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New Socialist Webzine

The Canadian State Helps Usher in a New Phase of Capital Accumulation

By Zac Saltis

The contents of the federal budget unveiled by the Conservatives on March 29, 2012 are hardly shocking.  In fact, this voluminous document sheds light on what strategies the Canadian state will be adopting to promote and facilitate capital accumulation in this era of economic stagnation and austerity for the working class.

In the years to come, Canadian workers will witness: 1) greater income inequality, exacerbated by deeper corporate tax cuts and government spending cuts; 2) a further concentration and centralization of capital, especially in the resource-extraction sector; and 3) a prolongation of the working lives of working-class people.  This article argues that the Conservative government is using the power of the state to intensify these tendencies.

Corporate Tax Cuts

The Conservatives have clearly indicated that they intend to deepen federal corporate tax cuts.  The inevitable outcomes of corporate tax cuts are: a) greater retention of profits by corporations and therefore larger dividend payments to their shareholders; and b) the erosion of the federal government's revenue base, thus squeezing public services and social program spending.  This leads to a situation in which deficits created in part by these same tax cuts give the federal government, and by extension provincial governments, carte blanche to cut public services and social program spending.  The revenue shortfall brought on by corporate tax cuts are then financed by government borrowing.  The Canadian Labour Congress estimates that Conservative corporate tax cuts will cost approximately $13 billion in the fiscal year 2012-13.  Simply put, corporate tax cuts are subsidies to the capitalist class by other means. 

Resource Extraction

No one else has welcomed corporate tax cuts more enthusiastically than corporations involved in resource extraction.  Over the last decade, the Canadian economy has witnessed a steady rise in both energy and mining investment.  Continuously rising prices and super-profits attract major flows of capital into the resource-extraction sector.  Consequently, capital spending in the primary sector by Canadian- and foreign-based corporations is occupying a greater share of total investment. 

It is important to note that financial institutions also benefit from this boom, as they help orchestrate mergers and acquisitions in the primary sector and boost commodity prices via speculation; in other words, they facilitate the concentration and centralisation of capital on a large scale.  Rising global commodity prices and super-profits fuelled by the competitive battle over coveted natural resources, energy supplies and raw materials have turned Canada into a significant exporter of crude petroleum, potash, precious metals and alloys, iron ores, and other base metals.   

According to Jim Stanford, chief economist of the Canadian Auto Workers, "in July 2011, unprocessed and semi-processed resource exports accounted for two-thirds of Canada's total exports…In contrast, higher-value finished products accounted for just a third of our exports.  Compare that to 1999, when finished goods made up almost 60% of our exports."

With resource extraction at the forefront of capital accumulation in Canada, Environment Canada will eliminate the National Round Table on the Environment and the Economy, and the Conservatives are ditching federal environmental assessments "overlapping" with provincial ones for large-scale projects like the Enbridge Northern Gateway Pipeline and the Keystone XL pipeline.  I believe that the Canadian state's aggressive support of the domestic resource-extraction sector reflects growing international competition over natural resources, energy supplies and raw materials among corporations and among capitalist states.

Yet this does not necessarily mean that resource extraction is benefitting at the expense of manufacturing, or that the Harper government necessarily favours Western Canada over Central Canada.  The so-called East-West conflict is just a distraction.  In fact, aggregate manufacturing investment in Canada has not suffered in any substantial way, at least in absolute terms. 

Of course, high value-added industries like automotive and aerospace (mostly concentrated in Central Canada) have declined relative to low value-added industries centered on the extraction and export of unprocessed and semi-processed raw materials and energy (mostly concentrated in Western Canada).  The loss of some 600,000 Canadian manufacturing jobs since the turn of the century -- due to a combination of mechanisation, a high Canadian dollar fuelled by the resource boom and hot money, and continued offshoring -- has been concentrated in densely unionised lines of business with a history of labour militancy.   Instead, profitable opportunities are being found in other areas of manufacturing with little or no union density across the country. 

Although it may hurt the volume of exports for some lines of business, the high Canadian dollar imposes downward pressure on all manufacturing wages, a situation all manufacturing capitalists favour across the country.  In other words, a high Canadian dollar (championed both by the Bank of Canada and the federal government) justifies the calls of the capitalist class and its spokespersons to eviscerate working people's wages, benefits and pensions and boost productivity, which is code for forcing the working class to work harder for less.

Extending the Working Lives of Working-Class People

Capitalists and the capitalist state also favour a working class that works longer.  The federal government's move to raise the age of eligibility for Old Age Security (OAS) and Guaranteed Income Supplement (GIS) benefits from 65 to 67 between 2023 and 2029 is consistent with the imperatives of capital, and is in line with events: since the 1990s, more and more working people aged 55 and over have delayed retirement to make up for their declining real earnings and, in most cases, their lack of workplace pensions. 

Raising the age of eligibility for OAS/GIS benefits from 65 to 67 is blatantly anti-worker.  It is a question of class and NOT a question of "inter-generational fairness."  For, within the baby-boomer generation, and within the generations that follow, there are haves and have-nots.  Reducing the share of the social surplus product earmarked for retired workers hurts both working-class baby-boomers and their children.  No one who has studied the OAS/GIS system seriously believes there is a "crisis of sustainability."  The bogus OAS/GIS "crisis" obscures the real issue at hand: the Conservatives are reducing the state's obligations to support working-class seniors in their retirement in order to continue granting tax cuts and subsidies to the capitalist class.  This measure will only impoverish more working-class seniors, negatively affecting their health and shortening their lives.  Although repugnant, we should regard this policy for what it really is: the capitalist state is forcibly prolonging the working lives of working-class people all in the name of greater profits. 

In the end, the Canadian state's aggressive promotion of corporate tax cuts, greater resource extraction and the extension of the working lives of working-class people amount to an intensification of the class struggle in Canada and is setting the stage for a new phase of capital accumulation.  The capitalist state follows is very simple formula: greater profits at the expense of the working class by any means necessary.  The federal budget of March 29, 2012 followed that formula to the letter.

Zac Saltis is a member of the Winnipeg New Socialist Group.

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