Why socialists should oppose Trudeau’s 75% “wage subsidy”

Trudeau’s latest measures have been celebrated by those on both ends of the political spectrum. The “left,” including the federal NDP, celebrates state subsidies as a victory for workers, using it as proof that Trudeau has “listened to the call” for more income support. The right celebrates them as a necessary measure to return things to normal. Both are wrong.

  • Marco La Grotta
  • Wed, Apr 1, 2020
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COVID-19 is wreaking havoc on the Canadian economy. 

Thousands of “non-essential” firms have been forced to close due to the pandemic. Those that remain in operation, including most manufacturers and oil producers, have announced steep cuts in production and capital investment. On Monday, March 30, a refinery employing 500 in Come By Chance, Newfoundland was shut down due to the virus and the ensuing economic fallout. Others will soon follow.

More than 1 million people have applied for Employment Insurance (EI) in the past week—greater than in any month during the Great Depression. Canada Revenue Agency officials estimate that as many as 4 million will apply for the new $2000 per month emergency benefit, many of whom don’t qualify for EI. In total, these figures suggest that as much as 25 per cent of the workforce is either unemployed or significantly underemployed. This scale of economic decline is unparalleled in Canadian history. 

The state steps in 

The capitalists have always bragged that the private sector, unencumbered by the state, would be able to overcome all obstacles standing in society’s way. However, this has not happened. Instead, they find themselves in an insoluble crisis, one for which they are incapable of providing solutions. Desperate, they have turned to the state for their salvation.

Trudeau started by offering billions to firms in the form of credit, tax deferrals and a 10 per cent wage subsidy. The Bank of Canada (BoC) followed up by lowering its borrowing rate to a historic 0.25 per cent, as well as introducing quantitative easing (QE)—a practice whereby central banks purchase bonds with money created out of thin air. Analysts predict the BoC will spend up to $200 billion on QE by December. The combined value of their support, while impossible to estimate, no doubt stands in the hundreds of billions of dollars. 

However, even this was not enough. In the following days, CEOs took to the press to demand a 75 per cent wage subsidy, such as was offered in Germany and Denmark. Trudeau, not one to upset his corporate allies, bumped his subsidy from 10 per cent to 75 per cent soon after. The CD Howe Institute estimates that a 75 per cent wage subsidy for all private employers would cost $6.3 billion per week—adding more still to the public’s already inflated tab. 

Confusion on the left…

Trudeau’s latest measures have been celebrated by those on both ends of the political spectrum. The “left,” including the federal NDP, celebrates state subsidies as a victory for workers, using it as proof that Trudeau has “listened to the call” for more income support. The right celebrates them as a necessary measure to return things to normal. Both are wrong.

The “left” have argued that so-called “wage subsidies,” while not ideal, are the fastest way to put money in the hands of workers. But who are those subsidies paid to? Not to the workers, but to the capitalists, who decide how and when to disperse it. In fact, they may decide not to disperse it at all: 

“[A wage subsidy] has great potential for waste and abuse. Many of the workers a company might be subsidized to keep on it might have planned to keep on anyway. Many others might be laid off even after the company had taken the cash. There’s also the question of how, once employers are hooked on the subsidy, to get them off it” 

The above quote was featured, not in Fightback, but in The Globe and Mail. Moreover, it was written not by Lenin or Trotsky, but by Andrew Coyne—a well known bourgeois journalist. Therefore, we cannot be accused of sectarian prejudice. 

However, this is far from its only shortcoming. Yes, many workers may indeed receive the subsidy, but many of them should not be working anyway. In fact, many have demanded that they be allowed to stay home, a plea which has been promptly ignored by Trudeau. 

Who does a wage subsidy benefit in this instance? Not the workers, but the bosses who refuse to stop production—not for the sake of their workers, but for the sake of their profits. The overwhelming majority of capitalists refuse to provide full pay to workers who stay home. Trudeau’s wage subsidy provides them with a convenient excuse not to. 

In truth, this sort of “wage subsidy” is just a corporate subsidy by another name.

…and deception on the right

The capitalist press is slightly more perceptive. They understand the real significance of Trudeau’s measures: not to benefit workers per se, but to weather capitalism through the storm

The Globe and Mail sums up Trudeau’s strategy:

“The answer to this chasm in the road is a bridge. Canada’s economy was strong before the pandemic, and that strength – its workers, companies, and factories – will be there after. We just need to get them across that yawning gap in the road.”

In fact, Canada’s economy was not nearly as “strong” as The Globe makes it out to be. Most analysts were predicting a recession long before the emergence of COVID-19. The virus simply acted as the trigger. But even then, how much will this “bridge” (i.e. subsidies, income support) cost? And who will pay for it?

The Globe has the answer:

“The numbers may sound otherworldly. Ottawa’s biggest deficit during the financial crisis was $56-billion. The Parliamentary Budget Officer on Friday outlined a scenario where the deficit will hit $113-billion.

“However, the cost of borrowing is at a record low.”

In other words, Canada should borrow its way out of the crisis. There is only one problem here: this is exactly what they did after the last slump, which in turn paved the way for the present crisis.

A separate, more sober Globe article highlights the point: 

“So, in late 2008, something extraordinary happens. Instead of allowing the system to fail as capitalism calls for, governments bail out the system. By doing so, they save the same people that created the crisis in the first place, effectively guaranteeing their wins and socializing their losses.

“You wonder how more debt could be used to solve a problem that was created by debt in the first place. Wouldn’t that delay the inevitable and make the whole system even more fragile?”

Every borrower knows that no money is free. It must eventually be repaid, with added interest. And who will ultimately pay that sum? The answer is already known: the same people who paid the last time—the working class

Trudeau is currently spending double the amount that was spent in 2008-9. What does this mean? It means that after the crisis is over, workers can expect double the austerity. And there is still no telling how much this sum may increase to.

As in 2008-9, the state again plans to “guarantee the wins” and “socialize the losses” of the big corporations—only this time on a far higher, more painful level. The much hoped-for “return to normal” is a fantasy of only the most deluded Globe journalist, or else an outright lie. 

Out with the parasites

Trudeau has been forced to shore up capitalism to save it from outright collapse. The state now acts as the private sector’s benefactor, financier and payroll manager—all rolled into one. Their only condition is that private property itself remain untouched. 

However, these actions serve not to benefit society, as some choose to believe, but the profits of the large corporations. The COVID-19 pandemic may yet last months, due in no small part to the draining of public funds by CEOs. These same CEOs then ask their employees to work in unsafe conditions with money provided for by…other workers. 

However, even as the COVID-19 crisis ends, a new one will then begin: as the capitalists foot their recovery bill on the people who had no part in creating it.

In every serious crisis, the capitalists have no qualms turning to the state for support, only to make off with the profits as soon as the situation turns. Such was done in 2008-9. It should not be allowed again. 

In truth, with the money provided in bailouts over the years, industry could have been nationalized many times over. If the capitalists are unable to run society in a sensible way, why then should they own it? This is not some utopian idea, as some “realists” may suggest. In fact, life itself is daily proving its urgent necessity: the dislocation of production, the chaos in the healthcare system, the absence of innovation, and so on. 

And what other choices do we have? Only more bailouts followed by more austerity, ad infinitum. This is hardly a desirable option.

The present crisis cannot be solved by state bailouts, but by a social takeover. Industry must be taken from the hands of the capitalists, and placed under the democratic control of the working class. The idle cash hoards of the billionaires should be appropriated, and used to provide full pay to those workers society deems non-essential for the duration of the pandemic.

No other road is available. The “settle for what you can” logic has time and again left us beaten, broke and abused. This time, it may even leave some of us dead.

It is high time we break the cycle.