Eight months into their minority government, the federal Liberals have tabled a budget that serves one main aim – survival. Their right-leaning budget aims to please everybody, or more accurately in typical Canadian fashion attempts to offend nobody, and in so doing shows the weakness of Canadian Liberalism. This weakness expresses the contradiction between the needs of Canadian capitalism and the opinion of the Canadian population. One way or another, the centre cannot hold.

When Prime Minister Paul Martin was voted leader of the Liberal Party, corporate Canada could not have been happier. But since then their opinion has soured as seen in this editorial from the Economist magazine:

“As finance minister, Mr Martin acquired a reputation as a tough and decisive deficit-cutter who transformed the public finances and oversaw the renaissance of the Canadian economy. But as prime minister, his faltering leadership has earned him the sobriquet of “Mr Dithers”. At an election last June intended to give him a personal mandate, the Liberals scraped back, reduced to a parliamentary minority. Both before and since, Mr Martin’s main concern seems to have been to court popularity by parading a generous social conscience.” (17 Feb. 2005)

They thought they had got “their man” in the top job. Martin was the finance minister responsible for the deep social cuts of the 1990’s and the leader of the right in the Liberal Party. However, their man led them to a minority government; their man lost public support for tax cuts, and their man has placed his own political survival above the wishes of his corporate paymasters.

One would think that the disarray of the Liberals should play into the hands of the opposition Conservatives. Nothing could be further from the truth. On the stated basis of support for corporate tax cuts and military spending the Conservatives are propping up the minority government. They too are in a political crisis as their support falls to 26%. They are in danger of being overtaken by the New Democratic Party with 20% support. Despite the wailing of the right-wing press, both parties of Canadian capitalism are incapable of carrying out the wishes of Capital.

On the other side we should not confuse the opposition of Bay Street and the Toronto Stock Exchange to mean that this budget is in any way pro worker. The main thrust remains tax cuts and military spending. Canada is the 6th largest economy on the globe and Canadian multinationals are seeking to put some military might behind their investments. Canada may pretend to play nice but one only has to look to Haiti to see the true Imperialism behind the “peacekeeping” propaganda. Attacks on public servants are back on the agenda and the increased social spending merely compensates for the massive cuts of the past. After the liberals stabbed working people in the back we should not thank them for pulling the knife halfway out. Fortunately the NDP has come out opposed to the budget and has called it a betrayal (however it did take them a day or two to come to this conclusion and their first remarks were in the line of “we’ll take a look at it”). Decisive opposition is needed to push the advantage.

What do the capitalists want?

After the slump in the early 1990’s, Canadian capitalism took advantage of workers’ fear of losing their jobs and went on the offensive. They extracted massive cuts and managed to put the burden of debt and deficit away from government and onto the backs of workers. This could be accomplished due to the weak opposition of the labour leadership, which was shown by historically low strike statistics. Since then though, workers have started to lift their heads and demand payback. The number of working days lost to strikes is almost back to the high level of the 1980’s. In fact the moderate growth of the economy, that is projected to be just under 3% over the next few years, feeds into this militancy as workers want their fair share. Corporate Canada is well aware that this growth is on a shaky foundation and is demanding a government that keeps the workers down for future battles. Budget analyses by the financial services firm Ernst & Young state, “Any slowdown in the economy, or unanticipated reduction in the effective tax yield per GDP, would make [the Budget’s] spending initiatives unaffordable”, and “the risks that the economy will underperform are substantial”. They worry about how the high Canadian dollar and the cost of the US occupation of Iraq will affect the exports of Canadian goods to the USA. These exports total over 25% of Canadian GDP and any crisis south of the border will have a massive effect.

Major budget items:

  • $12.8 billion for the military
  • Cut to corporate taxes from an effective 22.5% to 19% by 2010
  • $11 billion in savings from "streamlining" the public service (i.e. 2,900 jobs cut)
  • $5 billion for city infrastructure
  • $5 billion for national child-care programme
  • $5 billion in environmental spending
  • All spending commitments are over 5 years and are back-end loaded

The strategists of capital fear that any concessions given now will merely embolden workers for the future struggles. But they are stuck between a rock and a hard place. If they tabled a budget that met their needs it would be massively unpopular and would exacerbate the growing strike movement and increase NDP support. Under this scenario they face the never before seen horror of an NDP official opposition while the Liberals and Conservatives split the right vote. Their “dithering” representatives in Parliament have chosen to save their own necks and put off the fight with the workers until it absolutely cannot be averted. In this they risk facing a strengthened labour movement and they do not get to choose the time and place for the fight.

Workers are sick of the cuts and attacks that have been unending for a generation. The average family has not seen any improvements for 25 years and the conditions of the bottom 20% deteriorate year-by-year. Such is the state of the crisis that even some business groups are calling for action on unemployment insurance. During the 1991 slump 80% of the unemployed qualified for benefits; now less than 30% qualify. These “enlightened” businessmen worry about the social consequences of millions of unemployed on the streets of Toronto, Montreal, and Vancouver in the event of another major slump. They are correct to worry. Unlike the last slump that disorientated the workers, this one is likely to anger them. Trotsky explained that it is not booms that create class peace and slumps that create revolution but the quick transition between the two that shows workers that the capitalist system cannot solve their problems. If the short-lived growth leads to an increased fightback over economic issues, then any turnaround in the economy will push the fightback onto the political front. Weak Liberalism merely paves the way for future struggles. The days of compromise are coming to an end.

March, 2005