Per-Capita Economic Growth

To deal with inflation, neoclassical economic policy makers—which include liberal and the far-right—sacrifice wealth growth for workers to support profits for local companies. The main policy that does this is increasing central bank target lending interest rates.

Unfortunately, to understand the strange logic that gets us to the policy, we have to turn back to our previous articles on the Phillips Curve.

During the recent period of high inflation, orthodox economics resurrected the rather ridiculous notion that wages are related directly to inflation through the Phillips Curve. It was a position abandoned for being incorrect as it could not explain inflation changes in the across the medium term.

The short explanation for why this policy was resurrected recently was that is that capital has developed ways to deal with inflation and high interest rates through different forms of financialization. The higher interest rates are then not a problem for capital and the long-term result of higher interest rates is a slowdown of the real economy, which will eventually reduce interest rates by kicking the chair out from consumer demand.

Unfortunately, it takes a long to drive a recession through monetary policy, thus other measures had to be found to ensure workers, and not capital, pay for price growth.

While central bankers wait for the not so clear effects of increased interest rates, other measures were used to cause a focused slow-down of the economy, and to do so faster than in previous attempts to control inflation through monetary policy.

High wage growth followed the recession because of "tight" labour markets—too many jobs and not enough workers willing to work those jobs as the prevailing wage.

The response to this high wage growth was to rhetorically connect wages to inflation (the "wage-price spiral" nonsense touted throughout the post-pandemic period) and use every tool in the policy basket to bring wage growth down. Suppression of wage growth, remember, is the neoclassical hammer for every nail of imperfectly working capitalist markets.

The tools included:

• sudden increase in the rate of immigration
• support for temporary foreign worker programs
• targeted training programs where there was unacceptable (to capital) "tightness" in the labour market
• supports for the implementation of automation to drive turbulence in the job market
• tightening the rules on receiving unemployment benefits.
• layoffs and forcing strikes for any wage gains in the public sector
• easing child labour laws
• profit subsidies to tech companies promising any productivity gains through automation (such as supports for AI)
• restricting the right to strike
• interest rate hikes to drive zombie companies out of business

Across North America, you saw governments drive through the above changes, even if many politicians loudly complained about those very policies.

The mini-crises that have resulted from the post-pandemic anti-worker policy of bringing worker wages under control program of driving worker immigration including limited access to affordable housing, healthcare, and social services.

The liberal press stated confusion why the governments of the industrialized countries did not plan for the housing shortage when they opened the floodgates of immigration is that they did not care about the new people. These politicians only cared about the increase in high-skilled (but also planned lack of local qualifications for many of those skills) immigration would bring.

The left has long understood that when immigration is used by capital, it is used as a weapon against workers' increased negotiating power. Pay increases are in competition with profits and tight labour markets mean you have to pay workers more to keep them in a competitive economy. One way to deal with this is to increase the reserve army of labour and the easiest way for industrialized countries to do that is to increase the immigration rate.

The impact of the immigration policies are clearly seen in the per-capita growth rates. The economies were growing (though at a low rate), but because of the level and type of immigration policies, there was a reduction in wealth across the working class population in most countries:

To highlight that immigration has certain effects that are negative is not a rhetorical right wing analysis of "they took our jobs." Here, we are critiquing the anti-worker, anti-social right-wing and liberal policy program to bring-in workers at a rate where job competition was increased enough to affect wages and sustain profits.

The policy of increased immigration was quite clearly a response to local capital complaining that they could not find workers to do the work at the wages that capital wanted to pay.

The left must make sure that we include this analysis when speaking to workers about the housing and immigration programs.

There is truth in the rhetoric that the long-term impact of immigration is increased production and economic growth. In economies like Canada, there is a lot of immigration that can and should be welcomed. But, the move to rapidly increase the population without thinking about immigrants as people who have housing, social, and health needs is a policy program of the right.

Now, did this program even work to bring inflation down? No.

• Housing costs have skyrocketed as the housing market that is of interest to lower-income working families is exotically not the target market for developers.
• Healthcare costs skyrocketed in the USA and doctor shortages got worse in socialized medical services.
• Prices for basic goods (including food) increased as supply chains had to respond to shifts in purchasing.

Of course, affecting inflation was not the real point of the policy, it was to crush wage growth. And, at this it was successful.

It also worsened the labour productivity measures in Canada, helping drive the demand for more automation and increase profit subsidies from government to support that automation:

A backlash against immigration also resulted from changes to policy on immigration.

Governments that opened the gates closed them as soon as the impact on wages was felt. Apologies were given and promises to have "smarter immigration programs" going forward. But, it was too late.

The program was smart enough to shift the price burden of increased inflation to workers and kick the chair out from underneath the workers demanding wage growth at time of increased market power.

While it is clear that immigration is a plus for the economy in the long-run, the short-term rate of immigration and the "type" of worker targeted for immigration will impact the economy differently. And capital drove a very specific policy driving a very specific "type" into the country.

All this is really just a reminder that there is planning in the economy, it just isn't planning to support the needs of working people.

Workers in Canada must unite with new entrants into the workforce—no matter their background—to push for cohesive and wholistic economic policies, increased taxes on profits to pay for those supports, and public investment programs. The alternative is fighting between different elements of the working class while capital extracts all the benefits of divisive anti-social policy.