Is the NDP government being far sighted?

The newly elected NDP government has just announced its plans to increase the minimum wage for Alberta workers by almost 50 per cent.

The newly elected NDP government has just announced its plans to increase the minimum wage for Alberta workers by almost 50 per cent in the course of the next three years, attracting widespread and harsh criticism, bordering almost condemnation.

Critics state that the increased minimum wage, coupled with the forthcoming review of the royalties collected from oil and gas producers, will push investors away from Alberta to neighbouring provinces of Saskatchewan and B.C, create massive unemployment and will deal a blow to consumers as the corporations and companies affected by these latest changes will reflect their increased costs to their prices.

One has to admit that there might be a lot of truth in those statements. But critics also have to remember the fact that NDP was elected to govern this province on the back of promises to do exactly what they are doing now, so at least they are being true to their word and delivering on their promises.

So is the NDP government knowingly taking the province on a path of economic destruction?

The answer to this question is probably far more complicated than a simple yes or no, or even difficult to formulate within the bounds of a newspaper article.

The contradiction between what Rachel Notley’s government is trying to accomplish and the probable accuracy of the criticism leveled at it is the contradiction that is mushrooming in the very heart of the economic system we are living in.

What are the basic contours of this contradiction?

The system is based on the free enterprise of individuals making investments which create employment, which in turn allows creation of consumer demand, which supports production, which produces profits for investors who invest their newly acquired profits to make more investments to create more employment to generate more consumer demand and so on… But this works only in theory because:

–       Rampant financiialization of the global economy has been shrinking the money directed to investments to create actual manufacturing and service jobs, investors are growing their capitals through financial instruments and not from production of goods and services;

–       Increased automation of industrial processes is reducing the need for human workforce, thereby reducing creation of employment;

–       Increased unemployment and financialization of the economy is exacerbating the inner conflict of the system: Reduced investment is decreasing added value in the economy, which, in turn, is hitting the profits that can be made through the financial instruments.

Put in simpler terms. The pie is getting smaller as compared to the growing population and the top strata that control the money are finding creative ways of cutting bigger slices from the pie at the expense of those who have only small capital or their labor as a means of making a living.

Now, if you are a believer in the magic of the free market and free enterprise, it is only natural that you will think that market will resolve this problem through its natural course.

But the signs are that market’s regulatory mechanisms are getting increasingly ineffective, thereby inviting regulatory intervention from governments as in the form of increased minimum wage and increased royalties from oil and gas companies to generate funds in order for the governments to make investments to generate employment.

A book published by the Oxford University Press, entitled “Does capitalism have a future?”, reflects the arguments of some of the greatest minds of our times, global systems analysts like Immanuel Wallerstien, Randall Collins, Michael Mann, Georgi Derluguian and Craig Calhoun.

Majority of these thinkers believe that we are bound to see an end to the current economic system, and maybe not a very peaceful one, because the system has exhausted its ways of capital accumulation, its raison d’etre.

Whether their predictions in terms of time and manner prove accurate, it is hard to say. But we might want to look at what the Notley government is doing as a precursor of the things to come as early as the next 20 years.