Thread: Economic Crisis Slams Canada

Economic Crisis Slams Canada
Federal Government Denial


by Roger Annis
Global Research, March 29, 2009
SV


As the grim news of growing job losses mounts in Canada, the federal Conservative government is continuing the politics of denial that marked last autumn's election campaign. Especially troubling for the working class is that opposition political parties, including the trade union-based New Democratic Party, are offering no substantial alternative.

Economic collapse by the numbers

The first two months of 2009 were a disaster for working people; 240,000 workers lost their jobs. The job losses in January were the largest monthly loss ever in Canada. November to February losses are the steepest since the crushing recession of 1981/82.

Since June of 2008, Canadian households have lost 8% of their net worth. Household credit debt grew by 2% in the fourth quarter of 2008.

Two of the big three U.S. automakers in Canada, General Motors and Chrysler, say they will pack up operations in Canada if they don't receive nearly $10 billion of taxpayer bailout money. Together they employ some 20,000 workers in vehicle assembly and tens of thousands more in parts manufacture, sales, and service. Chrysler wants its workforce to concede even deeper cuts in wages and benefits than those voted by GM Canada workers in mid-March.

Cuts to social services will soon be the order of the day as governments cry poverty and deficits mount. Bank analysts say the federal government will have a budget deficit of $40 billion in fiscal 2009. The government of Ontario, the province with the largest manufacturing employment, has announced the largest budget deficit in the province's history for 2009, $14.2 billion.

If deep cuts to social services have not already begun, it's because the federal government and some provincial governments, notably in British Columbia, are positioning themselves for re-election before swinging their axes.

The social wage threatened

Among the first victims of the economic downturn have been laid-off workers trying to collect unemployment insurance, and workers who are retired or soon to be.

Laid-off workers receive fewer benefits for shorter periods of time as a result of drastic cuts to the federal unemployment insurance program over the past years. According to Winnie Ng of the Good Jobs For All Coalition in Toronto, only 31% of unemployed workers receive benefits. Under pressure, the federal government recently extended by five weeks the length of time that recipients can collect. It did nothing to improve access.

Workers with retirement savings connected to the stock market have suffered double digit losses in the past six months. Meanwhile, company pension plans at many of Canada's largest employers no longer have enough funds to pay established benefits, in part because companies have unilaterally cut their contributions in recent years. The highly profitable Canadian Pacific Rail, for example, allowed its pension deficit to triple in 2008, to $1.6 billion. Air Canada's deficit rose 172% that same year. GM Canada's shortfall is somewhere around $6 billion. Only 50% of GM's unionized workers' present and future benefits are covered.

The federal government is considering legislation that would extend to ten years, from the current five, the time allowed companies to make up pension plan shortfalls.

The public pension picture, once thought impervious to the vagaries of the stock market, is starting to look grim. The manager of public pension plans in the province of Quebec announced in February an astounding loss of nearly $40 billion in 2008, one-quarter of the value of its holdings, due to substantial investment in the stock market, including the riskiest of assets.

Losses in Canada's public plan, which covers residents of all provinces and territories except Quebec, were $18 billion, or 14% of value. A big part of the losses can be traced back to a decision by the federal government in 1999 to allow the plan to invest 25% of its assets in the stock market. One can only guess what the size of the 2008 loss would have been without that 25% cap.

What economic collapse?

In the face of the grim economic news, the message from the federal government is, "Don't worry, be happy." Prime Minister Stephen Harper told a business audience in Brampton, Ontario on March 10: "Canada was the last advanced country to fall into this recession. We will make sure its effects here are the least severe, and we will come out of this faster than anyone and stronger than ever."

The latest message from Harper repeats the denials he issued when the world financial collapse escalated in September 2008, coinciding with the beginning of the last federal election. As the financial decline broke over Canada that month, Harper famously declared that it would be a good time to invest in the stock market. By November, Canada's largest stock index had declined 44%. In March 2009, it still stands 39% lower.

The government's claims are so outlandish that even big mouthpieces of capitalism have taken their distance. No less than the International Monetary Fund, itself an agency promoting rosy prospects for a quick international economic recovery, said on March 17 that Canada's economy would shrink by 2% in 2009, double an earlier "estimate" of 1%.

Former Bank of Canada governor David Dodge says that Harper's claim that Canada will experience a quick recovery and lead the rest of the world out of its decline is "totally unrealistic."

Canada's media has been focused on the disastrous decline of the U.S. economy. But Canada's January/February 2009 job losses are higher by 50% on a per capita basis than the U.S., wrote Vancouver Sun columnist Barbara Yaffe on March 20.

She also pointed to another ominous comparison between the two economies. Canada's is far more dependent on exports than its U.S. counterpart. They account for 35% to 40% of Canada's gross domestic product, compared to 12% to 15% in the U.S. More than three-quarters of Canadian exports go to the ailing U.S.

Harper's Pollyanna-like message is echoed by the opposition parties in Parliament, all of whom followed the government's lead in downplaying the gravity of the economic collapse. Only now are they hinting at taking their distance.

Deputy NDP Leader Thomas Mulcair expressed unease with the government's projections during a CBC Radio on March 24, "I'd like to have a clear-eyed view of what's really happening in the economy," he complained.

When asked what should be done for the country's unemployment insurance program, Mulcair said that the two-week waiting period should be eliminated. He decried the reduction in accessibility to the program but offered no measure to redress this.

The NDP announced on March 22 that it is launching a nine-week public consultation process to, "investigate the effects of the recession on ordinary Canadians, and bring new ideas to Ottawa."

Sub-prime mortgage elephant in the room

The March 14 Globe and Mail reported on a subject that no political party has dared to talk about, namely the troubling state of housing mortgages in Canada. Headlined "Canada's dirty subprime secret," the article began: "A Globe and Mail investigation into more than 10,000 foreclosure proceedings has uncovered a burgeoning subprime mortgage problem that many, including Prime Minister Stephen Harper, have insisted does not exist in Canada."

The federal government opened up Canada's mortgage market in early 2006 to reckless and predatory practices similar to those in the U.S. For example, 40-year mortgage amortization terms became legal for the first time, extended from 25 years. Requirements for down payments were also sharply lowered for the first time in history.

The Globe article reports that in Canada, statistics on housing loans are veiled in institutional secrecy. The full extent of consumer exposure to predatory lending cannot yet be assessed. The authors write, "The spread of subprime mortgages to Canada is one of the country's most poorly researched and misunderstood economic afflictions."

Where the authors could find statistics — on home foreclosures in the provinces of Alberta and British Columbia — they found fully half of them last year were on sub-prime loans. Foreclosures in both Alberta and B.C. in 2008 were more than double the previous year. What is striking about those figures is that the two provinces experienced a resource-price economic boom until late in the year.

It's not only the ability to pay, or not, that has mortgage holders threatened with losing their homes. Lenders have lost the will, or ability, to lend. As a March 27 Globe and Mail report revealed, an estimated $3 billion to $5 billion in high-risk mortgages are up for renewal in the next four years and the original lenders do not have the necessary access to capital to renew them. They want the federal government to step in and provide the financing. As many as 25,000 mortgage holders are involved.

Profitable banks?

From the capitalist standpoint, the one rosy picture in the Canadian economy is the performance of the country's highly monopolized banks. They all reported profits in the last quarter of 2008.

Government propaganda says that the banks in Canada are solid and not suffering from the same mistakes as their U.S. cousins. But that didn't prevent the government from quietly changing a law last November that would now permit it to purchase bank shares. Just in case…

The previous month, the government authorized the purchase of up to $25 billion in bad loans and securities from the banks. That was boosted to $125 billion early in 2009.

The banks lost hundreds of millions of dollars from the stock market decline in 2008. Losses will deepen in 2009 as they are hit by the manufacturing downturn, declining profit rates, and the full onslaught of foreclosures and personal bankruptcies.

The financial liberalization of recent years has simply postponed a practice that is endemic to capitalism — producing more goods and services than can be sold for a profit. In countries like the United States and Canada, government borrowing abroad, easy consumer credit and all manner of financial fraud made it possible to postpone the contradiction between growing supply of goods and services, on the one hand, and exploitation-restricted demand, on the other.

They must pay for their folly, not us

Government bailouts of the financial industry are nothing but a massive transfer of wealth from the poor to the rich in order to prop up the very institutions and wealthy families that have brought economic calamity to the world in the first place.

"Stimulus" spending by capitalist governments is proving to be a similar boondoggle. The Canadian government announced a spending package in January to the tune of $40 billion. Some of it is earmarked for road and bridge repair, in other words to line the pockets of the very transportation designers and companies that have created urban transportation gridlock and brought the world to the precipice of irreversible climate catastrophe

But where much of the spending will be targeted is completely unknown. Passage of enabling legislation is delayed because opposition parties are uneasy with a near-total lack of details of where the money will be spent and how it will be accounted for.

One thing that is known — the government has already said it will ease the process of environmental review of "stimulus" projects.

By far the most effective forms of "stimulus" spending would be to expand social services, including health care, education and child care; raise the salaries or welfare and pension benefits of the lowest paid in society; build public housing on a large scale; and undertake a massive program to redress the social and economic calamity lived by most of Canada's 1.8 million Indigenous peoples.

This kind of spending would deliver immediate aid to hard-pressed individuals and families. It would reverse the damaging cuts to social services by governments in recent decades. It would also inject money directly into local economies.

A serious fight by trade unions and other social organizations for such "social stimulus" would strengthen the entire working class movement and place it in a better position to wage struggles around a particularly vexing challenge — how to confront the jobs crisis in manufacturing industries.

A fight for an "ecological stimulus" is equally pressing. How can environmentally destructive industries such as automobile assembly, energy production, forestry and many others be transformed to produce socially useful products that do not trash the natural environment?

And how can a plan for a new economy take control out of the hands of corporations driven by greed and profit?

http://www.globalresearch.ca/index.php? ... &aid=12945

You build your own economy and then size it right, maintain it, and never tie your sustainbility to growth in population or international trade. That's how you do it, the way smart nations have always done it. Growth and international trade are extras, the icing on the cake, but only when it pays for itself upfront and immediately.

Canadian industry in Ontario was heavily automible related. The big 3 all had plants there and there was an awful lot of parts manufacturers and tire plants as well. In the town I was born in and the 2 neighboring cities have been hurting for a while. The tire plants slowly laid off and were shut down and the same happened with some of the parts manufacturers. The ones that are still there have laid off more than half their staff in the last 5 years. Then other manufacturing plants shut down their Canadian operations and kept the plants in the United States open and chances are some of them had illegals working for them.

Welcome to the North American Union, Canada. You have welcomed the business when times were good and Americans spent money like "what do you mean I have no money; I still have checks in my checkbook."
Don't put all the blame on us as you profited from the bounty of employing workers in outsourced business from the US. A friend that was a mediator for GM running interference with customer complaints, lost his job and had to train his Canadian replacement, because the entire department left the country.

Vortex many of those plants in Canada have been there for over 40 years. They were not jobs that were outsourced recently at the expense of Americans. I am not siding with the Canadians but rather am commenting on what I had seen when I lived there and have read about or was informed by friends who I am still in touch with.

Maybe this will help put things into perspective on Canada:

In 1994, before NAFTA, we had a $14 Billion A Year Trade Deficit with Canada. In 2008, 14 years after NAFTA, we had a $74 Billion A Year Trade Deficit with Canada.

Canada has more than quintupled its portion of industrial capacity to serve the US market under NAFTA. So at least some of those plants weren't always there.

http://www.census.gov/foreign-trade/bal ... .html#1994

http://www.census.gov/foreign-trade/bal ... .html#2008

Together Mexico ($74 Billion in 2007, $64 Billion in 200 and Canada ($74 Billion in 200 represent $150 Billion a year in trade deficits for the United States and has represented trade deficits every single year of NAFTA.

The botton-line is simple. We do not benefit from NAFTA at all, not one scintilla, not one iota, not one dollar, not one dime. We lose $150 Billion of production and manufacturing base every single year to Canada and Mexico.

In return, they want to use NAFTA to tell US what to do in our country.

Thanks, but no thanks. NAFTA needs to be repealed, along with every other Free Trade Treason agreement, and repealed now. We need to return to a protected trade economy that uses tariffs and quotas to manage our trade balances so that in most years they are balanced or in surplus.

We need to put quotas on China to force them to build an economy that serves their people not ours, that solves the poverty in their country instead of creating poverty in ours.

While we have huge trade deficits with Mexico and Canada, they are dwarfed by our trade deficit with China which was $266 Billion in 2008.

http://www.census.gov/foreign-trade/bal ... .html#2008

The combined trade deficit of 3 countries, just 3 out of almost 192 members of the United Nations, Mexico, Canada and China represent more than half of our $711 Billion world wide trade deficit. We have trade deficits with almost every country in the world whose name we can spell or pronounce.

The United States can't survive with trade imbalances like this in our international trade. It's national economic suicide by the book and numbers. Only traitors would devise an international trade scheme that did this to our country.

We have to repeal Free Trade Treason agreements and restore protected trade immediately. Newspapers, economists, talk show hosts, television news stations and every single American must get up to speed on what Free Trade really means, what it really costs, and how it has played the key role in accomplishing the national bankruptcy of the United States.

This can not be allowed to continue, it is the primary reason for our economic condition followed closely by illegal immigration. These two policies have sucked all the net worth, all our money supply and most of our good jobs and technology out of the United States and stolen, deflated and diminished what was left.

We can not solve our economic problem without reversing the policies that caused it, and these are the big 2 of the big 5.

Wake Up America! We're the nation that's supposed to have trade surpluses. We're the nation that is supposed to be solvent and balanced. But free trade, illegal immigration, an illegal foreign controlled drug trade, drillings bans on oil and gas and a mandated tax code that aids and abets them have made the United States an insolvent, imbalanced, unstable country.

The other side of NAFTA is that people from Canada and Mexico can come and work here on visas. Those people are paid less than Americans in most cases. On such employer I know about first hand is Microsoft. They would go to the University of Waterloo which is has one of he best computer and engineering program in Canada and recruit those graduating. Bill Gates used to come in person. Hospitals also do the same with nurses. This is turn made it very difficult for Canadians to immigrate here so many stay on visas hoping they get renwed once they come up for renewal.

Originally Posted by swatchick

The other side of NAFTA is that people from Canada and Mexico can come and work here on visas. Those people are paid less than Americans in most cases. On such employer I know about first hand is Microsoft. They would go to the University of Waterloo which is has one of he best computer and engineering program in Canada and recruit those graduating. Bill Gates used to come in person. Hospitals also do the same with nurses. This is turn made it very difficult for Canadians to immigrate here so many stay on visas hoping they get renwed once they come up for renewal.

That isn't related to NAFTA. That's related to US immigration law. I live in a town in North Carolina with a college that trains a lot of Canadian nurses, too.

Judy I was told by an immigration that due to NAFTA more Canadians can come here on visas. As for nurses getting training here unless they have a college nursing degree and are getting their BSc or have that and are getting a Master's degree while working here then they too are on a visa. That is a student visa and it costs a fortune. I know as I went through it. My BSc degree csot me $47,000 that is tuition and books. When I first came here I stayed under 6 months, left and returned. I was married to a legal resident back in Canada. I went to university here to get a visa to stay here unitl my husband got his citizenship and could sponsor me. There was a 7 year wait for me if he applied as a resident and less time if he applied for me as a resident.

Originally Posted by swatchick

Judy I was told by an immigration that due to NAFTA more Canadians can come here on visas. As for nurses getting training here unless they have a college nursing degree and are getting their BSc or have that and are getting a Master's degree while working here then they too are on a visa. That is a student visa and it costs a fortune. I know as I went through it. My BSc degree csot me $47,000 that is tuition and books. When I first came here I stayed under 6 months, left and returned. I was married to a legal resident back in Canada. I went to university here to get a visa to stay here unitl my husband got his citizenship and could sponsor me. There was a 7 year wait for me if he applied as a resident and less time if he applied for me as a resident.

Before NAFTA, people from all over the world came here to study on student visas under our immigration policy unrelated to NAFTA. They could apply for a work visa when they graduated, and depending on how many H2B visas Congress passes for each of the various job titles, then someone can get a visa to work in the US after they graduate or possibly even while they are studying, but who, when, what job and at what salary is determined by the US Congress every year, not NAFTA. That's the way it's always been before and after NAFTA.

So I don't know what the immigration official was referring to. Maybe there's a provision in NAFTA that encourages more visas to Mexico and Canada than previously, but the final decision on that number is determined by the US Congress every year based on lots of information and data supplied by government employment and wage statistics as well as business and industry documents.