III. The National Situation

The Economy

It is claimed that Canada is experiencing a period of unprecedented prosperity. The stock markets are booming and the elite in society is accumulating enormous wealth. However, the situation for the average Canadian has been deteriorating steadily for over a decade. The rich are becoming richer, while the poor are becoming poorer. The Canadian dollar has sunk to historically low levels in relation to the U.S. dollar and many other currencies. The balance of payments deficit continues to grow, even though there are record balance of trade surpluses. Unemployment is at record levels and underemployment is the lot of many who do have jobs.

Why is it that the new technology which holds the promise of freeing human beings from drudgery has instead led to the overwork of some and the forced idleness of others? Why has this technology, and the enormous increases in productivity which accompany it, not led to prosperity for all and the shrinking of the gap between rich and poor? The answer lies in the motive of production of capitalism, which is not the satisfaction of the material, cultural and spiritual needs of the people, but rather the attainment of maximum capitalist profits.

The most important feature of an economic system is how individuals make their livelihoods. Capitalism in Canada is in its final stage, the stage of monopoly capitalism. Over 75 years ago Lenin described this system as moribund and parasitic, a system dominated not by mercantile or industrial capital, but by finance capital. The main feature of finance capital is that it generates profits for its owners outside of the cycle of production. As a result, it is actually a drain on the economy; hence the description of "parasitic". In the mid-1980s Statistics Canada figures showed that, for the first time in Canadian history, profits on finance capital exceeded profits from all other forms of capitalist activities. Since then the situation has become even more extreme. A Canadian Auto Workers (CAW) economist recently estimated that of every dollar invested in Canada, only 29 cents goes toward financing industrial production. The remaining 71 cents flows into the financial markets, which produce nothing. Furthermore, despite the claims that a stock market is essential to bring together investors and borrowers, of all the billions of dollars that flow into the Canadian stock markets, only five percent goes into the real economy (i.e. the production of real goods and services), and of that amount almost half goes to buy out existing companies. Thus, only about three percent actually finances new production.

Even a cursory examination of the stock and bond markets over the past several decades reveals the motive force behind government fiscal policies. During the 1970s and 1980s, although governments at all levels talked about "fiscal restraint", government deficits and debts grew at unprecedented rates. Since social programs were already under attack and cutbacks in health and education spending were commonplace, it cannot be said that these deficits were incurred in order to benefit the people. However, during this period government bonds were paying interest rates of around 15 percent, while stocks were averaging less than 10 percent. Massive government borrowing on the bond markets, therefore, guaranteed maximum profits to the finance capitalists. All that began to change in the late 1980s when the bond markets plunged and stock markets began their greatest climb in history. Holders of government bonds were then losing potential profits and were desperate to free up capital to speculate in the stock markets. Suddenly the deficit became the biggest danger to the economy, and federal and provincial governments of every stripe began making surplus budgets and paying down the debt their main priorities. There is no need here to go into the human costs of the resulting cutbacks in social spending, which are both enormous and well-known. The main point is that this fiscal policy has served only the aim of the finance capitalists to maximize their profits and nothing else.

It cannot even be argued that the reduction of deficits and paying down of the debt has been beneficial to the Canadian economy. Material wealth is produced by the action of labour on nature, by the production of real value. Activity in the financial markets does not produce any value or wealth. It merely redistributes already produced values. For every gain in the financial markets there must be a corresponding loss somewhere. There is no net increase in value. Value itself is produced in the real economy in the process of production. The health of an economy is measured by the rate at which production is expanding and not by the rate at which a handful of speculators are enriching themselves. If only three cents of every dollar taken out of social spending by government deficit-cutting is invested in the real economy to expand the existing base of production, then clearly there is a net loss of 97 cents out of every dollar from the real economy. In other words, the economy is actually suffering enormous damage at the hands of the finance capitalists and the government policies designed to enrich them.

Why would the finance capitalists kill the goose that lays the golden egg? Why would they pursue a course of action which is undermining and destroying the very basis of all wealth, the production of real value? The answer lies in the motive of production of a capitalist economy, which is the realization of maximum capitalist profits. This means that the production of real value or material goods is only important insofar as it results in maximum profits. If maximum profits can be achieved in some other way, then production will be sacrificed. Capital will flow to those areas where the return is highest. In general this means where the rate of profit is highest.

Following World War II, when the infrastructure of many countries was being rebuilt, the main source of capitalist profits was commodity production. At that time the United States had the most powerful industrial economy in the world. However, as the various European economies were rebuilt and many Asian economies were transformed from an agricultural to an industrial basis, the post-war shortage of commodities came to an end, and by the mid-1970s a generalized crisis of overproduction had set in. One of the consequences of overproduction is that competition intensifies and commodity prices fall. A direct consequence of the fall of commodity prices is a decline in the average rate of capitalist profits. This tendency for the rate of capitalist profits to decline was recognized not only by Karl Marx, but by various economists both before and since Marx. Some have even described it as an economic law and in some sense it is a law. Looking at the past two centuries of capitalism one sees long periods of slowly declining rates of profits interrupted by short periods during which this tendency has been temporarily reversed, usually by the introduction of new forms of technology and/or new forms of organization. The past decade has been one such period, but in this case the source of the reversal of the general tendency has been the direct bleeding of the public treasury and the expansion of the financial markets at the expense of the real economy. It is important to note that this particular reversal of the trend for the rate of profits to decline is only occurring for individual capitalists and not for the capitalist system as a whole. The average rate of profits taken over the entire economy is still declining, but the most powerful capitalists are using their control of the state and their monopoly positions to extort higher profits at the expense of the smaller and weaker capitalists and at the expense of the working people.

The problem that the Canadian economy is presently facing is not simply the result of the greed of a handful of finance capitalists. If that were the case, then the passing of legislation of various kinds, such as the proposed tax on financial transactions, may be capable of saving capitalism from almost certain collapse. However, the problem runs deeper than that. Probably for the first time in history, human beings are capable of producing far more commodities than they can possibly consume, at least within the present form of economic and social organization of society. So what are these capitalists going to do with their accumulated wealth? It simply does not make economic sense to invest more capital in factories to produce more commodities when there is already a surplus of those commodities. To do so would simply exacerbate the overproduction crisis and lead to economic collapse and depression. "Investing" in the financial markets has become both easier and safer than investing in risky production ventures. However, withdrawing capital from the real economy and using it to speculate in the financial markets is also creating instability in those financial markets by reducing the base for generating future profits. Sooner or later the flow of capital into the financial markets will necessarily slow down, panic will set in and the markets will crash, leading to economic collapse and depression. This phenomenon has already occurred in the Asian and Russian economies, and the North American and European markets appear to be losing steam. When such an economic collapse will occur is not certain, but that it will occur eventually is a certainty.

Politics

Politics serves economics and we have already shown how the policies of "fiscal restraint" directly serve the economic interests of the financial oligarchy. For the past two decades successive federal and provincial governments in Canada, as elsewhere, have been pursuing an increasingly anti-social, anti-national policy, a policy of serving every whim of the financial oligarchy to the detriment of the Canadian people and the Canadian nation.

The general features of this anti-social offensive are:

1) reductions in social expenditures in order to balance budgets and "pay down the debt";

2) privatization or the handing over of public property for the enrichment of the finance capitalists;

3) the dismantling of national institutions;

4) increasing political reaction, violations of civil rights and the adoption of "rule by decree";

5) reducing the role of governments to the collection of taxes and maintenance of "law and order", both internally and externally; and

6) Americanization of Canadian culture and the dismantling of Canadian cultural institutions.

The Crisis of Representative Democracy

Since the defeat of the Charlottetown Accord in 1992 Canadian federal politics has entered a period of disequilibrium. No standard-bearer of the bourgeoisie has emerged to break this disequilibrium. The Liberal government essentially "represents" only Ontario, parts of Quebec and the Maritimes. The West is split between the NDP and the Reform Party, while most of Quebec is represented by the Bloc Quebecois. The contradiction between Quebec and the federal government is at an impasse and neither side appears capable of making any headway at the expense of the other. Subjectively this impasse is reflected in the sentiment amongst the people against any further constitutional talks; at the same time they realize that serious attention to renewal of the constitution is crucial to prevent Canada from disintegrating. What has become clear is that the bourgeoisie is incapable of providing any leadership in sorting out any of these questions. Neither the issue of Quebec, nor the issue of Aboriginal peoples, nor the issue of regional discontent can be solved by the bourgeoisie. Only the working class is capable of providing the enlightened leadership required to solve these problems. Unfortunately, the working class still has illusions about capitalism and is not yet capable of pursuing its own agenda. Until the working class adopts its independent agenda and politics, the political disequilibrium in Canadian politics will continue to deepen and broaden and will eventually emerge as a full-blown political crisis.