services company Barclays.
The phrase “long-term growth” is a staple of Barton’s lexicon and a number of articles he has authored are focused on what this means and how to achieve it. Barton and Wiseman wrote in an article published on the McKinsey & Company website in December 2014 that “big investors are crucial to ending the plague of short-termism.” “Short-termism” refers to the pressure to deliver “short-term profits.” Barton and Wiseman express concern that a 2013 McKinsey and CPP Investment Board survey of 1,000 corporate board members and executives found that many felt pressure to deliver short-term profits.
In his writing on “long-term growth” Barton has little to say about how governments can effect such growth but this is not a surprise. Barton’s theory of “long-term growth” about which he will be advising the Liberal government is nothing less than a push to put the very biggest monopolies in charge of society and promote their well being. Barton contends that the growth of these monopolies and their power and prestige is synonymous with the growth of the economy, of employment and indeed synonymous with the public good.
Barton and Wiseman conclude that “the single most realistic and effective way to move forward is to seek change in the investment strategies and approaches of the players who form the cornerstone of our capitalist system: the big asset owners, who today own 73 percent of the top 1,000 companies in the United States, versus 47 percent in 1973.”
Barton, who declares himself a “true believer in capitalism,” contends that the crises inherent in the capitalist system can be overcome if the biggest monopolies in the world together “think long-term.” He declares that the “short-term focus” in terms of setting prices is what leads to “excess volatility, and bubbles.”
“Short-termism undermines the ability of companies to invest and grow, which ought to concern investors,” Barton and Wiseman say. “Those missed investments, in turn, have far-reaching consequences, including slower GDP growth, higher unemployment, and lower return on investment for savers. To reverse this destructive trend, we suggest four practical approaches for institutional investors serious about focusing more capital on the long term.”
One piece of advice to investors is to “[i]nvest the portfolio after defining long-term objectives and risk appetite.” One aspect of this is “giving much more weight to strategies within a given asset class that focus on long-term value creation, such as ‘intrinsic value-based’ public-equity strategies, rather than momentum-based ones. Since its inception in 1990, the Ontario Teachers’ Pension Plan (OTPP) has been a leader in allocating capital to illiquid long-term asset classes as well as making direct investments in companies,” Barton and Wiseman say.
“Asset owners” with “sufficient capacity” should “develop a network with like-minded peers, agree in advance on the people and principles that will guide their efforts, and thereby position themselves to respond to a potentially contentious issue with a company by quickly forming a microcoalition of willing large investors,” they say. “That approach worked well recently for a microcoalition of owners alongside a long term-oriented hedge fund with stakes in Canadian Pacific,” they claim.
This refers to the takeover of CP Rail by a U.S. hedge fund which put in charge former CN Rail President E. Hunter Harrison, under whose tenure relentless attacks against rail workers and public safety are increasing.
Much of Barton’s writing on “long-term growth” focuses on how the biggest monopolies can achieve such growth for themselves, with the idea that this leads to “GDP growth.” The “right place to start moving beyond the short-term mind-sets that still dominate today is with the people who provide the essential fuel for capitalism — the world’s major asset owners,” Barton and Wiseman say. “It is in their own interest and the interest of savers and society at large,” they conclude.
To equate monopoly interests with the public good is fast becoming the doctrine of the Trudeau government. To speak about the public good in the same sentence as the interests of the monopolies and claim they are identical is to seek to cover up that private interests are taking over governments directly and this is not good. Justin Trudeau and his close advisors are there to see it happens as quickly and efficiently as possible and they are counting on meeting no effective opposition from organized labour or any other quarter. They must not be permitted to succeed.
Dominic Barton, Global Managing Director of neo-liberal management consulting firm McKinsey & Company and the Chair of the Liberal government’s new “Advisory Council on Economic Growth” took part in a “Business, Government, and Human Security CEO Speaker Series” with the Council on Foreign Relations (CFR) on January 12. The CFR is a U.S. foreign affairs think tank which brings together members of the U.S. ruling class, military and political leaders to sort out issues of U.S. foreign policy. The discussion focused on “how business, government, the social sector, and the U.S. military can work to improve human security in conflict zones globally.” It reveals the takeover of the public domain by private monopoly interests in the name of human security.
“[Y]ou’re seeing an increasing interest in government to get business help and increasing help from the military to get business help, if you will, on it. And I personally got involved in this,” Barton said. The question, he said, is “how do we think about, post-conflict, ensuring that you’re not going to get conflict happening again, and what is it that business and the military can do.”
His theory is that “tri-sectors” have to work together but in fact it involves the military as well. “You’ve got government, you’ve got the private sector, and the NGOs. Those are the tri-sectors, have to work together more. And I think from each of those areas they’re saying we need the other to help,” Barton said.
Barton’s analysis of the causes for conflict and rebellion says nothing about the U.S. and other big power striving for domination. Far from it, Barton says that one of “the biggest sources of conflict is lack of employment” and then he appeals to businesses to invest to create jobs. “I don’t think a government can create those jobs; businesses need to create those jobs. But they’re not going to create the jobs if there’s not a viable business and if there’s not security. So I think that’s where it’s in all of our interests to, you know, create jobs that are viable in these hotspots.”
Barton addressed the “optimal time” for private monopolies to “go in” to “conflict zones.” He said: “This is, again, more in the U.K., where they do these and they’re literally, you know, two-week exercises. One of them was actually with Azerbaijan. That was sort of the case study, was Azerbaijan has been taken over by Iran and there’s a NATO force. So it’s this, like, wargame. You go and there’s blue teams and red teams. But what was interesting is they had — there were businesspeople there to say, OK, what are the — what are the things that are going to need to be done to ensure that people will actually start to invest and do things again.”
Claiming that his organization is looking at means to reduce refugee and other population movements, Barton again said the reason for such movements of people is “lack of jobs, no opportunities, so groups of young people just betting on it to move to find opportunity.” He said his organization is “actually taking a look at where do we think migrant flows will be over the next 10 years because it — you know, and what it is that you can then do to deal with the — at the source to prevent, if you will — not to block; it’s more to stop people wanting to have to move and see it.”
McKinsey & Company is only “doing some things” in conflict zones, Barton said, but he discussed some of the challenges as follows: “[W]hat we found is that there’s a lot of, if I could call it, bureaucracy that’s required to get it to work. So even just having a mayor. You know, it’s not that these — one in particular in Jordan we’ve looked at. You know, you have to have — you actually need a mayor to be able to get it to operate. Then you need the departments to be able to move it forward. And we had one request, which was to actually — from Christine Lagarde, (CEO of the International Monetary Fund – RU Ed.) saying, why doesn’t someone go and become a mayor? Get a person, one of your partners, they should go and do that.”
This is what the direct takeover of governments by the largest private monopolies in the world looks like. It is not promising at all. On the contrary, it is clear that the Liberals have usurped power for purposes of using the state authority to betray the interests of the people as never before, all in the name of high ideals. They must not be allowed to get away with it.