January 1, 2009

The frenzy of the holiday period now being behind us, the economic crisis and, especially, the measures put forward by the provincial and federal governments to contain it, will certainly be the topics of crucial debates in the follow-up.

For the FIQ, there is no doubt that now is the time more than ever to abandon the out of date beliefs that inspired the economic policies of the last 30 years and which have ended in resounding defeat. While during this period economic growth was generally maintained, the result is that the majority of the population are now working more and more for less money. The fruits of the economic growth have been monopolized by a tiny minority who enjoyed trying to make money on the stock exchange, with what are now well-known results. It is with credit that household consumption has been maintained instead of a better distribution of income by, among others, an adequate increase in salaries.

The FIQ has, for many years, denounced this situation which sooner or later will end in catastrophe. For the Federation, the provincial and federal governments must install a new social pact based on a more united and equitable society. In the short term, it is imperative to support household consumption in difficulty and to massively invest in training of the workforce. However, such policies will be worthless if not accompanied by a change in the fiscal plan in favour of a better distribution of income, as well as by a better sharing of economic growth between industry and workers.

In this manner, the FIQ deeply regrets the measures considered by the Harper government to face this crisis. John Flaherty, the Minister of Finance, has repeatedly said that reducing income tax would be the cornerstone of the Harper government’s strategy in order to contain the economic crisis. Mr. Flaherty’s argument appeared in La Presse on January 7th “reduction of income tax is a means to encourage investment, to leave more money in Canadians’ pockets for them to spend, to drive the economy”.

What must be retained from this statement is that piqued with the crisis and its foundations, the conservative government is maintaining its faith in neoliberal orthodoxy. For this government, it is by cutting the State, reducing to a minimum its interventions on the economy and abolishing as many rules as possible that govern the activities of enterprises that the economy is most likely to grow.

Yet, most of the specialists on this subject state that, on the contrary, these same measures have been the direct cause of the current crisis. A recent study confirmed the ineffectiveness of reducing income tax to stimulate the economy (1). Comparing two periods of reduced income tax, that of President Bush-father and that of president Bush-son, to a period of high income tax, that of President Clinton, the researchers showed that growth and investment was much stronger during the period of high income tax than during the two periods of reduction. As for the debt, it significantly increased during the Bush’s administration, while it leaned in the opposite direction during the Clinton era.

In short, the conservatives’ economic plan, if confirmed, is trying to fight a fire by splashing gas in the name of an ideology abandoned by the majority of western democracies. The FIQ intends to closely watch the next budget of the federal government as well as that of the Quebec government and will energetically defend the setting up of policies that stand up to the current crisis.

In solidarity,