Canada: No Change – The Bullet
The Prime Minister of the Liberal Party of Canada, Justin Trudeau, managed to be re-elected for the third time in the early general election he called. The Liberals won or led with 158 seats (one more than their 2,109 seats), out of a total of 338 seats, and the Conservatives followed the Liberals, winning or leading with 119 seats, three behind their 2019 result. But Trudeau will not get an absolute majority in Parliament (as before) and will need the support of the left New Democrats (25 seats) to pass a law.
Indeed, the result is more or less the same as in the last election two years ago. Trudeau’s plan for a majority based on the “success” of the government’s handling of the COVID crisis backfired. Many voters viewed the election as a cynical move and a waste of time. Indeed, it was the conservatives who got the most votes (as in 2019) attracting 34% of support against 32% of the liberals, but the support of the liberals is centered on urban and suburban areas where there are more seats. . And Canada has a first past the post system like the UK.
Voter turnout has fallen in the 21st century, from a high of 75%; in that election it was around 65% – much higher than the US, about the same as the UK but lower than other G7 economies like Germany and Japan . A 65% turnout meant the “non-vote” party was the largest – and Trudeau’s Liberals only attracted one in five potential voters.
Canada: voter turnout (%)
As the smallest G7 country in terms of GDP and population, Canada has recorded far fewer COVID cases and deaths than many other countries, and Trudeau recently reopened the border, but only to those vaccinated. In the election, Trudeau highlighted the dire situation in Alberta, led by a Conservative provincial government, which refused to adopt social distancing restrictions and now has a spate of cases and hospitalizations. Interestingly, the far-right anti-vaccine People’s Party failed to stand out, with just 5.1% in the polls.
Trudeau may be back in power, but like other G7 economies, things are not rosy economically. Canada’s economic outlook for 2021 is similar to that of other developed countries. After the sharpest economic contraction since 1945 (a 5.5% drop in GDP in 2020), Canada is still in recession, latest figures show, although forecasters (Oxford Economics) still expect a strong recovery .
Even if the above forecasts turn out to be correct (and this is uncertain), the long-term economic trends for the Canadian economy are not great. A recent report from the Macdonald-Laurier Institute wrote that “real GDP growth in Canada over the past decade has been as sluggish as the decade after the onset of the Great Depression in 1929” (Cross 2020). So Canadian capitalism had already been in trouble for over a decade when the COVID-19 lockdown began.
For an account of Canadian capitalism up to the 1990s, I recommend the work of Marxist economist Murray Smith. Recently, Geoff McCormack of the Center for Canadian Studies at the Guangdong University of Foreign Studies has produced an excellent analysis of Canadian capitalism, which I draw on here. McCormack finds that over the 13-year period following the “Great Canadian Crisis” of 1990-92, the rate of profit on Canadian capital fell from 13% to 28%. But after peaking in 2005, it started dropping to 17% in 2019.
The downward trajectory of the rate of profit over this 14-year period was accompanied by a stagnant mass of profit. Between the years 1993 and 2005, the mass of profits increased by 142%. After 2005 and until 2019, it stagnated, however, having only increased by 1.5% over the entire period.
Canada escaped much of the impact of the 2008-2009 global financial crisis due to the long period of relatively strong profitability and capital accumulation that preceded the crisis. But by 2006, according to McCormack, profitability had started to erode. “Subsequently, ‘furtive’ stagnation became increasingly evident in the rates of capital accumulation, capacity utilization, employment, as well as the growth of real wages and GDP.
In the eight years since 2010, business investment in factories and machinery increased on average by only 0.1%. The recovery from the Great Recession was driven by a housing boom fueled by credit. People got jobs but at low rates of pay just like in other G7 economies. In the years following the Great Recession, real wage growth slowed considerably, averaging only 0.4% per year. As McCormack puts it, “given low profitability, lackluster capital accumulation, truncated capacity utilization, low employment rate and low real wage growth, it is not. not surprisingly, real GDP growth has also been weak ”.
Canada is increasingly dependent on its production of oil and gas and other mineral resources. There is therefore no will to phase out the production of fossil fuels to save the planet. Trudeau said it in a speech applauding Texas oil tankers a few years ago: “No country would find 173 billion barrels of oil in the ground and leave it there.” Thus, Canada, which represents 0.5% of the planet’s population, plans to use nearly a third of the planet’s remaining carbon budget. There is oil in the ground and it has to come out.
And even the growth in income over the past decade has not been shared equally. As in other OECD economies, the share of income going to the richest 1% of “wage earners” has skyrocketed while the share of the poorest 50% has fallen. Indeed, the richest 1% have almost as much income as the poorest 50%!
Canada: share of top 1% (blue); Bottom 50% (red) – Global Inequality Database.
And Canada’s wealth inequality is comparable to that of other G7 economies.
Thus, the decade since 2009 has been characterized by stealthy stagnation, rooted in profitability problems that began after 2005. This manifested itself in the stagnant accumulation of machinery and equipment, low rates of utilization of machinery and equipment. industrial capacities, low levels of employment, as well as low real wages. and GDP growth. It is an expression of what I have called the long depression that all major capitalist economies have fallen into since 2009 in the ten years leading up to the COVID crisis.
And just like in other major G7 economies, corporate and household debt has reached record levels. Despite very low interest rates, the corporate sector in Canada is weighed down by debt service costs. In 2020, 55% of business income was spent on paying interest and principal on loans, compared to 43% in the United States. The debt service ratio fell from 38% in 2006 to 57% in 2019 as economic stagnation weighed on corporate balance sheets.
Bank of Canada economists have classified 25% of publicly traded Canadian companies as zombie companies, meaning they don’t earn enough income to cover interest payments on their unpaid debts.
Canadian capitalism therefore bears all the characteristics of the contradictions faced by the other G7 economies as they emerge from the COVID crisis. Prime Minister Trudeau got nothing with his snap election and faces the same problems running Canada’s capitalist economy as before. •
This article first published on the The next recession website.