Socialist economic policies are the answer to the current crises

| September 11, 2020


The cheerleaders of neoliberal policy are rising like zombies after the current collection of economic, health, climate, and political crises seemed to bury them for a while. This means that it is not going to be enough to just defend the current wreck, but build something better. Socialists have social and economic policy programs that deal directly with these challenges. It is time to dust them off and fight for them with abandon.


grow.webp

Abandon neoclassical orthodoxy, it is confused

Every once in a while there are crises large enough that even the reality-ignoring neoclassical orthodox economists can no longer explain away the problems with there theories. However, to take advantage of this time to advance a more rational and humane economic program, we must first identify the crisis points.

There are several places orthodoxy is currently (somewhat) acknowledging flaws:

  1. Spending that broke through their "upper bound" of GDP-to-debt ratios – without the cataclysmic collapse through inflation appearing. Even the IMF is looking for changes to this one and seeking input.

  2. High employment, low inflation that existed before the pandemic hit is now transitioning to low employment, low inflation. The mechanism for orthodoxy's understanding employment's relationship with inflation/growth is broken. To the point that central banks are all but abandoning inflation fears of low interest rates and unemployment.

  3. There was a recession that the world was sliding into before the pandemic – even though massive amounts of liquidity was being pumped into the financial markets. Unexplained and unacknowledged because of the bubble growth of tech stocks, but hard to ignore now looking back at all indicators in the months leading to the pandemic.

  4. The never ending state (promises of) spending to save financial capital has not helped workers and it is not sustainable help to capital re-invest those profits into production or productivity increases.

  5. The broken trade and supply chain system – now susceptible to even the smallest crisis. In a world of increasing rates of crises this is – only now – being seen as maybe a problem to society.

  6. The climate crisis and the inability to price in the "externalizes" of the risk of greenhouse gasses. The effect on profits of energy companies is now being made clear and yet there is still no clear mechanism to make this transition not so jarring as to disrupt whole economies.

These are important problems to answer around governing economic policy. The organized left must present solutions that work based on the materialist understanding of capitalism. Socialists have those answers, but the first step is to understand there is now clear open space to fight for those solutions.

Canada, privatization, and taxes

The zombie cries of orthodoxy continue long after they are known to be dead. It is those who so believe in the nonsense who carries these policies forward. Alberta, it seems, is going to be the place where those zombies are not limping forward, but running.

In spite of the lack of revenue to support it, Alberta has put tenders out to construction, contractors, and design groups for the public expansion subsidized and privatized infrastructure. While the rest of the world has noticed things have changed, the Alberta government is keen on seeing the neoliberal project through to its bitter end, no matter the ongoing consequences to its own economy.

The move to take overtime pay away from workers and attacking unions – not exactly powerhouses in the province as it is – almost seems petty by comparison to their broad attacks on social supports and good jobs of the population.

But, Alberta is just the most out-front. Recent calls in the Globe and Mail and other publications who are defenders of faith have already started to push "solutions" to what they see as the rising debt crisis from dealing with the pandemic.

Beyond privatization, the return of direct user fees (basically regressive taxation) is one of many issues the left should be concerned about.

Other regressive tax changes include:

  • Increased taxes on fixed income (in a way that is really just regressive transfer of pension earnings to the state).

  • Further changes from defined benefit to target-benefit/define contribution pension plans.

  • Reductions in the rate of expansion of employer-linked benefits plan coverage to new drugs (or, rather, the non-expansion of benefits to include new phara products like expensive biologics/biosimilars).

  • Small business transfer taxes (direct taxation of basic consumption and anti-local businesses).

  • Fees, especially income-contingent loan supported fees, for broader public services.

  • Regressive property tax increases (if people move out of the city, taxes are going to have to be re-distributive geographically).

  • Health-specific (or any other directed) tax surcharges.

  • Raiding income support funding processes (such as EI) for other means.

Further to this, the paying for debt (that supported spending during periods of reduced revenue) needs to be moved up levels of government to make them fairer and cheaper. Even keeping responsibility of taxation and spending at the same level as before the pandemic is going to lead to regressive impacts because of the way taxes are collected in Canada.

Production: public and directed

Ownership of productive assets by the state is going to be more important than ever. That means increasing ownership and management in public hands. This should be rather straightforward these days given the amount of failure in the private sector.

  • property ownership

  • public housing ownership and management

  • ports

  • energy infrastructure (electricity production and storage)

  • high-speed data infrastructure

  • health products production

  • childcare space

  • retirement and old-age support service and homes

  • transit

  • the effective use of logistics enterprises and their warehouses (post, liquor, etc)

These are all essential to stop unnecessary increased costs to the state.

Even things like owning (and leasing) space to small businesses in downtown areas could counter some of the collapse of local economies. Some communities already do this in Ontario, but could be supported provincially.

The ownership of the space that the state uses to provide services should be a focus of anyone who is concerned by "efficiency" of (read "where") dollars spent.

For example, almost as important as providing the childcare service is owning the childcare space/property and not leasing it. Efficiencies from this model can be found even in the inefficient distributed non-profit model.

The first step to supporting the transition to "Building Back Better" has to be expanding the productive capacity of the public sector and democratizing the prioritization of the care economy and social economic production. Once this starts to expand, the way forward will become clearer for the rest of the economy.

The LatestT