The Political Economy of The Sharing Economy

Introduction

Today, getting a lift to the store is as easy as loading an application on a digital device and summoning a roving car to one’s door. It is fast, cheap and, many argue, less onerous than ownership. The so-called sharing economy is on the radar of interests representing business, various governments in Canada and, to a seemingly lesser extent, academics and critics. I contend that the largely unregulated sharing economy in Ontario is already exacerbating unstable forms of employment in the province. I further contend that even with government regulation, which arguably serves to normalize the sector, the sharing economy shifts economic risk from capital, which can more easily absorb it as a cost of doing business, to individuals who cannot.

To explore these contentions, the first section of this paper will theoretically examine the role of the state vis-à-vis capital and the role technology plays in determining how social relations manifest into power, through a Marxian lens. The second section will attempt to locate the sharing economy in the appropriate political and economic context: that is, that the sharing economy appears during the current neoliberal political policy-making paradigm which is contemporaneous with a post-Fordist economy that features increasingly prevalent non-standard employment relationships and precarious work. The third section will discuss the size and impact of the sharing economy, closely examining general trends in North America with a special focus on Ontario — specifically, that province’s capital city, Toronto. In the fourth section, I will assess several arguments in favour of the sharing economy and how that sector is being positioned as healthy for the economy, the environment and the progressive ethos generally. The fifth section will look at views in opposition to the sharing economy, which predominantly focus on the sector’s record on safety, its tendency to shift risk to the individual from the firm and its role in a more general intensification of a race to the bottom characterized by downward pressure on wages and precarity. The sixth section will investigate tactics by subnational and municipal governments to deal with the sharing economy, be it regulation and/or prohibition. Finally, in the seventh section, I will analyze these socio-political and economic trends and the arguments for and against the sharing economy.

I. Theoretical Framework

The role of governing authority vis-à-vis economic activity is a major issue taken up in the study of political economy. This investigation concentrates on the institutions through which modern governance is exercised such as municipal councils, sub-national authorities including Canadian provinces/territories and states of the United States, and also national governments. Various political economy analyses locate the governing authority differently in relation to the economy and establish ideal roles and/or limits for that authority. These roles can range from one extreme of government merely ensuring a fertile environment for unchecked economic activity to flourish all the way to direct ownership and/or control of the entire economic apparatus, with many variations in between.

The Marxian view of the government during a capitalist economy is that it is a by-product of warfare between classes and that it is controlled by the most economically dominant group. In the case of a government operating during a capitalist mode of production, Karl Marx and Friedrich Engels point to those who own the non-human implements by which economic production is realized (the bourgeoisie) as the group sitting atop the socio-economic hierarchy. “The executive of the modern State is but a committee for managing the common affairs of the whole bourgeoisie,” they tell us in a particularly polemical passage.[1] While this notion of class tension helpfully guides any Marxian analysis, whether Marx and Engels intended such an apparently reductionist position regarding state-capital relations to be their legacy is muddied by later writings. In Capital: Volume Three, Bob Jessop notes that Marx writes:

The specific economic form, in which unpaid surplus-labour is pumped out of direct  producers, determines the relationship of rulers and ruled, as it grows directly out of production itself and, in turn, reacts upon it as a determining element. Upon this, however, is founded the entire formation of the economic community which grows up out of the production relations themselves, thereby simultaneously its specific political form. It is always the direct relationship of the owners of the conditions of production to the direct producers — a relation always naturally corresponding to a definite stage in the development of the methods of labour and thereby its social productivity — which reveals the innermost secret, the hidden basis of the entire social structure and with it the    political form of the relation of sovereignty and dependence, in short, the corresponding specific form of the state.[2]

Here, Jessop provides us a warning to read Marx’s words closely and carefully. Marx does not claim that a clear line can be drawn between individual policies enacted by the government and the prevailing economic indicators, he notes. Instead, “Marx argues that the ‘form of political organization’ corresponds to the ‘form of economic organization’.”[3] That is, where the economy is organized to privilege private property, waged labour and profit-driven exchange it will easily mesh with a politics that places importance on “the rule of law, equality before the law and a unified sovereign state.”[4]

It is arguably important to note that it is not only the Marxians who insist that when capital and the state are considered, they must be considered simultaneously. This ideological current has found a home in other heterodox analyses, such as those proposed by some Institutionalists. It is the degree to which the state and capital are enmeshed and/or operating in different silos that is helpful in differentiating among the various heterodox schools.  For example, Jonathan Nitzan and Shimshon Bichler assert that neither capital nor the state can be considered either as antagonistic towards one another or, alternatively, working in harmony. They argue that the limiting concepts between the two structures, the borders that separate capital and the state, have wholly collapsed and birthed a new power. “[W]e argue that capital and state do not stand against or function together with each other. They do not complement or undermine one another. They neither interact nor interplay. And the reason is simple: they are no longer separate. Capital itself has become an emergent form of state: the state of capital.”[5] Regardless, the place of government in relation to business is particularly important in the current socio-political-economic climate (which will be discussed further in the next section); in which government often functions to alleviate regulatory and confiscatory burdens on the flow of capital and the operation of the business sector in general.

The state, however, is not the only structure relevant to an adequate theoretical discussion underpinning an interrogation of the technology-driven sharing economy in late capitalism. The role of technology as an organizing force has long dominated Marxian analyses. In a footnote to Capital: Volume One, Marx remarks on the need for an extensive history of technology as he viewed its forces to be potentially correlated with social organization. “Technology discloses man’s mode of dealing with Nature, the process of production by which he sustains his life, and thereby also lays bare the mode of formation of social relations, and of the mental conceptions that flow from them,” he writes.[6] Some Marxian theorists argue a system of technology within a society develops into an organizational structure. For example, Nikolai Bukharin states:

In speaking of the social technology, we of course meant not a certain tool, or the aggregate of different tools, but the whole system of these tools in society. We must imagine that in a given society, in various places, but in a certain order, there are distributed looms and motors, instruments and apparatus, simple and complicated tools. In some places they are crowded close together (for instance, in the great industrial centers), in other places, other tools are scattered. But at any given moment, if people are connected by a labour relation, if we have a society, all these instruments of production-tools and machines, large and small, simple and complicated, manual or power-driven-are united into a single system.[7]

In turn, Bukharin suggests to us that the division of labour ─ that which separates the worker from the owner ─ flows from the individual’s relationship to the social technology structure. “The modern division of labor is determined by the modern instruments of labour, by the character, description, and combination of machines and tools, i.e., by the technical apparatus of capitalist society,” he notes.[8] Taken to a highly literal conclusion, this division of labour based on a relationship to social technology offers one theory for why individuals find themselves located where they do vis-à-vis the economically dominant class (either workers or those in ownership/control of the means of production). This is, admittedly, a technologically deterministic reading of Bukharin’s writing. The influence of the social technology structure in regards to the sharing economy is particularly relevant given the inherent risk associated to economic activity ─ a subject which will be investigated further in Section V.

II. Context

Following a period of economic growth, driven by mass production, and increased government spending on social programs after the Second World War, capitalism faced one of its first major crises since the Great Depression of the 1930s. Stagnant economic growth combined with high inflation (dubbed “stagflation”) in the 1970s confounded economic analysts.[9] The crisis gave increased credibility in many eyes to emerging proponents of market-based solutions who were clearly inspired by classical political economy theories that emphasized economic liberalism. Theorists affiliated with these approaches can be described as neoclassical and the associated socio-political-economic paradigm as neoliberal. “Economic neoliberals attributed the crises to the distortion of the market mechanism brought about by powerful trade union monopolists and unsustainable and irresponsible demands on the economic system by governments, transmitted through the competitive system in representative democracy,” Geoffrey Ingham tells us.[10] The stagnated economy could be corrected by a reduction in government expenditures, which would in turn lead to increased savings and revived encouragement “for both capitalists and workers to work harder and longer without having their rewards confiscated by profligate governments,” the neoliberal economists argued.[11] This neoliberal approach, which arguably became structural by the early 1980s, and can be additionally characterized by the privatization of state-owned economic assets, liberalized trade regimes and the deregulation of industry and labour markets, has been a dominant socio-economic paradigm in advanced capitalist nations such as Canada and the United States for more than 30 years. “Neoliberalism should be understood as a particular form of class rule and state power that intensifies competitive imperatives for both firms and workers, increases dependence on the market in daily life and reinforces the dominant hierarchies of the world market with the U.S. at its apex,” Greg Albo, Sam Gindin and Leo Panitch tell us.[12]

The consequences of the neoliberal era, which continues today in Canada and the United States, are significant. Economically, the neoliberal/neoclassical era is correlated with a preference by employers for non-standard employment relationships marked by part-time, contingent and other types of self-employment,[13] as well as “precariousness in job tenure,”[14] according to Mark P. Thomas. Meanwhile, Rosemary Hennessy tells us that “less government’, ‘privatization’ and ‘free trade’ have meant tax breaks and more profits for businesses at the expense of those most in need,” and draws specific attention to  “[c]uts in food, health and education programs that most affect the poor, the disabled, and the elderly”[15]

Rosemary Hennessy

Rosemary Hennessy

as characteristically neoliberal. Concurrently, global free trade accords, such as the North American Free Trade Agreement, have amplified Western capital’s search for regions in which it can lower labour costs produce goods and “massive layoffs have occurred at almost every major corporation since the early nineties.”[16] One of the arguably higher-profile characteristics correlated with the recent neoliberal age is widening income inequality. In Canada, almost half (46.9 percent) of the total household wealth in the country was held by the top 20 percent of income earners in 2012, according to Statistics Canada. That concentration has increased from 45 percent in 1999. On the other hand, the 20 percent of Canadians earning the least held only 3.9 percent of the country’s total wealth in 2012 ─ even less than the 5 percent they held in 1999.[17]

III. The Sharing Economy

To assess the so-called sharing economy, it is helpful to begin with a definition. This analysis proceeds from the idea that the sharing economy can be defined as the provision of one individual’s/group’s private property to another individual/group (also known as Peer-to-Peer) who wish access to that property but do not wish to own it. This analysis assumes this provision is monetized, given that the sharing economy is a sub-section of the larger capitalist economy. Sharing economy sectors often included in various analyses typically include: transportation (such as ride-sharing), lodging (such as home-sharing), retail, labour and services (such as running errands) and finance. Ride-sharing, home-sharing and errand-running will be the focus of this assessment because those services often involve privately-owned property and labour in Ontario. Often, sharing economy transactions are facilitated online through smart device apps or websites, which in many cases are operated by multinational companies.

Knowing the exact size of the sharing economy is less a science than an art at this stage. A 2015 report PricewaterhouseCoopers estimates that global revenues from the sharing economy are currently approximately $15 billion.[18] That firm expects global revenues from the sharing economy will hover around $335 billion by 2025[19] ─ an increase of about 2133 percent. In Ontario, the size of the sharing economy is even less defined. A 2015 report by the Ontario Chamber of Commerce describes the sharing economy as being “in its nascent stages in Canada and Ontario,” and there being “a lack of concrete data on the economic impact of this new and burgeoning sector.”[20] While the 2015 Ontario budget indicates its intention to “support” the sharing economy and acknowledges the impact businesses involved in that section are having on labour markets, it provides no assessment of the size of the sector, either.[21] Despite this ambiguity, the Ontario Chamber of Commerce estimates that the average Ontarian who shares a home through Airbnb, a multinational company in the lodging subsector of the sharing economy, can earn an average of $450 per month.[22] That report also estimates that more than 400,000 people in Toronto have engaged in ride-sharing through Uber, a multinational company involved in the transportation economic subsector. Twenty percent of residents in the Greater Toronto Area, the urban agglomeration surrounding the City of Toronto, have used Uber’s services, the chamber’s report states.[23]

IV: Pros

Proponents of the sharing economy often coalesce around an ethos that privileges access over ownership, Juliet B. Schor, et al tell us.[24] Drilling down further, some advocates view the sharing economy as a more sustainable model of use than ownership, according to PricewaterhouseCoopers. More than 75 percent of people surveyed by the company during one 2014 study said they believe the sharing economy to be “better for the environment.”[25] Nearly 80 percent of respondents in that same survey said they believe the sharing economy is “good for society overall.”[26] A 2015 survey by polling firm Leger found Ontarians are largely hopeful that the sharing economy will be a boon for economic development in the province. Eighty-five percent of people who live in the Greater Toronto Area that were part of the Leger survey believe the growth of sharing economy companies to be positive.[27] “Sharing companies bring significant economic, environmental, and community benefits, including better use of existing resources,” the Ontario Chamber of Commerce tells us.[28]

V. Cons

Given that this is an era that bears witness to an increasing shift toward non-standard employment relationships and precarious employment, detractors of the sharing economy have pointed to that sector’s potential to exacerbate an already perilous situation for labour markets. Some point to companies offering errand-running as an example of how low-waged work on an unreliable schedule ─ especially when those so-called errands are done for companies ─ is creeping in under the banner of the sharing economy. Those companies are, in essence, functioning as temp agencies offering services that “{slide} rapidly from [neighbourliness] to the most precarious of casual labour.”[29] Any intensification of precarity is arguably a cause for alarm, given its disproportionate prevalence among “women, racialized groups, immigrants and people with low incomes.”[30]

A second trend to which detractors regularly point is the shifting of economic risk from the firm to the individual involved in sharing economy activities. This trend is particularly relevant in the transportation and lodging subsectors. For example, Uber, which provides ride-sharing services via a smart device app, offers a low-cost service (UberX) in which drivers of privately-owned vehicles can connect with individuals willing to pay for a lift somewhere. In return, Uber takes a cut of the cost of the ride, a cost which can wildly fluctuate in an unregulated market. Uber’s drivers are expected to handle overhead costs such as the vehicle itself, personal driving insurance and fuel[31]. By contrast, traditional taxi and limousine companies pay licencing fees to local authorities to operate within the borders of a municipality and drivers are expected to be appropriately insured for the potentially expensive costs associated with professional transportation services. The shift toward the personal assumption of risk linked with the sharing economy exploded into plain view in April 2015 when a couple in Calgary, Alberta listed their home for rent on Airbnb and returned to find tens of thousands of dollars in damage and “biohazardous material” left in the house by the renters.[32] This risk-shift is a part of a larger trend in late neoliberal capitalism, Jacob S. Hacker tells us. “The Great Risk Shift is the story of how a myriad of risks that were once managed and pooled by government and private corporations have been shifted onto workers and their families ─ and how this has created both real hardship for millions and growing anxiety for millions more.”[33]

VI: Government Responses

Response to the disruption of traditional economic and labour models caused by the sharing economy has widely varied on a jurisdiction-by-jurisdiction basis. Some communities, such as Eugene, Oregon[34] and Calgary[35] have ordered Uber to cease operations under the penalty of fines until municipal bylaws can be updated. In Calgary, Uber allegedly told drivers that their personal driving insurance is primarily what protects them but they are also covered by the company’s “contingent” coverage up to $5 million for injury and damage.[36] The city’s position is that “a driver’s personal insurance is nullified when riders in private, unlicensed vehicles are injured.”[37] Elsewhere, in March 2015, a German court banned Uber from operating its ride-sharing service anywhere in that country.[38]

The City of Toronto is also grappling with how to deal with the sharing economy. Attempts to halt Uber, for example, in the city have been unsuccessful as of this writing. In the summer of 2015, an Ontario court found that despite Toronto’s protestations to the contrary, Uber does not function as a taxi company and therefore is not required to follow the rules set out for those companies.[39] The city’s mayor has also rejected pursuing an injunction against the company similar to that in place in Calgary,[40] against the wishes of the city’s taxi drivers.[41] Toronto’s ultimate aim is to regulate ride-sharing services.[42] Provincially, the government’s 2015 budget indicates a willingness to regulate ─ not crush ─ the sharing economy. “To help vibrant, emerging sectors thrive, the government commits to working with firms and industries to help them comply with existing obligations and to consulting on an ongoing basis to ensure those obligations reflect a changing economy,” the budget’s text states. In October 2015, a private member’s bill designed to, among other things, regulate ride-sharing companies, ride-sharing drivers and those who wish to share their homes, was tabled in the Ontario Legislature.[43]

VII. Analysis

The sharing economy is unquestionably a disruptive force. It is disrupting labour markets and economic models. It is however, doing little to alter the current social relations that flow from a late capitalist economy. This analysis does not assume a social/cultural determinism based on technology. There are, undoubtedly, other forces that influence ─ perhaps more greatly ─ general social relations in human society. That said, it is arguably fair that an individual’s proximity to control over social technology does at least play some role in the status they find themselves in as late capitalism continues to metamorphose. What is upending traditional analyses is that the system of social technology has changed in that some machines and tools can be owned by workers, such as an automobile or home, and those workers can still find themselves at the mercy of more powerful capitalistic forces, such as those companies involved in the development of sharing economy facilitation apps. In other words, the workers find themselves owning means of production ─ but not those means from which they escape their traditional underclass role.

This means that action by government is as crucial as ever. Governments at both the municipal level in Toronto and provincial level in Ontario appear to be set to regulate the sharing economy. While this action is not out of step with several other North American jurisdictions and developed economies throughout the world, it is a conscious, interventionist choice. Regulation of the sharing economy arguably normalizes an economic sector that does nothing to ameliorate current late capitalist trends toward increased non-standard employment relationships and precarious employment. That is concerning. If precarious employment gains an even stronger foothold, and intensifies pressure on labour markets already highly stratified along racial and gender lines, that is an unjust consequence. Trends in that direction should be stopped.

The arguments for the expansion of the sharing economy under its current incarnation are hollow. Lower consumption and a more environmentally sustainable economy are both admirable goals but does making it easier for drivers to deploy their underused fossil-fuel burning automobile for a quick cash infusion really square with sound environmental policy? It is hard to argue that such an approach is, at its core, truly environmentally friendly. As for the alleged economic benefits of the sharing economy, those seemingly cannot even be measured in Ontario at this time. Indeed, there is the potential that the sharing economy will create jobs but of what value will those be? Will families be able to subsist, let alone thrive, on the value extracted from underused assets? How much capital will individuals have to outlay and how much risk will they have to assume in order to make a decent living, given that solid employment opportunities are becoming increasingly infrequent? The answer appears to be, a lot.

Arguments against the so-called sharing economy appear more grounded. Errand-running companies should not be permitted to function as low-wage temporary employment firms. There is a significant difference between doing an odd job for someone for a few dollars and running “errands” for companies that can afford to hire employees. Criticism of the shifting of risk from firms to the individual is also valid. Individuals do not have the ability to pool risk the way governments and corporations do. And when they are interacting with mammoth multinational corporations, individuals should not have to take on the risk traditionally assumed by those who can more easily absorb it.

Conclusions

The potential consequences of the status quo in regards to the sharing economy in Ontario are concerning and unsustainable. This economic sector is doing little to nothing to disrupt the trends toward unstable forms of employment in the province. Regulation, which will normalize the sector, may intensify the shifting of economic risk from capital to individuals who cannot easily absorb it. Ultimately, the sharing economy is here and governmental authorities appear to be welcoming it. The long-term effects of the sector on the economy will determine whether or not that choice was correct.


 

[1] Karl Marx and Friedrich Engels, “The Communist Manifesto,” Karl Marx: Selected Writings, ed. Lawrence H. Simon (1848; Indianapolis/Cambridge: Hackett Publishing Company, Inc., 1994): 161.

[2] Bob Jessop, “The state,” The Elgar Companion to Marxist Economics,” eds. Ben Fine and Alfredo Saad-Filho, (Cheltenham, UK; Northampton, MA: Edward Elgar Publishing, 2012), 334.

[3] Ibid.

[4] Ibid.

[5] Jonathan Nitzan and Shimshon Bichler, Capital as Power: A study of order and creorder, (New York: Routledge, 2009), 278.

[6] Karl Marx, Capital: Volume One, A Critique of Political Economy, ed. Friedrich Engels, translated by Samuel Moore and Edward Aveling (1906; Minola, New York: Dover Publications, Inc., 2011), 406.

[7] Nikolai Bukharin, Historical Materialism, (1921; New York: International Publishers, 1925), 135.

[8] Ibid., 141.

[9] Geoffrey Ingham, Capitalism, (Cambridge: Polity Press, 2011), 196.

[10] Ibid., 196-197

[11] Ibid., 197

[12] Greg Albo, Sam Gindin and Leo Panitch, In and Out of Crisis: The Global Financial Meltdown and Left Alternatives, (Oakland: PM Press, 2010), 28.

[13] Mark P. Thomas, Regulating Flexibility: The Political Economy of Employment Standards, (Montreal/Kingston: McGill-Queen’s University Press, 2009), 22.

[14] Ibid., 3.

[15] Rosemary Hennessy, Profit and Pleasure: Sexual Identities in Late Capitalism, (New York: Routledge, 2000), 75.

[16] Ibid.

[17] Statistics Canada, “Share of wealth (or net worth) held by each income quintile, 1999 and 2012, %,” http://www.statcan.gc.ca/daily-quotidien/150603/cg-b001-eng.htm (accessed December 15, 2015).

[18] PricewaterhouseCoopers, “The Sharing Economy,” 2015, http://www.pwc.com/us/en/industry/entertainment-media/publications/consumer-intelligence-series/sharing-economy.html (accessed November 1, 2015), 14.

[19] Ibid.

[20] Andrea Holmes and Liam McGuinty, “Harnessing the Power of the Sharing Economy: Next Steps for Ontario,” Ontario Chamber of Commerce, 2015, http://www.occ.ca/wp-content/uploads/2013/05/Harnessing-the-Power-of-the-Sharing-Economy.pdf (accessed on September 26, 2015), 4.

[21] Province of Ontario, Building Ontario Up: Ontario Budget 2015, http://www.fin.gov.on.ca/en/budget/ontariobudgets/2015/papers_all.pdf (accessed November 1, 2015), 103.

[22] Holmes and McGuinty, “Harnessing the Power of the Sharing Economy: Next Steps for Ontario,” 4.

[23] Ibid.

[24] Juliet B. Schor, et al, “On the sharing economy,” Contexts, 14, no. 1, (Winter 2015): 13.

[25] PricewaterhouseCoopers, “The Sharing Economy,” 22.

[26] Ibid.

[27] Holmes and McGuinty, “Harnessing the Power of the Sharing Economy: Next Steps for Ontario,” 2.

[28] Ibid., 1.

[29] Tom Slee, “Sharing and Caring,” Jacobin, January 24, 2014, https://www.jacobinmag.com/2014/01/sharing-and-caring/ (accessed September 26, 2015).

[30] Luin Goldring and Marie-Pier Joly, “Immigration, Citizenship and Racialization at Work: Unpacking Employment Precarity in Southwestern Ontario,” Just Labour: A Canadian Journal of Work and Society, 22 (Autumn 2014): 97.

[31] Avi Asher-Schapiro, “Against Sharing,” Jacobin, September 19, 2014, https://www.jacobinmag.com/2014/09/against-sharing/ (accessed September 26, 2015).

[32] Danielle Nerman, “Airbnb renters who trashed Calgary home left biohazards,” CBC News, May 1, 2015, http://www.cbc.ca/news/canada/calgary/airbnb-renters-who-trashed-calgary-home-left-biohazards-1.3057288 (accessed December 1, 2015).

[33] Jacob S. Hacker, The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream, (Oxford/New York: Oxford University Press, 2006), 21.

[34] The Associated Press, “Uber ordered to quit business in Eugene or face fines,” The Oregonian, October 30, 2014, http://www.oregonlive.com/pacific-northwest-news/index.ssf/2014/10/uber_ordered_to_quit_business.html (accessed December 1, 2015).

[35] CBC News, “Uber to suspend Calgary operations to comply with temporary injunction,” November 20, 2015, http://www.cbc.ca/news/canada/calgary/uber-court-injunction-calgary-drivers-1.3327734 (accessed December 1, 2015).

[36] Ibid.

[37] Ibid.

[38] The Associated Press, “German court bans Uber’s ride service,” The Register-Guard, March 18, 2015,

http://registerguard.com/rg/news/32885577-76/german-court-bans-ubers-ride-service.html.csp (accessed December 1, 2015).

[39] Jennifer Pagliaro, “John Tory says Uber injunction not on the table,” Toronto Star, December 4, 2015, http://www.thestar.com/news/city_hall/2015/12/04/john-tory-says-uber-injunction-not-on-the-table.html (accessed December 10, 2015).

[40] Ibid.

[41] Shawn Jeffords, “T.O. cabbies want Uber injunction like in Calgary,” Toronto Sun, November 21, 2015, http://www.torontosun.com/2015/11/21/to-cabbies-want-uber-injunction-like-in-calgary (accessed December 1, 2015).

[42] Jennifer Pagliaro and Betsy Powell, “Toronto council votes to regulate Uber,” Toronto Star, September 30, 2015, http://www.thestar.com/news/city_hall/2015/09/30/toronto-council-debates-uber-role-in-taxi-industry.html (accessed September 30, 2015).

[43] Legislative Assembly of Ontario, “Bill 131, 2015: An Act to enact two new Acts and to amend other Acts to regulate transportation network vehicles, to provide freedom for individual residential property owners to share their property for consideration with others and to deal with the expenses of public sector employees and contractors in that connection,” http://www.ontla.on.ca/web/bills/bills_detail.do?locale=en&BillID=3534&detailPage=bills_detail_the_bill (accessed November 21, 2015).

 

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Raise Corporate Taxes To Slay Ontario’s Infrastructure Deficit: An Alternative Policy Proposal

The province of Ontario currently faces a significant public infrastructure deficit which is harming its economic productivity and its quality of life. The government’s own numbers estimate that deficit at “tens of billions of dollars.”[1] Some media reports have pegged the number at times in excess of $100 billion.[2] I propose a new policy paradigm of increased and creative corporate taxation to help fund this infrastructure funding shortfall. To examine this policy recommendation, I will first place the issue in its historical and present-day context. I will then investigate several methods used to finance the curbing of infrastructure deficits. Finally, I will analyze each method and explain my policy recommendation.

Issue Background
This analysis adopts the provincial government’s definition of public infrastructure as that consisting of “highways, bridges, culverts, transit systems, schools, universities, hospitals, drinking water and wastewater systems, parks, and government buildings.”[3] Important implications flow from a lack of investment in crucial public infrastructure; among them are decreased economic productivity and heightened social ills. Firstly, emerging research is increasingly quantifying the toll Ontario’s public infrastructure deficit is taking on productivity. A 2013 briefing report by the Conference Board of Canada specifically connects the two issues: “[T]here is a high degree of interdependence between the quality and quantity of public infrastructure and the performance (productivity) of an economy’s business sector.”[4] Public infrastructure investments by the Ontario government between 2004 and 2014 were projected by the Conference Board’s report to lift “the province’s real productive capacity by 2.1 percent” and add “$1,044 (in constant 2012 dollars) to the average income per resident.”[5] In the Greater Toronto and Hamilton Area, the economic cost of the infrastructure deficit, vis-à-vis traffic congestion is estimated to be $6 billion each year.[6] That cost is currently expected to grow to $15 billion per year by 2031, according to projections by the City of Toronto.[7]

Secondly, increased traffic on overburdened roads has resulted in increased delays for people simply trying to get around the province. This, in turn, has had a cascade effect of further negative consequences for Ontarians, a 2014 Canadian Index of Wellbeing report tells us. The issue of intensified traffic gridlock “increases stress among commuters, reduces time available for other valued activities, and reduces business productivity,” the report notes. “It contributes to higher levels of pollution, especially in urban areas, and diminishes environmental quality, thereby jeopardising public health.”[8] This problem is particularly acute in the Greater Toronto Area, where the average commuting time is about an hour in length.[9]

Government investment into Ontario’s public infrastructure has come in ebbs and flows in the post-Second War era. At present, the province segments infrastructure investment into three eras: The “Era of Visionary Investment” (1955-1974), the “Era of Neglect” (1975-1999) and what it calls the “Era of Renewal” (2000-2009)[10] [see Chart 1].[11] The most recent figures public available show the province states that it has invested nearly $100 billion in public infrastructure since 2003.[12] The government claims this spending is significant stating, “the province has not seen this level of investment since the post-war era, when many of the foundations of our present-day infrastructure, including the 400-series highways and the Toronto subway, were first laid.”[13]

Province of Ontario, Building Together: Jobs & Prosperity for Ontarians (Toronto: Queen’s Printer for Ontario, 2011), iii.

However, the province expects that during the course of the next quarter century, it will “encounter diverse growth challenges”[14] which will ostensibly exacerbate the issues faced by the significant infrastructure deficit if it is not addressed before then.

Funding Schemes
Several mechanisms for funding infrastructure deficits have appeared in jurisdictions in Canada and abroad in recent years. Some have been highly controversial. Other projects have been widely discussed but remain primarily in the proposal stage. This section will investigate three such mechanisms: firstly, the privatization of public assets, secondly, various funding programs from the federal government to the provinces and finally, proposals to tax corporations at higher levels and/or more creatively.

A major plank of the current Liberal Party government of Ontario’s plan to fund infrastructure investment is the privatization of some public assets.[15] Among the planned privatizations is the eventual selling of 60 percent of Hydro One, a transmission and distribution utility.[16] The province expects to eventually “realize $9 billion in proceeds, $4 billion of which will be invested in infrastructure and $5 billion to reduce (provincial) debt”[17] (which is projected to be approximately $300 billion in 2015-2016).[18] The privatization, via the offering of shares of Hydro One on the Toronto Stock Exchange, began on November 5, 2015.[19] The Government of Ontario argues that this privatization scheme is good for the province because it will provide needed money and also introduce “private-sector discipline” which “(will) allow Hydro One to achieve operating efficiencies” while remaining under provincial regulation.[20] However, an October 2015 report by the Financial Accountability Office of Ontario flags the government’s plan as potentially counterproductive. While the initial privatization which began on November 5, 2015, and is estimated to involve 15 percent of the total Hydro One shares to be offered, is expected to “significantly reduce the Province’s deficit in 2015–16,”[21] by the time all 60 percent of Hydro One is privatized (estimated to be 2019-2020), “the Province (will) experience an ongoing negative impact on budget balance from foregone net income and payments-in-lieu of taxes from Hydro One.”[22] In other words, not only will tax revenues from a completely publicly-owned Hydro One not be available for reinvestment into projects such as infrastructure, the loss of that revenue may drag Ontario’s budget down. Whether this short-term gain versus long-term pain trend will be projected for all public assets the government may privatize is unknown at this time.

A second method of funding infrastructure used in Canada involves transfer funding from the federal government to the provinces. Several programs have been implemented since 2000 and a greater emphasis was placed on the role for the federal government in the funding of infrastructure, specifically municipal infrastructure, in the aftermath of a 2001 meeting in Winnipeg by mayors of the five largest cities in Canada. The mayors argued “for a ‘new deal for cities’ to ensure local communities could address pressing public concerns and ‘fundamental infrastructure needs’.”[23] The federal government currently states it plans to directly invest $11 billion in infrastructure funding in Ontario between 2014 and 2024.[24] The money will flow to Ontario, via Ottawa, after it is collected through two federal programs: the New Building Canada Fund and the Gas Tax Fund. Ontario is also projected by the federal government to potentially “benefit” from $4 billion worth of projects “of national significance”, $1.25 billion worth of funds for embarking on public-private partnerships and $10.4 billion in federal tax rebates.[25] Federal funding has the potential to be helpful to Ontario, to a certain degree, but the main drawback to the scheme is that various programs have not adequately offset the provincial infrastructure deficit to this point. In the future, any increases to such funding initiatives will also be contingent on political will on the part of the federal government of the day.

The final funding mechanism investigated here is various proposals to adjust corporate taxation to help offset the cost of the infrastructure deficit. A March 2015 report by the Canadian Centre for Policy Alternatives argues that Ontario has a significant “revenue problem”[26] and that in order to meet it its goals of infrastructure spending and debt reduction, it “must raise taxes.”[27] Among the taxes it advocates hiking is the joint provincial-federal corporate tax, which it states is “one of the lowest corporate income tax rates among developed and developing countries.”[28] Corporate taxes were slashed during the financial crisis which began in 2008-2009 in an attempt to encourage the private sector to spend. However, several reports indicate that attempted inducement was ineffective in achieving its desired goals. The result has been that huge pools of cash horded by Canadian companies are currently lying dormant. This total of this dormant cash, or “Dead Money”, as former Bank of Canada Governor Mark Carney called it[29], is now estimated by the Broadbent Institute to be approaching $700 billion.[30] Despite nearly a decade of an objectively favourable tax climate, companies in Ontario are among the least willing to spend in Canada and invest an average of only $7,000 per worker. That ranks Ontario companies second-lowest behind only Quebec which spends a mere $5,700 per worker.[31] Given all of this, the Canadian Centre for Policy Alternatives argues it is time for corporate rates to rise. “The failure of corporate tax cuts on their own to spur business investment, coupled with our competitive tax rates, means there is room to return the corporate income tax rate to 2009 levels,” the Centre notes.[32] Meanwhile, the United States government appears to be embarking on a unique program to seize untaxed income from American corporations. Some reports indicate that as much as $2 trillion worth of American corporate profits are sitting in foreign accounts. President Barack Obama proposes to tax that money at a rate of 14 percent to help pay for infrastructure upgrades.[33] The amount of Canadian corporate assets held overseas in “tax havens” is estimated by Canadians for Tax Fairness to be approximately $200 billion.[34] If the Canadian government attempted a similar initiative to that of the Obama administration, the tax revenue windfall could be substantial.

Conclusions/Policy Recommendation
Ontario’s infrastructure deficit poses a significant challenge. Given the potential counterproductive nature of privatizing public assets, as flagged by the Financial Accountability Officer of Ontario, the decision to go down that path by the current government is concerning. As well, the failure of past federal-provincial infrastructure funding schemes demands a change of the status quo. Put bluntly, those funding initiatives simply have not in the past and are not presently addressing Ontario’s infrastructure deficit in a meaningful way. That any increases to those federal-provincial programs are contingent on political will is also a drawback. New thinking is required to deal with Ontario’s infrastructure problem. I recommend that the federal government move to begin taxing Canadian overseas corporate assets currently held in tax shelters and share those confiscated revenues with the province of Ontario under the condition that the money be used exclusively for infrastructure spending. I also recommend that the joint provincial-federal rate of Ontario corporate taxation be increased to 2009 levels immediately. Further increases of the rate also need to be considered. Ultimately, a more aggressive tone is clearly needed by government with the Canadian corporate sector, which has demonstrably not fulfilled its end of the low tax bargain since the financial crisis began.


 

[1] Province of Ontario, Building Together: Jobs & Prosperity for Ontarians (Toronto: Queen’s Printer for Ontario, 2011), http://moi.gov.on.ca/pdf/en/BuildingTogether_En.pdf (accessed on October 26, 2015), iii.

[2] Robert Benzie and Richard J. Brennan, “Liberals to force provincial government to have long-term infrastructure plans,” Toronto Star, November 7, 2013, http://www.thestar.com/news/queenspark/2013/11/07/liberals_to_force_provincial_government_to_have_longterm_infrastructure_plans.html (accessed on October 26, 2015).

[3] Province of Ontario, Building Together: Jobs & Prosperity for Ontarians, 4.

[4] Conference Board of Canada, The Economic Impact of Ontario’s Infrastructure Investment Program, April 2013, http://www.conferenceboard.ca/e-library/abstract.aspx?did=5425 (free registration required) (accessed on November 1, 2015), 2.

[5] Ibid., 1.

[6] Benjamin Dachis, “Cars, Congestion and Costs: A New Approach to Evaluating Government Infrastructure Investment,” C.D. Howe Institute, July 2013. https://www.cdhowe.org/pdf/Commentary_385.pdf (accessed on October 30, 2015), 2.

[7] City of Toronto, Deputy Mayor’s Roundtable On Gridlock & Traffic Congestion, February 2014, http://www.toronto.ca/legdocs/mmis/2014/ex/bgrd/backgroundfile-72899.pdf (accessed on October 30, 2015), 2.

[8] Canadian Index of Wellbeing, How Are Ontarians Really Doing?, 2014, https://uwaterloo.ca/canadian-index-wellbeing/sites/ca.canadian-index-wellbeing/files/uploads/files/ontarioreport-accessible_0.pdf, (accessed on October 30, 2015), 42.

[9] Ibid., 40.

[10] Province of Ontario, Building Together: Jobs & Prosperity for Ontarians, 9.

[11] Ibid., iii.

[12] Province of Ontario, Results-based Plan Briefing Book 2014-15, (Toronto: Queen’s Printer for Ontario), http://www.moi.gov.on.ca/docs/en/MOI-2014-15RbPBriefingBook-PartI-English.pdf (accessed on October 31, 2015), 6.

[13] Province of Ontario, Building Together: Jobs & Prosperity for Ontarians, iii.

[14] Province of Ontario, Results-based Plan Briefing Book 2014-15, 7.

[15] Province of Ontario, Building Ontario Up: Ontario Budget 2015, http://www.fin.gov.on.ca/en/budget/ontariobudgets/2015/papers_all.pdf (accessed on November 1, 2015), 73.

[16] Ibid.

[17] Province of Ontario, Hydro One Initial Public Offering Closes, (Toronto: Queen’s Printer for Ontario, 2015), https://news.ontario.ca/mei/en/2015/11/hydro-one-initial-public-offering-closes.html (accessed on November 5, 2015).

[18] Ontario Financing Authority, Province’s Consolidated Debt Portfolio, http://www.ofina.on.ca/borrowing_debt/debt.htm (accessed on November 1, 2015).

[19] Province of Ontario, Hydro One Initial Public Offering Closes, https://news.ontario.ca/mei/en/2015/11/hydro-one-initial-public-offering-closes.html (accessed on November 5, 2015).

[20] Province of Ontario, Building Ontario Up: Ontario Budget 2015, 79.

[21] Financial Accountability Office of Ontario, An Assessment of the Financial Impact of the Partial Sale of Hydro One (Toronto: Queen’s Printer for Ontario, 2015), http://www.fao-on.org/web/default/files/publications/FAO%20Hydro%20One%20EN.pdf (accessed on October 29, 2015), 1.

[22] Ibid., 4.

[23] Joan Grace, “Building from the Ground Up: Funding the Infrastructure Deficit in Manitoba,” Manitoba Law Journal 37, no. 2 (2014): 408.

[24] Government of Canada, New Building Canada Plan: Ontario, http://www.infrastructure.gc.ca/regions/on/on-nbcp-npcc-eng.html (accessed on November 1, 2015).

[25] Ibid.

[26] Kaylie Tiessen, “Fixing Ontario’s Revenue Problem,” Canadian Centre for Policy Alternatives, https://www.policyalternatives.ca/sites/default/files/uploads/publications/Ontario%20Office/2015/03/CCPA%20ON%20Fixing%20Ontarios%20Revenue%20Problem.pdf, March 2015, (accessed on October 28, 2015), 5.

[27] Ibid., 12.

[28] Ibid., 10.

[29] The Economist, “Dead Money,” November 3, 2012, http://www.economist.com/news/finance-and-economics/21565621-cash-has-been-piling-up-companies%E2%80%99-balance-sheets-crisis-dead (accessed on November 1, 2015).

[30] Press Progress, “Corporate Canada is sitting on $680 billion, 85% of Canadians say raise corporate taxes,” Broadbent Institute, September 13, 2015, http://www.pressprogress.ca/corporate_canada_is_sitting_on_680_billion_85_canadians_say_raise_corporate_taxes (accessed on October 27, 2015).

 

[31] Benjamin Dachis, William B.P. Robson and Nicholas Chesterley “Capital Needed: Canada Needs More Robust Business Investment,” C.D. Howe Institute, July 2014, https://www.cdhowe.org/pdf/e-brief_179.pdf (accessed on November 3, 2015), 7.

[32] Kaylie Tiessen, “Fixing Ontario’s Revenue Problem,” 10.

[33] Jeff Mason and Kevin Drawbaugh, “Obama targets foreign profits with tax proposal, Republicans skeptical,” Reuters, February 1, 2015, http://www.reuters.com/article/2015/02/01/us-usa-budget-tax-idUSKBN0L51IX20150201 (accessed on October 29, 2015).

[34] Canadians for Tax Fairness, Canadian $$ in Tax Havens Reach $199 Billion,

http://www.taxfairness.ca/en/news/canadian-tax-havens-reach-199-billion (accessed on October 31, 2015).

GOOD READING: @camilacore on the political economy of Uber in Toronto

Today, taxi drivers are demonstrating in Toronto over the city dragging its heels on regulating Uber. Cabbies have also let the politicians at Queen’s Park know how they feel. Ontario also has not moved to regulate Uber.

The following post has been re-posted from @camilacore‘s Facebook page with her permission.


 

“The cabbies are doing themselves no favour with this strike. They need to improve their image.”

This is the same line we repeatedly about unionized workers who exercise their right to collectively bargain, strike, and march on picket lines – year after year.

Don’t celebrate your supposed adaptation to neoliberalism.. it’s nothing to be proud of. The fact that you—as a worker—have no backbone and have conceded the very last of our rights, quality jobs and quality public services to a market that redistributes wealth from the bottom tiers to the wealthiest companies and individuals is nothing to brag about. That’s not progress or ‘progressiveness’, that’s not technological advancement, and it’s only forward-thinking in that you help accelerate a race to the bottom.

It’s mega bizarre that right-wing free market groupies (consumers who drink the kool-aid and are now pouring it down your throat) can have so much influence over us that they’re able to convince us that new shit is always better shit—even when new shit amounts to concessions on democratic accountability, standard employment, health and safety, decent living wages, etc and shifts risk from corporations to workers now operating under weakened labour protections. Some people get off on precarious non-standard employment relationships that don’t include benefits, I hella don’t.

These are not simple choices we’re dealing with, quite the opposite. Capitalism forces us to make the hardest decisions and constantly pits workers against other workers, and it’s currently forcing poor residents living in the suburbs and other areas of the GTA, which are underserved by public transit, to make a decision on whether or not to use seemingly inexpensive and attractive Uber services in a time when our cost of living is rising and our employment is the most precarious.

I can’t sit here from my most-privileged vantage point and tell my associates where to put their money or how to survive off our meager salaries, but I am telling you that our decision to welcome Uber into our city, as is, will have a profound impact on our city’s economy and hundreds of jobs currently occupied by brown and black men, many of whom are immigrant men, many of whom belong to religious minority groups, and many of whom are on multiple fronts discriminated against in the Canadian economy and who are vastly over qualified for their line of work. Drivers whose education, experience, and credentials have been denied by the Canadian state and who often work multiple jobs, or whose racialized wives have picked up the slack since immigrating to Canada. That’s just the tip of the iceberg for what’s at stake here. All of these issues must be addressed, though it’s not single-handedly the fault of Uber (a mere player among many that gets to stroll in and shit on Canadian workers) that we’re placed in this predicament, but I do ask that we be more critical when discussing the impacts of this general shift and make an effort to understand the issues placed before us from a labour standpoint.

Reflections on David Harvey: Neoliberalism and The State

For three decades, neoliberalism has dominated the political and economic landscape. Following David Harvey, I contend that neoliberalism depends on the manufacturing of consent to a neoliberal agenda and the use of coercion to enforce that agenda. I further argue that neoliberalism is a corrupted form of democracy which easily lends itself to a rule by powerful elites and reproduces social and economic inequalities. To explore these contentions, I will first place neoliberalism in context. I will then delve into the manufacturing of a consent agenda for neoliberalism and probe how coercion has been used to strong-arm that agenda. Finally, I will analyze neoliberalism’s anti-democratic patterns. This examination is primarily focused on trends in North America with specific references to the neoliberal experiment in Canada.

Locating Neoliberalism
Before the interrogation at the core of this analysis begins, it is helpful to properly locate neoliberalism as a governing paradigm. Neoliberalism is generally seen as having risen in an age in which post-Second World War employment, production and social patterns were declining. Neoliberalism’s characteristics include government with the aims of industry deregulation, a promotion of the primacy of the individual, “strong private property rights, free markets, and free trade.”[1] Another important aspect of neoliberalism is the degree of control that governments must have over the population to ensure the free flow and “integrity”[2] of capital and money. “(Neoliberal governments) must also set up those military, defence, police, and legal structures and functions required to secure private property rights and to guarantee, by force if need be, the proper functioning of markets,” David Harvey tells us in A Brief History of Neoliberalism. The institutionalization of neoliberalism can be closely associated with the ascendency of politicians such as the United Kingdom’s Margaret Thatcher, the United States’ Ronald Reagan, Canada’s Brian Mulroney and, as Harvey claims, China’s Deng Xiaoping[3] in the late 1970s and early to mid-1980s.

Consent
The rise of neoliberalism did not occur overnight ─ in fact, it was a long-term project ─ and was not without effort by capital, social institutions and forces within the academy, Harvey explains.[4] “The ‘long march’ of neoliberal ideas through these institutions that (Austrian political philosopher Friedrich von) Hayek had envisaged back in 1947, the organization of think-tanks (with corporate backing and funding), the capture of certain segments of the media, and the conversion of many intellectuals to neoliberal ways of thinking, created a climate of opinion in support of neoliberalism as the exclusive guarantor of freedom.”[5] This is arguably crucial, given the incremental steps consent takes and its ability to overcome any visceral rejection of rapid structural change in society ─ the kind of quick change revolution can bring. Also critical here is the tension between social justice and the struggle for individual liberties that neoliberalism has a tendency to exploit. Neoliberalism’s opposition to the perception of a government acting as a check to capital’s liberty may have ridden into town at just the right time as activists (civil rights, reproductive, sexuality and others)[6] were fighting very real battles against oppressive state actions. Well-funded attempts to conflate these social struggles with capital’s perceived plight speak directly to the manufacturing of consent and the implementation of the neoliberal agenda.

Coercion
But, where consent fails, coercion may do. It is entirely feasible to claim that late neoliberalism has become increasingly authoritarian. However, individual choice, the guiding force of hyper-liberalism and the extreme measures gone to in order to foster an environment where such individualism (which typically manifests as consumer choice) is the dominant narrative has an element of what Harvey calls “chaos”[7] to it. In response, neoliberalism has in many cases mutated into neoconservativism, which seeks to bring a highly moralized order to that perceived chaos via the state’s coercion apparatuses, most namely the military[8] but also the police and surveillance/intelligence agencies. All of this has been fuelled by the creation of myths that the nation is under attack by threats internal but also ─ and especially ─ external.[9] “Neoconservatism is therefore entirely consistent with the neoliberal agenda of elite governance, mistrust of democracy, and the maintenance of market freedoms. But it veers away from the principles of pure neoliberalism and has reshaped neoliberal practices in two fundamental respects: first, in its concern for order as an answer to the chaos of individual interests, and second, in its concern for an overweening morality as the necessary social glue to keep the body politic secure in the face of external and internal dangers,” Harvey notes.[10]

Analysis
But to what end is this consent and coercion used? Who are the beneficiaries of this complex creation of myths and fact-ish ideology reproduced in a volume of tsunami proportions? Who wins with the creation and exploitation of fears, based on threats real and perceived, domestic and international? I argue that one manifestation of neoliberalism is the intensification of the concentration of power in the hands of those traditionally allied with capital — specifically, the government Executive and the judiciary. Neoliberals are inherently “suspicious of democracy” and that they “tend to favour governance by experts and elites,” Harvey tells us.[11] The consolidation of power arguably serves two important functions: (1) to reclaim, and then intensify, ruling class interests all while legitimized and emboldened by the ability to enforce the status quo via the military/police and (2) to marginalize the legislature, where public, vigorous debate can be engaged in and witnessed. The context here, of course, is that this is occurring during an era in which security, both internal and external, is a dominant driver of government policy. As Harvey notes, “the neoliberal preference” is to “appeal to judicial and executive rather than parliamentary powers.”[12]

The Executive and judiciary are excellent zones for power to be centralized by the ruling elite. Secretive, authoritarian Executive governance can be conducted behind closed doors in cabinet meetings and through the invocation of time allocation and closure motions during majority governments, for example. The legal system, meanwhile, can be counted on to reinforce the interests of “private property and the profit rate over rights of equality and social justice” due to what Harvey calls “the typical class allegiance of the judiciary.”[13] This takes place despite a formal commitment to the equality of access to justice in the advanced capitalist core of nations ─ which in practice, often actually translates into costly court cases that limit justice to those who can afford it.[14]

Conclusions
Neoliberalism rests upon a foundation of manufactured consent and coercion. Its key focus is to reproduce power and class relations that intensify so-called “free market” relationships and commodify human interactions as mere consumer choices. Neoliberalism is inherently anti-democratic and thrives in environments in which threats, perceived or real ─ foreign or domestic ─ are promoted to manage the chaos hawkish neoliberals see as endemic to a society in which the value of liberty is extolled. Ultimately, neoliberalism shows no signs of abating. Proponents have offered no alternatives, which may indicate that the current structures are working satisfactorily for those who benefit from them. Opponents, to this point, have also been unsuccessful in presenting an alternative to this dominant governing paradigm that has captured the population enough to build a counter-hegemony and alternative paradigm. At this point, it is unclear how long the neoliberal experiment will last but given that it not only survived but has become intensified in the wake of the recent economic crisis, it appears solidly structural with a great deal of power, resources and will backing it.


[1] David Harvey, A Brief History of Neoliberalism, (New York: Oxford University Press, Inc., 2005), 2.

[2] Ibid.

[3] Ibid., 1.

[4] Ibid., 40.

[5] Ibid.

[6] Ibid., 42.

[7] Ibid., 82.

[8] Ibid.

[9] Ibid.

[10] Ibid.

[11] Ibid., 66.

[12] Ibid., 176.

[13] Ibid., 177.

[14] Ibid., 78.

The Militarization of Police: But Why?

Since the beginning of the year, several stories in high-profile mainstream media publications have examined the increasing militarization of police forces in North America.

  • In March, The Economist wrote a feature on the phenomenon noting that the use of tactical units, which are often armed with military-style weaponry such as so-called flash-bag grenades and tear gas, has spiked in the United States. Some cities are now using tactical units for routine patrol. The Economist suggested that civil forfeiture laws, under which no criminal conviction is required for people to lose large assets, are actually making it profitable to seize alleged proceeds of crime.
  • In June, The New York Times reported that during the Obama years, police forces in the United States have received “thousands of machine guns” along with”armoured cars and aircraft.” The Times asked whether the events of September 11, 2001 have blurred the lines between soldier and police officer.
  • And on August 15, the Toronto Star published an in-depth look at the militarization of law enforcement both in Canada and in the United States, noting Toronto’s notorious G20 Summit as a domestic example. The story also pulls from a report by the American Civil Liberties Association that claims 62% of tactical deployments were for drug searches and thus, “inappropriate.”

There has been much written about the who, the what, the where and the how of police militarization but little delving into the why. In this post, I explore three possible, and arguably intersecting reasons for the why: (a) Following Giorgio Agamben, that security and the overstepping of the law by governments in order to save the constitution is a long-held practice and is now a paradigm of North American governance. (b) That the state continues to show itself as terrified of marginalized groups and is using violence to coerce co-operation or at least peace from those groups when they express anger. And, (c) That neoliberalism, or the trend of governments toward market solutions and the retreat by the state from social programs is necessarily resulting in the increased use of the state’s security apparatus to quell opposition to such a trend.

This analysis assumes the police are an enforcement arm of the state. 

While Agamben freely admits there is no singular definition of the state of exception, he argues that it constitutes “the original structure in which law encompasses living beings by means of its own suspension.”[1] This, he claims, is a modern paradigm of governance. In other words, the state of exception is the situation in which the law is suspended to uphold the constitution of a particular society and that situation has become normalized and institutionalized as a driving pattern of governance. “In this sense, modern totalitarianism can be defined as the establishment, by means of a state of exception, of a legal civil war that allows for the physical elimination not only of political adversaries but of entire categories of citizens who for some reason cannot be integrated into the political system”, he tells us.[2] That is, the constitution can be suspended in order to save it. This state of exception has been taking root since the First World War, gained traction through National Socialism and has achieved its largest deployment today.[3] The state must have the tools necessary and at its disposal to continue to govern in a continuous state of exception, and thus, the militarization of the police, which function as its enforcement arm most often in times of crisis and suspension of liberties. The police are often the only coercion agency of the state funded at the local, state/provincial and federal levels of government, allowing multiple states of exception to exist — but also for a co-ordinated police effort during a singular state of exception to be possible. A good example of this cross-jurisdictional state of exception is the use of local[4], provincial[5] and federal[6] police officers during the Toronto G20 summit in 2010, during which the civil liberties of protesters were widely suspended and the largest mass arrest of Canadians occurred.[7]

The state of exception is also clearly being used to perpetuate and reproduce historic racism. But, the state of exception as a paradigm of government cannot be used to explain the cracking down on historically marginalized groups, such as Black North Americans and First Nations people. There is a deeper history there and I see it as being about the devaluing of human life via a structural racism that is woven into the fabric of North American governance. Black Americans and First Nations people have been subject to hyper-exploitation and attempts at genocide to the extent that the experiences of the oppressors — that is, overwhelmingly North Americans of European decent — have, I believe, formed an unfinished project of marginalization that continues to the present day. In situations such as these, and others, the state’s actions are not broadly based and sweeping but target specific groups because of antiquated notions about superiority or merely a depraved indifference to the lives and well-being of those who have endured despite attempts to kill them politically and biologically. The militarization of the police is necessary here for the state insofar as those who have fought and continue to fight against oppression do so while concurrently challenging the racist state’s fundamental legitimacy. As W. E. B. Du Bois puts it in Black Reconstruction in America: “[I]f the poor, unlettered toilers are given no political power, and are kept by exploitation in poverty, they will remain submerged unless rescued by revolution; and a philosophy will prevail, teaching that the submergence of the mass is inevitable and is on the whole best, not only for them, but for the ruling classes.”[8]. The state’s coercive response, as seen in situations such as demonstrations in Ferguson, MO after the shooting death of Mike Brown by a police officer in August 2014 and at the Elsipogtog First Nation in October 2013, are both attempts to assert a racist sovereignty and a superiority of the established ruling classes against the respective marginalized groups. Pam Palmater summed up the enforcement by the state of a sovereignty poisoned by racism in a post about the clash between Mi’kmaw activists and the Royal Canadian Mounted Police at Elsipogtog in a post only days afterward: “This heavy-handed deployment of heavily armed RCMP cops against women and children shows Canada’s complete disregard for our fundamental human rights and freedoms, and their ongoing disdain for Indigenous peoples. One RCMP officer’s comments summarized government position perfectly: ‘Crown land belongs to government, not to fucking natives.'”[9]

Finally, the nature of neoliberalism may be inherently coercive. As I have written here about neoliberalism in Ontario, some scholarly authorities see neoliberalism revealing increased authoritarianism. Concurrent with the neoliberal period generally and the aftermath of September 11, 2001 specifically has been an intensified securitization inside states, York University professor Greg Albo tells us. “In Canada this combination of economic and geopolitical interests has produced an internal realignment of the state, with military and security structures absorbing new funds and resources,” he notes.[10] If the police, again the department most often called to put down opposition to neoliberalism’s goals, are to be successful, they need the tools used to quell chaos. Such tools have been developed and deployed by the West during its ongoing wars on terrorism since 9/11 and logically, the fruits of those labours are spilling down to policing departments as such wars — take Afghanistan and Iraq for examples — wind down and focus shifts to domestic disturbances.

Whatever the “why”, and this analysis does not purport to be the final word, the militarization of the police is an ongoing phenomenon. Here, I have attempted to explore the state of exception, structural racism and neoliberalism as three possibilities for why the police in North America have become increasingly militarized. Any society that permits the expansion of the state’s coercion will inevitably have to deal with the counter pressure of civil rights activists. What is crucial to consider is the difference between a real crisis for the state and one that is a fictitious crisis in which civil and social rights are trumped so that the constitution may remain in place. What is left then, if the constitution survives such a battering by the state itself?


[1] Giorgio Agamben, State of Exception, Trans. Kevin Attell, (Chicago and London: The University of Chicago Press, 2005), 3.

[2] Ibid., 2.

[3] Ibid., 86-87.

[4] Graham Slaughter, “45-day jail sentence for Toronto police officer who beat G20 protester,” Toronto Star, December 9, 2013, http://www.thestar.com/news/crime/2013/12/09/45day_jail_sentence_for_toronto_police_officer_who_beat_g20_protester.html (accessed on August 24, 2014).

[5] Adrian Morrow and Daniel Leblanc, “Toronto police, OPP called the shots on G20 response, report says,” The Globe and Mail, May 14, 2012, http://www.theglobeandmail.com/news/toronto/toronto-police-opp-called-the-shots-on-g20-response-report-says/article4178745/ (accessed on August 24, 2014).

[6] Josh Visser, “RCMP abandoned policy when it participated in G20 ‘kettling,’ report says,” National Post, May 14, 2012, http://news.nationalpost.com/2012/05/14/rcmp-abandoned-policy-when-it-participated-in-g20-kettling-report-says/ (accessed on August 24, 2014).

[7] Canadian Civil Liberties Association, What Happened During the G20?, http://ccla.org/our-work/focus-areas/g8-and-g20/two-months-after-the-g20/ (accessed August 24, 2014).

[8] W. E. B. Du Bois, Black Reconstruction in America, https://archive.org/details/blackreconstruc00dubo, 206 (accessed August 24, 2014).

[9] Pam Palmater, Feathers verus Guns: The Throne Speech and Canada’s War with the Mi’kmaw Nation at Elsipogtog, http://indigenousnationhood.blogspot.ca/2013/10/throne-speech-in-action-canada-is-at.html (accessed August 24, 2014).

[10] Greg Albo, “Fewer Illusions: Canadian Foreign Policy since 2001,” Empire’s Ally: Canada and the Afghanistan War, eds. G. Albo and J. Klassen (Toronto: University of Toronto Press, 2012), 253.

Needed: A Real Deal For Cities

Over at NinetyTwoPointEight, I have written a post about the need for substantive discussion during the ongoing Toronto municipal election about freeing up the city from the paternalism of its relationship with and dependance on the province of Ontario.

Here is the link: Election 2014: A Lost Opportunity To Push For A Real Deal For Cities

Ontario’s Early Economic Development: A Political Economic Analysis

When writing about her adopted home of Ontario in Roughing it in the Bush, settler Susanna Moodie recalls penning a letter to Lieutenant-Governor Sir George Arthur requesting that he continue her husband’s service in the militia in the aftermath of the Upper Canada Rebellion, so that the family could pay off their debts.[1] Debt was a significant social technology in Ontario’s early days. Inspired by the work of Albert Schrauwers, I contend here that the early economic development of Ontario was not primarily steered by the competitive forces of a mythical free market but by elites, who controlled much of the economic social relations through the extension of credit (debt). In northern Ontario, this meant attempting to indebt First Nations fur traders to European merchants in an attempt to get them to conform to a European-style work ethos in which they could be controlled via the purchase of consumer goods. Concurrently, elites in what would become southern Ontario, an oligarchic group of men known as the Family Compact, worked to ensure that capital and power came together as one and did so by leveraging the power they had by virtue of their seats in both the houses of government and the Bank of Upper Canada. The Compact and those they chose to empower ─ such as credit-extending merchants ─ exploited farmers, millers, journeymen and labourers via severe legal punishments for debt and ultimately controlled the means of production. Examined here is the nature of economic development in Ontario between the 18th Century and the period just before Confederation. I will first theoretically examine the economic forces at work through a Marxian paradigm. I will then trace Ontario’s economic development through three lenses: first, the fur trade, during which Europeans relied upon the Cree, in what would become Northern Ontario, to provide animal pelts for sale in Europe; second, the importance of agriculture and the production of timber in southern Ontario, known at the time as Upper Canada, which fuelled the export market; and finally, the development of mills, around which a burgeoning labour class was constructed. I will then trace an analysis of the class relations that formed around the economic development and finally analyze the implications of those interconnected economic and political relations.

York, Upper Canada

York, Upper Canada

An analysis of Marxian economic theory is helpful to understand the forces at work during the early economic development of Ontario. This section will also examine the so-called fictitious commodities of land, labour and capital, which are often intertwined and, during Ontario’s early days, all controlled by the same people. What is of particular relevance to the economic development of Upper Canada is what Marx would identify as the fallacy of the concept of a free market. Instead of an invisible hand that guides market relations, he argues it is property relations ─ the social relations ─ that gave rise to revenues.[2] It is property that permits capital to physically create workplaces but capital must first gain access to the property. When land began to be sold to farmers in Upper Canada, it was, consciously or not, assigned a use-value. As Karl Marx put it, “a use-value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialized in it.”[3]

It will be shown that the state, that is, the colonial government of Upper Canada, controlled capital’s access to property in the colony. Geoffrey Ingham interprets Marx’s critique of political economy as positing that the state exists to “ensure the dominance of capital and the subordination of labour.”[4] In Upper Canada, the state’s control over capital via the extension of credit alters the strict paradigm of the capital-labour relationship but not to the extent that it no longer exists. We will see that state-sanctioned corporations which dealt with supplying money and the control of property were administered by the very same men, the Family Compact, who ruled over the colony in the houses of government. Ingham tells us that in modern capitalism, the money, and capital markets are typically examined separately. The money market, he notes, is the “institutional creditor-debtor links between the state, the central bank and the banking system which co-ordinate the supply and demand for money.”[5] The capital market, meanwhile, encompasses the investment banks and stock markets, which convert the supply of money into “money-capital to meet the demand from producers for the financing of the productions of goods and services.”[6] These two markets create the necessary money supply to fuel a capitalist enterprise by turning a profit after money is invested into a commodity. In Upper Canada, the Family Compact had control over both the money and capital markets as well as the state.

Meanwhile, Schrauwers will tell us that the use of debt by the elites who controlled both the money supply and the land created a class conflict between this landed aristocracy ─ many of whom received grants of land from the Crown and did not have to plunge into debt to obtain it ─ and an “industrious class” of millers, printers, carpenters and others. This industrious class attempted to reproduce itself through the traditional master-journeyman relationship but the Family Compact used its influence to permit general contracting to undermine that relationship. Harsh penalties for debt also bound labourers to contractors. Meanwhile, it was the same on the farm, where farmers were bound to those who extended credit and expected a profitable return. This exploitation of those in debt and expected to reduce costs in the production process will be shown to be a harbinger of the development of a modern capitalist economy in Ontario, in which profit originates in production, as industrialization was just beginning.

Also of importance to this discussion is to understand the mercantilist nature of the European fur trade with the First Nations. The primary European fur trader discussed here is the Hudson’s Bay Company, a company chartered by English King Charles II in 1670.[7] The company’s posts facilitated the trade of fur trapped by the First Nations (The West Main Cree of northern Ontario in this discussion) for European goods such as metal tools. The fur was sent back to Europe where it was sold at a price greater than what it was valued at in the North America. This system enabled profit to be made by merchants taking advantage of the different modes of production.

The Colonial Economy: A profile

That the fur trade was important and prevalent in Lower Canada, or what is now Quebec, during the development of Canada’s early economy in the 1700s is well established.[8] And, in the northern regions of what would eventually become Ontario, the West Main Cree of the James and Hudson bays area worked closely with Europeans. The Europeans, through the Hudson Bay Company aimed to profit by trading manufactured goods, including metal tools, for furs[9], which would be sold in Europe. Despite encroachment by Europeans intending to do their own trapping, the fur trade with the West Main Cree continued into the 20th Century but “crashed” by the 1920s.[10] Further south in Upper Canada however, the consensus suggests that the fur trade was of negligible importance. By the late 1700s, the northwest fur trade was still expanding but supply routes moved via the Ottawa River ─ not through the settled areas of Upper Canada.[11] “The fur trade was an activity in which Montreal was dominant, and Upper Canada was largely irrelevant,” Kenneth Norrie, Douglas Owram and J.C. Herbert Emery note in A History of the Canadian Economy.[12] Even Upper Canada Governor John Graves Simcoe derided the fur trade in 1792: “I consider the fur trade on its present foundation to be of no use whatever to Upper Canada.”[13]

For a significant period of time, wheat was acknowledged as the core ─ and in some cases, the exclusive ─ cash-producing export staple of Upper Canada’s colonial economy. In her 1935 analysis of Canada’s economic development, Mary Quayle Innis goes as far as to note that “the settlers who crowded into the upper province were producing more what than they could use, and they were eager for a market.”[14] It is not to be denied that the production of wheat and timber was substantial. Statistics from the colonial period show the production of wheat increased significantly over more than a decade: from 7.5 million bushels in 1848 to 12.7 million bushels in 1851 and 24.6 million bushels in 1860.[15] Timber and other commodities pulled out of the forests meanwhile, “probably accounted for at least half of all the province’s export earnings between 1815 and 1840.”[16]

And while wheat and timber were both of clear importance to the economy of Upper Canada, recently, the contention that Upper Canada was reliant on a staple economy has come under scrutiny. Norrie and the other authors admit that “at least in its earliest phase, Upper Canada did not have a staple-based (or commodity-based) economy.”[17] Douglas McCalla, meanwhile, argues that claiming Upper Canada was a staples economy based solely around wheat and timber “yields a an oversimplified and fundamentally inaccurate view of the process of economic development” in the region.[18] Reliable census data about wheat output in Upper Canada was not available until 1842[19] but even still, McCalla argues that based an analysis of more than a dozen country merchants, Upper Canada “shows that from its earliest days, the provincial economy produced and exchanged many more commodities besides wheat.”[20] To that end, mixed farming was always important. Among the important commodities produced other than wheat was dairy products.[21] By the 1860s, barley and rye were also being exported in significant amounts from Ontario.[22]

The key for McCalla is that four other aspects of the early Ontario economy have not been given enough consideration: “1. there were other external influences besides the exports of wheat and timber, 2. the spending in the colony by both the British and Upper Canadian governments was significant, 3. local markets were important, and 4. exports other than wheat and timber should be emphasized.”[23] Wheat prices would collapse in Great Britain in the 1830s.[24] Norrie, Owram and Emery also argue that settlers who came to Upper Canada with money to buy tools were able to obtain credit to start farms kick-started other businesses such as mills ─ firstly, saw mills, then grist mills and flour mills.[25] The authors also identify a large amount of direct British investment into Upper Canada between 1800 and 1812, when war broke out with the United States.

The genesis of Ontario’s transition to capitalism can be seen as early as before the 1820s.[26] Financial infrastructure such, the Bank of Upper Canada, was chartered as early as 1821[27] and provided credit.[28] Through the 1830s, banks began opening across the colony in communities such as Kingston, the Midland District and The Gore.[29] Business was booming, McCalla tells us: “Invested capital in the province’s chartered banks increased over six-fold in the period from the beginning of 1830 to 1837.”[30] The promise of available credit drove the hopes and dreams of municipal leaders who were responding to demands for growth by residents.[31] As well, “by the 1830s, there was an emerging class of entrepreneurs who, through ties to the political elite of the colony, were forces in their own right.”[32] This merchant-capitalist class “was directly or indirectly dependent on agriculture exports.”[33]

The Bank of Upper Canada

The Bank of Upper Canada

Merchant millers set up shop along the Humber River in what is now the Greater Toronto Area in the early to mid-19th Century to sell flour and other commodities to Britain via the colonial pipeline in Montreal. With them came “blacksmiths, wheelwrights, wagon-makers and other craftsmen, who while not part of the permanent labour force of the mill, would settle near one merchant-mill circulating freely round the countryside plying their trades where needed.”[34] Grist mills, in particular, produced products in great volume for the export market.[35] By the 1850s, apprentices, journeymen and masters of smithing, carpentry, tailoring and shoemaking also worked in the colony in great numbers.[36] This period is an arguably significant turning point, during which free wage workers with technology sold their labour into the market. Capitalistic elements emerge in the mercantilism of British North America due to the decentralized British economic and political culture, relative to that of France.

The Colonial Politics: A profile

A class relations analysis of Ontario’s early development is useful to explore the politics of production and appropriation. Initially, Europeans and First Nations traders appear to have worked fairly closely and equally, at least in economic terms during the fur trade. Indeed, alliances appear to have been sealed by blood as well as trade, with Europeans (primarily English and Scottish) marrying Cree “country wives” as early as the 18th Century.[37] The Cree trappers of northern Ontario carried just enough fur to trade for what they needed.[38] Credit flowed easily to the Cree, who used it to purchase necessary goods from the Europeans for the hunt but not much more. This approach created tension with the Europeans, who noticed the lack of interest the Cree had in becoming more reliant on consumer goods. This, it appears was a political position by the Cree. “‘We are poor, tis true, but we shall not be slaves’ expresses the stability-seeking ethic held by some ─ probably most ─ Cree,” Peter J. George and Richard J. Preston, tell us in “Going in Between”: The Impact of European Technology on the Work Patterns of the West Main Cree of Northern Ontario.[39] At one stage, the beginning of the 1900s, Cree trappers working with the Hudson’s Bay Company, appeared to have the upper hand in trade, when “free traders” and another company, The Revillon Frères Co., moved into the north.[40] “The Cree responded to the new situation by seeking the best price and spreading their favors as a precaution against the uncertain outcome of the competition.”[41]  Much, much later, once the fur market collapsed in the 1920s and 30s, the symbiotic business relationship between Europeans and the First Nations would not to extend to feeling of social responsibility and some Cree would starve.[42]

Perhaps most striking class relationship was that between Upper Canada’s elite, The Family Compact, and that of the farmers, millers and other Ontarians. The Family Compact was an oligarchic[43] group of men who controlled Upper Canada’s governance from 1791 to 1841, when Upper and Lower Canada were united. They were as W. Stewart Wallace puts it: “a governing clique, prone to administer the affairs of the province at its own pleasure, and sometimes in its own interest.”[44] But some, such as Schrauwers, argue the control exercised by the Family Compact was not simply political but economic as well. Schrauwers asserts that in the run-up to the Upper Canada Rebellion of 1837, a confrontation between classes ─ “law sanctioned privilege” and “the power of honest industry”[45] ─ had come to a head. “Gentlemanly capitalists”, epitomized by the members of the Family Compact “had engineered the commodification of land, labour and money”[46] in Upper Canada. The class conflict did not pit master versus journeyman but rather those who were industrious versus those who controlled the credit and debt, he tells us.

Three companies: The Bank of Upper Canada (“which controlled the colony’s paper money), The Canada Company and the Clergy Company (which both sold land) were closely affiliated with members of the Family Compact,[47] so much so that several individuals who sat in Upper Canada’s houses of government also sat on the boards of the corporations.[48] “These corporations exercised an economic domination propped up by the legal authority of the state; together they regulated the politics of production in Upper Canada, applying a capitalist discipline to nominally independent farmers and tradesmen.”[49] They accomplished this several ways: one mechanism involved the Bank of Canada earned profit through interest on notes it leant out to clients favourable (ostensibly, both economically and politically) to the bank’s board.[50] Another involved the Bank of Canada lending to local retailers who extended credit to farms so long as those farms produced “salable wheat” as cheaply as possible.[51] Also of importance is that many members of the Family Compact were granted land in Upper Canada before sales of land were common and took control of reserve land for sale when it was placed in the trust of the Canada Company and Clergy Corporation.[52] The debt required to be taken on by farmers who settled in Upper Canada as a result of the transition to land sales in the colony is linked by Schrauwers to a phenomenon known as “wheat mining”[53] during which the land was exhausted by farmers trying to pay off loans. “In other words, although these farmers controlled the labour process, the larger politics of production, including debt formation for the ‘fictitious commodity’ of land, was used to entrap them in a commodity chain that applied a capitalist discipline their maximizing yields of that commodity,” Schrauwers tells us. “The land market created by the change in government policy and the land companies was a critical tool in the creation of a disciplined workforce ‘mass producing’ wheat.”[54]

Similarly, in the city, the master and journeyman worked together under the thumb of the elites, he notes. The development of general contracting allowed the contractor to hire both “masters and journeymen as labour only”[55] and employ workers without official qualifications, thus throwing a wrench into the journeyman –master system of reproduction of craftspeople and permitting the contractor to pay less in wages. Debt was also employed by contractors to bind labour via tardy wage payment.[56] Strikes by workers agitating for payment became more common. Meanwhile, the government of Upper Canada introduced a bill that established Houses of Industry in November 1836 ─ about one year before the Upper Canada Rebellion of 1837 ─ under the guise of a social program for the able-bodied unemployed. The Houses were modelled on a British relief system, which Schrauwers tells us was designed to create a labour class “by limiting relief to those who entered a workhouse.” The legislation was envisioned by Upper Canada Lieutenant-Governor Sir Frances Bond Head, who was involved in the drafting of amendments to the Poor Laws in England.[57] A section of the legislation allowed two magistrates to “commit” any unemployed person spending their time in a public house ─ where many trade associations met ─ to the Houses of Industry.[58] “This draconian measure allowed for the indefinite imprisonment of the unemployed ‘vagrant’ or striker in state institutions with no appeal and no jury.”[59]

Analysis

The economic legacy of the early economic development of Ontario is that of a class of legally entitled appropriators wielding disproportionate power over a producing class. That legacy began with Europeans trading goods with the Cree in Northern Ontario and continued until the fur trade collapsed. At that stage, the wealth generated by the mercantilism of the Europeans, who appropriated Cree-trapped furs and sold them at a profit to Europeans, left the First Nations in the cold and starving when European demand dropped. It is exploitative in the extreme in the sense that the profits were not shared with the Cree, whose lives had become dependent on the fur trade. A fair price was never considered for the labour of the Cree, who were kept in the dark about the obviously high exchange value of the fur they were collecting for the Europeans. It was only after the market for the furs collected by the Cree in northern Ontario crashed that the Cree were cast aside like a used food can or a broken fork. The human labour of the Cree was the most exploited of resources during the fur trade as Ontario’s economy developed. It was a truly dehumanizing process ─ and one that left them undercompensated and undervalued by European merchants who knew the market and refused to share that insider information with those on whom they depended for the very products they needed to reproduce themselves. Despite this toxic business relationship, George and Preston, tell us that the Cree were not de-skilled. Instead, those skills were adapted, using European technology to improve “the efficiency of the hunt and the trapline.”[60]

Meanwhile, the nature of the Family Compact’s control over both the political and the financial in Upper Canada arguably allowed the group to function in a proto-capitalist role, with ultimate control over the means of production via the extension of credit. Its ability to wage war on both these fronts consolidated a tremendous amount of social relations power in their hands. The Family Compact also served as capitalist in the rural areas in that farmers were beholden to the debt they owed to the country financiers backed by the Bank of Upper Canada, which was controlled by the Compact. The farmers needed to produce surplus product beyond the product necessary to reproduce them in order to pay off their property debts. This surplus product was claimed by the financiers, who were backed by the Bank of Upper Canada, and in essence, served as the Compact’s hegemony enforcers.

The state’s role in disrupting the traditional journeyman-master system of reproduction in the urban areas is similarly exploitative. As previously mentioned, general contractor for large works were empowered by the Crown itself via the Lieutenant-Governor to weaken and “de-skill”[61] the journeyman through the hiring of cheaper workers. This worked to weaken a labour class that was in the initial stages of becoming politically conscious of itself in Upper Canada.  The consequences of introducing general contracting and the subsequent withholding of wages to the workers who faced increased labour competition, created a debt bondage system in which the general contractor held increasing control over the means of production ─ not physically but via the power of the state legal apparatus to institutionalize debtors and striking workers.

In the Communist Manifesto, Marx tells us that “the executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.”[62] And, indeed, those in charge of Upper Canada, including Family Compact men such as Bishop John Strachan, helped develop a class system in which landed gentry assumed the ranks of bourgeoisie and aristocratic legislator at once by the force of law. By contrast, legal punishments awaiting debtors both in the country and in the city who were unable to pay off their credit masters tipped the social relations scales to the great detriment of what Schrauwers called the “industrious class.” This was not a case of a classic labour versus capitalist paradigm, as if workers were streaming into a sweltering factory and working 18 hours a day but reproducing themselves in a mere eight or 10. In Upper Canada, the state, which was guided by bourgeoisie/aristocrats, played a much more direct and intertwined role in the economy ─ a schema likely the product of older European practices in which firms often conducted business only at the pleasure of the Crown. The state in Upper Canada not only functioned to serve the interests of capital in the colony ─ that being primarily financial capital ─ but, with the houses of government sharing directors with the Bank of Upper Canada, it was the interests of capital.

Conclusions

It can only be concluded from these facts that the stratified social structure that evolved in Ontario was directly related to its economic development, and vice versa. The type of social relations that governed the fur trade and later agriculture laid an exploitative groundwork to create a debt-bonded working class. There was no free market in the days of Ontario. The market was always controlled and, in many cases, coerced, by a few elites through the extension of credit (debt).  Fears of punishment for defaulting on that debt drove Ontarians to produce surpluses that were claimed by these wealthy elites. Changes by the state which interfered in the master-journeyman relationship and the debt labourers faced when their wages were held back also helped to undermine the ability of those we would now recognize as a working class to not only reproduce but also empower themselves, just as that class was getting off the ground in Upper Canada. Ultimately, as Schrauwers tells us, the social control exerted by debt gave those in charge of issuing it supreme control over the means of production, even if those means of production remained physically in the hands of the fur traders, farmers and labourers.


[1] Susanna Moodie, Roughing it in the Bush, (1871; Gravenhurst: Breller Books, 2011): 297.

[2] Geoffrey Ingham, Capitalism, (Cambridge: Polity Press, 2008): 57.

[3] Karl Marx, Capital: Volume One, A Critique of Political Economy, ed. Friedrich Engels, translated by Samuel Moore and Edward Aveling (1906; Minola, New York: Dover Publications, Inc., 2011): 45.

[4] Ingham, Capitalism, 59.

[5] Ibid., 148.

[6] Ibid.

[7] Hudson’s Bay Company, The Royal Charter of the Hudson’s Bay Company, http://www.hbcheritage.ca/hbcheritage/collections/archival/charter/ (Accessed on November 23, 2013).

[8] Carolyn Podruchny, “Unfair Masters and Rascally Servants? Labour Relations among Bourgeois, Clerks and Voyageurs in the Montréal Fur Trade, 1780-1821,” Labour/Le Travail, 43 (Spring, 1999): 44.

[9] Peter J. George and Richard J. Preston, “’Going in Between’”: The Impact of European Technology on the Work Patterns of the West Main Cree of Northern Ontario,” The Journal of Economic History, 47, no. 2, (June 1987): 449.

[10] Ibid., 451

[11] Kenneth Norrie, Douglas Owram and J.C. Emery, A History of the Canadian Economy, 4th ed. (Toronto: Nelson Education Ltd., 2008), 100.

[12] Ibid.

[13] Ibid.

[14] Mary Quayle Innis, An Economic History of Canada, 5th ed. (Toronto: The Ryerson Press, 1935): 146.

[15] Douglas McCalla, Planting the Province: The Economic History of Upper Canada, 1784-1870 (Toronto: University of Toronto Press, 1993): 267.

[16] Ibid., 64.

[17] Norrie, Owram and Emery, A History of the Canadian Economy, 101.

[18] McCalla, Planting the Province: The Economic History of Upper Canada, 1784-1870: 73.

[19] Ibid.

[20] Ibid., 77.

[21] Ibid., 88.

[22] Ibid., 223.

[23] Bill Marr, “Review: Planting the Province: The Economic History of Upper Canada, 1784-1870,” Canadian Journal of Regional Science, 16, no. 3, (Fall 1993): 526.

[24] Norrie, Owram and Emery, A History of the Canadian Economy, 116.

[25] Ibid., 101.

[26] Ibid., 112.

[27] Ibid.

[28] McCalla, Planting the Province: The Economic History of Upper Canada, 1784-1870, 150.

[29] Ibid., 151.

[30] Ibid., 152.

[31] Ibid., 154.

[32] Norrie, Owram and Emery, A History of the Canadian Economy, 112.

[33] Ibid.

[34] Sidney Thomson Fisher, The Merchant-Millers of the Humber Valley (Toronto: NC Press Ltd., 1985): Introduction xiv.

[35] McCalla, Planting the Province: The Economic History of Upper Canada, 1784-1870, 93.

[36] Ibid., 104.

[37] Jennifer S. H. Brown, “Métis, Halfbreeds, and Other Real People: Challenging Cultures and Categories,” The History Teacher 27, no. 1 (November, 1993): 20.

[38] George and Preston, “’Going in Between’”: The Impact of European Technology on the Work Patterns of the West Main Cree of Northern Ontario,” 451.

[39] Ibid., 454.

[40] Ibid. 451.

[41] Ibid.

[42] Ibid.

[43] W. Stewart Wallace, The Family Compact: A Chronicle of the Rebellion in Upper Canada (Toronto: Glasgow, Brook & Company, 1915): 1.

[44] Ibid., 2.

[45] Albert Schrauwers, “The Gentlemanly Order & the Politics of Production in the Transition to Capitalism in the Home District, Upper Canada,” Labour/Le Travail, 65 (Spring 2010): 43.

[46] Ibid.

[47] Ibid., 22.

[48] Ibid., 23.

[49] Ibid., 22.

[50] Ibid., 25.

[51] Ibid., 26.

[52] Ibid., 28.

[53] Ibid., 31.

[54] Ibid.

[55] Ibid., 36.

[56] Ibid., 37.

[57] Ibid., 40.

[58] Ibid., 41.

[59] Ibid., 41.

[60] George and Preston, “’Going in Between’”: The Impact of European Technology on the Work Patterns of the West Main Cree of Northern Ontario”: 459.

[61] Ibid., 33.

[62] Karl Marx and Friedrich Engels, “The Communist Manifesto,” Karl Marx: Selected Writings, ed. Lawrence H. Simon (1848; Indianapolis/Cambridge: Hackett Publishing Company, Inc., 1994): 161.