[R-G] Canada: Financial crisis intrudes on federal election campaign

[Anthony Fenton]

Canada: Financial crisis intrudes on federal election campaign
By Carl Bronski and Keith Jones
24 September 2008

http://www.wsws.org/articles/2008/sep2008/cana-s24.shtml

The meltdown of the US and global financial system, the panic sell- 
offs on international stock exchanges, and the unprecedented plans by  
the US Treasury Department and Federal Reserve Board for a massive  
$700 billion bailout of collapsing American banks and other financial  
institution, all made a rather rude intrusion into Canada’s federal  
election campaign last week. The financial calamity severely disrupted  
the scripted campaigns of all the parties vying for votes in the  
October 14th poll.

Even before last week’s global financial panic, there was an air of  
unreality surrounding the campaigns of all the contenders. The  
election was called by Conservative Prime Minister Stephen Harper in  
an effort to get the poll out of the way and gain a parliamentary  
majority before the Canadian economy slipped into recession. Yet  
Harper, Liberal Opposition Leader Stéphane Dion, and New Democratic  
Party (NDP) leader Jack Layton have conducted campaigns that  
desperately downplay, if not outright ignore, the crisis in the world  
economy, a crisis that by the end of last week even the corporate  
media was comparing to the Wall Street crash of 1929 and the Great  
Depression.

The parties, at least until last week’s financial convulsions, were  
content to jockey for electoral advantage in this or that region of  
the country by making reactionary law and order appeals, advancing  
various “targeted” tax and spending proposals—all of them framed  
within the straitjacket of a business-friendly, “balanced budget”—and  
trumpeting their rivals’ media-christened “gaffes.”

The systemic crisis of capitalism and the manifest failure of the  
ideology of the “free market” have not been the only taboo subjects on  
the campaign trail. The Canadian Armed Forces’ (CAF) leading role in  
the Afghan war—an involvement opposed by the majority of Canadians—has  
rated only rare mention. The Liberals and Conservatives are not eager  
to remind voters that they joined forces earlier this year to ensure  
that Canadian troops will be waging war in Afghanistan till 2012. The  
NDP, anxious to reassure the Canadian elite that it is a “responsible  
player,” meanwhile is soft-pedalling its call for a quick end to the  
CAF counter-insurgency mission in Afghanistan.

But reality can be quite persistent. The growing resistance to the US- 
NATO occupation forces in Afghanistan, and the resulting rise in the  
Canadian soldier body count combined with the US drive to extend the  
conflict into neighbouring Pakistan, forced the party leaders to  
briefly speak about the Afghan war in the first days of the campaign.  
So too, the global economic meltdown—and subsequent bailout package— 
briefly flushed the various electoral contenders from their set-piece  
presentations.

At the outset of the financial calamity that began on Wall Street  
Monday, September 15 and quickly impacted the institutional stock  
portfolios on Toronto’s Bay Street, Harper took a rather sanguine  
approach. “I don’t think the atmosphere should turn to one of complete  
doom and gloom,” said the prime minister. “My own belief is that if we  
are going to have some kind of big crash or recession, we probably  
would have had it by now.” Harper then went on to extol the resiliency  
of the American economy.

But as the bloodletting continued on financial markets the following  
morning, Harper was forced to wipe the egg from his face and adjust  
his diagnosis. “At the moment there are problems in the Canadian  
economy, but we aren’t in a recession...There are and will be  
difficulties in the world economy. At the same time, Canada is not in  
the same situation as the United States.” Taking a page from the  
playbook of US Republican Presidential nominee John McCain, Harper  
then went on to pronounce the national economy still “fundamentally  
sound.”

Of course, Harper knows full well that the “fundamentals” of the  
Canadian economy are anything but sound. Fears of an impending  
recession were why he called the election in the first place—over- 
riding, at some political cost, his own earlier legislation that set  
the next election date well into 2009!

Canadian home sales fell almost 20 percent in August from a year  
earlier, new car sales took a steep plunge this summer, the  
manufacturing sector (particularly in Ontario and Quebec) is being  
decimated by a spate of plant closures and layoffs, inflation rates  
remain elevated, growth has stagnated, productivity ratios are falling  
and the commodity bubble that has kept various financial instruments  
afloat has been pierced. At the same time, the US is already in  
recession with all that that entails for a Canadian economy in which  
US exports account for some 30 percent of GDP.

And last but not least, the Canadian banks and other financial  
institutions are, Harper’s claims notwithstanding, caught in a vast  
web of credit-debt dependency with Wall Street. It is simply a lie to  
say that Canada’s financial institutions don’t have serious exposure  
to the US financial crisis.

An interconnected, imploding world financial system

For the past year Canadian banks, investors, and other financial  
institutions have been squabbling over an emergency plan to liquidate  
$30 billion in so-called Asset-Backed Commercial Paper, whose value  
collapsed in the wake of the eruption of the sub-prime mortgage crisis  
south of the border.

The Canadian Imperial Bank of Commerce (CIBC) wrote down $6.8 billion  
for the nine months ending July 31st. Another $3.2 billion have been  
lost by their banking competitors. In addition, Royal Bank faces a  
payout of over a billion dollars from exposure to near worthless  
“auction rate securities.” And both the TD Bank and Bank of Montreal  
own troubled banks in the United States.

Far from Canada’s financial institutions being spectators to the  
financial crisis on Wall Street, they are currently mounting a  
ferocious struggle to be included in the US Treasury’s bailout  
package. (Under this package, the bad debts of the major US financial  
institutions are being “nationalized” at the cost of working people.)

According to an article in Tuesday’s National Post, lobbyists  
representing the TD Financial Group, Bank of Montreal, Royal Bank,  
Manulife Financial Corp., and other Canadian-based companies are  
pressing hard to ensure that the US Congress does not back away from a  
pledge by Treasury Secretary Henry Paulson to include “foreign  
flagged” firms in the US bailout.

Canada’s central bank, the Bank of Canada, has been working closely  
with the US Federal Reserve and other central banks in a so far  
unsuccessful attempt to inject enough liquidity into the world  
financial system to staunch the hemorrhaging.

Finance Minister Jim Flaherty has insisted that Canadian financial  
institutions are not in need of a US-style bailout. But on Monday,  
following the issuing of a statement signed by him and the other G-7  
finance ministers that promised they would take “whatever actions may  
be necessary” to sustain the world financial system, he conceded that  
were it to become necessary Canada would follow the US in removing  
“illiquid assets that are destabilizing financial institutions,”—that  
is, mount a bailout.

A key plank in the Conservative election strategy has been to speak to  
concerns about the state of the economy. But it is one thing to  
champion Harper as the “prudent and steady” leader the country needs  
at the helm in a period of economic turbulence and denigrate the  
Liberals’ “Green Shift” tax plan as a “risky experiment”; quite  
another to concede that Canadians are confronted with an historic  
crisis of the profit system.

Hence the Conservatives’ complex and contradictory stance. They are  
appealing for votes on the basis that only they can provide the  
“strong leadership” in a time of global economic trouble,” while  
systematically covering up the fragility of the Canadian and world  
financial system.

In truth the Conservatives are appealing first and foremost to the  
corporate elite, urging big business to rally behind their push for a  
majority government. The unstated argument is that a government that  
has no fear of an election till at least 2012 will be more insulated  
from popular opposition and thus better-positioned to act ruthlessly  
in imposing the full burden of the economic crisis on working people.

To underline this, Harper in his opening election speech pledged that  
the Conservatives will press forward with fiscal policies that are  
aimed at channeling an ever-greater proportion of national income to  
the most privileged sections of society and at hobbling the state’s  
ability to fund public and social services. The Conservatives,  
proclaimed Harper, “will continue to lead Canada by keeping taxes  
down, keeping the budget in surplus and limiting spending to clear and  
affordable objectives.”

The Liberals shift still further right

The Opposition Liberals jumped at Harper’s September 15 assertion that  
the economy would already be in recession if one were indeed coming,  
noting that by some important measures the Canadian economy has  
performed worse than that of the US during 2008. After pointing to the  
crisis in manufacturing, Dion even resurrected the cynical “Jobs,  
Jobs, Jobs” slogan Jean Chrétien employed in leading the Liberals to  
victory in the 1993 federal election.

But the Liberals’ response to the mounting economic turmoil, and to  
ruling class criticisms of their plan to use “environmental” policies  
to strengthen the competitive position of Canadian capital, has been  
to shift sharply to the right. The Liberals are now bragging that it  
was they, not the Conservatives, who imposed the greatest public  
spending and corporate and personal income tax cuts in Canadian history.

Summoning former Ontario NDP Premier Bob Rae cum Liberal “star”  
candidate to lead the charge against “Harpernomics,” the Liberals have  
pointed out that whilst their party under Jean Chrétien and Paul  
Martin slashed public spending in the 1990s to such a draconian degree  
that a $13 billion surplus was placed at the disposal of the incoming  
Harper regime, the Conservative government wasted no time in rendering  
the surplus down to “zilch” with its “irresponsible” two-percentage  
point cut in the Goods and Services Tax (GST). (Big business  
economists almost universally favour consumption taxes, which fall  
more heavily on working people, over personal income, capital gains  
and corporate taxes.)

On Monday, the Liberals announced that they would eliminate the tax  
the Harper government imposed, to a storm of protest from Bay Street,  
on “investment trusts,” a new form of corporate organization invented  
for the sole purpose of escaping taxation.

Ombudsmen and commissioners in the face of a Depression-type crisis

Jack Layton, the leader of the NDP, Canada’s social-democratic party,  
has made only the most limited, essentially vapid, appeals to the  
popular anger over mounting economic insecurity and social inequality.  
Layton’s NDP is increasingly casting itself as a consumer watchdog,  
promising to restrict banking fees and appoint a “gas price ombudsman”  
and “jobs commissioner.”

Responding to a statement by Harper in which the prime minister  
defended the elimination of jobs as the price to be paid for a well  
functioning, competitive economy, Layton agreed that every job can’t  
be preserved. He then went on to say that, unlike the Conservatives,  
the NDP will establish a “jobs commissioner” to “fight” against layoffs.

“No politician can guarantee jobs,” said Layton “but what they can  
guarantee is that [they] are going to fight for those jobs.”

In response to the meltdown of the financial system, Layton said the  
NDP favors increased regulation and other rule changes, such as  
eliminating non-voting shares, which will better protect investors.  
Layton called for a “top-to-bottom review” of the Canadian banking  
industry. “We’ve got to ensure that our financial institutions are  
properly capitalized, that they fully expose all of their risks to  
investors, that they don’t substitute flawed ratings systems for real  
risk management, and that they function with due care and prudence.”

Needless to say, Layton and the NDP have not so much as breathed a  
word about the irrationality and injustices of a social system in  
which socio-economic life is subordinated to the pursuit of profit for  
a few .

The NDP’s most “radical” proposal is to rescind the escalating scheme  
of corporate tax cuts introduced by the Harper government. These cuts  
are but the latest in a long series of corporate tax breaks, including  
many instituted at the provincial level by NDP governments.

Moreover, much of what the NDP taketh away it proposes to return in  
the form of subsidies to attract investment and assist companies in  
developing or adopting “green technology.”

A week can be a long time in bourgeois politics. With financial  
markets rallying at the end of last week in response to the Bush  
administration’s bailout announcement, the three main parties were  
quick to jettison any discussion of the financial crisis. Instead they  
returned to the small change of political fence mending and  
announcements tailored to this or that “demographic’—almost always  
presented in the form of TV sound bites in the constituencies most “up- 
for-grabs” according to this or that latest opinion poll.

Whatever the coloration of the next government, the convulsions in the  
financial markets, announcing as they do a systemic crisis of the  
capitalist system, will have a far, far greater impact on the policies  
that it will pursue, than their respective programs and platforms.