Why Unions Really Matter

Labour solidarity key to quelling austerity, neoliberalism
July 1, 2013

Fiscal austerity is a neoliberal economic policy the political purpose of which is to erode the power of -- if not destroy -- the working class through the reduction of the workforce and the suppression of wages and benefits in the interests, ultimately, of profit. Because unions are potentially the most powerful component of the working class, all-out war against them, especially the public service unions, is the most obvious tactic. Unless they become "outraged" (Los Indignados), fear, insecurity, and resentment are the results for working people. For if public service unions can be tamed, private sector unions don't stand a chance, and if the labour movement can be crushed, non-union workers might as well roll over.

Such crusades are undertaken in the holy names of "reducing deficits" and "balancing government budgets" to satisfy the capital "markets," a euphemism for the investor class and its financial institutions, and to maintain satisfactory credit ratings. Deficits, of course, are primarily caused by both misguided government spending and reduced revenue because of unwise tax cuts.

Here's how it all presumably works. For the investor class, austerity sustains investor confidence by working to keep governments solvent and the value of their assets stable -- especially long-term government bonds -- by controlling inflation through reduced spending. Inflation is anathema to the investor class for two reasons: it erodes the monetary value of long-term assets such as bonds and creates unwanted pressure to increase wages. Thus Canada's neoliberal fiscal policy complements the Bank of Canada's monetary policy of maintaining low interest rates, which also keeps inflation in check, thereby suppressing wage gains, as does a relatively high unemployment rate. When the unemployment rate is relatively but not too high, the pressure on employers to increase the wages of the employed is mitigated.

But, while the real effect of low interest rates is to control inflation, low rates also serve to stimulate the economy perversely by implicitly encouraging the incursion of more debt to offset decreased or stagnating wages. In other words, any fuelling of the economy by spending is on the conveyor belt of household debt, which now stands at an astounding 165% debt-to-income ratio. (That huge debt, of course, increases the profits of financial institutions.)

This isn't the only perversity that comes with low interest rates. Pensions and fixed income investment vehicles such as bonds, GICs, and savings accounts also suffer significantly, with most of the victims retail investors who simply don't have the capital flexibility that institutional investors possess. Because the rates are so low, there is also a risk that investors, institutional and retail alike, might seek more high-risk investments -- a major concern of the Office of the Superintendent of Financial Institutions, and rightly so.

These complementary fiscal and monetary policies are important to the investor class because government is of course the final guarantor of their investments and the solvency of their banking institutions -- a guarantee made even more secure with the recently announced "bail-in" proposal for Canadian banks whereby depositors could be on the hook in any too-big-to-fail crisis. In addition to these concerns is the classic neoliberal refrain that government service and government spending undermine private sector initiatives and competitiveness; hence the wish to shrink government.

In actuality, however, any outsourcing of government services, if it happens at all under austerity, is only an incidental benefit, as is so-called increased neoliberal freedom in the "marketplace," since spending, whether intended by the policy or not, is also seriously inhibited in the general economy.

So who benefits from austerity in a recession? Only the investor class. Who needs to stand up to the investor class? Unions. Unions, however, seemingly can't even raise significant concern from their own members, let alone political solidarity -- which means that, even though they're already under ruthless attack by the federal and some provincial governments, they can't even dream of organizational solidarity across the labour movement, and certainly not with other progressive organizations of the left. Still, all that the unions really have left as a weapon is solidarity, since negotiations and the strike have in effect been stripped from them by the Harper regime and austerity-driven provincial regimes.

But, as Leo Panitch, Greg Albo, and others have argued, unless working people start thinking of themselves as a class, rather than focusing on their same old parochial micro-political concerns, they are doomed to failure in their struggle against capital. There is little hope for the left or the possibility of systemic transformation, moreover, without the institutional participation of labour unions, for working-class labour is the only potential political force with enough critical mass and enough potential organizational capability to kickstart some sort of evolutionary force working towards a democratization of the economy.

To begin that process, however, unions, like countless other progressive groups, must first get over what American economic historian Gar Alperovitz calls "projectism" in order to move towards any sort of strategy focused on systemic undoing. Labour, in fact, must radicalize itself soon; else the struggle is in vain.

But that effort and the leadership it potentially provides are crucial, for the war against unions and the suppression of wages and benefits is a war against all working people, fundamental democracy, and ultimately, in its full implications, the destruction of the world.

(Barry Cameron is a retired university professor who blogs at: http://appalledbc.tumblr.com and tweets @AppalledBC)