BY MICHEL DUGRÉ
MONTREAL - Between March 1 and the end of August the Canadian
dollar plunged nearly 11 percent against the U.S. currency to a
record low of US$0.63. This is part of a broader economic crisis
in Canada, one of the weaker imperialist powers. Workers and
working farmers will particularly feel the squeeze in the coming
period.
Recent gyrations of the stock market are an indication of the underlying financial turmoil. Canadian stock markets were among the hardest hit on August 27, when all major stock markets around the world plunged. The Toronto stock exchange dropped by 6 percent, its fourth-largest one-day drop ever.
Over the last year, Canada has had the worst stock market performance of all countries of the so-called Group of Seven industrialized nations. While the bourses in France, Germany, Italy, United Kingdom, and United States all rose during this period, Japan's fell by 13 percent and Canada's dropped by 22 percent.
As stock prices were falling August 27, the Bank of Canada announced a raise in interest rates, hoping to stabilize the currency.
Since then the Canadian dollar has gone up. But none of the previous attempts to slow the retreat of the Canadian dollar by increasing interest rates has worked for more than a few months. The last attempt was earlier this year. Since then, the Canadian dollar has repeatedly hit record lows.
Impact of economic catastrophe in Asia
One factor in Ottawa's economic problems is that the Canadian
economy is particularly vulnerable to the financial disaster
sweeping much of Asia and the economic turmoil in Russia. As an
exporter of natural resources, the Canadian bourgeoisie is very
sensitive to falling commodity prices, due to the lower demand in
Asia and greater export of the same resources from Russia. The
downward pressure on commodity prices is accelerated by the
attempts of capitalists in other countries that export natural
resources, including Australia and Canada, to take advantage of
their lowering currencies to increase sales.
Another factor that plays against Canadian capitalists is that more than 80 percent of their foreign trade is with the United States, by far the largest economic power in the world.
While Canada has done relatively well over the last year in increasing production and exports, the productivity of Canadian industries still lies far behind those in the United States. The U.S. bosses have made more progress in forcing speedup and lowering real wages. As a result, over the last 20 years productivity in manufacturing has risen twice as fast in the United States as in Canada. Canadian capitalists have been able to maintain their sales in the United States only thanks to a lower Canadian dollar.
Fundamentally, the crisis of Canadian capitalists is no different than that of their rivals around the world, as they all face the threat of a deflationary spiral. Prices of basic commodities - oil, cotton, copper, gold, and so on - have dropped by 20 percent over the last year. In fact, this fall began two years ago but accelerated with the opening of the crisis in Asia in July 1997.
In their attempts to reassure investors, Canadian prime minister Jean Chrétien and Finance Minister Paul Martin point to the fact that unemployment in Canada is still going down, that productivity has increased faster in Canada than in the United States over the last year, and that the government deficit has been almost eliminated. All this is true.
Workers face joblessness, high prices
But this expansion hasn't come close to reversing the long-
term decline in the capitalists' rate of profit. This
trend - which is true throughout the capitalist world - is
fueling greater competition among rival capitalists, both within
Canada and internationally, and a greater drive to cut workers'
wages and speed up the pace of work. With each drop of the
Canadian dollar and the corresponding rise of the price of
imported food and other products, workers' real purchasing power
goes down. Some 38 percent of the consumer goods sold in Canada
are imported.
Unemployment levels in Canada, even after six years without an official recession, remain at 8 to 9 percent. Workers in Canada, in particular those who are young, are getting poorer. Average real incomes in Canada have fallen by 5 percent in the first half of the 1990s. Average real incomes for people aged 15-24 fell 38 percent between 1980 and 1995.
Canadian capitalists are getting more concerned. Appeals to the Bank of Canada and the Canadian government to defend the Canadian dollar are getting more strident. "Stand up for the dollar," screamed an August 6 editorial of the Montreal daily Gazette.
But Canada's capitalist rulers don't agree on what to do. Most objected to the rise of interest rates by the Bank of Canada, fearing this might ignite a recession.
These contradictory opinions reflect the fact that there is little Canadian capitalists can do to reverse this trend.
The main response by Canada's rulers to their sagging economy has been a nationalist campaign, calling on workers to make sacrifices in order to make the economy more competitive.
Earlier this year Maple Leaf Foods gave working people an example of what this means. Complaining that wages and benefits for workers in its plants were much higher than those of workers doing the same jobs in the United States, Maple Leaf succeeded in defeating a strike and imposing drastic wage cuts.
By calling on workers to support "their" company against its foreign competitor, Canadian capitalists want to force workers to pay for the crisis of the capitalist system by accepting a lower standard of living.
Michel Dugré is member of the Union of Needletrades, Industrial and Textile Employees and the Communist League candidate for mayor of Montreal.