What kind of capitalism? The revival of class struggle in Canada

Monthly Review, May, 1996 by Robert Chernomas, Errol Black

At the end of 1995, Gordon Wilson, president of the Ontario Federation of Labor, promised an intensification of class conflict in Canada's industrial heartland:

In 1996 ... the business community is going to discover that it cannot rip up the social fabric and expect the kind of harmony in the workplace that has evolved over the past 10 years.

It will be the year when confrontation replaces cooperation and partnership is replaced by protest. There is a price to be paid for the Ontario business community's adventure into the realm of political extremism. It will be measured in lost work time, lost production and lost profits, and it will be paid until this brutal agenda that debases human dignity is a thing of the past.(1)

Paradoxically, the promised challenge to capital and the state, if it materializes, will be inspired not by a desire to transform Canadian society, but rather to stop its transformation--from a form of social or communitarian capitalism to a miniature replica of the U.S. form of individualistic capitalism.

Communitarian capitalist countries and their capitalist classes evolved their vision in part out of the need to compete with the dominant United States after the Second World War. In each case there is a locus of power, often the state in combination with the forward thinking members of the business community. Typically, the state in these countries regulates mergers, capital for research, and the allocation of resources. It also encourages consortiums for investment, joint research, standardization, technological innovation, and training. In this way, longer-term planning is favored over short-run profit maximization.

In the best of communitarian capitalist countries, business activities detrimental to society are likely to be regulated. Taxes, licensing, demand, subsidies, grants, access to financial resources, regulation of capital flight and mergers are all tools the state may use to condition capitalist property rights when they are seen to be in conflict with a broader interest. When business activities promote economic improvement and social advancement, these same tools are used to reward firms.

As well, the communitarian approach places responsibility on the collective shoulders of society for the basics of health, education, and the social well-being of its people while developing policies and strategies that enable individuals to advance themselves more readily. Thus, labor productivity is viewed as an institutional problem rather than an individual or an "attitude" problem. Unemployment is a reason for retraining and relocation by the state or the firm. Workers' participation in design and decision-making is often encouraged, both as a means of increasing productivity and co-opting labor. Unions often play a central role in this latter process, in their traditional role as the guardian of worker rights and material interests, as a school for learning democratic principles and practices, and as an agent for collective decision-making. Moreover, in the most advanced communitarian societies, unions play the sometimes major role of partner in the determination of state policies with respect to fiscal matters, labor-market regulation, and social welfare programs, thereby serving as a guardian of community interests.

In the immediate post-1945 era, despite its close ties to the United States through direct investment by U.S. based firms in key sectors of the economy and through trade, Canada succeeded in constructing a set of institutional arrangements patterned on the West European model (the models of Germany, Sweden, and the pre-Thatcher United Kingdom) that distinguished Canada from the United States. These included a comprehensive social safety net, a major role for the state in the economy, and a robust and progressive trade union movement. As well, Canada had a dynamic, albeit minority, social democratic party--the C.C.F./N.D.P., which promoted both an expanded welfare state and a leadership role for the state in the economy. Canada's particular version of social capitalism was supported by labor and tolerated by capital, because it simultaneously generated a rising standard of living for the bulk of the working class and promoted capital accumulation.

The Advent of Economic Crisis

Conditions changed dramatically in the early 1970s with the onset of economic stagnation, escalating inflation, and growing social unrest. The Liberal government in Ottawa initially blamed external developments for the problems and attempted to ride things out. By 1975, however, it was evident that this strategy was not working, and the government looked to monetarism and a three-year regime of generalized wage and price controls to restore order in the economy and society.

Wage controls succeeded in bringing down the rate of increase in money wages and increasing profits, but they also engendered widespread hostility and opposition from labor. Consequently, the government opted to rely on a version of "hard" monetarism (based on the assumption that the unemployment rate must be maintained above 8 percent)--augmented by public-sector specific wage controls--to check the power of trade unions and curb inflationary pressures.