Introduction
It is not surprising given their shared governing ideology that the Con-Dem coalition is relishing the opportunity to cut public sector spending in the UK. With the help of the UK media and the City, they have successfully securitized the budget deficit by presenting it as an existential crisis requring emergency measures that break normal conventions of what a government is supposed to provide. What is surprising is that the Canadian experience of the mid-1990s is being forwarded as a model for initiating 'progressive' public spending cuts in a rigorous fashion. But there was nothing progressive about Canadian spending cuts or they way in which they were organized. Moreover, deficit reduction in Canada took place during a time of economic stability, not in the wake of the biggest financial crisis in modern history and the resulting global recession.
What then can we expect if the Con-Dems do indeed adopt the Canadian model? The short answer is devastating cuts to front-line services with many of the burdens of these cuts falling onto other levels of government. In Canada, transfer payments were cut to provinces. In the UK we can expect that cuts will be shifted onto local authorities. But what will be more harmful is that the Canadian case illustrates what is likely to happen if growth returns and surpluses begin to accumulate. Re-investment into social spending will be sacrificed in order to initiate tax breaks.
What did the Canadian government do?
After winning the 1993 Canadian general election the Liberal Party embarked upon an aggressive deficit reduction program. With the federal deficit sitting at 6 percent of GDP and public debt at 64 percent of GDP, Finance Minister Paul Martin sought to balance the budget by 1997. Such a dramatic turnaround required that massive spending cuts be taken in defense, foreign aid, and transfers that would go to fund provincially administered social programs in health, education, and housing. As Hugh Mackenzie has documented, by 1996-1997 program spending had been reduced from $120 billion CDN–
the 1993-1994 spending level– to $108 billion CDN. Relative to the size of the Canadian economy, this was the lowest
level of federal government spending since 1950. Those who did not have the necessary financial supports to find alternatives to reduced and/or eliminated social services were most affected.
What happened next?
With the return of economic growth in Canada and the beginning of huge budget surpluses (e.g., in 2004 fiscal year, the federal government achieved a $9 billion CDN surplus), new funds were not re-invested into those areas most affected by previous cuts. Instead a choice was made to cut taxes– particularly corporate income tax rates– and to funnel a significant portion of each yearly surplus to debt reduction. The goal was to reduce the debt load to 25 percent of GDP.
Unsurprisingly, alternative assessments of these budgets in Canada show that the tax cuts disproportionately benefited the most wealthy members of Canadian society, thereby increasing income inequality. Moreover, economic growth-the ultimate goal of these policies– would have been better served through increases in funding to education and health care rather than servicing the debt in a dollar to dollar comparison (see for example Andrew Jackson's work and analysis or Ellen Russell).
What were the longer-term effects?
Overall, while economic growth and debt reduction exceeded target goals, these achievements came with significant social costs. A scathing UN report noted the following issues years after cuts were first implemented:
- poverty levels--at 11.2% of the population--remained extraordinary high for a high-income country.
- minimum wages in all provinces were located below the poverty line, even for full-time workers.
- social program funding transfers were below 1994-1995 spending levels despite nearly a decade of sustained economic growth.
- social assistance benefits were set at 50 percent below the poverty line.
- 7.4 percent of Canadians were identified as facing food insecurity.
- 40 percent of food bank users were found to be children.
- although the Employment Insurance scheme accumulated a large operating surplus, unemployment benefits were reported as only being available to 39 percent of the unemployed, with youth, immigrants, and women facing serious barriers to access.
- unemployment benefits levels had fallen to their lowest level in Canadian history.
These outcomes were not the result of mismanagement or financial constraint. Rather, they were made possible by specific political choices.
Lessons from the Canadian Experience
If Canada is the role model for the current British government, there would seem to be dark days ahead. While David Cameron has been at his patrician best claiming that 'we're all in this together', the Canadian experience clearly demonstrates that some will be in the muck for deeper and for far longer than others.
There are many lessons that can be taken from the Canadian experience. But one that might be most pertinent at this time is the following:
- it would be unwise to capitulate to current spending cuts in the belief that public provision levels will return in the not-so-distant-future.
Unfortunately, neoliberalism does not work like this and as an ideology, it will seek to hollow out the state--save for its coercive capacity--as its continuous mission.
Thus, it would be prudent at this point for those on the Left to establish a counter-discourse that places an emphasis on income generation through innovative taxes that target speculative financial activity and wealth (e.g., a French style wealth tax) and push that the government take advantage of its banking assets--beyond income garnered from bail-out repayments.
Photo credit: The Prime Minister's Office
