Fraser Institute

The Fraser Institute

George Hewison         July 2013       Political Economy #1

 

Neo-Conservatism in Canada-Theory and Practice

 

In May, 1983, the Social Credit Government of Premier William Bennett won the provincial election in British Columbia with 49 per cent of the popular vote to the NDP opposition’s 45%.

 

In the immediate aftermath of its election victory, the Bennett Government, counting on a deflated opposition, morphed into a governing entity previously unknown in BC.

 

Years earlier, Social Credit, under Bennett’s father, WAC Bennett, had displaced the discredited Liberal/Conservative Coalition by jettisoning its “funny money”, Major Douglas libertarian views and committed itself to corporate Keynesian economic and social policy. The new Social Credit coalition, financed by big business, gathered together the wreckage of both Conservative and Liberal parties enabling it to head off a looming Cooperative Commonwealth (CCF) threat.

 

Thirty years later, a different political entity (with the same name and faces) emerged, bearing little similarity to its predecessor self; or to promises made during the election campaign. A new Bennett agenda heralded a significant change in Canadian politics. Neo-conservatism had gone from theory to practice in Canada.

 

Three weeks after the election, the Socred cabinet had met at a posh Okanagan Lake resort with Michael Walker, head of the Fraser Institute, which most social and labour activists in BC (including myself) dismissed at the time as a fringe element in the ideological sphere because their ideas seemed so far-fetched, and totally out of the mainstream.

 

The Fraser Institute had been established as a far Right think tank in 1974, replete with charitable tax status. The Institute`s founding CEO, Michael Walker, now a Senior Fellow at the Institute, had a close relationship with neo-conservative economic guru, Milton Friedman, of the celebrated Chicago School of economics.

 

To the horror of activists and within weeks of this Fraser Institute/Bennett post-election meeting, much of the propaganda of the Fraser Institute found its way into a Throne Speech, Budget, and proposed legislation. 26 bills were dropped, all at once, onto a shocked British Columbia public, targeting social and health services and education, firing thousands of public sector workers and gutting bargaining rights for those that remained, abolishing rent controls and the Human Rights Commission plus many other initiatives that threatened the social fabric of a province that had one of the strongest labour movements in Canada.

 

This was the coming out party, and a testing ground, for the Fraser Institute.

 

It also proved to be coming out of sorts for organized labour and the community. Up until then, labour and community activists had existed mainly as two distrusting solitudes. After July 7, 1983 (when the new budget and bills were introduced) a new relationship of necessity between organized labour and the community was forged, first as a Budget Coalition and later the Solidarity Coalition. Those formations became a template for future coalitions.

 

What happened in the weeks and months since then are beyond the scope of this discussion and worthy of a fuller treatment. Needless to say, the reaction of British Columbians was unique for the time. Countless demonstrations, meetings, and rallies of unprecedented size throughout BC, the occupation of the Premier’s office for two days, surrounding the Social Credit Convention in downtown Vancouver with 100,000 demonstrators, and a planned escalating general strike among many other noteworthy activities, shattered corporate and Socred illusions that British Columbians were too demoralized to fight back. The Premier and his corporate backers began to reconsider the wisdom of his “shock doctrine” tactics, hallmark of political practice of Friedman followers (so eloquently described by Naomi Klein in her famous book of the same name).

 

It must also be noted that the grass roots tactics of the resistance to the Government’s actions also concerned many union and opposition political leaders as organized labour and its new allies began to enter uncharted territory, using extra-parliamentary (non-electoral) political tactics, many for the first time.

 

The Fraser Institute, its corporate benefactors and the politicians under its ideological influence learned important lessons in that first engagement. In the years that followed, the blitzkrieg approach gave way to more sophisticated tactics, sometimes more incremental, and sometimes such as Ontario Mike Harris’ “Common Sense Revolution”, sweeping attacks on labour and the community depending on the circumstances. Whatever the tactics, the goal of the neo-conservative was the same-to retake the gains won by Labour and the Community over decades of struggle as part of the strategy to increase corporate profitability. Privatization and deregulation became the fad, while the attack on Labour was limited to chipping away at rights rather than a full, all out frontal attack…until now!

 

Lost in the three decades of struggle since the Fraser Institute went from Right Wing fringe to mainstream politics throughout Canada is the strength of its ideology, based on its scathing indictment of Keynesian economics from a Right bower.

 

In the early 1970s, Keynesian economics had begun to run out of Great Depression/post-WWII gas. Lord Keynes is widely credited with being the ideological saviour of capitalism. Governments, using fiscal and budgetary measures, could smooth out and delay cyclical crises that had plagued capitalism since 1825… but at a price…deficits and enormous public and private debt. The bill came due in the 1970s when inflation hit 18% and mortgage rates beyond that, and credit card rates still higher. The federal government of Pierre Trudeau intervened in draconian fashion with his infamous “wage and price controls” (effectively only wage controls) and the Anti-Inflation Board (AIB). Union collective agreements in 1975-76 were limited by the AIB to 6% in the first year and 5% in the second. Workers were furious that they were prevented from catching up to the ravages of inflation, while profits went unchecked. The Canadian Labour Congress called a National Day of Protest in 1976 and a million Canadian workers walked off the job in what amounted to Canada’s first political strike by labour.

 

It was into that inflationary milieu that the Fraser Institute (and its sister American counterpart, the CATO Institute and others) was born, offering corporate Canada (and the US and the world) a seemingly new ideological life. Milton Friedman`s fundamental thesis (central to the Fraser Institute`s existence) was that Lord Keynes had been wrong. Friedman had done studies on the Great Depression and suggested that government intervention at the time was wrong-headed and concluded that the economy, if left to its own devices, would essentially be self-correcting. That there was widespread suffering or that the profit system of capitalism was foundering during the Dirty Thirties never factored into Friedman`s economic view of history.

 

His back-to-the-future theories of neo-classical political economy were quickly grasped by the powerful. Money from corporate Canada and corporate USA flowed in, sustaining the work of the Fraser Institute. The Institute’s economics papers, supposedly “peer reviewed”, are thinly disguised, primitive political tracts to roll back the decades-old clock on the Keynesian welfare state. A central feature of that welfare state, the historic compromise Rand Formula, which has framed labour relations for the past 65 years, went on the “hit list”.

 

In the intervening three decades, the Fraser Institute has been inspiring a generation of Right Wing prophets, including our current Prime Minister, his mentor (and former Chief of Staff and CBC commentator) Tom Flanagan, Wild Rose leader, Danielle Smith, and many others. At the same time, in the US, society was treated to a similar process with Ronald Reagan and then George W. Bush, and the Tea Party backstopped by the American Legislative Exchange Council (ALEC), the CATO Institute, the Hoover Institute and the Koch Brothers.

 

The crisis of 2007-08, rather than sounding the death knell of the flawed economic theory of the Chicago School, gave new life to Friedman economist followers and their political mouthpieces. They continue to advocate as Friedman had argued about the Great Depression, that continuing Keynesian restraints are the problem and the attack against the welfare state has simply not gone far and deep enough.

 

Such a climate of crisis in 2007-08 should have positioned Keynesians for the offensive. Not so. Keynesian response has been tepid at best, first because it doesn’t have the ear of the most powerful voices of globalized capital and also because it refuses to acknowledge the logic of where the profit motive has led society. Meaningful solutions are in short supply if profits are not on the table. Keynesians generally try to avoid talk about profit for fear of alienating capital. Hence, working people, in increasingly straightened circumstances, are offered the Hobson’s choice of higher taxes and bailing out corporate malfeasance by the Keynesians on the one hand; or more horrific consequences by the Friedman followers on the other. Most governments, even liberal, socialist and social democratic, throughout the developed industrial world have found themselves forced to fashion their governance within a narrow band framed by Right Wing think tanks such as the Fraser Institute. The degree of austerity is the debate, and, unfortunately, not austerity itself.

 

Now, the long delayed frontal attack on Labour is on the political agenda. Among the current “peer reviewed” documents of the Fraser Institute circulating in Canada, we find the following:

·         “Reject Unions and Prosper-Enacting a worker-choice law would give a province a competitive advantage”

·         “Follow Indiana`s Lead Canadian provinces should give workers choice”

·         “Minimum Wages Don`t Help the Poor”

·         “Why It Pays to Be a Government Worker in Ontario” (reminiscent of Premier Bennett`s fireside chat thirty years earlier, this tract cries crocodile tears about the unfair advantage that public sector workers have over their poor private sector worker counterparts)

·         Bolder Reforms Needed For EI To Be a True Insurance Program (attacking the latest EI legislation as not going far enough)

 

We needn’t wonder where Tim Hudak, Premier Brad Wall, or federal Conservatives get their talking points.

 

Through its international connections at the lofty sounding International Freedom Network that operates with like-minded Institutes (such as CATO) in 80 countries, the Fraser Institute is now widely accepted as a respected source by international capital. JP Morgan (that was in on the financial gorging that created the banking crisis)[1], now with assets a little over one third the size of Canada’s (two and a half trillion dollars), offers advice to Europe using Fraser Institute “expert research”. Morgan`s latest twelve page newsletter suggests that Europe is only about half way done in its crisis austerity program; and goes so far as to suggest that the democratic political constitutions, in formerly fascist states such as Greece, Spain and Portugal, are impediments to further  economic “reforms”.

 

Singing the praises of “economic freedom” for the little guy facing financial juggernauts such as JP Morgan and Goldman Sachs[2], as the Fraser Institute defines “economic freedom”, is like praising the Marquis of Queensbury rules for Rowan Atkinson (Mr. Bean), the “boxer”, as he enters the ring against Muhammad Ali in his prime. The crisis of 2007-08 and the size of the current global economic behemoths should be enough to suggest that political economists have a responsibility to delve deeper into the cause of crises, and not simply react in defence of Keynesianism. That is a losing ideological/political/economic strategy.

 

What is not touched by either Friedmanites or Keynesians is the cause of crises, or what causes swollen profit and ledger sheets while poverty grows. Neither ideological approach touches the sanctity of profit that is bedrock to the social and economic system we live and work under. While Friedman followers bring the wrecking bar, Keynesians can only nibble at the edges of enormous problems, and can delay the pain for a time (not unimportant if it gains Labour and the Community time to regroup). The Chicago School suggest using blunt instruments to increasing profitability; Keynesians suggest using inflation to hide profit-taking and offending nobody. If the debate stays within the narrow ideological confines of two defenders of the system, capital then has nothing to fear as it pursues its extreme manifestation in its quest for maximum profits, be it through privatization, deregulation, union-busting, redistributing wealth away from the community, environmental degradation, cannibalizing smaller business, the race to the bottom and so on.

 

It is always the fear of losing profit (temporary in the case of a successful strike; more permanent when folks start to talk about fundamentally reorganizing society in a more humane way, e.g. the Regina Manifesto) that is always primary in the boardrooms of the world. It is that fear that is missing in the power equations of today. There is widespread questioning and demonstrating, but it is not underpinned by coherent political, economic theory despite wonderful research by underfunded Left leaning institutes and academics.

 

The latest admission by Michael Walker that the Fraser Institute accepted money from the Koch Brothers Foundation[3] almost from the beginning should give us pause to consider how Labour and the Community gets back into the ideological fray in a more meaningful, coherent way. The Koch Brother founded the CATO Institute and is largely credited with bankrolling the Tea Party. We now know that within the last five years, Koch has provided the Fraser Institute with more than one half million dollars. It is the Trojan horse of international capital and it has a huge head start. I, for one, dismissed the Fraser Institute at one time. I did not draw the necessary connection to what was coming down around our heads in the middle of a tempest. I will never underestimate it again!

 

 

George Hewison, as General Secretary-Treasurer of the United Fishermen & Allied Workers Union, and Vice President of the Vancouver & District Labour Council in 1983, called the first meetings that led to founding the Budget Coalition that in turn led to province-wide opposition to the Fraser Institute/Premier Bennett Government Budget and 26 Bills. In addition to linking music to working class struggle for the past half century, Hewison has always merged political practice with discussions on political economy. He continues to raise his voice both in song and also in engaging working people and others in discussions about our collective destiny. 



[1] JP Morgan was one of the biggest players in the bank crisis of 2008. It had gambled with over 20 trillion dollars in credit default swaps.

[2] Goldman Sachs supplied the last three US Treasury Secretaries, Canada`s whizz kid, Mark Carney, and the last Prime Minister of Italy, Super Mario Monti was an advisor to GS.

[3] Fraser Institute co-founder confirms `years and years` of U.S. oil billionaires` funding, David Ball, Vancouver Observer,

April 26, 2012.