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A SPECIAL UE RESEARCH DEPARTMENT REPORT ON...

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The facts about inflation and wage controls

Many top economists, the prime min-

ister, and the heads of most corpora-
tions, argue that wages are the principal
cause of Canada’s inflation. How can you
say they are wrong?

A Quite easily. Not only are they

wrong, they know they are. They are
deliberately lying for reasons we will talk
about later.

The facts about wages and inflation are
provided by Statistics Canada. Their most
complete data on wages and salaries in
Canada show that wages have not even
kept up with inflation, much less caused it.

Since November, 1976, inflation (as
measured by the Consumer Price Index)
has increased 67.1 per cent, the biggest
5'4-year jump in Canadian history.

During the same time period, workers’
wages and salaries in Canada increased
57.6 per cent — 11.5 per cent /ess than the
rate of inflation.

In Ontario, wages and salaries went up
only 52.2 per cent — 16.9 per cent less
than the rate of inflation.

.Far from causing inflation, wage and
salary workers have been among its main
victims.

Why are the government and its busi-
ness allies pinning the blame on wages
if that is not the cause?

Because their real aim is not to
‘‘cure’’ inflation.

Q What is their real aim?

A Their real aim is to fight the current
economic crisis by diverting wealth
from the Canadian people to the private
sector. Based on their faith in so-called
“‘free enterprise,”’ they feel that the Cana-
dian people must sacrifice to help private
enterprise.

Q Where do wage controls fit in?
A Wage controls are just one measure
for taking money from individual
Canadians. During the last round of con-
trols, from 1975-78, it was estimated by the
business-oriented Conference Board of
Canada that the average worker lost
$20.61 a week in wages as a result of the
control program.
Corporations profited from controls.
The same Conference Board of Canada
study revealed that controls increased

corporate profits by $558-million in 1976,
$1.65-billion in 1977, and $2.4-billion in

1978.
But the current controls are just on
Q the public sector. How does that help
corporations?
A Several ways. First, if the controls
are successful in the public sector,
they will depress wages in the private sec-
tor as well.

Second, the government estimates that
it will save hundreds of millions of dollars
in wage expenditures, giving it more
money for its giveaway programs for cor-
porations. In 1981-82 the federal govern-
ment had already budgeted close to $9-bil-
lion in direct aid to corporations. On top of
this, its tax loopholes are worth about

another $9-billion to the corporations.
- Wage controls are only part of the
government’s squeeze on_ individual
Canadians. Other aspects include cut-
backs in education, health services, wel-
fare, pensions, day care, and social ser-
vices. >

Finally, public sector wage controls are
likely the first step to private sector wage
controls if the corporations’ drive for
concessions is not successful.

PACIFIC TRIBUNE—SEPTEMBER 10, 1982—Page 6

What do concessions have to do with
this?

Concessions serve the same func-

tion as wage controls. Both are

means of putting more wealth in the hands

of the employers at the expense of work-
ers whose wages are reduced.

One reason that controls have been

applied just to the public sector is that |

governments are hopeful that the corpora-
tions’ demand for concessions will be
successful in Canada as it has in the United
States. .

If workers make concessions, wage
controls are unnecessary.

What’s wrong with wage controls and
concessions if they get the economy

moving again?

A That’s the point, they have no hope
of getting things going again. In fact,

they will make things worse.

Q How?

A First, workers will have less money
to spend. With less spending, fewer

goods will be bought and production will-

become further depressed. More people
will be laid off, and the situation will
worsen.

To stimulate the economy, the buying
power of workers needs to be increased,
not decreased. Concessions and wage
controls do the opposite from what is
needed.

With 1.4-million Canadians officially
listed as unemployed, and close to 2-
million Canadians actually unemployed,
the country cannot afford the misguided
policy of wage controls and concessions.

But won’t wage controls and conces-

sions give corporations more money
to invest in equipment and expansion of
productive capacity?

A This will not happen. For the multi-

nationals, increased profit in Canada
is no guarantee they qyill spend a dime in
Canada. They will look at their world em-
pires and spend their Canadian profits.
where it suits them.

For example, it was recently announced
by the federal Petroleum Monitoring
Agency that oil companies shipped half-
a-billion dollars of their 1981 profits to the
United States in the form of dividends
alone.

Even for strictly Canadian cor-
porations, there is little likelihood that in-
creased profit will be used to expand capa-
city since the latest figures from Statistics
Canada show that over 30 per cent of the
existing manufacturing capacity is not in
use.

Why would corporations create more?
They are busy cutting back on what they
already have.

Q What. can be done?
A Several things. First, unemployment
must be recognized as our major
problem, not inflation. The government’s
phony war on inflation has been the ex-
cuse for policies that have put more Cana-
dians out of work than at any other period
in our history — including the Great De-
pression of the 30s.
A real solution involves a new industrial

strategy based on expanded manufac-.

turing development under public owner-
ship. In the short run, workers and the
unemployed must press the federal
government to outlaw layoffs and plant
closures that cannot be justified in a public
audit.

A228 |
VE NEWS CANADA y

‘For this crime, we arrest the victim!

The program director of the Social
Planning-Council of Metropolitan Toronto
has recently argued that over a billion dol-
lars should be spent on new direct job
creation programs.

While that amount may seem a lot,
$1.1-billion would be. available for direct
job creation if the federal government
simply kept its defense outlays for 1982-83
at their 1981-82 level rather than raise
them 18 per cent as planned.

But won’t stimulating employment
make inflation worse?

A Not necessarily. The argument that
unemployment is necessary to cure
inflation is merely an excuse for fighting
inflation on the backs of the poor.

Since 1976, the first full year the
government began its restrictive policies,
the number officially unemployed has in-
creased from 736,000’ to the present
1,386,000 — an increase of 88 per cent.
Despite this massive jump, inflation has
not lessened. Quite the opposite. The in-
flation rate in 1976 was 7.5 per cent. Today
it is 10.8 per cent.

It is time to separate the fight against
inflation from the problems of unemploy-
ment. Unemployment does not reduce in-
flation. Nor does employment cause in-
flation.

If wage increases are not causing our

inflation and if expanded employment
won’t worsen it, what are the causes of
Canada’s inflation and what can Canadians
do about it?

The basic cause of inflation is the

pricing power of the giant multina-
tionals which dominate every sector of our
economy. Their enormous economic
might allows them to set prices with little
regard for the market.

Their response to economic decline is
not the classical one of lowering prices.
Quite the reverse, they raise prices to pre-
serve profit margins. The giant automobile
companies are a current example.

Q Are there other causes?

A Yes. Inflation has been deliberately

fuelled by the federal government’s
policy of dramatic increases to oil and gas
prices.

" American) domination of our manufac

‘rate/tight monetary policies must be re

ond step is the mobilization of public sup”

High interest rates set by the Bank of
Canada, and the major private banks,
have pushed inflation ahead — raising
costs for everyone from the manufacturer
to the consumer.

The declining value of the Canadian dol: |
lar is also contributing to inflation because —
it forces Canadians to spend more dollars
for the same amount of goods.

As a result of the foreign (mainly

turing sector, Canada is overly reliant 02
imports and especially vulnerable to the
inflationary effects of currency changes.

Finally, Canada’s close economic ties t0
the United States cause it to suffer exces
sively from American economic policies
designed to curb domestic inflation born of
America’s massive expenditures on arms:

Q What is the solution?

Briefly, Canadians must take control
from the multinationals. This will i”
volve selective nationalization. (as i
France), stiff legislation on corporate be
havior, and public ownership of the majo!
financial institutions which are essential t0
the corporate sector.
The government’ s counter-productivé
energy pricing policies and its high interes!

versed.

The excessive dependence on imports
can only be ended through an economi¢
development strategy that emphasizes 4
full-fledged Canadian manufacturing seC
tor.

Since the private sector wants to pel
petuate Canada’s international depef”
dence, economic development will only
be accomplished through public ownel
ship and control.

Q How do we achieve this?

A Through intensified political actio?
by, the trade union movement

other progressive organizations. The firs!

step is to dispell the lies about inflatiod:
wage controls, and the economy. The se

port for labor’s program. Local educé
tionals, briefs to all levels of government:
rallies and demonstrations are a few of thé
means for carrying forward the fight.

— Reprinted from UE NewS:

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