Austerity is poison. Drink up!

Dublin, 2012

 

When it comes to economics, most of us don’t understand the basics, including a lot of professionals, it seems. Not so Paul Krugman, a Nobel Prize-winner that The Economist magazine recently described as the second-most influential economist in the world.

In today’s Guardian, Krugman rips a strip off British leaders for continuing to advance economic policies of austerity that he says have proven to be an utter failure. “The austerian ideology that dominated elite discourse five years ago has collapsed, to the point where hardly anyone still believes it. Hardly anyone, that is, except the coalition that still rules Britain — and most of the British media.”

Umm, over here, Mr. Krugman! Here in Quebec we have a government and a media that’s just as clueless about austerity as British PM David Cameron! In fact, we have politicians espousing the same kind of nonsense you pick apart so effectively and thoroughly in your lengthy Guardian piece, “The Austerity Delusion.”

Mr. Krugman, you could have been talking about Quebec Premier Philippe Couillard or Treasury Board president Martin Coiteux when you explained how right-wing American “politicians were catering to a public that doesn’t understand the rationale for deficit spending, that tends to think of the government budget via analogies with family finances.”

Bingo! Coiteux, as a former professor at Montreal’s Hautes Études Commerciales, would certainly have failed any student who made that comparison in a term paper. But there he was two weeks ago spouting the same moronic line on the popular Tout le Monde en Parle TV talk show (you can watch the segment here).

Any decent economics student can spell out the difference between using the family credit card to purchase goods you can’t afford vs. a government that uses deficit financing to provide services and support the economy. Suggesting that governments should spend less at a time when consumers are struggling and businesses are cutting back on investment isn’t only illogical, it’s a surefire way to make the economy even weaker (which, as Klugman illustrates, has happened to the EU countries that adopted austerity measures).

To put it another way, if Coiteux really believes that government and consumers should act the same way, shouldn’t he be advising that we, too, stop borrowing and buying things? He doesn’t, of course, because he knows that’s a surefire road to recession, or worse.

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(Couillard doesn’t like the word “austerity” and has convinced some of the province’s more milquetoast media that what he’s doing isn’t that. Among the Liberal tricks is to suggest that because budgets are still increasing — by the tiniest of margins —  it isn’t austerity. The Oxford dictionary, however, defines it this way: “Difficult economic conditions created by government measures to reduce a budget deficit, especially by reducing public expenditure.” That seems to fit what the Liberals are doing to a T, so I’d ask my media colleagues who refer to it as “so-called austerity” to either consult a dictionary or just slap a Couillard campaign sticker on their press cards.)

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Spending is, of course, just half the balance sheet. Revenues are, literally, equally important to achieving a balanced budget. Numerous anti-austerity groups have made suggestions about ways to raise revenues in an effort to avoid service cuts. Among the more obvious: make rich people and wealthy corporations pay more taxes. They suggested adding two new tax brackets at high-income levels to achieve the former. (Meanwhile, Quebec has lowered corporate taxes even further.)

Coiteux again resorted to word play when he was asked on TLMEP why Quebec didn’t look for greater revenues from the only segment of society that can truly afford to cough up more money. Basically, he said, we don’t have enough rich people for it to make much of a difference and that they, too, were already overtaxed.

That triggered a stinging rebuke this week from left-wing Quebec economist Léo-Paul Lauzon, who pointed out that although their numbers may be small, top earners  control a massively disproportionate share of the province’s wealth. They are also, he noted, the beneficiaries of many of the province’s tax breaks and shelters that are of rare use to the middle class (stock purchase options, incorporation, family trusts, capital gains) and which allow the wealthy to significantly reduce the portion of their income that is considered taxable.

In Canada, the wealthiest 20 per cent of the population control 94 per cent of the financial assets. Tax breaks for the wealthy cost the government billions in foregone revenues, a loss that can only be made up by reducing services or increasing the tax load of the remaining 80 per cent.

Around the world, meanwhile, the economic downturn doesn’t seem to have hurt the rich very much. In fact, they keep getting richer. In the United Kingdom, the Guardian reported this week, “the wealthiest 1,000 individuals and families (in the U.K.) now have a combined fortune of just over ($1-trillion Canadian) – or ($1-billion) each on average.”

“The figure has more than doubled since a total of just under ($462-billion) was recorded in 2005, despite the world economy being gripped by a punishing recession over much of the last decade.”

In Canada, the median income of the top 20 per cent nearly doubled from 1999 to 2012, according to StatsCan.

So although the economy is growing at a slower rate, a larger and larger share of that growth is going into the pockets of the economic elite here and elsewhere. The income gap in industrialized countries continues to grow, hitting a 50-year high, according to the Organization for Economic Co-operation and Development.

The growing inequity has the OECD — not exactly a left-wing think tank — worried about the economic and social consequences and it has urged governments to introduce tax reforms to reduce the gap, including “abolishing or scaling back a wide range of tax deductions, credits and exemptions which benefit high income recipients disproportionately.”

But Coiteux and friends aren’t listening to the OECD any more than they’re learning from the failed efforts in Europe to cure struggling economies with some old-fashioned bloodletting.

They’re depending on your cooperation — or ignorance — to get away with it. Don’t let them.

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Quebecers from across the province will be protesting again this week, marking International Workers’ Day on May 1 with one-day strikes, marches and a broad variety of activities designed to educate the population about the consequences of the government’s austerity agenda.

In Montreal, the march starts at 6:30 Friday at Phillip’s Square. ■
Peter Wheeland is a Montreal journalist. His sardonic observations about the city and province appear on Cult MTL every week. You can contact him by Email or follow him on Twitter.