The IMF, Structural Adjustment and Greece

The IMF and its boosters like to bill it as having 'seen the light.' Nowadays, we hear all about the IMF that has learned its lesson and is warm and cuddly. We are told that the IMF understands the importance of maintaining governance and government capacity. Why, we are even told they have a focus on poverty reduction. For a sterling example of this, you can see a discussion at enmasse.ca between me and several other posters going under the handles thwap, Rufus Polson, elmateo, Senor Magoo and A_J about the IMF, structural adjustment and whether or not Haiti should accept the loans offered by the IMF after the earthquake. You can read it here.

The notion that the IMF is not a heartless profit machine is, frankly, absurd. The conditions being imposed on Greece now prove this and put the lie to the notion that the IMF has changed from the cruel master of the 1980s and 1990s. All you have to do is look at the package of "austerity" measures that the Greek government (a quisling "Socialist Party" government at that) is trying to put through the parliament. The BBC has the details (see here and here), and the thing that is immediately noticeable is that the vast majority of the pain from these reforms is going to be felt by disadvantaged groups: the poor and the elderly.

In a crisis, the government needs to look to both its income and cost situation. Clearly, the IMF and the European Union are demanding action on the cost side of the ledger. But the government is doing almost all of its actions on this side, trying to cut expenditure without substantially increasing long term revenue. These measures don't even include a hike in income taxes, the most progressive way a government has of raising revenue. The government ought to be hiking taxes on its top income brackets to ease its balance of payments crisis, not cutting services and raising taxes that have disproportionate impacts on the poorest people in society. The government should also be raising taxes on banks and other corporations - the ones who actually caused the crisis. Instead, all there is is a one-off tax on profits and hikes in VAT (the Greek sales tax) and increased taxes on fuel, alcohol and tobacco. For the elderly, these cuts will be a double-whammy as they will see their pensions cut, and their costs rise.

The BBC also mentions privatization. Privatization is stupid at the best of economic times, killing the goose that lays the golden eggs. In times like these it would be a fire sale, giving away valuable state enterprises for pennies on the Euro. Privatization represents just another way of transferring capital accrued by the people in common to the owning class. Transferring control away from democratically accountable institutions like Parliament to the kleptomanic classes that caused this problem. But this is another hallmark of the reckless profit-lust of the IMF. It seems that in their view and Naomi Klein's words, the state should be nothing more than a conveyor belt moving public money to private interests.

The IMF remains the same villain it has been for decades. What is happening now shows no indication that the IMF cares a whit about reducing poverty, in fact these actions will without a shadow of a doubt increase poverty in Greece. The IMF cannot viably claim to be new, warm and fuzzy when it is pursuing policy options that could well have been tailored to cause more poverty and misery. The IMF should just admit that it is what it is, a shill for the global capitalist class, seeking to open countries to exploitation by capital.

The Budget is a Bust

As I feared, there are major tax cuts in this budget. The Conservatives are cutting taxes by $1.9 billion this year, and $2 billion on a continuing basis by moving the tax brackets upward. I will admit, that these are not the worst tax cuts there could have been, there could have been corporate income tax cuts, or cuts for the top tax bracket. The cuts that are in this budget do help to fight bracket creep, and that is generally speaking a good thing. These cuts are not, however, targeted to help the poorest of the poor, and those earning the least, those for whom tax cuts flow directly back into the economy in the form of spending on staples like food and clothing.

Also bad, is $4 billion over two years in tax credits for home renovations. This is a stupid way of doing things. Firstly, the credit isn't tied to any environmental objective. Someone expanding their monster home to build a heated swimming pool would get this credit the same as someone who is renovating their home to put in solar panels, geothermal heat sinks and improved insulation. Secondly, this programme requires individuals to outlay, and then claim back on their tax returns. This is stupid and produces unnecessary paper shuffling. The better way is simply for the government to directly reimburse for costs of pro-environmental renovations.

A good thing is to see extended EI benefits, to fifty weeks. But very bad is that there is no expanded eligibility. Part of the problem with the EI programme now is that only a tiny percentage of people who pay into it will ever be able to collect. The government should have expanded eligibility rules to ensure that more laid-off workers have access to the plan.

The budget includes $4 billion over two years for new infrastructure projects. This is paltry compared to the demand that is out there, and the massive infrastructure debt that this country faces. Public transit projects alone could gobble up all of this money.

Where is the money for social housing? Where is the money for retraining programmes for laid-off workers?

The deficit for this year is expected to be $33.7 billion, for 2010-2011 $29.8 billion, for 2011-2012 $13 billion and for 2012-2013 $7.3 billion. That means that the government expects to lose $83.8 billion over the next four years. That undoes almost a decade of debt repayment that was bought with the suffering of Canadians from slashed healthcare transfers, cuts to education, the outright theft of the EI surplus and a myriad of other cuts.

This budget is a bust, and if the Liberals support it, as far as I am concerned the coalition is dead.

Update: On further review, this budget is even more garbage than I thought it was. It places a huge load on the provinces and the municipalities to provide matching funds for infrastructure projects, which is insane since cities can't run deficits. The feds can borrow at a much lower interest rate than provinces. Those jurisdictions that cannot come up with the matching funds will be unable to access the federal money. This budget is a sham. Further, it is based on the 2008 fiscal statement (you know, the one that produced the first major constitutional crisis in a decade), and therefore includes by reference the elimination of pay equity, the attack on workers' rights and the ending of public campaign financing.

With regard to EI, I should add that the lack of increased eligibility is a disgrace, since the government blatantly stole $50 billion from the EI surplus during the 1990s and 2000s to pay for corporate tax cuts.

For an excellent explanation of why this budget will not stimulate the economy, see The Progressive Economics Forum.

The Budget, and the Coalition's Last Chance

Tomorrow, Finance Minister and Flim-Flam-Artist-in-Chief Jim Flaherty will deliver the federal budget for the 2009-2010 fiscal year. Much of the budget has already been leaked, in defiance of long-standing trends of budget confidentiality. The Conservatives appear to be set to spend like drunken sailors on a variety of areas. The spending seems, for the most part, to be focussed on good things (though as the NDP has been pointing out all day, the Conservatives can't really be trusted to deliver on this stuff, since they keep re-announcing the same money over and over). Concerningly, however, is that it has been indicated that the budget will contain broad-based tax cuts.

As I wrote a while ago, tax cuts are not stimulus, no matter how much the government would like us to believe the Chicago School, neo-liberal orthodoxy that if you free the market, greater prosperity will follow. That has been proven time and again, from the Southern Cone of Latin America to the post-Communist economies of the former Soviet Block, to the former Asian Tigers. Neo-liberal orthodoxy produces fantastic riches for an elite few, but produces planned misery for the vast bulk of the population. Neo-liberalism produces a massive wealth transfer from the poor to the rich, and produces the most astonishingly unequal societies on the face of the earth.

If this budget includes broad-based tax cuts, those will not be stimulus, those will drag the federal curent accounts budget into a structural deficit. Reducing revenue is the most astonishingly inappropriate thing for the government to do when major fiscal stimulus is needed.

The Liberals have this one opportunity to prove that they have grown a spine. If they vote for this budget, and for the con artists who have put it together, they will have proven themselves cowards, shrinking in the face of Conservative lies and bullying. However if they vote against, they will have proven a willingness to find an alternative within our constitutional structures, and without forcing the expense of another election on the people of Canada. Of course, all of that depends on the Governor General not disgracing herself again when Harper asks her for dissolution and a new election.

If the Liberals knuckle under, that will be it for the coalition. There is no point in any kind of cooperation with a Liberal Party that is staggering drunkenly to the right under Michael Ignatieff who is quickly proving once again that the Liberals will say anything and stand for nothing.

Tomorrow will be interesting.

We Get it CBC, There's a Deficit Coming

I don't know about anyone else, but I'm getting really tired of CBC's constant stories about how the upcoming budget is going to run a deficit. My reaction is generally something along the lines of "no shit, Sherlock." Everyone and her dog knew that a deficit was coming, except for the Conservatives well before the failed fiscal update that triggered a constitutional crisis. CBC seems determined to try to scare people with horrible economy stories. It's very reminiscent of Fox News and it's fear factory approach to reporting.

My message to CBC: give it a rest. We know the economy is bad, and we know a deficit is coming. You need to stop telling us to be afraid, to be very afraid, and start treating the Canadian public like a group of rational adults (no matter that we may not behave like it sometimes).

On a positive note, the window for George Bush to pre-emptively pardon his torture-cronies is closing quickly. He's only got eighty-two hours left as Preident.

Days Remaining in Bush Presidency: 3

A Momentous Time

As we approach the end of the reign of George Bush II, it becomes evident, to all but the most-close-eyed conservatives the hell to which we've been carried in Bush's hand-basket.

Human disasters are unfolding across the world. In Afghanistan and Iraq, the imperial west is brutally occupying, whether to extract oil or to protect pipeline routes. In Gaza the Palestinians are being slaughtered for political gain, in an appallingly crass, hubristic and hypocritical display. The genocide in Darfur continues to unfold, and American ally states from Lebanon to Pakistan to Georgia have been declaring states of emergency and clamping down on democratic opposition.

The great glory of modern capitalism, our globalized economy, is coming apart at the seams as economies across the world melt down, throwing workers out on the street, and bringing new protestations of Keynesian faith, despite the fact that the supposedly socialistic policy of bailouts simply enriches those already bloated with ill-gotten wealth. Bush and his wild-eyed acolytes of laissez-faire and the unfettered free market have proven to be unspeakable failures at managing the economy, as the ideological bankruptcy of their economic ideologies is proven to be matched only by its moral bankruptcy as in engages in one last orgy of upward redistribution of wealth. Executives get golden parachutes and workers get the soup kitchen line.

As laid out by the late, great, and incomparable Molly Ivins and Lou Dubose in their book Bill of Wrongs, the Bush regime has encouraged an all out assault on the principles of constitutional government in the United States, and this has had knock-on effects across the world. Canada puts in place Gitmo North and imprisons four men for eight years without charge, the opportunity to face their accusers or to know the evidence against them. Great Britain collapses into an agonized security state in which the average citizen of London is recorded on camera three hundred times every day, which would make Big Brother jealous. States in eastern Europe hold and torture men who have been kidnapped by the American government, in a practice called, with a chilling sterility, extraordinary rendition. American puppet regimes in the Middle East torture others, including Maher Arar who was confirmed to have committed no crime.

Bush and his flunkies have radically undermined the emergence of an international legal order, attempting to scuttle the International Criminal Court after securing major concessions. They have sabotaged attempts to save our climate from radical and disastrous change by recanting America's signature on the Kyoto Protocol to the United Nations Framework Convention on Climate Change. They have undermined the Geneva Conventions on the Law of War by creating the status of illegal enemy combatant that has no basis in law and is simply an excuse to hold the racialized other forever in a legal black hole.

This is but a brief and incomplete catalogue of the worst excesses, and high crimes, of George Bush, called Dubya. But not all is dark.

In the election on Nov. 4, 2008 Americans spoke resoundingly of a desire for change. While they likely will get only cosmetic change out of Barack Obama, Americans were mobilized and involved in politics in a way not seen since the election of John Fitzgerald Kennedy. Americans have been jolted out of political apathy, and it is to be hoped that their awakening will be transmitted to the slumbering populations of the rest of the industrialized world.

In Latin America a radical transformation of both economics and politics is gaining steam. A truly democratic and socialist movement has arisen, and is demanding justice and equality for their people, and an end to the domination of their states by their wealthy paleo-colonialist elites and foreign corporations. The people of Venezuela resisted an American-sponsored coup in 2002 that was eerily reminiscent of the coups in the southern cone during the 1970s. The workers and the indigenous populations have reclaimed control of their countries in Venezuela, Bolivia and Ecuador. Centre-leftists have been elected by wide margins in Brazil, Argentina, Chile, Uruguay and Paraguay. South America faces a revolutionary moment, and it provides a template that can be followed across the South.

As the economy melts down, that defining revolutionary moment spreads into the industrialized economies. It is a self-evident failure of capitalism. Socialists must be ready with alternatives to present, or we will lose this moment, as we lost the moment of the Great Depression.

The last days of George W. Bush are a time for celebration, as the global tyrant leaves the scene. But we can't stop at celebration. We must push for a true revolutionary moment, to bring democratic socialism to all the people of the world.

Days Remaining in Bush Presidency: 6

EI and Stimulus

On Wednesday, the Liberals decided to announce that they want the Harper government to improve EI as part of the budget in order to obtain their support. That's all well and good, but coming from the Liberals, it seems like a rather last minute trip along the road to Damascus. Liberals are the same party that effectively gutted EI in the 1990s to finance their deficit reduction. They stole billions from Canadian workers, and used it to pay down the debt and deficit. I'm glad they've finally seen the light, but it seems rather late.

Improving EI is an excellent way to stimulate the economy, because it keeps families who have lost jobs able to buy their essentials, and pay their bills, which flows money back into the economy. It's also the right thing to do, because these workers have been paying EI premiums for years, and deserve the security it brings, so that losing one's job does not mean an instantaneous disaster. Workers have given their sweat, tears and (far too often) their blood, for this county. It's time for the country to give back to them.

In their Alterative Budget, the Canadian Centre for Policy Alternatives called for the injection of $3.4 billion into the EI programme, to increase benefits to 60% of insurable income, and coverage to fifty weeks. EI is the very definition of counter-cyclical spending, since it spends money when the economy is bad, and saves money when the economy is doing well (at least it saves when the feds don't steal its surplus).

Canadian workers deserve the support of their government, and enriching EI is a good way to give that support. If the Liberals want to get on the pro-worker train, the more the merrier. But they're going to have to prove that they have earned their seats.

Days Remaining in Bush Presidency: 12

Tax Cuts Aren't Stimulus

The Finance Minister is an idiot. I'm going to put that out there now. He's also a liar and a crook, but that's a different story. This one is about how Jim Flaherty thinks that tax cuts are a form of counter-cyclical stimulus. He is talking about including tax cuts in the federal budget due at the end of January.

I'm sorry, this is a moronic move. The kind of tax cuts that Conservatives like are narrowly focused on the capitalist class, and emphasize trickle-down voodoo economics. Supply-side tax cuts are unequivocally not what we need in this economic climate. I don't think we generally ever need them, but that is, again, something for another entry, but we especially don't need them when our economy is staring massive over-production in the face. Providing tax cuts intended to increase capital investment is an inappropriate move in the current economic environment. If the Conservatives are bound and determined to have tax cuts in the budget, then cut marginal taxes for the lowest tax bracket, and maybe raise the basic personal exemption. This is the kind of tax measure that might be helpful. Those who would benefit from the measure are the people who live from paycheque to paycheque, and spend every cent they get. This money goes right back into the economy, and stimulates demand, easing the crisis of overproduction, without sacrificing jobs.

But I don't think tax cuts are the way to go right now. Tax cuts aren't a good method of counter-cyclical stimulation of the economy. Counter-cyclical stimulation, in the typical Keynesian mode, requires that the stimulation be capable of easing off when the economy no longer requires stimulation. Tax cuts cause a major problem in this regard, because in the current political climate it is very difficult to raise taxes, when the economy no longer needs the stimulation. We have seen a practical example of this in Canada. In the last election, Stephane Dion mused about the possibility of raising the GST back to 7%, and the howling across the country was deafening.

The best way to stimulate the economy is infrastructure spending. Infrastructure spending has five aspects that make it good for counter-cyclical stimulation:

1. It is capable of getting to work quickly, since most cities and counties have some kind of infrastructure project just waiting for funding to go into effect. An example is the Transit City proposal in the City of Toronto, envisioning many more streetcar lines to greatly increase the available transportation in the city.
2. It puts people to work, both in the immediate construction industry and in the feed-in system, creating a ripple effect across the economy. By putting people to work, more money is earned, and that helps to ease the overproduction crisis.
3. It stimulates demand for products manufactured in Canada, helping to keep well-paid manufacturing jobs in Canada.
4. Building infrastructure leaves something that will be useful for decades. A new subway line can be used for a hundred years or more (see London and New York), a new streetcar line for decades. Building infrastructure is a part of long-term economic planning.
   
5. It can be easily eased off when the economy recovers.

Obviously, infrastructure spending can't be the whole deal, but it is a far better way than idiotic Conservative tax cuts that will be secreted in bank accounts, and not put to work on products made in Canada. We need real stimulus in this budget.

Days Remaining in Bush Presidency: 14