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The following is a Guest Editorial..
The “Atlantica” concept being forwarded by Atlantic Canadian business leaders under the direction of the Halifax-based Atlantic Institute for Market Studies (AIMS) is, at it’s core, a full scale neo-liberal prescription for the economic future of Atlantic Canada.
Yes, there is talk within pro-Atlantica circles about improving the region’s transportation infrastructure (not a bad idea in itself) and easing the flow of goods across the U.S.-Canadian border, these are not the only aims of Atlantica. The ultimate aim of Atlantica is the creation of a free market haven in Atlantic Canada and northern New England, where even the most basic forms of market regulation and social policy are non-existent.
The most revealing document concerning the end goals of Atlantica appears on the AIMS website. Entitled How Poor Quality Public Policy Holds Atlantica Back, this document focuses on how “poor public policy” is supposedly impeding economic growth and prosperity in Atlantic Canada. This document suggests that certain public policies practiced in the region are generating severe economic distress, and the document grants each jurisdiction in the region an “economic distress” rating. Jurisdictions are rated from 1 to 5 on their respective levels of economic distress, 1 being ideal and 5 being poor. All four Atlantic Canadian provinces are given a “5” rating, thus securing their status as areas with a high level of economic distress. What is revealing about this rating system is the criteria used to assess a jurisdiction’s economic distress rating. Factors that contribute to a higher economic distress rating include minimum wage legislation, union density, public employees as a percentage of total workforce, and the size of the public sector relative to the size of the economy. Minimum wage legislation and unions are regarded as barriers to “labour flexibility”, while public employees and spending are viewed as “burdens” on the economy.
One does not have to read between the lines to realize what this rating system says about the basic economic philosophy of the pro-Atlantica forces. The neo-liberal, free market agenda of Atlantica is quite obvious from the fact that minimum wage laws, unions, and a strong public sector are all regarded as burdens, something that is a cause of “economic distress”. In their attempt to further this project, AIMS employs some very egregious myths concerning both the state of the Atlantic Canadian economy and what it takes for a modern economy to be successful and competitive.
Upon reading the Atlantica stance on public policy in Atlantic Canada, one would be led to believe that the region is a socialist haven, with lavish wages, extensive unionization, and a strongly socialized economy that is unresponsive to capital, and that all of these factors are holding Atlantic Canada back from achieving its golden age. Of course, this is not the case. In fact, Atlantic Canada has embraced the neo-liberal project more than any other region in Canada, and indeed is one of the few areas in the Western world outside of the United States where social democratic policies have not been practiced widely. Indeed, the economic stagnation and lack of widespread prosperity in the region is not because of an over-regulated, union heavy economy with an extensive social safety net. It is rather, due more to the absence of these things.
The implications regarding the state of public policy in Atlantic Canada made by Atlantica do not coincide with the reality of public policy in the region. The Atlantica lobby suggests that our minimum wage legislation is an economic burden, yet the four Atlantic provinces are among the five provinces with the lowest minimum wages in Canada (New Brunswick and Newfoundland & Labrador tie eachother for last place, while P.E.I. and Nova Scotia have wages that surpass only Alberta). In terms of union density, the Atlantic region is again not heavily unionized vis-a-vis the rest of Canada. Indeed, in 2000 unionization rates in the three Maritime provinces range between only 24% - 26% of the workforce, on par with the Canadian rate of 25.8%. Only Newfoundland and Labrador’s union density is higher than the Canadian average (34%). Atlantic Canadian corporate tax rates are no higher than the Canadian averages, and the province with the highest corporate tax rate (Saskatchewan) has both a higher growth rate and lower unemployment than any of the Atlantic provinces. And finally, the degree of public ownership in the region is not excessive, with private ownership of key sectors such as auto insurance and telephone services that operate as public corporations in other, more prosperous provinces.
Atlantica lobbyists also claim that further economic integration with the United States is mandatory for the future success of the region’s economy. However, the region as already been engaged in a process of steady economic integration with the American market since the passage of free trade in 1989. The first decade since the implementation of free trade has shown that the benefits of increased integration with the American market have not materialized as promised. A recent study by Statistics Canada stated that between 1988 and 1999, wages in Atlantic Canada increased by only 0.4%, and manufacturing productivity in the region grew by only 0.2% per year on average. The integration into the U.S. economy that was kick-started by free trade has not brought significant prosperity to this region, and there is little reason to suspect that further integration would be of great benefit. The ever-increasing budgetary deficits and trade deficits in the United States, coupled with low rates of individual savings, are creating a very fragile situation for the future health of the American economy, thus making further integration with the American economy all the more risky and unlikely to produce significant prosperity.
This argument is not the product of an anti-American pathology. It is merely a pragmatic economic argument that takes account of developing trends concerning the weakening state of the American economy and the realization that having only one significant export market is not a secure trade policy.
What an examination of the facts reveals is that the claims made by the pro-Atlantica forces do not hold water. The Atlantic region is already more in line with the neo-liberal agenda than anywhere else in Canada, and the results have not been that grand. The Atlantica program is not a bold new direction for the region. It is merely an intensification of policies that have already been practiced for decades.
Apart from the myths about the current state of the Atlantic Canadian economy, the pro-Atlantica forces also base their arguments on the neo-liberal myth concerning what it takes to be a successful and competitive economy in the 21st century. The Atlantica lobby are displaying religious devotion to the neo-liberal mantra of excessive tax cuts (especially for the wealthy and corporations), privatization, de-regulation, and the erosion of social programs. The Atlantica forces are holding on dearly to this faith, even though in practice neo-liberal economic policies have proven to be disastrous.
There are numerous examples of countries and regions that embraced neo-liberalism during the 1980s and 1990s and met economic decline as a result of it. New Zealand represents the most extreme example of what neo-liberal economic practice can do to a modern, developed country. Between 1984 and 1999, New Zealand adopted the neo-liberal prescription of privatization and de-regulation moreso than any other Western nation, and the results of this experiment speak volumes about the failure of the neo-liberal model. The unemployment rate, which never rose above 5% between 1945 and 1984, more than doubled, peaking at 10.9% in 1991. Real incomes dropped significantly, and between 1987 and 1998 the average New Zealander lost $30,000 in real income, according to the economist Paul Dalziel. Half of the population saw their real incomes drop between the start of the neo-liberal experiment and 1995-96. Union membership was cut in half, with no increase in labour productivity. The experiment was abandoned in 1999, and New Zealand has begun to reverse the damage done to its economy via neo-liberal policies. The abandonment of neo-liberalism has already begun to produce results, namely a halving of the unemployment rate.
The New Zealand experiment reveals just how faulty the recommendations made by the Atlantica project are. And while the Atlantica lobby insists that the only way for the Atlantic Canadian economy to prosper is to engage in a wholesale free market race to the bottom, facts show that there are numerous social democratic countries who are not only defying the neo-liberal orthodoxy, but actually prospering by not practicing it.
Countries practicing social democratic economic and public policies, and rejecting the neo-liberal mantra of privatization, tax cuts, and de-regulation, are among the most competitive economies in the world. The 2005-06 World Competitiveness Report, compiled by the World Economic Forum, ranks Finland as the most competitive economy in the world. Sweden ranks third, Denmark fourth. Indeed, of the top ten most competitive nations, six are running under varying degrees of social democratic economic policy.
The Nordic social democracies, with their higher tax rates, extensive social safety nets, and strong labour laws, should be economic basket cases according to the Atlantica lobby. Yet these economies are among the most prosperous in the world. The chief economist and director of the Global Competitiveness Network, Augusto Lopez-Carlos, stated in an interview accompanying the report that there is no evidence that high tax rates and strong social programs hinder economic growth. Indeed, these things enhance economic prosperity. According to Lopez-Carlos, when tax revenues are directed towards education, effective social safety nets, and creating highly skilled and motivated workforce, economic competitiveness is boosted, not undermined. This completely contradicts the worldview of the Atlantica lobby.
What is also revealing about the report is the ranking of emerging Eastern European economies. Since the collapse of Communism, many former Communist states (Russia, Ukraine, Romania, Slovakia, Serbia, and the Baltic States) have adopted neo-liberal economic programs, most notably flat tax rates. These states, like Atlantic Canada, constituted an economically underdeveloped region on the periphery of a much larger, more developed economy (the Northeastern U.S. and Central Canada in the case of Atlantic Canada, Western Europe in the case of Eastern Europe). The formerly Communist Eastern European states adopted many policies that would warm the hearts of Atlantica proponents. The result? Estonia was the highest ranking member of this collection of East European states, and it ranked only 20. No other flat tax Eastern European economy made the top 40.
The myths propagated by Atlantica proponents concerning both the current state of the Atlantic Canadian economy and the success of neo-liberal economics are based not on reality or evidence, but at best on a blind devotion to a bankrupt faith.
There are numerous holes in their assertions and sufficient evidence to the contrary. Yes, Atlantic Canada is plagued by persistent poverty and economic hardship. The model to follow in attempting to ensure the future prosperity of the region however is not the neo-liberal, free market model advocated by Atlantica. Rather, a more successful and pragmatic model exists in the form of the social democracies of Europe.
The Nordic countires in particular demonstrate that Atlantic Canadians do not need to choose between social programs and economic competitiveness, or between high wages and productivity. These things can not only exist with eachother, but indeed compliment eachother. The alternative to the neo-liberal program of Atlantica is the social democratic example of the Nordic European nations. This model is neither abstract or utopian. It is a living and breathing pragmatic example of what is the best path for Atlantic Canadians to follow. |
