Wednesday, July 15, 2015

On Recession Economies

So, today the Bank of Canada lowered its prime lending rate to 0.5%.  Supposedly, this signals that Canada is sliding into a recession.

Those of us who have been watching have long ago figured out that the minute the bubble burst on oil prices, Canada was going to slide into a recession.  Arguably, if you aren't in the oil patch, Canada has been in a recession for the last four or five years.  What am I talking about here?

Jobs.  Sure, the government has posted "new jobs growth" regularly, but let's be honest with ourselves here.  Most of the jobs involved have been service jobs.  Jobs that pay poorly, have terrible hours and don't even provide a subsistence level of income.  If you're a skilled knowledge worker, you might luck out and get a contract job.  But guess what?  Contract work is unstable, and instead of paying a premium for your skills, you'll be lucky to get the same dollars you made as a full employee.

So, how do we end up with a long running "jobs recession" but still have economic growth for the last few years?  It's not really difficult to see.  If you have money invested in companies, they end up looking like they are posting profits, and the GDP numbers improve.  Basically, we're measuring two different things.  Growth in the size of the economy has become the rising tide that only floats the boats of the truly wealthy.  The rest of the "boats" are so far away from the water that the tide isn't even going to reach them.

Lower interest rates?  Well, it makes it easier to borrow money, right?  Sure ... except you need to have the income in the first place to support the loan.  So who benefits?  Once again, it makes it easier for business to borrow.  Oh, great, that means they can create jobs, right?  They could, but in today's world, they have been funnelling those funds into projects which eliminate jobs like automation projects; and as much as possible, new work that requires people gets shoved offshore wherever it is cheapest, or (until recently) assigned to temporary foreign workers instead of Canadians.  

The net effect of Harper's lovely little war on the middle class has been that those who aren't part of the privileged classes are screwed.  Lose your job?  Chances are the next one won't replace your previous income, and most certainly won't have any stability to it.  The problem is that business has decided that people are a risk, not an investment.  They are no longer willing to invest in people to solve problems.

Harper can deny that we're in a recession all he likes.  The cold, brutal reality is that we have never recovered from the consequences of the 2008 downturn, and the current crude oil price war being waged by Saudi Arabia and others is going to continue to keep things depressed.  Business may well post profits, the GDP will seem to grow, and workers will continue to be left behind.  

1 comment:

Anonymous said...

The Cons Free Market Capitalism ideology has been morphed into one of unbridled Corporate Greed. As you point out the only beneficiaries of the meagre economic growth are the wealthy. Also, thanks to the maniacal Conservative focus on creating corporate wealth at the expense of the citizens (NAFTA, the upcoming TPP, etc.), the situation has now evolved that during economic downturns the wealthy still benefit, and the corporations still get fatter. This situations occurs primarily due to the fact that the wealthy are now positioned to profit by buying up the lands, property and possessions, of those who have been forced to sell them because the corporations are now able to strangle their own work force out of a proper payment for their work. This has been a long evolving situation through the demonization of unions, the passing of 'Right To Work' legislation, the movement away from properly supported social programs to one of User Fees, etc. All of these have had a major negative impact on anyone who is not super wealthy, and has completely gutted the 'middle class'. Additional pressure on people is now occurring in most 'Western Style Democracies' whereby the Right Wing Governments are hell bent on imposing even more draconian 'AUSTERITY' measures, which do nothing more than create extreme poverty, decimate jobs, and funnels money and benefits to the wealthy.