Date: Thu, 15 Jul 1999 00:14:11 -0500
From: tim rourke <[EMAIL PROTECTED]>
Subject: workfare for capital
It's time to introduce "workfare for capital"
By Jim Stanford
Frank Stronach, former CEO of Magna International, once explained why
companies weren't investing more in the production of goods and
services.
"Why would you pour a foundation, buy machines, or hire employees," he
asked, "if you can make as much money buying Canadian government bonds?"
The figures bear him out. The average return on equity for Canadian
business from 1990 to 1998 was 5.7%, while the average return on
long-term Canadian bonds during the same period was 8.2%.
Conservatives have long deplored the alleged harm that "easy public
money" has on the work incentive of poor Canadians. In response,
provincial politicians have cut welfare rates and the federal government
has cut unemployment insurance benefits. And they try to justify these
punitive cutbacks by claiming they help to break the poor's "cycle of
dependency."
But the recipients of the biggest public welfare handouts are being left
alone. They are the financial investors who received $77 billion in
interest payments from Canadian taxpayers last year on their holdings of
government bonds. That's almost four times as much as the total cost of
the welfare programs of all 10 provinces, and over six times the total
UI benefits paid out last year.
Our politicians conveniently ignore the impact of all this "easy public
money" on the work incentive of investors, who obviously have lost the
will to earn an honest living. Knowing they can rake in so much money
simply from holding pieces of paper, they have no need to undertake
useful and productive work. Why should they bother financing the
production of goods and services of real value when they can live as
well, or better, just by clipping coupons from government bonds?
These unfortunate investors are clearly locked into a cycle of
dependency. All they can think of is what they will buy when they get
their next government cheques. Will it be expensive booze? A gambling
spree in Vegas? A cruise on a luxury liner? Another Mercedes-Benz?
What these lazy investors need is a healthy dose of tough love. Their
welfare rates--the interest on their risk-free government bonds--should
be slashed by a percentage that at least matches the deep cuts in social
assistance. And, if they still won't go out and get real jobs, they
should be made to enroll in a "workfare for capital" program. In return
for their welfare income, they would have to invest some of it in
community development projects. Like low-cost housing, for example.
Such a worfare program for unproductive investors could be patterned on
the pronouncements of Ontario Premier Mike Harris in his 1995 election
platform. The Common Sense Revolution was the definitive statement on
the benefits of workfare. We reprint it below, with appropriate
editorial changes indicated in bold-face:
"We want to open up new opportunities and restore hope for investors by
breaking the cycle of dependency...We should prepare financial welfare
recipients to return to the real economy by requiring all able-bodied
capital...either to work, or to be reinvested in the community in return
for their benefits...Although the amount of money involved may not be
large, the possibility of community work opens the door for financial
welfare recipients to learn new skills, work towards full-time
employment, and increase their self-esteem."
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(CAW economist Jim Stanford is a visiting fellow with the CCPA.)
Taken from The CCPA Monitor, June 1999.
