Part 1: Canada and the Erosion of the Public Interest

“My main point…has been that market systems imprison policy.  Those of us who live in those market oriented systems that are called liberal democratic exercise significantly less control over policy than we have thought…That our thinking is itself imprisoned is a separate phenomenon of importance.”

The Market as Prison, Charles E. Lindblom, The Journal of Politics, May 1982

“I am convinced that politics as usual will not help us and that today’s politics is, almost without exception, not much more than elitist, technocratic, professionalized, highly paid impression management.”

Interview with Wolfgang Streeck, Jacobin Magazine, August 2018

Roughly 35 years ago, Canada’s political leaders lost the plot.

Their purpose was then, and remains today, to focus on the public interest, understood as the health and economic well-being of the average citizen, along with the health and vitality of the natural eco-system upon which we depend for our survival. The solemn duty to the ‘general welfare’ which our elected representatives owe to ordinary citizens precedes all else. It is akin to the duty of care that parents owe their children; it is sacred, primary and enduring.

Jean-Jacques Rousseau cast doubt on whether a ‘representative assembly’ form of government (theoretically embodying civic values of duty, responsibility, and accountability) could ever really deliver on the expression of the ‘general will.’ He believed that it would always fall prey to powerful sectional and private interests.  However, it has been the preferred model of governance in most developed nations since the demise of feudal/monarchical rule. On the face of it, a model founded on equality of participation, regular elections based on universal suffrage, and the delegation by citizen-electors of decision-making powers to their elected representatives in constituent assemblies was a stroke of creative genius.

Up until the late 1970s, that model served Canadians reasonably well. Importantly, politicians and public servants of the postwar era knew that they owed everything to ordinary members of the public. Colossal collective action failures of the 1920s and ‘30s had resulted in both global economic depression and world war. After 1945, leaders in Canada and elsewhere knew instinctively that they had to prevent a recurrence of the financial asset speculation, grotesque wealth distortion and abject market failure which had exacted such a heavy price on their citizenry in terms of loss of life, human suffering and wasted potential. The memory of soup kitchens, ‘hoboes’ and ‘riding the rails’ was still vivid in the post-war Canadian mind. Curbing unbridled capitalism and, at the same time, making real provision for ordinary people became both a noble objective and a point of pride for governments in the post-war years.

Having said this, it has always been the case that formal procedural equality and observance of the tenets of democracy could not be confused with equality of influence or of outcome. Yet, in the immediate post-war years, most citizens in Canada and other advanced industrial economies were prepared to tolerate that sleight of hand – as long as they received their share of social goods, economic opportunity and basic legal rights, and while they remained reasonably convinced that their leaders were engaged in wise stewardship of our collective resources. For thirty-five years after the Second World War then, that model of democratic representative government, harnessed to a philosophy of enlightened welfare provision in support of the least well-off citizens and regions made Canada a beacon of progress, public-spiritedness and generosity, at least in the North American context. During this period of strong and sustained economic growth, extensive family income supports, increased educational opportunity and genuinely progressive taxation, Canadians (excluding, of course, Aboriginal peoples) enjoyed an enviable quality of life.

Our leaders in Canada and those of many other western governments rescinded this democratic social contract beginning in the early 1980s. The sacred pact between our governing elites and the average citizen has been breached repeatedly since then by a mix of ideologically-driven policies, inexcusable neglect, and calculated design. The reasons why are hardly unique to Canada and can be boiled down to greed and narrow self-interest. In broad terms, however, we can say that a group of disgruntled corporate elites, wealthy patricians, and narrow-thinking economists and philosophers of ‘limited government’ became severely disenchanted with the proactive “regulatory” and “re-distributionist” posture of the state they could see taking shape around them. Driven by a shared hostility to the gradual erosion in the rate of private profit arising from the ‘evils’ of economic planning and progressive taxation, an international collection of conservative ideologues came together in the Swiss resort of Mont Pelerin in 1947.  Disciples of the libertarian ideas contained in both Friedrich Hayek’s 1944 book, The Road to Serfdom and of the writings of a second Austrian thinker, Ludwig von Mises, the Mt. Pelerin Society (MPS) became a kind of ‘incubator’ to a host of ideologically kindred, slavishly pro-market think tanks that gradually populated the western democracies. As a harbinger of things to come, Guy Standing, in his recent book The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay also noted the early and close ties of the MPS to financial capital, with its inaugural conference being funded in part by Credit Suisse. As Eric Hobsbawm put it, these self-styled “prophets in the wilderness” warned heedless western governments that, by rejecting “the supremacy of the market,” they were sliding towards an economic abyss. On the contrary, noted Hobsbawm, through mostly benign intervention and careful, far-sighted planning, “it (capitalism) was advancing into an era of economic miracles.”

Heavily influenced by both the British Institute of Economic Affairs (founded in 1955) and the School of Economics at the University of Chicago, sympathetic Canadian individuals and organizations began to push the same pro-market, anti-state strictures that were so explicitly hostile to the notions of the Commons, the public interest or the ideal of social solidarity. Chief among these has been the Fraser Institute, founded in 1974, and inspired by the writings of Milton Friedman. Their mission has been to impose a market society on Canadians; the alleged ‘virtues’ of individual economic freedom and consumerism are used as a battering ram to question, undermine and, eventually, roll back the social and collective gains obtained through the sacrifices of ordinary Canadian women and men of previous generations. Their goal has been the ascendancy of homo economicus, a society in which we have no intrinsic worth by virtue of our mere humanity; instead, we are judged by our success in the market as economic agents or our heft as consumers.

The varied policy objectives of groups such as the Fraser Institute have been to secure maximum flexibility for capital to engage in profit-making and capital accumulation and include privatization, bilateral and multilateral trade and investment agreements, deregulation, tax cuts, austerity measures, outsourcing, anti-labor measures, public-private partnerships, user fees, means testing, benchmarking and a host of highly dubious techniques (when applied to the public sector) designed to foster ‘efficiency,’ known as the New Public Management. Other vocal and well-placed lobbies for reducing the fiscal obligations facing corporations and wealthy private individuals include the CD Howe Institute and the Canadian Council of Chief Executives (formerly the Business Council on National Issues). More recently, two other think tanks have become influential vehicles for advocating on behalf of a market society: the University of Calgary’s School for Public Policy, and the Macdonald-Laurier Institute. Both of these have been funded generously by donations from the financial and petroleum sectors.

These various entities have spent years successfully convincing Liberal and Conservative cabinets and finance ministers that ‘there is no alternative’ (TINA) but to restrain, as Murray Dobbin wryly put it in The Myth of the Good Corporate Citizen, “the self-destructive economic forces unleashed by democratic political choice.” In its place, we are urged to worship at the altar of the market and give precedence to policies that enhance the mobility and flexibility of capital at the expense of other factors of production. All of these think tanks have the same brief: to peddle a set of “anti-government parables” and spurious economic dogmas that have as their goal making Canada a fitter place for corporations, the wealthy and the privileged to conduct their affairs. A credulous public has placed a mistaken faith in the arguments, assertions and claims of these insider groups, believing that they derive from an unchallengeable set of economic laws and relationships which carry some divine authority and, moreover, that they are somehow welfare-enhancing.

This is clearly not true if we consider the substantial levels of income inequality, indebtedness, job insecurity and the declining health status of many Canadians. These same groups have enlisted the aid of an economics profession that is conventionally attached to the neoclassical, pro-market approach that serves as the basis for the introductory micro-economic pedagogy taught in our universities and colleges, and of the mainstream business press and media that are devoid of any desire to challenge the current narrative. The campaign orchestrated by these think-tanks to convince governments in Canada to implement the neoliberal orthodoxy has been extremely well financed, communicated and, ultimately, highly successful, with elected representatives and many senior public servants across Canada now ritually embracing the prescriptions of rentier capitalism.

In fact, for the past thirty years, governments, both federal and provincial, have been engaged in a dismal strategy of jurisdictional arbitrage, in which governance consists of competing to offer up capital, tax and regulatory enticements to transnational corporations or international hedge funds so that a lucky few Canadian workers might be the beneficiaries of foreign direct investment, global product mandates or new e-commerce fulfillment centers. It is hard to escape the conclusion that we have forfeited our economic sovereignty and capacity for independent agency because a few well-heeled lobby groups have succeeded in hoodwinking the Canadian public and our politicians into believing there is no alternative to ‘market fundamentalism.’ We have become prisoners, as the earlier quotation from Charles Lindblom abjectly notes, of a restrictive creed. Yet, as John Weeks trenchantly puts it in his recent Economics of the 1%:

Mainstream, “neoclassical” economics is not logically powerful, technically strong or empirically valid. On the contrary, its logic is contradictory, its techniques sloppy and the real-world economy refutes its generalizations with startling regularity.

As deference to the benign impact of the invisible hand of the free market and the virtuous influence of unfettered globalization became widespread, senior political figures in Canada’s two major political parties became increasingly outspoken in their support of it. In fact, as Dobbin notes, they soon launched “the equivalent of an ideological holy war against the old forces of Keynesian economics, state social intervention, collective rights, and egalitarian values.” In this, they have been highly successful and Canada, as a society, has paid a heavy price.

In fact, after reviewing the evidence of successive Liberal and Conservative governments in Canada since the early 1990s, Donald Gutstein, in his book Harperism, is driven to observe that “neoliberalism became entrenched under the Liberal governments of Jean Chretien and Paul Martin, who accepted the ideology as their own policy orientation…” and that by the time Stephen Harper and his Conservative party took over (2006) “…neoliberalism was normalized as the accepted way of running the country.”

We might briefly digress here to note that the impact of neoliberal policies and the current pro-market zeitgeist is that they eat away at and eventually sever the associational bonds of fraternity, collective responsibility, and mutuality which unite us as citizens with obligations to each other and the natural world. Furthermore, they seek to rid us of the heretical idea that we might democratically organize our economy and resources and distribute the resultant benefits fairly. What is prized instead is flexibility or an “accommodative” policy in respect of labor, environmental standards or government regulation. Governments have repeatedly told us that they have little choice but to accede to the demands of the market and transnational capital. In effect, they acquiesce before a marketing and social media discourse that promotes the virtues of egotism and rugged individualism as a guide to individual conduct. Canadians are increasingly pitted against each other, against workforces in other countries, and against a remote set of economic metrics, typically involving profit or cost, that are said to be determinants of our worth. The result is that Canadians now spend their working lives engaged near continuously in a zero-sum game of competing and striving.  Canadians intuitively recognize this for what it is: a massive step backward in the quality of our social, economic and political lives.

For all of the neoliberal rhetoric about the virtues of ‘teamwork,’ young people entering the labor force quickly realize that genuine collaboration and cooperation receive little priority in this worldview and that the incentives and rewards for solidarity-affirming behavior are negligible. This is certainly true of the corporate world, and it is increasingly the case in the public service workplace as well. In fact, this creed of rampant “instrumentalism” is even leaking into the co-operative, not-for-profit and charitable sectors, where the detrimental effects have been registered in the morale of the folks who work there. Overall, the labor market appears to have experienced a significant diminution in fragile but critical values such as trust, fairness, cooperation and reciprocity. This has changed the calculus for how to conduct oneself within the work world. As several political psychologists and sociologists have begun to note, fear of the future, the zeal with which managers promote efficiency, and the promise of financial or positional rewards for compliant participants have provoked a kind of ‘neo-liberal personality disorder’ in which particular traits on the sociopathic spectrum – i.e. aggression, lack of empathy, narcissism, workaholic behavior – are tacitly encouraged.  The result is that an increasing number of workplaces have become ‘toxic’ in nature.  Conspicuously, many workers are now less inclined to help each other than in the past.  As Canadians submit to the new regime and engage in conformism in order to advance their careers, it is hardly surprising that a litany of ills should ensue: conflict amongst staff, depression & anxiety, isolation, plummeting morale, rising benefit plan costs, increased incidence of absenteeism & stress leave and, ultimately, high rates of staff turnover. As the German thinker Joseph Vogel has astutely noted in The Specter of Capital:

Economic governance aims at a kind of efficient and continuous self-employment in which competition, in all its manifestations, clears and penetrates the thicket of social relations…Households are redefined as miniature factories, individuals as microenterprises.

So Canada is effectively at a fork in the road. Down one road lies more of the same; an increasingly financialized economy driven by rentier logic, financial speculation and last- gasp carbon exploitation plays. In this model, our commercial and political elites continue to maintain the extraction of income streams or ‘rents,’ whether they originate from the energy sector, intellectual property (IP) patents & assets, or levies and user fees linked to accessing both the credit markets or the new ‘information economy.’ Allied to this business-as-usual approach is a policy of active support for foreign investment in our metropolitan real estate markets. The notion of housing and shelter as a human right has no place in a world of asset flipping. Finally, the logic of the current FIRE (Finance, Insurance, Real Estate) model dictates that we conform to the catch-all demands of ‘competitiveness.’ The latter includes a basket of measures such as corporate tax abatement, the offering up of state-owned assets and programs for private equity participations, asset recycling (which has become a euphemism for privatization), and light-touch regulation.  Inevitably, it results in significant public interest concessions being made to fulfill the terms of international trade and investment agreements such as the extension of patent protections for drugs. Prosperity in this model accrues to rent-seeking corporate interests; to hedge fund managers, speculators & arbitrageurs; to foreign extractive energy companies; and to a group of technology platform companies that seek to appropriate and monetize our private lives. It is also one in which governments are systematically deprived of revenue through their tolerance of such practices as transfer pricing, by which multi-national corporations legally book revenues in low-or-no-tax jurisdictions where they have a subsidiary, even if that subsidiary is engaged in little tangible physical activity. Some business-school academics have even attempted to justify this pattern of activity by arguing that the use of offshore tax havens makes Canadian corporations more competitive and productive by virtue of the lower taxes they pay when repatriating profits. However, as Nicholas Shaxson argues in his in-depth analysis of tax havens (Treasure Islands):

Companies and capital migrate not to where they are most productive, but to where they can get the best tax break. There is nothing efficient about any of this.

Overall, this reliance on the hyper-mobility of capital, on credit & debt finance, on the exploitation of non-renewable energy sources, and on ‘off-shoring’ for tax advantages or for reasons of secrecy, is one in which the average Canadian citizen, along with our natural environment, lose. The neoliberal approach undermines the public interest – understood as policies, regulations or laws that have been democratically arrived at through meaningful public consultation and are aimed at enhancing the general welfare. Instead, as Will Davies has argued, it compels citizens to compete and prove themselves relative to one another. Significant material inequality is the inevitable by-product. In the new ‘normal’, the Canadian state is relegated to the role of an advocate – not, of course, for ordinary citizens, but for the ‘financialized’ accumulation strategies of large firms and corporations and high net worth individuals.

Down another road lies a different kind of economy, in which the primary unit of analysis is not the corporation or the investor but, variously, the ordinary citizen, the community, and the life-sustaining natural ecosystem. Building on an active, engaged, socially-minded citizenry, it rejects the distorted version of human nature upheld by capitalism in which we realize our potential through our purchasing decisions in the marketplace. In fact, we are not all self-regarding, interest-maximizing, economic agents equipped with an algorithmically knowable set of preferences and a soulless urge to pursue our own material gain. Human nature is infinitely more complex and far removed from this self-serving and deterministic caricature. The ‘public choice’ school has led us astray by pretending  that we could organize our collective affairs by assuming that the primary and constant driver of our economic and social conduct was each individual’s rational calculation of the economic incentives and opportunity costs gains facing him/her. The upshot was a market society – increasingly a neoliberal dystopia – in which we are designated as either productive members (winners) or noneconomic free riders (losers). This simulacrum of human nature is based on the idea that, by itself, the act of commercial exchange defines us as social beings. When this is coupled with the neoliberal obsession with efficiency, we thwart different resource allocations and arrangements that may have resulted in genuinely collaborative and sustainable outcomes.  We must appeal once again to our better selves and to the needs of the greater community.

We need then to urgently reacquaint ourselves with what the real public interest looks like. Both the true frailty and the enormous dignity of the human condition were vividly brought home to politicians and public servants in the immediate aftermath of the dual calamities of the Great Depression and the Second World War. The successive experience of lack of employment, want, homelessness, ignorance, disease and eventually, destruction, disfigurement, and death had seared into the souls of post-war Canadian leaders what the public interest actually meant.  Suffice to say it was grounded in an altruistic and fraternally inspired view of human nature that recognized our limitations, flaws and vulnerabilities. Today, our conception of the public interest should also include recognition of our absolute dependency on the finite biosphere we share with other species and the true nature of the willful conceit which holds that we may treat it with neglect, if not indifference. It is axiomatic in the new approach that we start from the needs of average citizens and from the imperative of protecting the environment. This approach calls for measures to address the massive disparity in income, life chances and health outcomes that presently separates the objective conditions of the great majority of people from those of the well-off (the “1 %”). At the same time, and in view of the existential ecological crisis confronting humankind, it calls, as James K. Galbraith has done in his work The Predator State, for all future decisions about sourcing and exploiting carbon-based energy to be removed from the purview of profit-maximizing private corporations and placed under public administration.

In another essay I will put forward three recommendations for policy and institutional change that I believe are urgently needed to put Canada back on a sustainable environmental, economic and social footing.

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