The staples of securing a middle-class life in Canada are becoming less realistic for millions of Canadians every year. Treating the disease and not the symptoms is important: rising inequality is not a Canada-specific problem, it’s a global market problem and market planning is the way out.
Leader of the Official Opposition Pierre Poilievre put out a political advertisement in early August where he suggested that cities should be pressured to build high-density, affordable housing near or on public transit hubs.
Poilievre’s reasoning is straightforward; those who consume public transit the most tend to be a physically- or financially-limited demographic. He names senior citizens and students in his proposal as examples. Having close access to transit alleviates the expenses of a personal car or the time commitment of walking to get out of suburban sprawl.
The proposal unsurprisingly caught the political commentariat by surprise. Poilievre is a politician who spends most of his airtime toeing the party line with empty rhetoric around the mummies of red tape produced by the government that can only be unraveled through a laissez-faire market approach. Yet here he is proposing a concrete solution to alleviating the housing crisis administered through F.D.R-era centralized government planning.
To be clear, a cynic has good reason to believe that this is Poilievre’s attempt to capture the votes of young, single-issue voters who are feeling the despair of never owning a home on top of increased gas prices in the last couple years.
But to be clear, the idea itself is excellent. Putting zoning laws in place for dense, rent-controlled public housing near major transit hubs would disproportionately bolster the working class. Without such zoning and government control, it’s often more in the direct interests of developers and investors to build luxury condominiums as they have a higher rate of return on investment.
An example of misallocation from the private housing market in my hometown city of Burlington, Ontario is extremely apropos to Poilievre’s cause.
A set of eight luxury condominiums called the Paradigm Grand started construction in the last decade in Burlington on a plot of land that’s contiguous with the regional train’s Burlington Station as well as one of the same regional transit provider’s bus stations. The condos are set to finish completion in 2025 and the available unit prices range from $649,000 to $995,000, making them hardly affordable for the majority of Canadians looking to own a home.
The result is a situation where working-class people are often coming to and from the bus terminal walking from the crowded local bus stops surrounding the station. Meanwhile, the mostly professional-class inhabitants of the condominium units – a minority of the total traffic coming through this bus and train terminal in a given day – are going from their condos onto the train.
It was Friedrich Engels who, in a footnote to the fourth German edition of Karl Marx’s Capital, noted that the words “work” and “labour” seem to denote different things. The former seems to fit an anthropological category of that which is productive in human society, while the latter was a term employed in a capitalist context where surplus value is the non ducor, duco of human productivity.
An analogous linguistic implication exists in the difference between the words “house” and “home.” The former is, at best, a market term for the commodity of shelter; at worst, it’s a “safe” speculative instrument. There’s of course the proverb, “a house is not a home” that has found use in the titles of many Western films since the mid-20th century many of which express loneliness and alienation. So “home,” like Engels insight into “work,” has an anthropological determination: a home is that with which people build close bonds with family and friends while sheltering from the elements. It’s also a place where basic needs are met in terms of food, rest and recreation.
The neoliberal logic of the last five decades has eroded these anthropologically sacrosanct areas of human life that one could call The Commons – public spaces and essential goods and services like homes, healthcare, education, emergency services and communication networks. However, many of these resources are subject to supply and demand and allocated based on pricing in countless OECD countries.
With that being said, despite the valorization of competition rather than planned cooperation, being the best bet of reaching “market equilibrium” and thus prosperity in the eyes of neoclassical economists, it appears more and more that the largest corporations today plan a great deal of their operation in order to be big retail players that reliably provide what people want at low costs.
Leigh Phillips and Michal Rozworski’s book, People’s Republic of Walmart: How the World’s Largest Corporations are Laying the Foundations for Socialism, stresses the importance of planning in the world’s largest retail firms. Phillips and Rozworski compare major distributors like Amazon and retailers like Walmart and they find that these corporations with internal economies larger than the economies of some countries have made use of internal planning and supply chain transparency. This approach is counter to the orthodox use of internal markets where predicting price fluctuations happens asynchronously, even among tightly bound supply chains.
Early in the book, the authors explain the “bullwhip effect,” which arises when there’s a marginal change in demand for a good on the consumer end that causes disproportionate adjustment to inventory stock for that good moving backwards through the supply chain.
The authors note that this fluctuation at each node (extractors, manufacturers, wholesalers, distributors, etc.) can be up to eight times the actual change in market demand. In fact, a study from the ‘90s, which is cited in this passage from the book, found that it was roughly a one-to-eight ratio of the real change in consumer demand verses the reactive inventory changes along an affected supply chain. Therefore, if there’s a fluctuation of consumer demand of 10 per cent, affected supply chain organizations will prepare for a demand shift of around 80 per cent.
Essentially, the more transparent and less competitive a supply chain, the more likely that supply will match market demand leading to better efficiency. Phillips and Rozworski explain that this is what Walmart realized with an initiative called Collaborative Planning, Forecasting and Replenishment (CPFR) wherein all levels of their supply chains collaborate in a free flow of information around firm activity and forecasting.
The book also makes a case study of what happens in the opposite case of organization with Sears. Sears is a multi-departmental mega-retailer which implemented an internal market between not only suppliers but departments, which the authors argue lead to its downfall as competition, mistrust and misallocation caused the retailer to close down a large number of stores across the continent. Only a double-digit number of Sears stores remain in 2023.
Phillips and Rozworski draw the conclusion that a great deal of economic planning in the age of big data and advanced algorithms is the best way to allocate scarce resources. However, the authors note that with the incentives of capital being the accumulation of profit, which often doesn’t see a substantial trickle-down to the employees, then more planning isn’t enough on its own to make the production and share of resources more egalitarian across society.
When things like stock buybacks – which use the accumulated value created by labour – are far more serving to the interests of the owners and investors of a corporation than investing in labour or production technology, you have a system problem that even planning can’t fix. Hence the need for more direct government intervention into the market, especially for those goods considered essential, like housing.
Thomas Piketty’s 2014 bestseller, Capital in the 21st Century, is an exhaustive study on global inequality since roughly the 19th century as this is roughly when tax information started to be collected by governments in a standardized fashion. Piketty’s conclusions lead him to predicting that the 21st century is likely to reach wealth and income inequality levels unseen since Belle Époque Europe.
Piketty notes in his study that, as a rule, r, the rate of return on capital, tends to be greater than g, the growth rate of the economy (r>g), throughout fiscally recorded history. When this happens, concentration of wealth and massive disparities of income relative to one’s relation to the means of production ensue. The only time this formula was reversed to r<g was briefly within the period spanning from the outbreak of World War I in 1914 to the neoliberal turn in the 1970s.
Massive government intervention into the market; the wide-scale spread of progressive income taxes; the destruction of wealth in the aftermath of two world wars and massive population growth with the end of war; not to mention the systematic introduction of women into the global market – all created an anomalous situation where inheritance and the ownership of capital were less predictive of a decent life.
The trend of robust redistribution was reversed according to the data presented by Piketty with the reforms of the 1970s. Although, inequality looks different today compared to before World War I, with income disparities and “supermanagers” being the main harbingers of 21st century inequality whereas wealth inequality resulting from the nobility and the now non-existent rentier class was understandably the larger inequality relative to income inequality in the Belle Époque era.
When r>g is the status quo, a condominium has a higher likelihood of being inefficiently built next to vital transit services for poor and working-class people rather than to serve the interests of a few high earners and investors looking to make a profit.
As global inequality is on the rise, direct government intervention and democratic workplaces that make use of transparent planning and cooperation may be the only way to steer us out of a protracted period of neo-feudalism ruled by a global rentier-investment class.
To be clear, the imperative for more democratic planning of the economy extends past just the misallocation of housing and other scare resources. It is more apparent than ever that non-nationalized control of sectors like energy are fueling the ecological crisis as structural competition has petroleum giants playing a lucrative game of chicken with the stability of the planet’s biosphere as the knock-out.
In Norway, one of the two sovereign wealth funds that comprise The Government Pension Fund of Norway invest the profit of the state-owned petroleum sector into funding pensions. Not to mention, Norway being located between the North Atlantic Ocean and the Arctic Ocean makes its inhabitants more susceptible to dramatic changes in global temperature. Nationalization of the petroleum sector means the ability to scale back and switch to renewables more easily for the Norwegians because control is more in the hands of those affected by rising temperatures through their votes instead of in the hands of investors who are responsible mainly to their own personal self-interests and who can flee once they’ve made their fortunes.
Again, Poilievre’s pop-economic idea of planning based on demographic needs is obviously a single-issue layup and which isn’t anywhere to be found on his still proposal-empty campaigning website. Just for comparison, Bernie Sanders, who isn’t running for United States president anymore, still has an “issues” page on his website with detailed proposals to expand Social Security, but I digress.
Regardless, the kernel of democratic control and transparent planning over the allocation of resources in Poilievre’s proposal needs to be radicalized so that that same thinking is directed at the commanding heights of the economy and the authoritarian structure of traditional firms.
