Why Can’t We Afford What We Used to Have?

In this age of  austerity, we are constantly told by governments that we have to tighten our belts. Tuition fees have to go up; public pensions, Unemployment Insurance and social assistance benefits have to be cut; universal public health care is no longer affordable, and so on ad nauseam.

But, as my friend Peter Puxley recently reminded me,  it is passing strange to argue that we can no longer afford what we could afford thirty years ago, when we were, as a society, much less  affluent.

Perhaps the best single measure of what we can collectively afford is real per capita GDP  – national income per person adjusted for inflation. Statistics Canada has usefully provided a long term historical series in a paper and a new CANSIM series. (383-0027.)

Real per capita GDP in 2010 was 53.2% higher than in 1980, roughly when the era of welfare state expansion gave way to the era of retrenchment.

As shown below, the growth rate of real per capita GDP has slowed considerably in the age of austerity – which deserves extended comment – but it has by no means ground to a halt.  This suggests austerity flows not so much from the lack of growth, as from the fact that more and more of that income growth has gone to the top 1% who just don’t want to share it with the rest of us.

Growth of Real GDP per capita, compound annual growth rates.

1960-69     3.42%

1970-79     2.80%

1980-89     1.90%

1990-99     1.60%

2000-10    0.80%






  • This is the bottom line. It needs to be hammered home many, many times.

  • This is the point given the austerity, that goes around the world that is one of the bigger contradictions.

    Truly this is all about accumulation and distributional issues.

    We need to occupy austerity.

    I hope the labour movement can somehow power itself to ride this wave of this tide to the new shores of struggle.

  • Andrew: Isn’t this table at the end an argument in favour of austerity of sorts? That is, with the “golden age” growth rates well behind us, isn’t this slower pace the real reason for the push for austerity? You cannot any longer have healthy, growing profits and rising public expenditures and improving working conditions with these kinds of growth rates. Defending social gains (never mind extending them) will require a direct attack on the share of profits. The capitalists understand this, why can’t we?

  • If growth rates are slower why should profits have priority over improving working conditions and social programs?

    Besides, growth rates dropped when neo-liberal austerity driven governments came to power. If we stopped all the austerity and other neo-liberal policies, maybe the higher growth rates would return.

  • Darwin: Capitalism is about never-ending accumulation of profits, not growth per se. Neoliberalism may have slowed growth (or it may have been a reaction to the exhaution of the post-war boom) but it did a great job at breaking the strength of labour and restoring profit rates. I’m all for working conditions and social programs coming before profits, but when the capitalists go on an investment strike, we see the limits of social democrat Keynesian policies. At that point, you either retreat (the usual socdem move) or radicalize – and thus move towards another social system not based on profits.

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