The financialized self

We have become entrepreneurs in the era of globalization.

Each of us is a little business, left to navigate the risky world of investments and the stock market. As a consequence, the role that the state plays in the welfare of citizens has been reduced.

    image: Proxim Group

Now retirement depends on how well we strategize financial speculations. It used to be that pensions were determined by salary and years of service, now it’s risk management.

As financialized subjects, we must consider economic cost–benefit calculations as the natural criteria for evaluating life choices.

The ethos of the financialized self is one of expertise in planning and managing investments. The study of finance has become the key to success. Kyle Liao and Jonah Butovsky explain:

“In viewing their actions through the prism of financial literacy, the individual (entrepreneur) becomes personally and solely responsible for the day-to-day ‘business’ of their lives (CCPA Monitor, Nov/Dec, 2107).”

We are exposed to the machinations of capitalism. If we aren’t skilled in managing our finances, it’s not the fault of capitalism -it’s ours for not being shrewd investors. And when we seek financial advice, it’s from advisors who are also trying to claw their way to the top. We become keys to their success.

TV shows reflect the financialized self. They become grim lessons of what happens when you are not a shrewd manager. Money Moron and Til Debt Do Us Part profile the financial mistakes of ordinary families.

In CBC’s Dragon’s Den, aspiring entrepreneurs pitch business and investment ideas to a panel of venture capitalists (“Dragons”) in the hope of securing business financing and partnerships. U.S., contestants competed for a one-year $250,000 contract to run one of Donald Trump’s companies in The Apprentice. Trump’s pretence as an astute entrepreneur propelled him to the presidency.

The message in both shows is obvious: We, the clever people who have made it to the top, will judge you poor schmucks and your pathetic ideas. The format reminds me of the movie They Shoot Horses Don’t They? in which the lives of a group of contestants intertwine in an inhumanely gruelling dance marathon that is rigged for all to fail.

Of course, the rich are not always that clever. In the Great Recession of 2008, the geniuses who invented dubious investments brought the world to the brink of financial collapse. We, the reluctant citizen entrepreneurs, paid the price. The TSX lost 35 per cent of its value and it took five years just to get back where we started.

With interest rates so low on savings, and with wages that haven’t kept up with inflation, we have little option but to compete in the grim dance of capitalism. The FIRE industries (finance, insurance, and real estate) play the tunes.

Films, biographies, novels, television shows and online content about finance and financiers (lionized or demonized) are more popular than ever.

The inescapable logic of finance shapes public policy and social institutions, from hospitals and schools to scientific research labs, where the prime dictum is ‘risk management,’ ‘return on investment,’ and ‘market efficiency.’ The benefits of pure scientific research are abandoned.

The evolution into financialized citizens has had a profound effect on society. It reduces cooperation and treats everyone as competitors in the marketplace.

Advertisement

Tax loopholes –the good, bad and ugly

What’s the difference between a tax break and a tax loophole? Tax breaks are legitimate deductions that I make and loopholes are shady tax dodges that others use. Seriously, they’re all what economists call tax expenditures. The only difference between them is whether they progressive or regressive, and how much they improve equality.

Some tax expenditures benefit low and middle-income families such as deductions for union dues and post-secondary education. Others benefit wealthy Canadians such the mineral exploration deduction and the capital gains allowance.

Regardless, they are all uncollected taxes. And it’s a lot says David MacDonald, senior economist for the Canadian Centre for Policy Alternatives (Monitor, Jan/Feb, 2017). The government of Canada gives up almost as much in tax expenditures as it collects in taxes. In 2011, tax expenditures were $103 billion while collected taxes were $121 billion.

Tax expenditures serve a useful purpose if they improve equality. Equality is an indicator of how happy citizens are, be they rich or poor, as I argued in an earlier column (Conservatives can increase chances by decreasing happiness, Dec. 14, 2016).

The question is whether tax expenditures increase equality or reduce it. Are they progressive or regressive? MacDonald has analysed tax revenues and found that of 64 tax expenditures, only five are progressive and go to the lower half of income earners. The remaining 59 tax expenditures go to the top half. The tax benefit for low-income earners is a paltry $130 while for the richest it’s $15,000. Is it any wonder that “tax loopholes” seem shady? Low income earners see it for what it is –a benefit that only the rich receive.

With the feds in the fiscal hole, and with almost as many taxes uncollected as collected, I would have thought that Finance Minister Morneau would have use the last budget to reform taxes. But he didn’t according to Kevin Milligan, professor of economics at UBC.

“In the budget, the government did make some good moves with the tax measures it tackled, but it did not tackle enough. That is, Mr. Morneu may have grabbed some of the low-hanging fruit, but he left a lot of fruit further up the tree untouched, (Why Morneau got cold feet over eliminating Canada’s bloated tax-credit system, Globe and Mail, Mar. 24, 2016.)”

On the plus side, the feds are still committed to reviewing corporate tax shelters that allow income to be split with partners and lower taxes. And they simplified the Canada Caregiver Credit for those caring for an elderly or infirm family member.

It’s OK to eliminate tax breaks but not my tax break. Milligan elaborates:

“For every tax expenditure, there is a particular constituency that benefits, while costs are dispersed across all taxpayers. Firefighters like their volunteer-fighter tax credit; teachers like their teacher-school-supply credit and first-time home buyers like their home-buyer tax credit.”

The solution, adds Milligan, is to eliminate entire bundles of tax breaks. That way no particular group feels targeted by tax reform.

Tax reforms may be painful but they’re necessary to improve equality. We’ll all be happier for it.

Merge CBC with Canada Post

 

The CBC and Canada Post are both in the business of delivering information, so why not bring them together into a single entity?

Canada Post/CBC

They are both crown corporations; they are both undergoing radical transitions to digital communication; and each has what the other could use.

Canada Post has 6,200 public and privately-operated offices across Canada. CBC has hundreds of TV and radio transmitters. Canada Post serves a larger area than any other country. CBC broadcasts to every corner of Canada in English, French and eight aboriginal languages.

The new entity, the Canadian Communication Corporation would not only consolidate the resources of the CBC and Canada Post, it would expand into the mobile wireless business to provide some needed competition.

Canadians now pay some of the highest cell phone prices for some of the worst service in the industrialized world, reports the Huffington Post (July 18. 2013). In a study of prices in 34 OECD countries, Canada is 25^th for high priced wireless phones. We are dead last when it comes to the number of people owning a cell phone.

The former Conservative government tried without success to encourage more independent wireless carriers into the market. The CCC would sell phones at Canada Post outlets and use CBC transmission towers to carry the service. For example, a customer in Iqaluit, Nunavut, could pick up the phone at the post office and receive service from a cell transmitter mounted on the tower that broadcasts CBM-FM-3.

Canada’s North lags behind in internet access. Nunavut tourism advises “Internet service is limited in Nunavut and slower than elsewhere. Wi-Fi service is uncommon. Visitors to Nunavut should not plan to spend much time on the internet.”

Professor Dwayne Winseck of Carleton University lists other advantages of the CCC: “Blanket cities with open access, lighting up the vast stock of underused and unused municipal dark fibre (CCPA Monitor, July/August, 2016).” By “dark fibre,” he means optical fibre that is not being used to capacity. As I reported in my column Kamloops Community Network -a vision unfulfilled, (July 22, 2014), Kamloops has a lot of dark fibre, the legacy of bold plan of former city technology manager Frank Mayhood.

“Extend public Wi-Fi in cities across Canada,” adds Winseck, “and broadband access to underused and unserved people in rural, remote and poor urban areas.” Rural service is not a luxury; it’s a necessity in business and education. The mayor of Caledon, Ontario, says that some students have their parents drive to the parking lot of a public library just so they can upload homework assignments (National Post, November 23, 2015.

The Trudeau government will give $16 million to internet service providers in B.C. to provide better rural access. If it makes sense to provide give money to private providers, it makes even more sense to invest in the CCC.

While there is a scarcity of internet service in Canada, there is also a looming news crisis. The CCC could not only deliver the news, it could produce it through the CBC’s capacity.

The business model of news delivery is failing as we get news echoed from ever fewer sources. A newly configured public broadcaster could fill that vacuum.

A good economy

A good economy will feature work rather than growth for growth sake. Some progressives think that negligible growth is inevitable, perhaps even desirable. Too much growth, so the argument goes, consumes too much of the Earth’s resources. It doesn’t have to be that way says Economist Jim Stanford.

“I disagree on all counts. I do not think that slow growth is natural, inevitable or desirable. I do not think that stagnation and recession will fix environmental problems; more likely, they will make things worse (CCPA Monitor, May/June, 2016).”

New jobs can be created when a nation decides to.

There are many ways to create growth. One is through capitalism and the unsustainable plunder of the Earth’s resources which focuses on fat dividends for investors.

Another is through work. It’s not like there is a shortage of things to be done, much of it in the service sector: better care for seniors, health care, child care, education, and the arts. Many more jobs wait in green technologies; building and repairing roads and bridges, schools and cultural facilities, public transit. Jobs will continue in areas such information technology and as energy extraction (we won’t stop using fossil fuels tomorrow).

Increased service sector jobs are a novel concept when seen through the lens of Neoliberalism where growth is seen as a function of profit. And it’s a mistake to think that growth is even their primary motive. Greed is. Capitalism is organized to reinforce the wealth and power of a few.

Neoliberalism does not encourage growth. To reduce input costs, wages are driven down. Workers are disempowered through de-unionization and precarious work. “These are all anti-growth policies,” says Stanford.

A measure of growth is the Gross Domestic Product: the total value of goods produced and services provided in a country. In order to keep up with the growth of population and productivity, the GDP should grow by about two per cent annually says Stanford. Any slower and unemployment increases.

The growth of jobs in the service sector may sound a bit fanciful because of resistance from capitalists. Try as they might, they haven’t managed to squeeze much profit out of health care and education.

It’s not fanciful when you remember that we did it once before. Canada and other Western nations pulled themselves up by the bootstraps during the Second World War by creating jobs that met a national objective, not corporate profits.

Unemployment disappeared within months. Untapped sources of labour were drawn into the workplace, particularly women. The bloom of job growth lasted decades with a reduction in poverty and improvement of life expectancy.

Who’s going to pay for it? During the war, money was never a constraint in spite of the hard times of the Great Depression. With modern credit, raising capital is easier than ever. Private financial institutions create money out of thin air whenever it suits their profit-driven motives, as I discussed in my column of December, 2015 How to make money.

Governments can similarly create money, as they did when they saved banks and industry after the Great Recession of 2008. The only thing stopping the growth of service sector jobs is the government’s fear that they will offend the sensibilities of corporations.

Uber Apploitation

When I fly to Los Angles next week, I was going to take an Uber taxi. Now I’m not so sure after reading Andrew Callaway’s article in the CCPA Monitor.

George, 35, protests with other commercial drivers with the app-based, ride-sharing company Uber against working conditions outside the company’s office in Santa Monica, California June 24, 2014. REUTERS/Lucy Nicholson 

“Oh, Canada! I’m writing you from Berkeley, California to warn you about this thing called ‘the sharing economy.’ Since no one is really sharing anything, many of us prefer the term “the exploitation economy,” . . . Whatever you want to call it, the basic idea is that customers can outsource all the work or chores they don’t want to do to somebody else in their area.”

Since phone apps can be used to order just about anything you want from groceries and restaurant food to laundry pickup and house cleaning, the exploitation economy might be better labelled as the “apploitation economy.”

On the surface, the sharing economy seems ideal. Independent workers can pick up jobs whenever and wherever they want. But dig deeper and you find that drivers are not so independent. They certainly are not employees. If they were employees, they would receive fixed wages and benefits, deductions for employment insurance, Canada Pension Plan, and taxes.

If Uber drivers were truly independent, they could control their rates and  conditions of work. Callaway soon found out some of the drawbacks when he worked for a company similar to Uber called Lyft. He found out that, without warning, ride-sharing companies will lower drive wages. By the time drivers notice the cut, they have invested in cars and are stuck in the job.

Ride-sharing companies are careful not to send drivers to pick up specific passengers because that would make them employees. Instead, drivers are given red zones which supposedly indicate where passengers will likely be. But by the time that other drivers move to the zones, the likelihood is reduced. It’s inefficient for the drivers but avoids the company’s responsibility.

If drivers don’t like the arrangement, why do it? “Realistically, people aren’t driving around strangers because they love it. The most common defence of the sharing economy I hear is, ‘if it’s so bad, why are so many people doing it?’ Many do it out of desperation. I’ve talked to a number of drivers who will work over 30 hours every weekend in addition to a full-time job just to have enough money to pay rent and take care of their kids.”

And if drivers like conditions so much, why do they want to organize unions to protect themselves? Seattle City Council recently approved a bill that would allow drivers for ride-sharing apps to form unions. The vote is a victory for the App-Based Drivers Association (ABDA) of Seattle, an organization of on-demand contract workers that lobbied for the legislation. Union organizers in California have said that the Seattle vote could influence actions taken in their own cities.

Ottawa recently joined Edmonton as the second Canadian city to legalize Uber. The move will put pressure on others. Canadian cities need to pay attention to the American experience and get ride-sharing right by easing restrictions on taxis and reducing apploitation. If Uber really wants to provide a useful service, it needs to treat drivers fairly by allowing greater rate control and working conditions.

Zombie Canadian mining company stalks Costa Rica

The vital statistics of Infinito Gold, based in Calgary, don’t look good. It has no functioning mines and a negative working capital of $154 million. Monitor magazine assesses their condition bluntly: “Infinito should be six feet under.”

Yet, it staggers on. The only thing keeping the zombie mining company going in Costa Rica is cash infusions from Calgary billionaire Ronald Mannix. He refuses to let it die.

If you’ve been to Costa Rica, you know how important eco-friendly tourism is to the small Central American country. Infinito seems to have been blind to that culture when they bought land on the border of Nicaragua to build an open-pit mine fifteen years ago.

When I visited the area near the border of Nicaragua in 2012, Costa Rican pride in their pristine rivers and forests was evident.  Back in June 2002, on the occasion of World Environment Day, the Costa Rican president of the time, Abel Pacheco, banned open-pit mining completely.

But not even banishment could stop the mining company from lurching forward. In an apparent bribe, Mannix flew to Costa Rica in 2008 to offer $200,000 to a Foundation named after the new president Oscar Arias Sánchez. Suspiciously, shortly after the trip, the president decreed that the open-pit mining ban was lifted.

Costa Ricans were incensed and through a citizen court secured a moratorium on Infinito’s activities; regrettably, not before the company had done $10 million in damage to the proposed mining site.

Costa Rica’s attorney general wanted to get to the bottom of Sánchez’s motives for lifting the ban. While that move would be virtually impossible in Canada under the iron fist of the PM, Costa Rica’s attorney general boldly investigated possible wrongdoing of his own government.

The key was whether the $200,000 offered by Mannix had actually been transferred to the president’s foundation. A request was made of Canada’s Department of Justice to provide a definitive answer. At first, Canada ignored the request, and then stonewalled by demanding additional information from Costa Rica; disclosure of which would have breached the country’s privacy laws.

In the absence of cooperation from Canada, Costa Rica’s attorney general recently stated the case against Sánchez would have to be closed for lack of corroborating evidence.

When apparent bribery doesn’t work, Mannix has yet another scheme to jolt the lifeless body of Infinito. It’s called investor rights. The concept was first embedded in NAFTA, soon to be entrenched in the TPP.  Rick Arnold explains the twisted strategy.

“Time to call it quits? Nope. Infinito Gold’s main backer, the unremitting Mannix, decided to up the ante by gambling on an investor–state lawsuit against Costa Rica, to be heard outside the courts by a private, investor-friendly World Bank tribunal. The legal costs would be expensive, but a win could earn the empty shell of a company megabucks in compensation for not building its mine.”

Even if Mannix wins, the shattered hulk of Infinito will crumple. It’s a lose-lose situation. Costa Rica will lose $94 million for rejecting a mine that was never wanted, promoted by a vindictive Canadian, conducted by a tribunal in secret.

Cuts to CRA encourage tax avoidance

It’s a familiar pattern: talk tough and do nothing. The Harper government says that they want to crack down on tax evaders; all the while they cut 3,000 positions from the very agency that could investigate. To top that, they fail to pass legislation that would plug loopholes.

To enable tax avoidance, the Harper government signed a treaty in 2011 with Bermuda to allow Canadians to transfer money there and transfer tax-free dividends back, reports Paul Weinberg in the CCPA Monitor.

For appearances sake, the finance minister made a trip to Bermuda in 2013 to assure fellow G8 countries that Canada was on board in the effort to close tax loopholes.

It’s fine to talk tough but actions speak louder. Alain Deneault, professor at The University of Quebec discloses that Canada is complicit in sheltering tax avoiders in his soon to be released book Canada, A New Tax Haven: How the Country that Shaped Caribbean Tax Havens is Becoming One Itself.

While researching his book, Professor Deneault found inside sources that exposed the government’s hypocrisy.  “Officially, Canada shows solidarity with other western countries about tackling tax avoidance. I have informants in other countries, people whom I talk to when I travel, and they say that Canada, in the meeting rooms, is also always fighting against any kind of proposal that would make it difficult for corporations to use tax havens.”

It’s not just big Canadian corporations that are avoiding taxes. Court documents recently obtained by the CBC reveal that a wealthy Victoria family paid virtually no tax over a span of eight years in a sham cooked up by one of the most respected accounting firms, KPMG Canada.

The Canadian Revenue Agency found that that between 2002 and 2010, the Victoria family paid little or no tax, despite receiving nearly $6 million from an offshore company. KPMG lawyers claim any money the family received were “gifts” and therefore non-taxable.

KPMG must have felt emboldened by the inaction of the Harper government. The feds were essentially signaling to KPMG that despite the tough talk, this kind of dodge was OK.

Imagine the number of tax avoiders that Canada Revenue Agency could find if they were properly staffed?

While other G8 countries are tightening up laws to reduce tax avoidance, Canada’s net to catch cheaters has holes in it big enough for a whale to swim through.

NDP tax critic, Murray Rankin, tried to pass a private members bill that would tighten the net and bring Canada up to par with the tougher approach to tax cheats taken by the U.S.  It failed to receive government support.

“Murray Rankin’s bill is right on,” says Robert McMechan, a former general counsel in the tax litigation section of the Department of Justice. He’s seen too many “complicated corporate transactions where money goes around a circle and nothing of real economic substance occurs.”

I gladly pay my taxes, not just because the money is well spent in the services and infrastructure I receive in return, but as investment in the kind of Canada I believe in. It’s too bad the Harper government isn’t of the same mind.