Global Markets, Inequality, and the Future of Democracy

Highlights of My Reflections on the G78 Policy Conference

This is the title of the Group of 78 Conference held at the University of Ottawa in September 2019. The conference engaged some 16 Canadian economists, political scientists, sociologists and other expert presenters who were joined by key-note speaker, American political economist, Robert Kuttner. The purpose of the conference was to explore the roots of hyper-inequality, economic insecurity, higher unemployment, and the erosion of democracy over the last four decades.


Globalization is a phenomenon of one or more of the following elements

  • The volume of international trade as measured by the volume of exports and imports among countries including trade arising from “off shoring” the production of components of goods
  • The flow of financial capital (including foreign direct investments) across national borders
  • A substantial degree of human migration between countries
  • A substantial degree of exchange of ideas and information among countries

Hyper means more than normal and there are certain periods in history in which the process of globalization expanded rapidly – that is hyper globalization. Hyper globalization began around 1970 following the collapse of the 1944 Bretton Woods system and then again in 1990, notably with the Canada US free trade agreement (CUSFTA) in 1988 and NAFTA in 1993.

Conference economist Mario Seccarecci argued that the collapse of the post-Bretton Woods System actually revived an inverted form of neo-mercantilist structure, in which the hegemon or core country, the United States (as purveyor of a global reserve currency), must run a chronic trade deficit with the rest of the world. This deficit is counterbalanced by a large constellation of countries seeking to achieve trade surpluses based on a strategy of a hybrid neo-mercantilist model of “export-led growth”, especially the two NAFTA countries owing to their geographic proximity. The important point is that, to be successful in achieving chronic trade surpluses through the competitiveness game, one must pursue policies domestically that suppress wage growth with internal demand growing less quickly than exports. So, the effect of trade liberalization starting in the 1970s spread deflationary pressures in the labour market that most directly and negatively impacted unskilled labour because of competition with foreign “cheap labour”. The second indirect effect was government policies to cut corporate taxes to create jobs or attract scarce jobs [from foreigners]. This was especially evident during the administration of Prime Minister Stephen Harper [from 2006 to 2015]. Fiscal public spending policy gutted certain social programs, like Unemployment Insurance (UI) which was renamed Employment Insurance. More generally spending was cut by “combating” deficits that arose from cuts in corporate taxation that started back in the 1970s.

The Global Financial System

The liberalization of international investment enables speculative investments in cross border finance. These can lead to nation state austerity to accumulate foreign exchange reserves in $US to counter the speculation.

Central Bank Monetary Policies

Central bank monetary policy of exclusively targeting inflation leads to inequality between the wages of labour and the interest of the rentier class of bond holders. Specifically, when prices (and wages) start to exceed the target inflation rate, central banks raise interest rates thereby raising the income of the rentiers who earn interest and suppressing wages associated with the suppression of prices.

Neoliberal Economic Policies in Canada

All economies are a hybrid of a capitalist economy and a socialist economy both of which are to be managed by the government on behalf of the people. Neoliberal economic policies reduce the socialist economy to increase the capitalist economy and reduce regulations on the institutions in the capitalist economy. Specifically, neo liberal economic policies in Canada since the 1970s have included

  • a 59% reduction in the federal corporate income tax rates from 37% in 1970 to 15% in 2012
  • an average (54%) reduction in the 1969 highest marginal personal income tax rates for 1% of the highest income earners and a much lower 32% reduction in the rates for middle income earners
  • limit of capital gains to 50% of tax rates on employment income and complete exemption of capital gains taxation on owner-occupied principal residences
  • repeal of the federal estate tax on inheritances in 1971
  • subsidies to capitalist firms/businesses,
  • privatizing government operations to increase demand for more capitalist firms (e.g. CNR railroad)
  • reducing regulations on capitalist firms in the real sector of the economy
  • reducing regulations on capitalist firms in the financial sector of the economy

By the 1990s, the tax reductions and exemptions took their toll in increased national debt and large annual deficits which precipitated the major austerity initiatives in the Martin 1995 budget. Conference economist Toby Sanger estimated that, if annual federal government revenues were today at their 50-year long-term average as a share of the Canadian economy, they would be $50 billion higher.

Sales tax increases to levels in the UK, for example, would restore an estimated $35 billion which could more than finance Conference policy recommendation 2.1: to extend health care coverage to drugs and dental care, extend education support to include universal child care to deal with an egregious source of gender inequity and lower university tuition fees to deal with the growing problem of student debt. This is a means of reducing income inequality through the tax expenditure system as Conference sociologist John Myles explained.

Neoliberal Commodification of housing

Commodification is defined as the sale of man-made useful goods that are bought and sold typically in so-called free markets at prices based on the forces of supply and demand that are set by the capitalist firm suppliers to clear those markets.

Decommodification is then about the production and distribution of goods and services in the socialist economy where there are no profits or market prices because housing is inherently a public good where market prices distort the efficient allocation of resources in the economy. The evidence of distortion is the result that housing prices in Canada have exceeded the rate of general inflation by 2.5% per annum since 1980 dramatically increasing the incidence of unaffordable housing and debt of Canadians and massively increasing the wealth of the top 20% .

The Conference 1.2 recommended the decommodification of housin:

  • Reverse the hyper-commodification of shelter by building more social housing and by heavily taxing unoccupied and short-term rental housing

Neoliberal commodification of labour

Labour time is bought and sold like man-made goods in so called free markets based on factors of supply and demand. These are different from prices for labour under the labour theory of value where labour time is priced at a sort of average in the community adjusted for time requirements to obtain skills for different jobs. Distortions in wage and income arising from pricing are reflected in wage stagnation and precarious work associated with the expanding gig economy that features non-standard full-time employment involving fewer hours and lower pay that is implicitly designed to clear the market for labour time.

Wage stagnation is reflected in the fact of a drop in the wage share of GDP from 70% in 1991 to less than 64% in 2005 because wages have not increased commensurate with labour productivity. Median wages in 2015 should have been 13.5% higher than they were in 2015.

File download (docx, 12 pages): G78 conference report for CPG Roundtable 2.1