German Chancellor Olaf Scholz and Canadian Prime Minister Justin Trudeau in Berlin on March 9, 2022. Sholz attended a delegation visit to Canada from August 21 to August 23, 2022. Image Credit: (Michael Sohn/The Associated Press)

Written by: Morrigan Johnson

Canada and a shifting international economic situation

Earlier this year Canada endorsed the US-led coordinated sanctions against Russia. Since late February, Canada has experienced very high inflation and sees an affordability crisis unfolding. Western narratives on the sanctions, the international economy, and Russia seem to be full of contradictions. Canada has taken advantage of an escalating international crisis by peddling ‘ethical oil’ to displace Russia from international markets, jeopardizing a just transition in the process.

Western countries rolled out a series of sanctions packages across NATO member states as they were deliberated with economies and supply chain in mind. NATO countries have frozen assets, while implementing trade restrictions and financial prohibitions. Notably restricting many technologies and components for Russia to produce high tech goods, global services like Mastercard, and Russian oil and gas are banned or being phased out of Western markets.

Europe will replace Russian energy in the short term depending on sourcing new supply. This has put incredible strain on the international economic situation. There is also a disturbing trend in some countries lobbying dangerous russophobic laws such as Estonia, a former Soviet state, seizing homes of Russians, and banning Russian visas.

Corporate foreign policy in the interest of multinational mega corporations demonstrates that capitalists are failing to save capitalism from monopoly, with increasing destruction for the people and the prospects of the planet.

The Canadian economy is back to work nearly three years into the Covid-19 pandemic. Canadian conditions are less dire than in Europe following Russia’s Special Military Operation in Ukraine. Inflation is beginning to slow in Canada, and the unemployment rate is falling. Traditionally, these are good trends. However, if we look deeper the root problems remain malignant features of capitalism.

During the recession of Covid, we saw concerning trends. Shocks in employment and production due to lockdowns, little relief for people, austerity, profiteering, protectionism of private intellectual property patents, protectionism of markets, and supply chain issues. There is an escalation of multinational mega corporations finding ways to dominate and exploit global crises with the help of the State to achieve market dominance.

In rich imperialist countries, finance capital sustains this system. In Canada for example, we rely on the Bank of Canada to manage inflation through interest rates of debt and printing new money to keep the system afloat just like the Federal Reserve system in the United States. This means unprecedented money creation, reliance on finance rather than production, where production is outsourced to countries where labour and resources are easier to exploit. We can also see supply chain destruction, as markets are shifted through sanctions while extreme weather and the climate emergency disrupt food production. For example the drought in Europe this year is estimated to be the worst in at least 500 years, impacting crops and food supply.

The Canadian ruling class has chosen an economy of war

Amid high inflation many consumer price categories have risen at a pace we have not seen since 1981, 41 years ago. People are returning to work with the unemployment rate at 4.9 per cent in July. Wages are rising in order to keep people in the workforce, but are not keeping up to match inflation. At this stage the damage to purchasing power is changing market behavior.

The ways we measure inflation are not the most accurate measures for most people, due to category, weight, and the circumstance of the consumer. There are also limits to measuring the long term damage to value, from price changes on goods in ways that linger to the livelihoods of people in tangible ways. Value ought to have a relationship to price based on the labour required to produce a good, but sometimes that relationship fails to recover as other economic measures recover.

During the reference years of 2018 and 2019 the Government measured food insecurity as part of its ‘Opportunity for All—Canada’s First Poverty Reduction Strategy’ legislation. In 2022 we see gaps in useful measures where food insecurity is not being tracked in ways that give a picture of people’s livelihoods as they fall out of range of standard economic measures.

We see no drastic structural changes to redistribute capital and bail out the people or the planet. The Government of Canada approved a budget of war, while many provinces made budgets of austerity. Finance Minister Chrystia Freeland gave an update in June, which will be dealt with later.

Angus Reid’s most recent report shows that 76 per cent of Canadians are stressed about money, with 56 per cent saying they cannot keep up with their basic costs of living. One third of Canadians are worried about losing their jobs, while 80 per cent are changing their financial behaviors in some way.

The Consumer Price Index shows the Canadian average inflation rate at 7.6 per cent in July. Wages are only expected to increase 3.7 per cent this year, which shows a destruction of value in relation to work. Some countries such as Australia are seeing the worst destruction to real wages since records began. Small rise in wages can be explained by the minimal competition of employers to retain workers and fill labour shortages. The EU currently sits worse at an overall inflation rate of 8.9 per cent in July which is yet to peak.

The improvement in Canadian inflation trends can be explained by the stabilization of the price of fuel. However other categories of consumer goods, such as food, are not stabilizing in-trend and by July are still rising, at 9.2 per cent, while the inflation rate of shelter rose to 7.6 per cent. To break down this number for the same month: Home ownership inflation rate rising to 6.3 per cent. Utilities at 14.5 per cent. Vancouver and Toronto are pulling the shelter prices trend higher. One third of Canadians are renters; rent inflation sits at 4.9 per cent.

Private vehicle operation (including fuel), peakeding at 24.1 per cent in May. Depending on the region, for example the Eastern provinces of greater concern pulled the trend higher.

Finance Minister and Deputy Prime Minister Chrystia Freeland announced $8.9B in measures to address affordability in June emphasizing investment, job creation, and respecting the banks. The hands-off approach increases tax benefits, old age security, one-time damage deposit assistance for low income Canadians, child care, and dental care benefits. Also increasing indexation of federal programs to match inflation such as GIS, CPP, CCB, and GST credits.

Following this announcement, Freeland told CBC, she “must strike a balance between helping Canadians suffering from the effects of inflation and pursuing a policy of fiscal restraint — or risk making the cost of living problem worse”.… “I don’t want to make the Bank of Canada’s job harder than it already is” she said. This essentially means the Bank of Canada is steering the ship. No structural changes are foreseeable, only growth of the same economic malignancy of the ruling class. There is no plan for the long term destruction to value in relation to labour.

Protectionism and the environment

Natural Resources Minister Jonathan Wilkinson has been busy with Canada’s intermediate Oil and Gas interest as well as the long term Hydrogen interest. Canada has pivoted to new markets opening in the EU from the sanctions forcing Russia out. The coordinated sanctions packages have wedged an opening for one third of the EU oil supply, and 40 per cent natural gas markets before the Special Military Operation began. The EU is racing to close the gap. Russia also had long term interests in transitioning the market to clean energy, for example Russia was poised to supply Europe with Hydrogen, which has now fallen through.

Canada will increase exports of crude by 200,000 barrels per day, and natural gas by 100,000 barrels per day by the end of the year. Canada could replace 5 per cent of Europe’s natural gas supply gap and less than 10 per cent of the oil gap. This would be transported to Europe through existing infrastructure from the Gulf of Mexico in the USA. The logistical capacity limit the utility of further increase at this time. Alberta Natural Resources Minister Sonya Savage commented in March, “the federal government has “demonized” the oil and gas industry for too long, and as a result the industry’s ability to grow is constrained”. Bloomberg reports that a natural gas export terminal on Canada’s west coast should be ready by mid-decade.

Wilkinson reassured Canadians “Canadian oil displacing Russian oil doesn’t cause more climate change. There’s no more C02 emissions”. This means the overall supply and demand of energy products isn’t changing from prior, it’s simply more share for Western monopoly. Canada is essentially pursuing protectionism using the historical branding strategy of the far right, i.e. Ezra Levant’s book ‘Ethical Oil’ published in 2010. Keep in mind Russian energy is publicly owned, and Russia has far lower per capita emissions than the US and Canada, despite being far less developed and economically poised to transition. The same per capita trend is true for China. Moralizing Oil is a dishonest distraction from the international economic situation.

American energy interests would compete with the OPEC countries; Saudi Arabia and the UAE, to fill the supply gaps however both have seemingly been hesitant to significantly boost production yet. The sanctions appear to be a handout to Western monopolies.

On August 22, Wilkinson picked up the deal with Germany during the delegation meeting with Chancellor Scholz to replace Russia’s deal. The hydrogen trade for cleaner energy could be worth 11.7 trillion between Asia, Europe, and the USA by 2050. Russia was poised to supply 20 per cent of the hydrogen trade. Canadian and German leaders said Monday, “Russia’s Invasion of Ukraine is bringing Canada and Germany closer together, with Canada seeking to boost energy and critical mineral exports to Germany as both countries wean themselves off fossil fuels”. During the delegation the leaders also discussed AI and attended a Russophobic digital Crimea summit.

Jonathan Wilkinson has been peddling ‘ethical oil’ in what seems to be eco-protectionism, but this is also an ecological contradiction. Canada, and the USA, UK, and EU have committed to carbon neutrality by 2050. In May of this year the European Commission released an update to it’s Green Deal as further sanctions packages were deliberated. The EU’s Green Deal essentially failed to shift course, re-committing that transition from carbon emissions is at the pace that the corporations set, while individual consumers will be targeted in marketing campaigns to use less energy. This was a missed window for European Capitalists to save themselves.

Already profitable multinational monopoly oil and natural resource corporations of rich developed economies are edging out Eastern economies far less poised to transition from carbon, and orchestrating Russia into a dependency on oil economics for the long-term through coordinated sanctions. Canadian financial interests have undermined the economic ordering of a just transition. This will have climate impacts and diplomatic impacts on climate cooperation.

The United Nations Intergovernmental Panel on Climate Change (IPCC) is in its sixth assessment. According to the best available climate science, we see the remaining carbon budget, to avoid the most catastrophic effects of climate disaster without drastic change, will be depleted by 2030. Meanwhile the report shows we are already falling behind the 2050 targets promised. In July, The Economist reports 3 degrees of global temperature rise is likely. This modeling is on the assumption that war and diplomatic breakdown are not going to happen. The international situation makes this cruel optimism.

Furthermore, Ukraine and Western Powers are failing to engage in diplomacy. If there is no repair of Minsk II, or no agreement for a new political solution, balanced with Russia’s defensive concerns for a demilitarized zone, we will likely see a continued international conflict on the horizon.

An updated Brown University study on ‘Pentagon Fuel Use, Climate Change and the Costs of War’ from 2019 shows the US Military to be one of the most historically highest contributors to the climate crisis, and military activity is the most carbon intensive category. And to make matters worse, Nancy Pelosi’s visit to Taiwan province earlier in August, has resulted in counter measures from China. The country announced the end of all climate cooperation between US-China.

Canada’s complicity in the international economic situation is palpable. We have undermined Eastern transition from fossil fuels while meddling in their access to long term clean energy markets through sanctions.

Canada’s war-focused economy and sanctions pushes just transition farther away

Putin has contained the economic pressure of sanctions—being the world’s largest exporter of oil with strategic trade deals and subsidies struck with China and India, its GDP will shrink far less than the 12 per cent figure projected months ago, only shrinking 4.2 per cent this year. Russian people lost disposable income by 2.8 per cent, and a yearly inflation of 13.4 per cent. The Kremlin mitigated the potential for collapse and pushed through the sanctions.

The Nord Stream 1 pipeline that supplies the EU with natural gas announced a shut down from August 31-September 3rd, cited for repairs by energy giant Gazprom. However, as reported on September 2, the pipeline will indefinitely remain offline. Turbines sent to Canada for repairs had been stuck due to sanctions, but Germany requested they be returned with exemption. Gazprom has refused the delivery citing irregularities. A looming international energy crisis is possible.

The contradictions of Western corporate foreign policy are notable, having done barely any damage to the opponent, but proving to be destructive to the international economy and the planet. Yet several monopoly categories are on the precipice of substantial opportunistic profits. ‘Ethical oil’ as a strategy of Canadian and American economic intervention is categorically false considering ecology and the economy. Displacing Russian energy achieves very little for combatting the climate crisis, while sabotaging international markets, climate cooperation, and a just transition from fossil fuels. Working class people who will bear the burden, particularly in Europe, have a challenging winter ahead.

Afternote

The growth of several multinational monopoly categories is alarming. Macro data taken for this year, are measures of the last twelve months averaged at the time of the second financial quarter of 2022.

Military industrial complex;

Congress approved $840 billion USD in military spending in July, an 8.7 per cent increase from 2020, but this will likely be much higher by the end of the year as updates are made and expenditures run over budget. $10.2 million USD in lobbying donations to House and Senate Armed Services Committee members were given to help achieve this. Approximately half of this expenditure is expected to land in weapons companies and other contractors. The US streamlines its arms trade through the Foreign Military Sales Program, the largest channel for US weapons exports. US allies and NATO member states feedback-loop into this program, in partnership with these contractors. The general trend is that costs that vanish into the industrial complex are hard to track due to the complexity of feedback despite the growth. Direct contributions to Ukraine for example, 54$ billion USD from the US, has almost all been for military purposes. This can be re-doubled for the rest of NATO member states.

Big oil, big pharma, and others;

American oil companies have seen drastic increases of revenue in recent years, with Canadian oil not far behind. ExxonMobil saw revenue grow 57.38 per cent last year, and 66.16 per cent this year. Chevron saw revenue grow 71.57 per cent last year, and 81 per cent this year. In Canada, Enbridge has seen revenue grow by roughly a quarter year over year in the last two years. Suncor saw revenue grow 66.83 per cent last year, and 67.47 percent this year.

Vaccine producers during Covid maintained their private intellectual rights which has internationally been criticized as ‘Vaccine Apartheid’ and an incredibly large wealth transfer of public funds into private monopoly. Most vaccine makers saw a doubling each year, with the shocking exception of Moderna which saw exponential growth. Moderna saw a revenue increase of 1238.33 per cent in 2019, 2200.25 per cent increase in 2021, and a 227.61 per cent in the past twelve months, slowing to 9.07 per cent by Q2 2022

Big Tech is also striking in their economic measure. Tesla saw revenue grow 70.67 per cent last year, and 60.45 per cent this year. In the last two years Apple, Amazon, Twitter, and Meta (Facebook) have seen their revenue grow by a quarter to a third year over year.

Editor’s note: The Canada Files has spent more than two years doing critical investigative reporting on Canada's imperialist foreign policy. We’ve established a clear track record of exposing the truth Canada's political establishment hides from you. There's so much more we can do, but only with your financial support.

TCF’s monthly support is at $688 per month. To expand our journalism, and one day raise pay rates for news analyses and investigations, we need your financial support.

Please consider setting up a monthly or annual donation through Donorbox.

Morrigan Johnson is an anti-imperialist writer based in Calgary, Alberta.

More Articles

Featured