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Labour + Industry

The Meltdown, Seen from Below

What union leaders, labour experts and anti-poverty activists say needs to be done.

Tom Sandborn 3 Nov

Tom Sandborn is a contributing editor to The Tyee.

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Now that bullish turned out to be bull...

As the global financial meltdown spreads to threaten General Motors and even the Euro, financial experts in well-tailored suits vie in the news media to frame how we arrived here and what should be done.

Their debate tends to be about just how many billion of dollars need to be delivered to banks and other financial institutions to keep the good ship globalization afloat. From quarters such as the conservative Fraser Institute, we hear that government is to blame for intruding into the market, and so less regulation is the cure.

Here at The Tyee, we noticed that most of the commentary on our Titanic dilemma seems to be coming from the passengers in first class and the government navigators who helped create the crisis. We were curious about how it looks to the crew and the passengers in third class, so we made some calls to union leaders, anti-poverty activists, and various economists and historians who make it their business to study big business without being part of the action.

We heard voices saying that Canada and the world economy need increased social services, expanded public infrastructure investments and restored regimes of strict regulation for banks and investment houses. And we heard much skepticism towards bailout programs perceived to have so far rewarded the folks who created the crisis.

"The bankers seem to have forgotten one of the most serious commandments, 'Thou shalt not steal,'" said Sister Elizabeth Kelliher, a Franciscan nun on Vancouver's gritty Downtown Eastside.

"We need government action to set and enforce a living wage," she told The Tyee. "The government should immediately fund new social housing."

'A great unwinding'

Kelliher, who operates a soup kitchen that feeds between 300 and 500 of the city's most poverty stricken each day, says she is already seeing the results of the financial crisis as desperately needed donations to sustain the feeding program are beginning to dry up. So while the crisis may mean diminished RRSPs and pension funds for many of us, it could already be generating thinner soup and smaller sandwiches for the city's hungriest citizens

Andrew Jackson, director of social and economic policy for the Canadian Labour Congress, agrees with Elizabeth Kelliher that the Canadian government should be making massive new investments in social housing, as well as many other areas of infrastructure.

"What we're seeing here is a great unwinding of the current system," he said. "We are headed into a major downturn, and Canada should be putting at least $10 billion into infrastructure projects right away. We need to get out of the casino and into the real economy that channels savings into new production."

The CLC has just issued a paper on its response to the current crisis titled "Global Capitalism: On the edge of the abyss." The paper says the global economy is now "almost certainly headed for a deep and prolonged recession," and notes that global markets have already fallen as far as they did in the Great Crash of 1929.

The labour group blames deregulated global finance for the crisis, pointing to what it calls "the unregulated shadow banking system of investment banks, hedge funds and private equity funds," and decrying the creation of "fiendishly complex and sometimes outright fraudulent products." The face value of these highly abstract and uncertain financial instruments, the paper notes, was recently estimated at over $50 trillion.

The CLC paper quotes Nouriel Roubini, professor of economics and international business at the Stern School of Business at New York University: "The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity.... a housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in he biggest real sector and financial sector deleveraging since the Great Depression."

The CLC paper calls on Canada to play a role in creating a co-ordinated international response to the crisis that features re-regulation of both local and cross-border transactions and the imposition of a small transaction tax on all securities trading, including commodity futures. This Tobin Tax, named for the Nobel Prize winner who first suggested it, is designed to discourage short term speculation and to raise the government revenues that will be necessary to fund appropriate investments in social services and infrastructure repair.

Bail out tied to regulation

While many critics of the official response so far are asking why so much money is going into the banks and finance houses that created the crisis, the CLC endorses some bail-out activity as necessary to avert a systemic collapse. The bail out money must come, it cautions, tied to effective regulatory rules.

The CLC wants Canada Mortgage and Housing to re-finance distressed Canadian home mortgages at lower rates, dismissing the view that Canada is not experiencing a housing bubble as a myth. The $10 billion a year in new infrastructure investment the CLC calls for, says the paper, would create 200,000 new Canadian jobs rebuilding roads and bridges, mass transit projects, water works and the like as well as replenishing the country's diminished stock of social housing. A public letter recently signed by 80 prominent Canadian economists has echoed this call for an active and interventionist response by government to the economic crisis.

Further corporate tax cuts should be cancelled, the paper argues, in favor of direct government support for new investments in machinery and equipment, research, development and training.

Even if all these reforms are put into place, says the CLC paper, Canada may well experience serious increases in unemployment, which will expose weaknesses of the Employment Insurance program. Far fewer workers are eligible for EI as it now exists than was true in years past, and maximum rates and time allowed for coverage are both inadequate, according to the paper, which calls for broadened eligibility, higher maximum payouts and longer terms of coverage for the unemployed. The EI system currently has a surplus of over $50 billion.

Call for new pension protection

The CLC paper predicts the current financial crisis will create a severe pensions crisis, and a follow-up paper issued on Oct. 29 calls for the creation of a new pension benefit insurance scheme (financed by the proposed tax on financial transactions) to insure annual pension and RRSP benefits for individual Canadians up to $60,000 a year.

Pensions are a concern for Bill Saunders, too. Saunders, the president of the Vancouver and District Labour Council, says that Canadian workers and their pensions are more exposed to risk during market trouble because of the successful campaign over the past decades to move from defined benefit pensions, which guarantee a certain monthly amount when you retire, to defined contribution plans, promoted by market enthusiasts.

Contribution plans shovel a defined amount every month into mutual funds and other stocks, creating pension payouts that can vary widely depending upon the health of the market, as many Canadians are discovering this year as their RRSP holdings have shrunk dramatically.

"Twenty years ago," said Saunders, "60 per cent of Canadian private pension plans were defined benefit. Now that share has been cut in half. Defined contribution plans just don't deliver the goods for workers the way defined benefit plans do, and the current crisis illustrates that."

Deficits and ideology

Marc Lee, economist at the Canadian Centre for Policy Alternatives, a progressive Vancouver think tank, says that government action on the reforms suggested by labour will be hampered by ideological objections to running deficits in bad times.

"In Canada, we're haunted by the deficits of the '90s. However, in times of recession, you want government to run a deficit. If you try to avert deficits in times like these, you get pressures to cut services, which would only make the problem worse.

B.C. Finance Minister Colin Hansen has predicted the global meltdown will strip billions from provincial government revenues. Lee says that's no reason to punish the poor, in fact, it's bad economics.

"We need to use income transfers like EI and social assistance to channel money to people who will put it back immediately into the economy. We should increase welfare rates by 50 to 100 per cent and increase EI replacement rates to 75 per cent. We should also be gearing up public infrastructure projects, especially ones like mass transit that advance other important agendas like reducing green house gas emissions," says Lee.

'Job creation is vital'

The union and anti-poverty activists who spoke to The Tyee for this article were unanimous in echoing calls from the CLC and the CCPA's Lee for increased infrastructure and social spending in Canada. Jean Swanson, a veteran of decades of anti-poverty work in Vancouver, noted that the only up side she could see to the crisis is that it might possibly slow down the "luxury condo hurricane" she has seen crowd out needed new social housing in the Downtown Eastside. Swanson backed the calls heard from others for increases in welfare and EI rates, and expressed hope that some of the bail out money could go to creating new housing and infrastructure.

Gary Kroeker, president of the BC and Yukon Building Trades Council and business manager of Operating Engineers Local 115, says his members are already seeing big construction projects cancelled and postponed. Like Wayne Peppard, the council executive director, Kroeker told The Tyee that part of the solution to the current crisis lies in robust new investment in public infrastructure.

"Job creation is vital," said Kroeker. "We can't let the economy go to hell in a handbasket.

"We have to make Keynesian investments in the future," said Peppard.

Barry O'Neill, president of CUPE BC, wants to see some of those Keynesian investments made at the local level. He told The Tyee that local governments are currently the most progressive in Canada, and the ones closest to their citizens and taxpayers. O'Neill advocates robust infrastructure investments, and he would like to see more tax money controlled locally to focus on local needs and job creation.

"We should be doing more on import substitution and local production, and on investments that will keep money in the local economy," he said.

Kids, women to bear brunt?

Darryl Walker, president of the BCGEU, says his members are worried and want more money to go into public projects and smaller communities. They are confused and angry about the economic crisis, he said.

"Somebody has squandered and wasted billions of dollars," he said, "and Campbell is throwing darts at the wrong dartboard."

Irene Lanzinger, president of the BC Teachers Federation, echoed the call for public investments and stricter regulation of banks, and added particular concerns about schools, women and students.

"B.C. has the highest levels of child poverty in the country," she noted. "Why can we find millions for tax cuts and bank bail outs and not enough for kids?"

She said that increases in poverty always had serious impacts on B.C. students, and on women, who continue to make lower average wages than male workers.

"Downturns always hit women harder," she said. "We haven't yet made the progress we need."

Judy Darcy is another union leader who serves a primarily female membership, and they are telling her they are very worried about the future.

"We're not seeing job losses yet, but there is a lot of generalized angst among members," the secretary treasurer/business manager of the province's Hospital Employees Union told The Tyee. "We'd like to see all health care facilities pay their workers a living wage, and we'd like to see the current mantra that all new infrastructure be build with public private partnerships revisited. We've argued for a long time that these privatizing deals don't make sense, and now, with the credit crunch, P3s are a ticking time bomb and a threat to public infrastructure."

Marjorie Griffin Cohen, who teaches political science and women's studies at Simon Fraser, says that the economic crisis will have serious impacts on women.

"The private sector will be a bloodbath for women and, if the crisis is prolonged, the pressure for service and staffing cuts in the public sector, where women have some significant union protection, will grow. At my university, we've already had announcements that 30 faculty and 50 support staff will be cut, and these are likely to be mainly women."

Like many of the other union leaders we consulted, Darcy says that her union will continue to organize aggressively during hard times, noting that the HEU has successfully signed up workers at most of the health facilities where the Campbell government has contracted out support services.

Re-training a high priority

Saunders and BC Fed president Jim Sinclair both pointed to the need for more worker education as one component of organizing drives in hard times.

"The challenge for our movement is to establish a new alternative vision, and to protect workers," said Sinclair. "We want to see programs that educate and re-train workers and more support for apprenticeship."

The Vancouver District Labour Council is sponsoring a local public appearance by Canadian Auto Worker economist Jim Stanford in January, Saunders said, and an ongoing study group based on Stanford's new book, Economics for Everyone.

Stanford told The Tyee that one of his policy priorities would be more emergency aid for the real economy of production, as opposed to banking and finance.

"Do you let North American auto companies go down? I don't think so. We need a return to a Canadian industrial policy. The past three years have been terrible across manufacturing. Things could get much worse if manufacturing crashes altogether. And when we put public money into companies, we should demand a quid pro quo, make it an investment, not a bail out."

Militancy reborn?

In the last Great Depression, one of the responses to a worldwide collapse of capitalism was the emergence of new and more militant unions. The Tyee asked the folks contacted for this article what the prospects were for another such upwelling of popular resistance.

Jim Stanford says the crisis may well be an opportunity for labour.

"There are huge risks here," he said, "and huge opportunities for a fight back. We could see dramatic changes like the 1930s. We'd need to see ambitious, militant organizing to lead to such a renewal, but it could happen."

"When times are bad, movements get re-born," Griffin Cohen observed. "I don't see any new militancy emerging, at least not in B.C., but big cuts may lead to resistance."

Mark Leier teaches labour studies at SFU and has a special interest in the Wobblies, or IWW, a hardcore militant union active at the beginning of the last century. He agrees that the current crisis represents an enormous challenge and opportunity for organized labour.

"Nothing happens automatically, though," he cautions. "It all depends on labour's openness to new ideas and strategies. The crucial message of unionism is that we need to help each other."

Guest workers take a hit

Leier says it would be a mistake for unions to wait for the laws to change. Militant struggle is what leads to more pro-labour legal changes.

"We would have to combine the rebel energies of anger, discontent and joy with the institutions that are already in place in the movement," he told The Tyee. "You can't rule out any tactics out of hand, for example, a general strike. We just don't know now what would work. We have to continue to push for legal changes such as sectoral bargaining and at the same time stay active in the streets."

Another way that the current crisis hurts those at the bottom of the economic ladder was revealed in a conversation with Lucy Luna, a United Food and Commercial Workers union organizer among immigrant farm workers in the Fraser Valley, who notes that the reduced value of the Canadian dollar means that the remittances sent home to Mexico by the "guest workers" shipped to Canada under a federal temporary work permit program are now nearly cut in half in value by the time they reach Mexico, where the economy is geared to the U.S. dollar.

Luna also predicted that farm owners will continue to lobby to expand the guest worker program, citing economic pressures to justify access to even more cheap labour from abroad.

SFU's Leier mused that the fast-shifting landscape may change the way people think about their own identities, and their relationship to the people running the economy.

"The idea of class has been kicked out of people's heads," he said. "Maybe one result of the meltdown will be that we re-discover class."

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