In the federal election of 2019, Canada’s ruling Liberal Party was reduced to a minority government. Since then, Justin Trudeau has complained of “toxicity and obstructionism” from the opposition on both his left and right. On August 15, he asked Canada’s governor general to dissolve parliament for a September 20 federal election.
Taking it as a given that Canadians also want the Liberals unencumbered by obstructionism from the opposition, Trudeau has rationalized the election as an opportunity for voters to give the Liberals a stronger mandate. And so the writ has dropped, despite experts warning that much of Canada is on the edge of a fourth wave of COVID-19 infections.
On the campaign trail, Trudeau has emphasized his government’s efforts to support those who suffered job loss due to COVID-19 as examples of the “Real Change” that he will continue to deliver if reelected. Examples of this change include extended Employment Insurance (EI) coverage and the $300 per week Canada Recovery Benefit (CRB) for those who don’t meet EI eligibility. But Trudeau neglected to mention that most of the programs involved are set to end just weeks after the election.
CRB will expire on October 23 and the extension of EI is due to come to an end on November 23. The deadline for COVID-19 supports was set by the Liberals in their 2021 budget. These target dates were established in the very same budget that acknowledged that:
Many vulnerable workers risk withdrawing from the workforce or seeing their skills erode, with lasting impacts on their lifelong earnings, and on the wider labor market, that could take years to reverse.
Trudeau’s first speech after the election was ominous. In it, he warned that Canada was beset by a series of global crises: “A global pandemic. A global recession. A global climate crisis that’s causing wildfires and flooding around the world.” In a phrase that sounds more like a warning than a promise, he added that: “The decisions your government makes right now will define the future your kids and grandkids will grow up in.” With this in mind, Trudeau’s party’s track record as a force for austerity does not inspire confidence.
From 2019 to 2020, unemployment rose sharply from 5.7 percent to 10.9 percent. With the service sector making up 79 percent of total employment, the pandemic wiped out all of Canada’s “job gains” since the late 1980s. The goods-producing and manufacturing sectors, one government report noted, have been adversely affected by falling sales and by transport challenges.
Through July 2021, unemployment remained stuck at 7.5 percent. According to the most recent CRB data available; approved CRB applications in July numbered roughly 845,110 — down from 1.13 million in March 2021, and 1,198,160 at the end of 2020. Both of these earlier numbers reflect the time when much of Canada was in lockdown. This high unemployment persists even while most provinces are now open — despite the rise in Delta Variant cases.
Right-wing journalists are convinced that “generous” COVID-19 benefits have allowed the unemployed to live “lavish” lifestyles and stopped them from seeking work. They have found receptive ears in Trudeau’s cabinet, which was eager to tighten eligibility rules to impose “rigor” on the workforce.
A recent survey by the Bank of Canada found Canada’s economy is, in reality, marked by a persistent “excess supply of labor.” Forty percent of firms surveyed claim that current sales are below pre-pandemic levels, with many having laid off staff. Although those polled expect sales and hiring to improve, most do not expect to return to 2020 levels in the next twelve months.
Another recent study found that more than half of Canadians are on the brink of insolvency, owing to job losses and wage cuts throughout the pandemic. They cannot afford to wait a year for economic recovery.
There is no lack of money sloshing around, however. Thirty-seven percent of investment capital is being directed to real estate — the highest percentage in the OECD. With the support of public funds, all of Canada’s “Big Six” banks have seen their profits soar. Share buybacks have also risen steadily. Individually, Canada’s superrich have massively increased their personal wealth since last March.
The Coming Austerity
Led by massive business bailout packages, the federal deficit has ballooned to $345 billion. Earlier this year, Trudeau mandated his finance minister to fight COVID-19 without “creating new permanent spending.” All other ministries were mandated to either “restore” or “preserve” Canada’s “fiscal advantage.” This means cuts, either today or tomorrow.
Meanwhile, the federal Liberals have not made any significant commitments to correct for job losses in the labor market, other than advertising the low cost of Canadian labor. The government’s efforts to redirect funds toward “made-in Canada Silicon Valleys” comes with the promise that workers in Canada come with lower “labor costs” than in the United States. Trudeau’s “Invest In Canada” organization has made similar promises about agri-food and auto workers.
Nor have the Liberals offered much of a future for public sector workers. In an April 2021 report titled Measuring What Matters: Toward a Quality of Life Strategy for Canada, Finance Canada consigned “areas of quality of life and well-being” to the provinces. In a country deemed “the most decentralized country in the OECD,” the Liberals have elected to eschew strong federal leadership in the midst of a global emergency.
Health care, housing, and education are administered by the provinces and territories with the help of federal transfers, chiefly the Canada Health Transfer and the Canada Social Transfer (CHT and CST). Shortly before the pandemic, the CHT covered about 23.5 percent of total health spending. These transfers were increased in 2020 and 2021 to help the provinces weather COVID-19. Meanwhile the share of social spending covered by the CST varied but hovered below 20 percent. The existing status of federal transfer payments is not sustainable — it reflects the legacy of historical cuts from previous Liberal governments.
Current targets for budget transfers from the federal government to provinces, based on recent findings by the Parliamentary Budget Office, will fall far short of what’s needed to maintain provincial expenses on health, education, and the like. Federal “fiscal sustainability” will mean site closures, sell-offs, wage freezes, user fees, and regressive taxes.
Canadians got a taste of this after the 2008 crisis, especially in provinces that could not take advantage of relatively high oil prices. Ontario’s Liberals imposed contracts on teachers, froze hospital spending, slated hospital beds for closure, and began closing hundreds of schools. Quebec’s Liberals and Parti Québécois governments alike tried to increase university tuition, cut funds to school boards, and more. Governments in Atlantic Canada raised university tuition, increased class sizes, and, in one case, even imposed a regressive “book tax.”
The Ghost of Liberal Austerity’s Past
It wasn’t always this way. Prior to changes made by Trudeau’s father, Pierre Trudeau, in 1977, the CHT covered 50 percent of total health expenditure and the funding provided by the CST was more extensive and redistributive. Cuts intensified under the Conservatives in the 1980s, with the party promising A New Direction For Canada. This early document called for sweeping cuts to federal grants for social programs to curb “expectations,” “facilitate adjustment to market forces,” and establish more “peaceful” relationships between workers and employers.
The Liberals returned in 1993, after the recession of the early ’90s wiped out whole industrial hubs, over two hundred fifty thousand jobs, and left over a million children in poverty. According to then–prime minister Jean Chrétien’s account of the period, My Years As Prime Minister, cabinet immediately committed to see through “a strict austerity program.”
Chrétien saw the fallout from the economic crisis as “an opportunity to launch a much-needed review of Canada’s social security system” and to remove any “disincentives to work” with cuts and eligibility rule changes. “We could no longer afford to keep people sitting at home drinking beer,” he said. His Liberal government’s cuts compelled the provinces to cut unemployed workers off — maximizing “labor market flexibility” by compelling workers to accept any job at any wage.
All told, federal transfers were cut by nearly 20 percent in real terms and, as a percentage of GDP, by 1.9 percent. Every province followed the federal lead and engaged their own attacks on workers. They axed social assistance, implemented workfare policies, introduced tuition hikes, carried out social housing closures, hospital closures, bed cuts and more. Unemployment was slow to decline, falling from 11.2 percent to 8.7 percent between 1992 and 2000, while real wages “stood still.” On the whole, these developments have not been reversed.
In 2016, then International Monetary Fund boss Christine Lagarde toured the House of Commons with Trudeau and remarked “I very much hope Canadian economic policies could go viral.” But as liberal journalist Paul Wells noted for the Toronto Star, much of Canada’s current economic policies owe their origin to cuts from former Liberal prime ministers. According to Trudeau, it was during these periods that the Liberal Party “earned credibility on the economy” and demonstrated it could “practice fiscal discipline.”
We should understand Trudeau’s promise to shape the future for us, our children, and our grandchildren in the context of his party’s history of implementing destructive neoliberal reforms. Campaign promises to the contrary, Trudeau’s government is perfectly happy to impose massive cuts to social spending if it is in the interests of business. There is ample money in society to fund hospitals and salaries for nurses and teachers, and to rehire and retrain those made unemployed by the pandemic. But left up to the Liberals and their friends on Bay Street, we won’t see a cent.