Skip to content

Bill 28 at odds with a fair economy

Bill 28, the Public Services Sustainability Act, was passed by the Progressive Conservative government of Manitoba in June 2017, but has not yet been proclaimed into law. It would freeze public sector wages for two years as each collective agreement expires. It is now being challenged in court by the Manitoba Federation of Labour and numerous other unions. Please see below comments made by Robert Chernomas, a member of the Council of Canadians Board of Directors, at hearings on Bill 28.

My name is Robert Chernomas and I am a Professor of Economics at the University of Manitoba and President of the Manitoba Organization of Faculty Associations (MOFA) representing approximately 1,600 academic staff and Librarians from faculty associations including Brandon University, Université de Saint-Boniface, University of Manitoba, and University of Winnipeg.

Bill 28, the Public Services Sustainability Act (‘the Act’) is at odds with the best practice on how to run an efficient and fair economy that would best serve our community. Austerity is not best practice.

In the wake of the 2008 economic crisis deficit spending has come back into political vogue both as a measure to stimulate the economy and to protect valuable public services. The term “austerity” has been coined to pillory disastrous European efforts to balance the books after the 2008 economic collapse by cutting spending on public programs. European austerity programs have created unemployment, gutted government services and been blamed for creating a “lost generation” in several countries. Government spending is a more effective best practice means of eliminating debt by stimulating the economy.

Economists at the International Monetary Fund (IMF), long a leading advocate and international enforcer of austerity policies, recently published a paper titled, “Neoliberalism: Oversold” arguing that running budget surpluses through austerity policies is doubly dangerous. First, contrary to the belief that smaller government will unleash the private sector and create economic growth, the reduction of government spending reduces demand and slows the economy. Second, the austerity programs required to reduce the size of the state create increased inequality, which further harms growth. Countries where incomes are more equally distributed tend to grow faster and have growth cycles that last longer. In fact, “policymakers should be more open to redistribution than they are” according to the paper. In reporting on “Neoliberalism: Oversold”, Fortune magazine pointed out that while the economic growth that austerity policies are designed to create is “difficult to discern” from the evidence, “the inequality caused by austerity and laissez-faire policies is palpable.”

The World Economic Forum (WEF) is a Geneva-based foundation whose Annual Meeting of chief executives and political leaders, held in Davos, Switzerland is a gathering of the truly rich and powerful. The WEF is a think tank funded by 1000 corporations. Member companies must have annual revenues of more than $1 billion. The WEF produces a Global Competitiveness Report, which ranks the competitiveness of the world’s economies.

The top ten countries of World Economic Forum Growth Competitiveness Index Rankings for 2005 in rank order are; Finland, US, Sweden, Denmark, Taiwan, Singapore, Iceland, Switzerland, Norway and Australia (Lopez-Carlos et al, 2006). What is most interesting about this list is how few of these countries follow a conservative economic strategy and how little the list changes over time.

The countries that dominate the top ten list are the so-called Nordic countries, better known disparagingly for their welfare states by conservatives. It seems the quality of their public institutions, budget surpluses, low levels of corruption and high degree of technological innovation trump their high taxes and strict regulatory framework so that they are characterized as having “excellent macroeconomic management overall”.

In the 2013-2014 Report, Finland ranked 1st, Sweden 6th, and the US 7th on innovation.

Many scholars – perhaps most famously Richard Wilkinson and Kate Pickett’s in their book The Spirit Level – have pointed out that inequality of outcome is a problem. Unequal nations fare more poorly than those that are equal on a myriad of social indicators, including health, education, social mobility and violence.[i] According to Wilkinson, “if you want to live the American dream, you should move to Finland or Denmark.

Social Democratic Nations have:

Among the Lowest Debt-to GDP ratios in the OECD

Among the Best Health Outcomes in the world- Longevity & Infant Mortality

Are at the top of the list of the 10 best countries for gender equality -Iceland –Norway-Finland-Sweden

Are at the top of the list of the 10 most environmentally friendly countries on the Environmental Performance Index-Finland-Iceland-Sweden-Denmark.

Several EU countries, including all Nordic nations, Austria, and Germany do not charge fees to their students. Not coincidentally they are among the most advanced, productive, equitable economies in the world with the least debt and the happiest and healthiest of citizens.

According to Augusto Lopez-Claros, chief economist at the WEF when summarizing the success of these social democratic nations wrote the following:

“Integrity and efficiency in the use of public resources means there is money for investing in education, in public health, in state-of-the-art infrastructure, all of which contributes to boost productivity. Highly trained labor forces, in turn, adopt new technologies with enthusiasm or, as happens often in the Nordics, are themselves in the forefront of technological innovations. In many ways the Nordics have entered virtuous circles where various factors reinforce each other to make them among the most competitive economies in the world, with world class institutions and some of the highest levels of per capita income in the world.” (Lopez-Carlos, 2005)

There is a better way to run an efficient and fair economy – Bill 28 will become part of the problem not the solution.

Thank you for listening.