Apr 27, 2020

A progressive macroeconomic response to the coronavirus crisis in British Columbia

Edna Winti / Flickr

While much of the world remains under strict lockdown and we have yet to determine the full extent of the already-unprecedented economic crisis caused by the global coronavirus pandemic, it is not too early to start thinking about the way out of the crisis.

So many people have seen their incomes collapse or their jobs disappear. Others are anxiously wondering if their job will survive the next year, month or even the next week. Everyone is worried about the healthcare system and whether the services they need will be there when they need them. When the public health conditions are right, we will desperately need a “people’s recovery” from this crisis—reconstruction that protects the interest of the majority over those of the few.

A progressive exit is one that, at minimum, protects livelihoods, public services, jobs, health and housing.

Every jurisdiction will need to have its exit plan and there will have to be pressure in every jurisdiction to make it a progressive one. A progressive exit is one that, at minimum, protects livelihoods, public services, jobs, health and housing. It is one that looks after the most vulnerable, fixes the holes in the social safety net that the pandemic exposed, and ensures that the broad poor and working majority does not pay the costs of the crisis. It is one that increases democratic participation in the economy and does not introduce draconian surveillance in everyday life. In short, the reconstruction to come needs to be one where we rethink what the economy is for—what is of use and what is not.

A people’s recovery takes the positive reforms grudgingly adopted in the depths of crisis, entreches and extends them, while taking the opportunity to rebuild a new economy that works better for the majority of us instead of seeking a return to the old economy that largely served the interests of a minority of rich individuals and corporations. Here’s a few ideas for what this could look like in British Columbia. This list is not meant to be exhaustive; in fact, it should be seen as more of a bare minimum.

The big picture

With that in mind, let’s start with some overall principles for the eventual economic recovery, both to prevent a pandemic-driven economic slowdown from turning into a depression and to rebuild a more resilient and inclusive economy.

  • Support economic activity (for economists, this means effective demand across the economy) to prevent and act against negative feedback loops, particularly between loss of income, lower expected income, lower demand and deeper crisis.
  • Treat the government as the first and best backstop to the collapse in demand and the best actor to support the recovery, remembering that socializing the losses during the crisis needs to be complemented by socializing the gains coming out of it.
  • Protect the incomes and access to basic services of all British Columbians, including expanding what counts as a basic service to include the necessities of life.
  • Use public investment to restart the economy, to rebuild the public sector’s capacity to provide universal, high-quality services that people need, to respond to the big challenges of our time, and to support confidence in the private sector. In particular, this is a big opportunity for a Green New Deal investment program and an accelerated, public-led just transition to a green economy.
  • Build recovery plans at the local level in partnership with First Nations, ensuring that these plans continue the commitment to implement the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP).
  • Empower workers and communities to take economic decision-making into their own hands, in part through more public, co-operative and community ownership, in part through expanding on and institutionalizing the networks of mutual aid that have sprung up over the course of this crisis. 
  • Remember that public healthcare is a key service, and should be expanded to more comprehensively cover people’s health needs, including for seniors’ home and community care, pharmacare, mental health care and dental care.
  • Use this as an opportunity to re-consider the government’s direct role in the economy through industrial policy and re-industrialization in a more fragmented world, in particular domestic manufacturing and supply chains for key medical supplies and food.
  • Redistribute wealth and income downwards to ensure that inequality does not drive a weaker exit from the crisis by further suppressing household spending at the local level.
  • Engage workers across industries and the public sector in coordinating every aspect of the recovery effort.

Supporting incomes through the crisis is just the first step

While the crisis is ongoing, the general principle should be to guarantee incomes in the immediate term by ensuring that people keep their wages and their jobs even if they have to stay home, and providing a minimum income to anyone unemployed or out of the labour force. Here are a few specific ideas:

  • Lobby for the addition of strong conditions to the wage subsidy program, including minimal layoffs, restrictions on executive compensation and bonuses, a freeze on dividends and stock buybacks, and crucially, the government taking equity stakes in corporations that draw on the subsidy. If businesses get public support in bad times, the public should share in the benefits and have a say in what happens in the good times.
  • Lobby the federal government to close any remaining cracks in EI, CERB benefits and wage subsidy programs so that no Canadian is denied support and to maintain these emergency supports as long as any shut-downs and associated decrease in economic activity remain in place.
  • Make permanent the BC government’s recent $300 increase to welfare and disability rates and have a concrete plan to further increase rates so that no one lives below the poverty line.

A worker-led recovery means transforming work

The overarching goal of any just recovery that starts from the needs of workers should be to transform work itself. Workers need jobs that are more secure and less precarious, better paid, with better access to unions, and with more generous benefits. This crisis has shown that workers with some of the worst working conditions are the most essential for a functioning society. It is time to fundamentally change the rules so that they and other workers receive more than platitudes in a crisis.

  • Regularize migrant agricultural labour as a priority, including a quick automatic path to permanent residency, eliminate all other exceptions under the Employment Standards Act and bring all gig workers and other dubiously self-employed workers under Employment Standards Act rules. All workers need to have basic workplace rights and protections.
  • Institute at least ten paid sick days for all workers.
  • Accelerate the increase in the minimum wage to $15.20 from 2021 to 2020 and implement a plan for future increases that move the minimum wage to 60% of the median wage.
  • Make unionization easier by bringing back card check—automatically recognizing a union if over half of workers sign a union card—decreasing the capacity of employers to influence union elections and looking at models of sectoral bargaining to give workers in dispersed service industries a fair chance at forming unions.
  • Double funding for WorkSafeBC, increasing the number of health and safety inspections.
  • Institute work-sharing and shorter work time provisions for crisis situations as a permanent feature to protect employment relationships in the future (similar to the German Kurzarbeit model).
  • Develop plans to lower the full-time work week below 40 hours to share work more fairly.

Now is the time for housing for all

The coronavirus shut-downs have shown just how precarious housing is for many of us. Many Canadians are unable to make rent or mortgage payments, in part or in full—the proximate cause may be the current economic crisis, but the real cause is the runaway unaffordability of housing built up over decades. This pandemic has shown that we need to guarantee housing as a human right.

  • Freeze rent increases for several years and extend the ban on evictions for at least one year—both key for renters reeling from falling and/or uncertain incomes.
  • Build public housing on an unprecedented mass scale, first to house vulnerable populations and those pushed into housing insecurity by the current crisis and, second, to create affordable housing for the working majority—a public option that includes public housing, co-ops and land trusts as an alternative to out-of-control rental and ownership markets. This will need to include a rapid, emergency build-out of modular housing for every person who is homeless in British Columbia and will also stabilize a construction industry hit by a stalled real estate market.
  • Rather than provide inadequate subsidies for renters, take equity stakes equal to foregone rental payments in the properties of commercial landlords unable to weather the crisis out of retained earnings or credit. With further public capital, this would transition part of the commercial rental stock to public or co-operative ownership over the long run. Rather than maintaining existing relationships between landlords and tenants, now is the time to start to transform them.

Hire, don’t fire, public workers

To put it bluntly, no public sector worker or non-profit worker providing publicly-funded community services should lose their job or income now or during the recovery. The current pandemic has already highlighted the essential role of a strong public sector to support people and businesses. Direct public sector employment is an automatic stabilizer of demand, making this crisis and future crises easier to weather.

  • Target a percentage increase in public employment as a share of total provincial employment for the next five years, focusing in particular on new healthcare workers.
  • Make permanent the insourcing of long-term care staff under standardized terms and allow for automatic union recognition under a new provincial master agreement for the sector following membership votes.
  • In-source all outsourced workers in the healthcare sector (cleaning, food, laundry, etc) as well as across all public services.
  • Cover funding shortages at municipalities, school districts and other sub-provincial public sector bodies so that they are not forced to lay off public workers as a result of this crisis.

We need to invest like never before

Here the general principle is that the government has the long-term time horizon and willingness to take risks in the face of genuine uncertainty. It is the agent to support economic recovery and economic transformation towards a more just, more resilient economy.

  • Increase investment in public healthcare on the principles of a resilient system that can meet increased pressures following COVID-19, and will be ready to face emerging crises in the future.
    • Increase public hospital capacity in order to work down elective surgery backlogs and maintain this capacity to reduce wait times over the long term.
    • Make significant investments in seniors’ home and community care which will take pressure off hospitals and reduce wait times for everyone.
    • Accelerate investments in non-profit primary care services, such as Community Health Centres , that focus on the social determinants of health and provide continuity of care and virtual care options.
    • Invest in localized supply of key medical equipment, taking suppliers fully public or taking public ownership stakes.
    • Enact a provincial pharmacare program if the federal government is unwilling to do it and invest in public mental health care.
    • Create new spaces for training public healthcare workers, including nurses, technicians, care aides and more, to staff the expansion of the public healthcare system.
  • Increase investment in basic physical infrastructure that has been neglected over decades as a means to restart economic activity, support economic demand in all communities across the province and support the delivery of key services that promote social inclusion.
    • Invest in public child care spaces, schools and educational facilities to support learning at all ages in all communities. We need a public child care system more than ever.
    • Invest in municipal infrastructure (sanitation, water, recycling, etc) as a way of ensuring investment goes to every corner of the province.
    • Increase investment in First Nations communities to close gaps in all forms of infrastructure, whether health, education, municipal services or other.
    • Expedite investments in digital infrastructure and internet connectivity in rural and northern areas, with the aim of creating a provincial public internet provider run as a universal public utility.
  • Use this as an opportunity to start a mass transition to a green economy, to invest in a made-in-BC Green New Deal, using a public financing authority supported by the provincial government (and implicitly federal government/Bank of Canada).
    • Transform transport away from cars and towards electrified mass transit with major investments in transit capacity and service levels across the board.
    • Renationalize and rebuild the passenger rail network.
    • Launch a program of green housing retrofits.
    • Invest in R&D subsidies for green businesses, in particular in carbon-intensive industrial processes and agriculture, with public equity stakes in return.
    • Enact a managed wind-down of the fossil fuel industry in the province and a just transition for communities that rely on it, sunsetting production and retraining the workforce.
  • Support workers, communities and economic recovery in the private sector by developing new, affordable adult education and re-skilling opportunities and extending Community Benefit Agreements that not only build skills and capacities, but also stabilize incomes.

More federal transfers, less deficit and debt worries

Economists from across the ideological spectrum are saying that a crisis of this magnitude is not the time to worry about public sector debt. The public sector is the sole actor able to restart the economy out of this crisis and that means taking on debt. That said, the federal government is the ultimate fiscal and monetary backstop in Canada and so it must play a big role in reconstruction even within a decentralized federated structure. While government programs may be decentralized, this is the time for resources to be more centralized. The British Columbia government has a significant capacity to raise its own tax revenues in the future, but it should also have a guarantee from the federal government today to do whatever it takes.

  • Call for increased fiscal transfers from the federal government for at least the next decade to aid in reconstruction and support demand in the exit from this massive crisis.
    • The federal government is a relatively unconstrained borrower on international markets relative to the provinces, and the Bank of Canada has the capacity to monetize debt (something seen as increasingly necessary coming out of this crisis, see for example this Financial Times editorial).
    • Lobby to tie these fiscal transfers to floors for social services, environmental standards and coordinated public health responses across provinces.
  • Ensure that there is an explicit federal government guarantee on provincial debt (for example, through the current Bank of Canada facility buying provincial debt), sustaining low rates and a market for BC debt.
  • Call for increased provincial bond-buying by the Bank of Canada across all maturities even after the acute phase of this crisis, maintaining low borrowing costs.
  • Don’t worry about the debt! The way to sustainably decrease the debt-to-GDP ratio after a crisis is to increase nominal GDP via growth and moderate inflation, as after World War II. This means a greater role for the public sector. The austerity non-alternative is decreasing debt by cutting the public sector and cutting down the recovery along with it.

Planning for a different future

The suspension of much economic activity in response to the threat of coronavirus presents an enormous challenge, but it also presents an opportunity to rethink how the economy functions, not just at marco level but at work and in our communities. We have an opportunity to rethink who makes decisions and how—to bring democracy into the economic sphere—as well as to rethink whether we want visionless markets or more conscious, collective decision-making to guide economic activity.

  • Support workers at crisis-hit and failing businesses, large or small, to take over these enterprises as worker co-operatives, through technical help, regulation, targeted lending and financial restructuring.
  • Create a publicly-financed “Green Reconstruction Authority” with the purpose of converting carbon-intensive businesses towards sustainable needs, with a preference for community, public or worker co-operative ownership. Provincial plans for retooling and retraining should guide the work of this new public agency.
  • Put worker and community representatives on the boards of companies where the government has acquired equity stakes via crisis bailouts.

Democracy is the answer

This crisis has shown our vulnerabilities and our interdependence on one another. We need to run the economy with this mind. The casual irrationalities that we sweep under the surface in normal times—that we produce what is profitable, which is not always the same thing as what is needed—have shown themselves with full, sometimes deadly, force. We have idle factories and we lack personal protective equipment for workers. We have delivery apps aimed at high-income professionals and low-income seniors who cannot leave their homes. Service workers now rightly deemed essential are overworked and underpaid, while shareholders have seen record payouts.

This crisis has not only reminded us how fragile human life is, but shown us how fragile our economy can be.

In the long term, this is what we have to resolve. We need more coordination of economic activity: more planning and more participation. More democracy in workplaces and in economic policy. Rather than individual competition that undermines sociality, we need to think together about what we need and how we go about producing and distributing things. This crisis has not only reminded us how fragile human life is, but shown us how fragile our economy can be. We can rebuild it on a different, more democratic, more human, more useful basis.

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