The great affordability crisis

September 16, 2019   ·   0 Comments

By Laura Campbell

This column is not describing how and in what ways life has become too expensive. You know it as well as I do, and every well-meaning politician knows it too. But it’s a lot more complicated than they make it seem. Here are my thoughts:

The Conservatives advertise a whole lot on TSN. Every Sunday, when my husband gets his well-deserved break after a long week of work (an average shift at our small business is about 12 hours for him) and tunes in to watch Football, he must sit through Andrew Scheer making a vague appeal to us about ‘getting ahead.’ 

Scheer and the Conservatives are right to highlight this as a key issue. There’s an affordability crisis in our country. Average people are deeply indebted in order to make ends meet and there are many reasons why this is the case. Unfortunately for Scheer, one of those reasons is the policy-legacy of those very same Conservatives and their corporate friends. Though Stephen Harper didn’t actually embrace deep austerity programs like we saw in the 1980s (though the $100 Harper child tax benefit was particularly sad), he instead advanced corporate tax cuts that began in the year 2000. The Liberals started down the road, and Harper happily followed suit: corporate taxes have progressively fallen from around 29.1% in the year 2000 to 15% in 2012. Trudeau has left that number in place. Those tax cuts did not make goods and services more affordable for the rest of us, but they sure made a whole lot of bankers and investors happy. 

Ironically, one of the reasons life is unaffordable is not ‘because we buy iPhones.’ This claim is very cynical. Instead, I would argue, we have become entrapped in a system that is tailored to produce profits for the richest people in our society – CEO’s of Amazon, Apple, the big banks, Loblaws, and so on. The Conservatives and Liberals, in general, believe that what’s good for large employers is good for everyone (there are some variations between the two parties on this theme, but at the core, they both participate in this ideology). They believe the wealth will just naturally spread to the rest of us, too. Of course anyone working for minimum wage today knows that their jobs are both not well-paying enough to get by, nor are they stable. How did we become convinced that ‘trickle-down’ economics works, that creating wealth for the 1% will somehow create wealth for the rest of us? Jobs, maybe (if we ignore automation), but wealth, clearly not. 

A little bit of that has to do with the history of economic theory. About 50-60 years ago, a man by the name of Friedrich Hayek began to push back against the predominant wisdom that government should regulate the market in some ways in order to prevent disorder, or financial crisis (that predominant wisdom was known as Keynesianism after economist John Maynard Keynes). Hayek did not share his perspective, and  made his way from Europe to the University of Chicago, where he founded what is now known as the Chicago School of Economics – a place, and a theory, all at once. The Chicago school believes that the ‘market’ is all-knowing. It does not need regulation, or intervention. The idea is that human beings in society will spontaneously self-regulate by setting prices and wages that work. For these ideas, Hayek won a Nobel Prize in 1974. 

But there are two things I always linger on when I think about Hayek. 1) As brilliant as he was, he was still a product of his time. Just like his contemporaries, he was confronted with the ‘spectre’ of communism and the legacy of National Socialism in Germany in the 1930s. Those things informed his ideas. 2) He did not experience 21st century capitalism. What I mean is that, by now, most large companies are linked to one another, and we in turn are linked to them, through direct investments or our pension funds. This latter part, especially, means that the government has a duty to ensure a healthy corporate environment so that THEIR own (our) investments are safe, stable, and GROWING. Which is all to say that, despite the triumph of capital accumulation for the 1%, we don’t live in a free market as such. And therefore, wealth can’t trickle down when that wealth creation is contingent on cheap labour and low corporate tax rates. 

If wealth doesn’t trickle down, why then are politicians still using the broad talking points of this ideology? I only wish that we could have an honest conversation about it. Lowering taxes for the middle class is a nice idea, but if that means less social programs for us that we all rely on, then we aren’t really saving money in the end. For example, we aren’t getting ahead while medication becomes more costly. A small tax cut for us won’t make up the difference. In short, we can’t afford those tax cuts. But we could, if we took the next logical step: raised taxes on non-productive capital (money just sitting in corporate bank accounts, that is being speculated on, etc, and instituted more widespread social programs and improved the ones we already had. 

I know the election is now on. I will pledge to do the best I can to cover the issues and give credit to all of our local candidates for their hard work. But until we ALL demand and work towards a better, more equitable system, the promises of “getting ahead” will be empty. Let’s not get duped this time around. Let’s demand better.

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