An update on the Economic and Political Situation in Canada 2017
Relative calm and stability have seemed to define Canadian politics in a world marked by crisis, instability, abrupt shocks and sharp polarization. International commentators have highlighted the strength of the political “centre” in Canada. The Economist even ran an article titled “Canada: The last Liberals” after the victory of Donald Trump in the American elections last fall. Will Canada continue to be an “island of stability” surrounded by a storm affecting world politics, economy and international relations?
The mood in the country is beginning to change, and indeed beneath the surface it has been changing for the past period. In Quebec and Alberta, the political situation is already defined by sharp antagonism and rapid swings to the left and right. The first outlines of a political polarization can be witnessed in the federal leadership races in the Conservative and New Democratic Party. At the same time, Trudeau’s post-election popularity has begun to wane.
The crisis in the oil sector that began in late 2014 has had a major impact on the provinces of Alberta, Saskatchewan and Newfoundland & Labrador. Meanwhile, alarm bells have been ringing incessantly on the Canadian housing bubble. The impact of the Trump presidency on access to a market that receives 75% of all Canadian exports is sending chills through the spines of both Canadian investors and politicians.
All these are symptoms of a coming storm. Canadian capitalism is not immune to the processes unfolding across the globe. The stability of the Canadian economy and politics is superficial and stands on very shaky foundations. We are leaving the period where Canada stood as an island of calm surrounded by a world in crisis.
The Material Basis of the Political “Centre” in Canada
Justin Trudeau won the 2015 elections with 39.5% of the vote, and during the next 12 months his popularity increased to between 45-50%. Significant hopes in the Trudeau government arose from a sense of relief that the Harper era was over and because of the “progressive” image he presented. It should be noted that Trudeau was only successful in this because of the sharp turn to the right by the NDP leadership.
These illusions in Trudeau have begun to dissipate over the last 18 months. The causes of disappointment in Trudeau range from his approval of pipelines, the endorsement of Trump’s missile attacks on Syria’s government, the harsh criminal measures included in his weed legalization policy, his retreat on proportional representation and his abandonment of his election commitments to indigenous peoples.
While Trudeau’s popularity has dropped, it has simply returned to levels of support he achieved in the last elections at around 40%. This means that if an election were held now, he would win a majority government. The traditional governing party of the ruling elite in Canada (the “political centre”) remains strong in Canada, and this stands in contrast to the processes we have witnessed in one country after another.
Sharp political polarization has occurred in many advanced capitalist countries, with political forces on the left and right growing (often reflected in new parties), while support for historically dominant “centre” parties has collapsed. This collapse in support occurs because these traditional “centre-right” and “centre-left” parties expose themselves in front of the masses by pushing down their living standards and carrying out austerity, while protecting the interests of the ruling class. That Canada currently seems to be an exception to this process of polarization requires some explanation.
The fundamental reason for this is that Canadian capitalism was able to weather the 2008 crisis in a more resilient fashion. Two of the most important factors were the continued real estate boom (based on record low interest rates and the massive expansion of credit) and the boom in resource extraction and the oil sector, which are central to the Canadian economy. As a result, we have not experienced vicious austerity policies, skyrocketing unemployment or severe drops in living standards on a national level.
This has allowed the Federal Liberals, and the Federal Conservatives previously, to avoid carrying out serious austerity measures. On the contrary, the Liberals have embarked on a Keynesian stimulus plan. This is being done to halt the gradual slowing down of the Canadian economy over the past years. During the last year, the Federal government ran a $23 billion deficit, and the expectation is for a $28.5 billion deficit in the coming fiscal year.
The Liberals announced their second budget recently. It was quite an uneventful budget with no significant reforms or counter-reforms affecting the working class. The only exception was that it scrapped the transit pass tax credit; it was also noted that corporate tax loopholes were left in place. The most significant element of the budget was the revision of the deficit financing plans, with an estimated further increase of $5 billion annually to the deficit over the coming years.
The ability of the Liberals to delay austerity can be explained by the relative stability of the Canadian economy since 2008. Despite this, illusions in the Liberals have been dissipating, with a recent Forum Research poll showing that only 10% of Canadians believe that the new federal budget would help the middle class, while 41% believe it would hurt the middle class, and 31% believe the effects would be neutral.
Lifting the Mask: Trudeau’s Handouts to Bay Street
Trudeau’s infrastructure spending plan is exposing the openly capitalist face of the Liberal Party. Trudeau has been seeking advice from financial services firms Credit Suisse and Morgan Stanley for a potential program of privatization that would help raise the funds for his spending plan. Plans for the privatization of the airports in the eight largest Canadian cities have been examined, as well as a proposal to sell 18 seaports.
This would mean profits for corporations, increasing consumer costs, layoffs, unsafe work conditions and further attempts to undermine unions in the ports and airports. Trudeau is also seeking private capital for his infrastructure bank to fund the construction projects in his stimulus plan. Private investors would expect returns of around 7-9% as compared to public financing rates of 1-2%.
Trudeau has also declared his support for private-public partnerships to carry out these projects, which will mean higher service fees, tolls and cost overruns as the capitalists try to maximize their profits. These policies represent a massive corporate handout, and even the Toronto Sun commented that this represented a significant right-wing shift and that Trudeau was emulating the policies of Donald Trump.
For many workers and especially young people, the pro-business character of the Trudeau government is not yet clear. Many do not remember that the Chretien/Martin Liberals carried out the worst austerity measures in Canadian history, including deep cuts to health, education and housing in the 1990s.
Trudeau embarking on a privatization plan, or pushing through corporate bailouts in the event of a housing collapse or economic downturn, would rapidly expose the anti-working class and pro-capitalist character of the Federal Liberals. The backlash against the Liberals would be quite intense given that they won by presenting themselves as progressive and for the “middle class”. In addition to anger at anti-worker policies, they would also be correctly seen as having lied to and manipulated voters.
Canadian Economy on Shaky Foundations
Canada has fared better than many advanced capitalist countries since 2008, but that should not be taken to mean that the economy is healthy. Since the collapse in oil and commodity prices, growth has slowed. In 2015, GDP grew by 0.9%, by 1.4% in 2016, and expectations are for growth of 1.7-2.4% in 2017. The International Monetary Fund predicts growth rates of 2% over the next years, and the UK-based Centre for Economics and Business Research (CEBR) predicts 2% average growth rates until 2030. These are not optimistic perspectives despite significant government deficit spending.
Commentators have lauded the fact that there has been net job creation every year since the 2009 recession, including during the ongoing crisis in the oil sector. However, the 2016 figures for job growth were quite telling. TD Bank Economics explained that all net job growth was in part-time employment, and that there was a net-loss in full-time jobs. This was largely due to 65,000 net full-time jobs lost last year in the oil producing provinces–Alberta, Saskatchewan, and Newfoundland and Labrador. The report went on to explain that full-time jobs outside those three provinces grew by only 0.5%. Of these full-time jobs, a full 75% of them were in real estate-related industries, including construction and finance.
Precarious and low-wage work has become a defining feature of the Canadian labour market. A 2015 report by the Canadian Centre for Policy Alternatives showed that the percentage of the workforce in Ontario being paid minimum wage had gone up from 2.4% to 11.9% from 1997 to 2014. Two-thirds of these workers were over the age of 20. The percentage of the Ontario workforce deemed low-wage stood at 29.4% (defined as being within $4 of the minimum wage). Furthermore, the report defined 50% of all jobs in the Greater Toronto and Hamilton area as precarious (ie. working less than a 40-hour workweek).
Over the past six months there has been an upswing in the Canadian economy with unemployment falling to 6.5%, which is the lowest rate since 2008, and expectations for growth in the first quarter of 2017 set at 4%. These figures on the surface could suggest a healthy economy, however scratching beneath the surface reveals an entirely different picture. The growth in the Canadian economy is almost entirely based on the housing boom. The real estate, construction and financial sectors account for nearly 27% of the Canadian GDP. It is estimated that housing specifically contributes approximately 20% to the Canadian economy. Residential construction alone represents 7.5% of Canadian GDP, as compared to less than 4% in the USA.
The resource sector was a major driving force of the Canadian economy in the past as the high growth rates of China and other “emerging economies” swallowed up commodities and drove prices upwards. Oil prices stood around $90 a barrel for many years but the collapse that began in late 2014 saw prices dip to around $40. Prices have since edged up to around $50. Canada, as a major exporter of oil, minerals, and other commodities, benefitted significantly from the boom and is now severely affected by the slump in these sectors. While there has been a small recovery in the oil sector, optimism is unwarranted. Perspectives for increasing oil prices are not very sound.
Global demand remains muted due to continued overproduction in manufacturing. There has also been a significant increase in oil output from the USA, which does not bode well for the Canadian oil sector, which is almost completely reliant on the US market for its crude exports. American shale gas producers, who have become significantly more efficient and competitive through the oil slump, have increased production by nearly one million barrels per day in just the last six months. There is also a big question mark over OPEC’s ability to maintain its cut to production over a long period of time, especially with the USA aggressively expanding its market share. While regional military conflicts, perhaps arising from Trump’s aggressive foreign policy, could push up oil prices, there is little reason for confidence in the short or medium term for the oil industry.
The manufacturing sector in Canada has faced a long-term decline due to the pressure of the world market to reduce labour costs, which has resulted in offshoring facilitated by free trade deals. Since the early 2000s the manufacturing sector has lost 630,000 jobs, a drop of 27%. Since the 2008 financial crisis, overproduction has spread from one sector to the next, first affecting manufacturing and, more recently, oil and mining.
Faced with shrinking or unstable markets, the bourgeoisie refuses to invest in new plants and machinery. With the drop of the Canadian dollar after the collapse of oil prices, there were hopes that an upswing in manufacturing would occur. The hoarding of nearly $700 billion by the capitalists in what former Bank of Canada governor Mark Carney called “dead money” shows they lack the confidence to invest in production. Much of this cash is being used to speculate in stocks and especially housing.
Despite record low interest rates, the low dollar and an American economy with momentum, there has not been investment in the manufacturing sector, and predictions are for a further 4.4% drop in capital investment in this sector for 2017. Private sector spending on machinery and equipment is expected to fall 5.4% from last year, its third consecutive annual decline. The productivity of labour in Canada is lagging as a result. The election of Trump brings significant uncertainty to the manufacturing, resource-extraction and agricultural sectors, which face the prospects of tariffs on accessing Canada’s largest export market.
The feverish housing market is the driving force of the Canadian economy. Most of the benefits of this speculation-driven economic growth have gone to speculators, bankers, developers, realtors, lawyers and investors who have made robust returns. Sections of the petit bourgeois and an important layer of the working class have also benefitted from the boom, which has allowed them to increase their living standards on the basis of perceived asset values. However, there is another world for the workers in manufacturing, oil and mining, and those working precarious jobs (often in the service sector) who have seen their living standards decline and have not seen the benefits of the housing boom. The rising cost of living–especially of housing in large urban areas–has squeezed this section of the working class significantly. This has created a seething anger that has yet to find an organized outlet in the regions where the housing boom continues to fuel the “good times”.
The Bubble Will Burst
The housing bubble is primarily based in the Greater Vancouver Area, the Greater Toronto Area and cities near Toronto. Housing prices in Vancouver rose by 27% from February 2015 to February 2016, reaching $1.3 million for the average detached house. The average price of a detached home went as high as $1.7 million in Vancouver at their peak in July 2016. Toronto’s superheated market has gone up by 33% from March 2016 to 2017, with the price of a detached home in the City of Toronto hitting $1.6 million. The price of a home in the GTA has reached an average of $916,567 in March 2017, up from $688,011 the previous year.
Moody’s listed Canada as one of the four countries most vulnerable to a housing correction in April 2017, and compared rising real estate prices to the situation in the USA, Spain, and Ireland, prior to market correction. If one compares the rise of US and Canadian housing prices since 2000, American average housing prices have doubled while Canadian housing prices have almost tripled. There is now universal acceptance of the fact that the housing market will face a correction. The only question is: when will it occur, how far will housing prices drop and what will the consequences be?
The skyrocketing price of homes is not occurring at a time of rising wages as one might expect. Since the early 2000s, wages have stayed largely stagnant, and this has especially been the case since 2008. Under the pressure of inflation, real purchasing power has dropped. For example in 2016, wages for salaried workers saw zero growth and hourly workers saw a reduction in wages by 0.4% once inflation was taken into account. Even these figures are boosted by a small layer of very high-income earners, and they also include overtime worked. Stagnating incomes partially explains the heavy dependency of Canadian capitalism on credit. One has to ask, on what basis could GTA home prices increase by 33% in a single year when incomes have remained stagnant and precarious work has become the norm?
After the 2008 financial crisis, the Bank of Canada knocked down interest rates from around 4% to less than 1% as a means of evading a long recession. Rates currently stand at the rock-bottom level of 0.5%. This has massively fueled borrowing, especially in housing. The average income to debt ratio has increased to 167%, which is a record high and is at levels similar to those that existed in the US prior to the crash. The booming housing sector based on access to cheap credit is one of the two principal reasons that Canada was able to weather the 2008 financial crisis.
Reckless loans and shirking mortgage regulations have contributed to the bubble. A large shadow banking sector has developed, with estimates that it provides 25-30% of all mortgages in Canada. This was exposed with the recent fraud scandal surrounding the Home Capital Group, which is one of many lenders that provides sub-prime mortgages to people turned away by traditional banks. After 45 mortgage brokers were found to have falsified borrower income and employment information, there has been a run on the deposits at this bank and share prices have plummeted 78% from April to May 2017. The contagion has spread to the Equitable Group, which has faced a run on deposits and a drop in share prices of 34%. The growth of non-traditional mortgage lending in Canada has been compared to the similar situation that existed in the USA prior to the housing collapse.
All in all, Canadian households owed $2.03 trillion at the end of 2016. Canadians now owe $1,329.6 billion on their mortgages, and $596.5 billion in consumer debt such as credit cards. In May of this year, Moody’s downgraded the credit rating of the top six banks in Canada hot off the heels of the scandal at the Home Capital Group. Moody’s cited high consumer indebtedness and high home prices as a source of risk that could lead to the undermining of the value of bank assets. At present, indebtedness of consumers is counterweighted by the rise of asset prices. People are wealthier based on the value of their homes and therefore feel confident borrowing. Rising asset values have been fuelling consumer demand, from car purchases to restaurant outings and leisure spending.
There is a clear contradiction between stagnant wages in Ontario and British Columbia and skyrocketing home prices. This shows the degree to which credit is fueling the housing boom, including fraudulently approved mortgages. There is also a massive speculative component to the housing boom. One symptom of this is that 6% of residences in Toronto and 5% of residences in Vancouver are vacant. Here the owners have not even bothered to rent out the units, suggesting that very short-term property flipping is occurring. However, as long as the bubble continues to grow, the combination of rising asset values, expanding consumer spending and demand for new construction, financial, and real estate services push the economy forward. The economic growth of the last period has been on an artificial basis. The bubble will eventually burst and the real situation will force itself to the fore. This will be an extremely painful process.
Government intervention has been instituted in an attempt to manage the housing bubble and limit speculation. In July 2016, a 15% foreign buyer tax was implemented in British Columbia. In October 2016, the federal government put forward new mortgage rules, including a more stringent stress test, and closed loopholes that allowed some foreign speculators to avoid paying capital gains taxes. The Ontario government instituted a foreign buyer tax of 15% in April 2017. The Ontario Finance Minister, Charles Sousa, had also been pushing the federal government to hike capital gains taxes for all non-principal residences. There is a palpable fear among politicians and government bureaucrats at the prospect of the collapse of the housing bubble.
The result of these measures has begun to be felt in the BC real estate market. According to the British Columbia realtors’ report, the average price of a home sold in the province was down 10.5%. The drop in sales is the most striking figure. First quarter sales went from $21.6 billion in 2016 to $14 billion in 2017, with sales in the Greater Vancouver area having gone down from $13.3 billion to $7.4 billion.
This is the start of a process whereby the housing bubble is beginning to deflate. We cannot say what factors, internal or external, might trigger the bursting of the housing bubble. For example, one scenario put forward by the Canadian Mortgage and Housing Corporation (CMHC) in a 2016 report explained that a 2.4% increase in interest rates alone would result in a 30% drop in housing prices. Two other scenarios considered were a global downturn and a drop in oil prices to $20, which would both lead to a drop in housing prices. Just as we cannot predict the exact trigger of a decline, we also cannot say for certain when the downturn will occur, and whether the process will be staggered. What is clear, however, is that the consequences will be disastrous.
The Financial Post ran an article on May 1st, 2017 titled "Life after oil makes real estate the new crutch of Canada’s economy – and it’s huge", where it explained how affected the economy as a whole, and especially finance, would be by the decline in real estate:
“You don’t need a collapse in house prices, you don’t need housing starts to be cut in half for a weaker real estate sector to have a significant effect on GDP and incomes,” Chandler said. RBC’s ballpark estimate is that a 10 per cent decline in national home prices would knock a full percentage point off growth."
“A Toronto Dominion Bank report from 2015 found the housing wealth effect has been responsible for about one-fifth of all growth in consumption since 2001…"
“Bank of Canada figures show 14 per cent of all private business loans from chartered banks are now bound for so-called real estate operator industries, the biggest share in the history of data back to 1981."
“The $27.4 billion in private loans to the sector, which represents companies that own and manage real estate assets, exceeds the combined lending to the manufacturing and oil and gas sectors combined. That’s on top of the $15 billion loaned to developers, more than double levels in 2010."
“The chartered banks are also lending to real estate operators at the fastest rate on record — $10 billion since the start of 2014.”
Employment in construction, real estate, finance and even transport would be severely affected by a downturn, and the resulting drop in consumer spending would in turn affect a variety of other sectors of the economy such as retail. Rising unemployment would lead to foreclosures, which would push housing prices lower. Government coffers would also be affected. For example, $3 billion in revenue generated last year from the land transfer tax in Ontario is being credited with balancing the provincial budget. Revenues for large municipalities are primarily based upon property taxes which have been rising rapidly. The Federal government could quickly find itself forced to intervene to bail out insolvent banks facing bankrupted clients and declining profits. The Federal government already insures 50% of mortgages through the CMHC. As the dominos fall, one would expect austerity measures to be carried out by indebted governments sapped of revenue, occurring simultaneously with a developing unemployment crisis. A downward spiral would likely unfold in the period following the rupture of the housing bubble.
This would lead to rapid shifts in consciousness and intense social polarization to the left and to the right. The Marxists have to be prepared for the situation that would be opened up by such a significant event. After the housing collapse in Spain, Ireland and the USA, mass spontaneous movements on the streets against foreclosures, bailouts, inequality, unemployment and austerity measures erupted. The sharp polarization we have witnessed in Alberta after the oil crisis would pale in comparison to the struggles that would flare up in the years following a significant downturn in housing.
Alberta: a Balance Sheet of the NDP Government
The political situation in Alberta is important to study as it was formerly the most booming province of the country. A political earthquake occurred when the 45-year Progressive Conservative dynasty was brought down. The province was known to be a bastion of Canadian conservatism, the Alberta NDP was historically weak and had never formed government. Over the past year it has been home to the only NDP government in the country. While the NDP did not run on a particularly left-wing platform, its victory in the context of Alberta represented a sharp swing to the left. This arose in response to the economic slump brought on by the drop in oil prices and looming austerity measures by the Conservative government. It was also significant that the ruling class was split between the Conservatives and the right-wing populist Wildrose party.
The provincial economy shrunk by 4% in 2015 and by 2.8% in 2016 and there have been significant layoffs over the past two years. The recession from 2014-2016 was one of the largest (if not the largest) in the history of the province. There has been the beginning of a modest recovery in the last six months accompanied with a reduction in unemployment, arising from the recovery after the devastating wildfire, and from oil prices rising up to $50 a barrel.
The Alberta NDP has held back on carrying out austerity despite the drying up of government coffers. To do this they have embarked on significant deficit financing, with $5.4 billion in debt accumulated in 2015-2016, $10 billion from 2016-2017, and another $10 billion expected from 2017-2018. These are significant deficits; however it should be noted that there was no debt inherited from before the oil crisis. This shows that a certain amount of fat existed in the province from the past boom years.
The NDP has garnered support on the basis of protecting services and public sector jobs during the slump. The NDP also extended important workers rights to agricultural workers, including unionization rights, however they retreated on extending those rights to family members and children. The most significant retreat of the NDP was on its commitment to increase oil royalties. The promise to hike the minimum wage to $15 was also delayed and phased in over three years. At the end of April 2017, 46,000 teachers were forced to accept a two-year wage freeze. These vacillations arise from the reformist program and outlook of the Alberta NDP leadership, which was not particularly left wing to begin with.
The Alberta NDP is basing its entire strategy on facilitating capital investment by the oil bosses, which means ensuring that the oil bosses can make healthy profits. For example, this has meant pushing forward pipeline developments, not hiking taxation on the oil industry and openly collaborating with the oil bosses to ease their concerns and show that they have an ally in government. This is the same group of people that is the most vicious enemy of the Albertan working class, and which is doing everything in its power to undermine the NDP.
This class collaboration has meant that the NDP has been unable to address the unemployment crisis in the province, which reached as high as 10.2% but has since gone down to around 8%. In the past, Alberta used to suck up unemployment from other provinces. In the absence of this safety valve, the effect is increasing social instability throughout the country. High unemployment is a major point around which the right wing mobilizes to attack the NDP, to which it has no response.
If you aim to manage capitalism then you must administer its crisis. In a free-market economy investment does not occur unless the capitalists can expect to make a profit. As long as oil prices remain low and the market for oil is limited, the oil bosses will reduce investment, downsize existing projects and lay off workers so as to minimize losses to their profits. The needs and livelihoods of the workers do not factor into these business decisions. As long as the NDP refuses to break from capitalism then it must accept the logic of the profit motive.
The polls indicate a serious decline in support for the NDP. Polls place the NDP third with between 23-27% support, Wildrose at 34-38% and the PCs at 24-29%. Postmedia reported that 58% say they are dissatisfied with the NDP’s handling of the economy in a poll taken in March 2017, while Angus Reid polling suggested Notley’s approval rating has gone down from 53% to 33% since the election. It should be noted that Edmonton, a more working class city with a large public sector, while seeing a drop in support for the NDP, has maintained a more resilient level of support at around 43%.
The recent PC leadership race was won by Jason Kenney who garnered 75% of the vote. Part of his platform was working towards a merger with the Wildrose party. The bourgeois in Alberta no longer feel that they can afford the luxury of having two different parties. Given the current polling data and the prospect of a merger of the PCs and Wildrose, what we can say is that there is significant danger looming for the NDP and the Albertan working class.
Rachel Notley is pointing to the austerity carried out by the right-wing government in neighbouring Saskatchewan, which has also been affected by the oil crisis, as a means to galvanize support. However, her unwillingness to come out in support of the BC NDP in the ongoing election campaign, due to its opposition to the Kinder Morgan pipeline development, shows the degree of political narrowness that has arisen from her policy of class collaboration with the oil tycoons.
The looming defeat for the Alberta NDP arises fundamentally from its unwillingness to wage a struggle against oil bosses and the broader bourgeoisie. Indeed, Rachel Notley is trying to present herself as a moderate going into the next election in 2019. In response to the merger of the PCs and the Wildrose, she explained that “In the longer term, as we get closer to an election I look forward to having our mainstream ideas contradicted with the rather more extreme ideas that we hear from folks on the other side of the aisle”. In a province mired in crisis, deep inequality, with one of the weakest provincial welfare states, the lowest unionization rate in the country, and faced with an aggressive ruling class, the search for a “middle road” can only lead to defeat for the NDP.
The NDP must base itself on the working class to carry out bold reforms and to fight for the nationalization of the energy industry under workers’ control as a necessary and practical task to protect the living standards of the Albertan working class. The energy sector is linked to approximately 40% of the provincial economy. An offensive on the private property of the oil bosses would have to be part of a broader struggle against the capitalist class, which would respond to such a measure using every means at its disposal.
Quebec Society: Mired in Crisis
Quebec society has been at the forefront of the class struggle in Canada, with wave after wave of mass struggle from 2004 to 2015, reaching its highest point from 2012-2015. The 2012 Quebecois Spring witnessed over 300,000 students on strike at its peak, with spontaneous daily demonstrations. This movement reached its height when the students defied the anti-protest law, Bill 78, which led to spontaneous action by the workers in support of the students (the “casseroles” protests). The wave of struggle starting with the Printemps 2015 (“Spring 2015”) student strike was followed by mass demonstrations organized by the trade unions in the fall (who had united into the Common Front). This movement led to a series of rolling strikes involving tens of thousands of workers and a one-day public sector general strike with unions representing 400,000 workers participating. This was the largest strike in the province in decades. The movement was ultimately betrayed by the trade union leaders who accepted a five-year contract, which included significant concessions.
This has led to an ebb in the movement as workers and students see no clear path forward for the struggle in the streets or on the industrial front. People cannot fight forever, especially when they cannot see a path to success and when the leaders are holding back the struggle. Evidence of this demoralization was seen on International Women’s Day this year, when no demonstration was organized by the unions despite the strong tradition of women’s struggle organization in the province. The union-organized May Day demonstration this year was one of the smallest in recent memory. The radical student federation, ASSE, is in disarray. It was unable to attain quorum in two congresses in a row because of a lack of participation from local student associations. A proposition to expel 12 associations was even discussed at the Congress in April of this year as a means of reducing the threshold for achieving quorum. This is a striking development that speaks to the demoralization, as just five years ago the ASSE led the strike of over 300,000 students!
The retreat of the movement has created a period of reflection and re-appraisal of past struggles within the working class and youth. Among the most advanced layer, there is a growing interest in revolutionary politics and Marxism. Additionally, as we have seen in many countries in Europe, once the struggle reaches a dead-end in the streets and on the industrial front, there is a tendency for the accumulated social contradictions to find an expression on the political plane. This process had already begun with the gradual increase of the vote share for the left-nationalist Quebec Solidaire (QS) through this period of mass struggle. Since March, when Gabriel Nadeau-Dubois, who was the main leader of the 2012 student movement, joined QS, we have seen an increased momentum for QS which could be the beginning of a heightened expression of the accumulated anger into the political struggle.
The two-party system that has dominated Quebec for 40 years has been shaken through the last period. There is deep hatred for the Liberals in Quebec as the consequences of austerity are being felt, and corruption scandals involving the Liberal establishment are constantly in the news. Since 2003, the Liberals have been the main force in government pushing this vicious program of austerity cuts.
The Parti Quebecois (PQ), which is the other traditional ruling party in Quebec, has been in perpetual crisis for over 10 years. They only managed to form government briefly in 2012, after the student movement toppled the Charest Liberal government, by presenting themselves as progressive and as supporters of the mass movement. The PQ quickly discredited itself by carrying out austerity policies. In an attempt to maintain support, the party adopted anti-immigrant and anti-Muslim rhetoric under the banner of defending “Quebecois values”. The result was that it was unceremoniously kicked out of office in 2014.
The crisis in the PQ has since deepened, which reflects the further splintering of the nationalist movement along class lines. In the past, the PQ was able to weld the francophone workers and middle-class behind the francophone bosses under the banner of “national unity” and “sovereignty,” but this is increasingly difficult for them to do. Losing ground to QS on the left and the right-populist CAQ on the right, the PQ has been floundering, trying to be everything to everyone.
For example, the new leader of the PQ, Jean-François Lisée, has even invited the QS into an alliance, allegedly to oust the Liberals. At the same time, in order to guard its right flank, Lisée has been promoting islamophobia and racism, and has talked about the need to debate potentially banning the burqa in Quebec. He has also announced that sovereignty will not be on the agenda before 2022.
A poll carried out by Le Devoir in March of this year explained that 65% of Quebecers were dissatisfied with the ruling Liberal party. Furthermore, 50% agreed with the sentiment that GND expressed upon announcing his run with QS, that, “We must remove the political class that has governed us for the past thirty years, because they have betrayed Quebec.” This shows the enormous anger that exists towards the two establishment parties, which should come as no surprise. During the last 18 years, austerity measures have been pushed by both the Parti Quebecois and the Liberal Party. A reflection of this rejection of the status quo is that more and more workers and youth are rejecting the tired federalist-sovereigntist debate between the PQ and the Liberals.
During the last year, the Liberals have slowed down with their austerity program. They are now trying to give a few crumbs to the working class in order to buy the election next year. The last budget presented in March, dubbed the “budget of hope”, gives tax breaks to working class people as well as abolishing the hated “healthcare tax” implemented by a previous Liberal government.
This of course doesn’t mean that austerity is over in Quebec. The Quebec economy, while seeing a recent uptick, is not healthy. The government is heavily indebted, and the provincial economy is extremely vulnerable to economic shocks in the rest of Canada and to protectionism to the south. This means that the capitalist class in Quebec, while they may tolerate a temporary halt to austerity for political expediency, will once again demand deep cuts be carried out by whichever party forms government in 2018.
The rise of right-wing populism in the CAQ and PQ is a reflection of the crisis of nationalism in Quebec, which in turn is the reflection of the general crisis of capitalism. The massacre carried out by a right-wing terrorist at the Islamic Centre in Quebec City in January of this year is a symptom of the deep malaise in Quebecois society, and is a direct result of this racist rhetoric that has been whipped up by mainstream politicians in the province. The massacre was followed by an outpouring of solidarity and mass vigils, which represents a healthy rejection by the working class of the reactionary, racist and divisive politics that has been promoted over the last period in the province.
The rise in xenophobic rhetoric from the PQ and the CAQ has allowed the Liberals to present themselves as defenders of Anglophones and immigrants. Despite widespread hatred at the austerity policies, corruption and outright manipulation of the Liberals, they have been able to maintain support due to splits in the nationalist movement. What we can see is a political vacuum on the left in Quebec begging to be filled.
In past years, the QS has been unable to become a firm pole of attraction for the working class and youth. However, this may be changing. Their recent momentum, after GND declared his intention to run for the party, shows the real potential that exists in the province. While QS won 7.6% of the vote in 2014, the party is now polling between 12-14%, and its membership has gone up from 10,000 to 16,000. The likely future co-spokesperson of the party, Gabriel Nadeau-Dubois (GND), was the most prominent leader of the 2012 Quebec student movement. If the party and GND are able to focus on the class issues that are the main preoccupation of the youth and class-conscious workers, a political earthquake like Melenchon in France would be on the agenda going into the next election.
Unfortunately, GND has clearly retreated from his more radical positions of 2012. While he has directed fire at the corporate elite, such as with the recent scandal around bailouts to Bombardier, he has been vague on program and proposals. He has said that he is open and even favourable to an electoral alliance with the PQ under certain conditions. GND has also wasted much time advocating a merger with the tiny nationalist party Option Nationale, which stands to the right of QS.
In spite of the vacillations of GND, his radical image, which has been exaggerated in the mainstream press with comparisons made to Marx and Castro, and his status as a young outsider to the political establishment, are contributing to the growing support for Quebec Solidaire. Our 2016 Perspectives document explained this process in advance:
“The present situation cannot last forever. Sooner or later the radicalization of the masses must find a political expression. So far, the leadership of Québec Solidaire has been incapable of making the party a political focal point for the mass discontent in society. It is possible though, in spite of the leaders of the party, that QS could become a conduit for the anger in society. This could be the case heading into the next provincial election of 2018.”
First Outlines of Political Polarization across Canada
While Quebec and Alberta are expressing the sharpest political polarization in the country, a similar process can be witnessed across the board. The Federal NDP and Conservative leadership races have seen candidates putting forward programs that reflect a move towards left reformism on the one side and right-wing populism on the other.
The candidacy of Kellie Lietch and Kevin O’Leary (who has since dropped out) reflect a shadow of the phenomena we have seen in the US with Trump and in Britain with the Brexiters. O’Leary presented himself as a self-made businessman who is a political outsider, while Lietch has taken up xenophobic rhetoric and is pushing anti-immigrant policies.
The NDP leadership race has been marked by a slow-motion shift to the left where the three candidates of the bureaucracy have taken up a few left-wing demands between themselves, such as free education, a program of affordable housing construction, universal basic income and even rhetoric that includes references to the ‘working class’. Niki Ashton has taken on the role of being the left candidate and has adopted a program that has parallels to that of Bernie Sanders during the primaries. Thus far, Ashton has been unable to develop a coherent momentum around her campaign. This is largely a result of the fact that she has been unwilling to concretize her program, and she has lacked the strident anti-establishment fervour of figures like Sanders and Melenchon.
It is very unlikely at this stage that we will see a mass influx from outside into the NDP (as was seen in Britain around the leadership campaign of Jeremy Corbyn). Within the existing NDP membership, however, there is a mood of frustration at the party establishment which could be mobilized on the basis of a bold socialist program and a grassroots campaign.
In Ontario, 14 years of Liberal rule have left a bad taste in the mouths of people. Anger at precarious work, skyrocketing utility bills due to the privatization of Hydro One, astronomical housing costs, corruption scandals and Liberal fundraising practices have led to an approval rating of 12% for Kathleen Wynne. It is very unlikely that the Liberals will hold onto power and bitter infighting has developed within the highest echelons of the party establishment.
The Progressive Conservatives are the current favourite to win the 2018 elections, however, this is largely on the basis of anger towards the Liberals, and the PC leader Patrick Brown is largely unknown. The Ontario NDP could also win in spite of the reformist and uninspiring leadership of Horwath. The ONDP unveiled some of its policy planks at the recent convention, which included universal pharmacare (which is not actually universal), a $15 minimum wage and the re-nationalizing of Hydro One (through buy-backs of shares at market prices). The party is at a low point in terms of membership involvement, however, these limited reforms represent a modest shift to the left for the party, which could allow it to capture some of the anger in the province.
The BC NDP was set to win the elections in British Columbia, polling consistently higher in the lead-up to and during the first period of campaigning. There is significant hatred for the 16-year-long rule of the corrupt and openly corporate-aligned BC Liberals. However, the BC NDP once again managed to come in second to the Liberals, and the Green Party has made significant gains and now holds the balance of power with three MLAs. While the NDP did propose some reforms which represents a very modest shift to the left, the party was perceived to be an establishment party because of its past history of campaigning and governing to the right. In the context of general cynicism towards old-line politicians, people had no faith that the NDP would carry out its minor reforms - even if they sounded good on paper. The Greens on the other hand were not perceived to be an establishment party, and gained accordingly.
Horgan’s reformist campaign therefore failed to inspire and the NDP once against snatched defeat from the jaws of victory. A minority or coalition government is now on the agenda as the Liberals are one-seat short of a majority (pending re-counts and absentee ballots). This shows the narrow-mindedness of the NDP bureaucracy, which has been unable to learn from the past that moderation is fatal. Whether it is the NDP or the Liberals that are able to form a minority or coalition government with the support of the Greens, they will almost certainly face an economy in significant slowdown or downturn.
BC has led Canada in GDP growth over the past few years, but this has almost entirely been based upon the housing boom. The slowdown in the housing market, which accounts for 40% of provincial GDP, will have disastrous consequences at a certain stage. The recent tariffs imposed by Trump on softwood lumber exports will also have a severe impact on the BC economy, which accounts for 60% of Canadian softwood exports. Facing an economic slump and armed with a moderate reformist program, a BC NDP government would find itself administering the crisis and the drop in living standards that would accompany it.
In the two other oil-producing provinces, Saskatchewan and Newfoundland & Labrador, severe austerity programs are being instituted in response to economic slowdown. In Manitoba and Nova Scotia, austerity cuts and layoffs have also been instituted. This is creating the basis for greater social polarization in these provinces and an upswing in the class struggle at a certain stage. In Newfoundland & Labrador, a first wave of struggle developed through 2016, under the banner #NLrising, which spread even to small towns throughout the province.
As we explained immediately after the election of Trudeau, the class struggle is tending to have a more provincial dynamic as significant illusions exist in the Federal Liberals. There is a different tempo to the struggle in the various provinces but there is a general process of polarization to the left and right, and a growing mood of anger towards political parties that have ruled during the past period. The class struggle outside of Quebec tends to be at an early stage. The responsibility for the delay in the struggle must be placed on the NDP and the trade unions in no small degree. Nowhere have the workers’ organization provided any semblance of a lead to initiate a movement against the problems and growing pressure bearing down on the working class.
The trade union movement in English Canada is, however, entering an interesting period. The first fault lines between left and right inside the trade unions are revealing themselves, as anger towards the cowardly and self-serving bureaucracy develops. After years of accepting concessions and the loss of workers’ rights, there is the beginning of a push back from the rank-and-file. There is also a backlash at the cozy relationship between the labour bureaucracy and the Federal and Ontario Liberals. This frustration of the rank-and-file is being expressed in high strike votes, rejection of tentative agreements presented by the leadership, through opposition candidates gaining significant support and through a deep distrust at the leading cliques within the trade unions. Examples of this mood were seen among TTC workers during the recent scandal and bureaucratic infighting within the elected leadership. At a packed membership meeting the workers expressed disgust at the elected leadership and calls to hold new elections for all positions were met with massive applause. It was also seen in the rejection by 5,000 Ford auto workers in Oakville, Ontario of the tentative agreement recommended by the UNIFOR leadership. This is an important process that will eventually break through the blockages erected by the trade union leadership.
The Youth are Radicalizing in Anticipation of the Coming Storm
There is a process of radicalization that has been occurring among the youth in Canada. Faced with fewer economic opportunities, double the national unemployment rate, heavy debt loads and inaccessible housing costs, this should come as no surprise. Youth are also being radicalized by the general social crisis and by world events such as the refugee crisis, imperialist wars, right-wing populism, racism and nationalism, sexism and violence against women. Trump has been a very significant factor in pushing the youth to the left, as has been the rise of right-populist politics in Quebec, inside the Federal Conservative Party, and outside of mainstream politics through the emergence of far-right organizations.
This process of radicalization is particularly pronounced among the youngest demographic; those in high schools, CEGEPS and those who have just graduated. They have grown up in a world that seems irrational, unjust and sick. Even those in their late-20s and 30s can remember a time when capitalism was booming, and many have seen their parents moving forward. The youngest layers only have inequality, insecurity and crisis as a reference point. This creates a mood of hostility to the status quo and rebelliousness which leads to searching for ideas that can provide an alternative.
In Quebec, the situation among the youth is very advanced. The big events of 2012-2015 and its major lessons of that experience are etched in youth consciousness on a mass level. The youth understand that mass struggle can occur, that through collective struggle the government and cops can be defied and even defeated. They have also seen that despite the bringing down of the Liberal government in 2012, little was actually achieved. While some layers have drawn pessimistic conclusions, most are looking for radical solutions as they ask themselves what went wrong in the last period of struggle. The anecdotal evidence from the successes of the Marxist movement in Quebec suggests that such a process of radicalization and self-reflection is indeed occurring among the advanced layer of the youth.
The Marxists have long been a voice in the wilderness in Canada, explaining that the crisis of capitalism would arrive here and that the contagion of class struggle must arrive with it. First we pointed to the processes in Latin America in the 2000s. From 2011 onwards we pointed to the Arab Revolutions and especially to the wave of struggle in Southern Europe. In the last couple of years, class struggle and social polarization spread to Britain and the United States, two historic bastions of capitalist stability. It is hard today to maintain that Canada can remain an island of stability in a world capitalist system facing prolonged organic crisis.
Maintaining a long view of history allowed the Marxists to build a modest but firm organization in Canada. This difficult work of swimming against the stream was vital in preparing our forces for the coming class struggle. Those who agree with our analysis and who support the fight for socialism should join us in building the revolutionary movement in the present quiet before the storm - so that we will be prepared to intervene boldly once the storm arrives.