The UK labor strikes are years in the making
British workers have hit a breaking point, with half a million people including nurses, railway workers, and teachers striking Wednesday for wages that match the pace of inflation and the actual value of their labor. Though the UK’s cost of living crisis has affected most sectors of society, it’s only the latest of a cascading series of problems for the country’s workers.
The strikes emerge following a decade-plus of austerity program and social services cuts that have hit the poor and middle income classes particularly hard, as well as dramatic shifts in the UK economy which some experts say have exacerbated inequality.
Wednesday’s strikes were the largest in a decade, closing schools and stopping the country’s rail service. The UK’s public services, including the National Health Service (NHS), schools, rail and maritime services, firefighters, and police, have suffered from a lack of government investment over the past decade and in particular, under the UK’s Conservative party. That lack of investment has been further amplified for the NHS due to the Covid-19 pandemic, which overloaded the already stretched system.
Railway workers, led by National Union of Rail, Maritime and Transport Workers General Secretary Mick Lynch, have been holding strikes since the summer due to what the union says is a proposed pay cut over the next two years, as well as proposed job and service upgrade cuts. The government under Prime Minister Rishi Sunak has responded by admonishing the workers, condemning the strikes, and backing legislation around minimum service levels, which would limit workers’ right to strike if it passes Parliament.
The strikes have spread to civil service workers, like those in His Majesty’s Treasury and workers who manage passport applications and driving tests, over the same concerns with wage stagnation.
UK inflation peaked at 11.1 percent last year according to the Financial Times and has been hovering around 10 percent, but pay for public sector workers hasn’t kept up. A proposed pay raise for public sector workers averaged around 5 percent, with civil service workers given a raise of only about 2 or 3 percent.
“[NHS workers] had a flat-rate pay rise of £1,400 (no matter what pay grade they were on) last year,” Anthony Barnes, a spokesperson for UNISON, the public service union, told Vox. “That works out at something like a 4.5 percent pay rise on average. That might sound ok, but inflation has been around 10-11 percent for months.” Barnes also pointed to “catastrophic staff shortages” because workers are leaving the service for better-paying work. “That puts extra pressure on the people who remain, and yet with pay running so far behind inflation, the pay ‘rise’ amounts to a pay cut.”
Wednesday’s strikes — and the further actions planned — indicate that the government, employers, and unions are far from a resolution. They also speak to bigger problems in the UK’s economy, going back to Brexit and before.
More than just economic demands, though, the strikes are about politics and policy — asking what kind of government can not only negotiate with workers but also mitigate some of the problems that have brought about the current economic and labor conditions.
The UK’s economic and political decisions have led to this moment
The current cost of living crisis brought on by inflation and the energy shortage due to Russia’s invasion of Ukraine is no doubt dire. But it didn’t come from nowhere; rather, it’s the apotheosis of a series of economic and political decisions that have drained social services while depending on them both from a practical and economic standpoint, increased inequality, and cut off opportunities for growth.
The cost of living crisis is “probably more of a tipping point, rather than the underlying causal driver” of the strikes, Liam Stanley, a professor of politics and international relations at the University of Sheffield, told Vox. “It’s quite difficult to disentangle all of the different factors because the UK’s been quite dysfunctional for quite a long time.”
The UK’s economy probably doesn’t conjure an image of dysfunction. But this past September, former Prime Minister Liz Truss exposed some of the country’s economic precarity when she unveiled a tax plan — quickly reversed — which would have lowered taxes for the nation’s wealthiest and provided tax breaks for corporations.
That plan caused chaos in the financial markets because it was such a radical departure from mainstream economic understanding: injecting money into the economy through tax breaks only exacerbates inflation. Corporations and other governments no longer had faith in the UK economy under Truss’s leadership, so they divested from it, causing the UK’s currency, the pound sterling, to fall to its lowest-ever value against the dollar.
Furthermore, governments have to raise money for services they provide, like schooling, health services, taxation and benefits, and more. Taxes and foreign investment are two obvious ways to do that, and when Truss and her Chancellor of the Exchequer Kwasi Kwarteng announced the plan, it raised questions about how her government would pay for the services, including the treasured NHS, that already suffered for years from underfunding.
Mark Blyth, director of the William R. Rhodes Center for International Economics and Finance at Brown University, pointed out to Vox in a September email interview that the UK government has been doing “astonishing acts of self harm” for years, including “cuts in spending on a state that has already been cut to the bone.” After the 2008 financial crash, the UK government under Tory Prime Minister David Cameron drastically cut resources for everything from food safety and air quality inspection to elder care.
Technically, the NHS and public education were to be spared those cuts, but the austerity program overall undercut British society and further entrenched inequality such that in 2018, the UN Special Rapporteur on extreme poverty and human rights Philip Alston delivered a scathing report on its effects. Because of that program, he wrote at the time, “great misery has … been inflicted unnecessarily, especially on the working poor, on single mothers struggling against mighty odds, on people with disabilities who are already marginalized, and on millions of children who are being locked into a cycle of poverty from which most will have great difficulty escaping.”
Another facet of the economic crisis, Blyth said, is Brexit, which “lost the UK the export markets they might use to grow out of this crisis.” That assessment is echoed in data from a 2022 report by the Center for Economic Policy Research, which shows a major decline in goods and service exports to Europe due to Brexit and its trade policies, in addition to causing shortages and rising prices on goods imported from Europe.
Brexit caused further insularity in the economy — which had already grown away from industry and manufacturing and toward what Stanley calls “rentier capitalism” — the ownership of a few prized assets like land, intellectual property, or natural resources, which are then rented out, to the cost of the many and benefit of the few.
Rather than industry and manufacturing, the UK’s economy is now based on services and the so-called rentier capitalism, increasing economic inequality over the past several years while also failing to produce innovation that could increase economic growth. To that point, the International Monetary Fund has forecast that the UK’s economy will contract by .6 percent this year, performing worse than other developed economies, and even Russia’s, which is under a punishing sanctions regime.
In the near term, worker power is set to continue
Wednesday’s strikes were the largest in a decade, but they won’t be the last. Barnes told Vox that UNISON members will strike again on Friday, February 10. More actions across a variety of sectors are planned for February and March.
Lynch promised further action in a speech at Westminster on Wednesday. “We’re not going to win it in one day,” he said. “We’re going to win it by staying the course. We’re going to have to dig in.”
That doesn’t just mean continued strikes, although those are certainly part of the plan. It also means taking political and legal action.
The current strike bill moving through Parliament, for example, faces potential legal action from the Trades Union Congress, Tim Sharp, senior policy officer for employment told Vox in an interview Friday. “We think that it’s highly likely that what the government proposes is illegal,” Sharp said, and runs afoul of Article 11 of the European Convention on Human Rights. “We think it’s contrary to what the [International Labor Organization] requires in terms of the right to strike.”
The UK doesn’t have enshrined into its law the right to strike, although work stoppage is legal provided trade unions follow specific government procedures. What the minimum services bill would do, Sharp explained, would give the government more power over work stoppage because service minimums would be decided by government ministers — not employers or unions.
Should they take the reins in the next general election, the Labour party has promised to repeal the minimum service bill if it’s signed into law. But ultimately what the unions and the striking workers demand is a government that is responsive to the needs of workers — that will prioritize funding the public services so many depend on and work toward an economy capable of serving its people. Lynch’s speech on Wednesday called for politicians to respond to worker demands for better pay.
“If they’re not, they’d better get out the way now,” he said. “Let’s get a general election on, and let’s get a new government that acts on behalf of our people.”
Highlights of Quebec 2023-24 budget
Quebec Finance Minister Eric Girard presented his fifth budget on Tuesday, for the province’s 2023-24 fiscal year. Here are some highlights:
— Income tax cuts of one percentage point on the first two income tax brackets, starting in 2023, which will save a single earner up to $814 per year.
— GDP growth is projected to fall to 0.6 per cent in 2023 from 2.8 per cent in 2022, before rising to 1.4 per cent in 2024.
— Government spending will be about $148 billion in the 2023-24 fiscal year, with a deficit of about $1.6 billion. The deficit rises to $4 billion after accounting for legally required payments into a fund dedicated to paying down debt.
— The budget is projected to be balanced in 2027-28, when payments into the debt fund are considered. The budget would be balanced as early as the 2025-26 fiscal year excluding those payments.
— Starting Jan. 1, 2024, Quebecers over the age of 65 who are in the workforce will have the option to stop paying into the Quebec pension plan, which will increase their after-tax income.
— Health-care spending rises by 7.7 per cent, for a total of about $59 billion — the largest government expenditure.
— Education spending rises by six per cent, for a total of about $20 billion.
— Spending of $649 million by the 2027-28 fiscal year for the promotion of the French language.
— Quebec will receive about $14 billion in equalization payments in the 2023-24 fiscal year, an increase of 2.7 per cent.
— Federal transfers will be about $30 billion, up 1.8 per cent, including about $8.7 billion for health care, which is 22 per cent more than in the previous fiscal year.
— Debt service will be about $9.5 billion, a drop of about six per cent from the prior fiscal year.
— Quebec’s gross debt by March 31, 2023, will be about $223 billion, and its gross debt-to-GDP ratio will be 40.2 per cent.
This report by The Canadian Press was first published March 21, 2023.
The Canadian Press
Why We Shouldn’t Expect the Russian Economy to Collapse Tomorrow
Last week, the head of the International Monetary Fund (IMF) Kristalina Georgieva predicted that sanctions on Russia would have “quite devastating” effects on its economy, which she said would shrink “by at least 7%.” This statement came out of the blue considering that the IMF recalibrated its Russian GDP forecast for 2023 in January, saying the fund expected it to grow by 0.3% instead of falling by a further 2.3%.
Of course, it’s a stretch to call 0.3% growth. However, you don’t expect a country that is struggling under unprecedented sanctions pressure and is spending up to 10% of its GDP to fuel its war effort to boast such statistics. By comparison, Germany’s GDP is expected to go up by just 0.1% over the same period.
This “optimism” regarding the stability of Russia’s economy caused an uproar. The general public did not appreciate the IMF’s attempt to act in an unbiased manner, especially considering that other international institutions kept their forecasts the same: a 3-4% drop in GDP in 2023.
That’s why this time around Georgieva had to send a much clearer signal to the expert community.
The rebukes hurled at the IMF (and even more so, at Rosstat) are mostly justified. But they also expose the fact that those engaging in arguments about the effectiveness of sanctions often indulge in wishful thinking.
Analysts now can be roughly split into two camps. The first group believes that even if the Russian economy is not “torn to shreds” it is still undergoing a major crisis. The collapse was only averted due to efforts made by technocrats in the Russian government and the sluggishness of the West’s sanction machine. Give it a little more time and the noose will tighten.
The other camp — the skeptics — say “sanctions don’t work.” A year later, the Russian economy is yet to implode and still somehow manages to pay the ever-growing expenses of the war. It seems that Vladimir Putin’s regime is as strong as ever, while sanctions turned out to be weaker than market middlemen and the potential beneficiaries of the restrictions, namely India and China.
This point of view has gained traction in the last few months and attracted a response.
The sanctions, of course, are working. Russia’s budget deficit in the first two months of 2023 reached 88% of the total deficit planned for the coming year. The new formula for calculating oil and gas taxes and a “shakeout” of major businesses should improve the situation a little, but even cautious estimates say that the deficit will swell to 5-6 trillion rubles (61.75-74 billion euros) which is a very unfortunate turn of events for a Kremlin that has grown used to having a piggy bank. Unlike 2022, which brought about record-high windfall gains from selling oil and gas, 2023 will be a year of shrinking exports.
Medium-term losses in GDP and the standard of living for Russians will accumulate. The country is now pursuing “regressive import substitution” — a policy that rolls back production to the level of technologies used 20-30 years ago, while consumers are offered outdated goods for higher prices to substitute for the lost imports. The Russian government heralded this course back in 2014 but it has already brought about losses of tens of thousands of rubles for the average Russian family.
But does it mean that the IMF forecasts will definitely not come true, while Georgieva is broadcasting propaganda myths about Russia’s invincibility in the face of sanctions? Not at all.
Firstly, the 0.3% GDP growth can be ushered in through public spending and arms production even while consumption is deeply in the red. Secondly, even if the economy shrinks by a few percentage points, it will not drive the West closer to what they seek: Russia’s military defeat. This is exactly what those who offer a more cautious stance on the destructive nature of sanctions are saying.
Yes, this is an unprecedented blow dealt primarily to consumption. But the Kremlin’s reserves to keep the war going are still significant. The Russian economy has not even moved to the mobilization stage and largely still functions according to the old quasi-market rules.
It does not mean that sanctions are pointless. They do work and their effect is very noticeable. But it’s not the IMF’s fault that the Russian economy is still afloat.
It is crucial to understand that the West’s economic leverage on Russia is not all-powerful and that even once the most effective measures have been implemented, expectations should be kept realistic.
This article was first published in Novaya Gazeta Europe.
The views expressed in opinion pieces do not necessarily reflect the position of The Moscow Times.
Canadian banks are stable, but ‘something is going to break’ in economy: experts
Canadians may have had flashbacks to the 2008 financial crisis last week when it looked like the collapse of Silicon Valley Bank was spreading before Washington stepped in. The bank turmoil adds to the economic uncertainty caused by inflation, rising food and gas prices and high interest rates. Ahead of the federal budget announcement on March 28, “The West Block” host Mercedes Stephenson speaks with Kevin Page, former Parliamentary Budget Officer and head of the Institute of Fiscal Studies and Democracy, and Lisa Raitt, former Conservative cabinet minister and vice chair of global investment banking at CIBC, about the state of Canada’s economy.
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