On May 6, the Newfoundland and Labrador Premier’s Economic Recovery Team (PERT) released a report and statement outlining an economic “Big Reset” for the province. The PERT report makes numerous recommendations to Liberal premier Andrew Furey. These recommendations are painted as a strategic plan to reduce the provincial debt—which has ballooned to $39 billion, the servicing of which will become unmanageable for the province in the near future—and to reduce expenditures to match revenue. It should be stated clearly that while the 342-page report is full of language about creating a progressive green economy and revitalizing the province, the content is nothing but pure austerity and a direct attack on the working class of Newfoundland and Labrador (N.L.). But workers shouldn’t have to pay for over a century of government mismanagement and corporate theft.
A rotten foundation
To understand the grave financial situation facing N.L. today, it is important to go back to its economic roots. As a resource-rich but capital-poor territory, N.L. has a long history of turning to outside investors to exploit local resources, consistently to the investors’ advantage and at the workers’ expense. This pattern has resulted in an ever deepening crisis for the province.
Debt from day one
The transformation of natural abundance into corporate profit and government debt was already evident in N.L.’s days as a self-governing colony in the late 19th century. In an attempt to open up the interior of the territory for timber and mineral extraction, the government signed land over to railway companies for development. Two companies went bankrupt in the process of construction, leaving the N.L. government shouldering the cost. In the early 20th century, now as a dominion of the British Empire, N.L. spent $35 million fighting in Britain’s imperialist Great War. By 1919, interest payments on the colony’s debt consumed one-fifth of its annual revenue and by 1929, two-thirds of the colony’s debt was still dedicated to paying the price of the railroad and the First World War. With the Great Depression that followed cutting heavily into the dominion’s export of natural resources, and amidst widespread government corruption, N.L. faced bankruptcy. In 1934, the N.L. government voted itself out of existence and the dominion was ruled by a British-appointed “commission” until N.L. joined Confederation in 1949. It was only the boom of the Second World War that injected temporary prosperity into the N.L. economy, money that was subsequently squandered on incentives for outside manufacturers and disastrous large-scale industrial projects.
The Churchill Falls Generating Station has become synonymous with resource exploitation that funnels money into out-of-province corporate hands. The project was carried out by the Churchill Falls (Labrador) Corporation (CFLCo), a subsidiary of the British Newfoundland Corporation (BRINCO). BRINCO itself was formed by a group of British bankers and industrialists who were granted extensive land and water rights in the province by Premier Joey Smallwood in the 1950s. Churchill Falls’ proximity to the Quebec border meant that power would have to travel through Quebec to reach other markets. Lengthy negotiations with Hydro-Quebec were complicated by border disputes between the two provinces and by Quebec nationalizing a private company with a 20 per cent stake in CFLCo (effectively becoming both seller and buyer in the deal).
In 1969, with CFLCo steadily losing money on construction and increasingly desperate for financing, Hydro-Quebec executives agreed to carry the power to the U.S. market on condition that N.L. first sell it to them at a fixed price for 65 years. Under the terms of the agreement, the price was set at $2-3 per megawatt-hour and not indexed to inflation; what was openly acknowledged as a laughable price at the time of the contract today translates to essentially giving the electricity away for free. Moreover, CFLCo representatives signed the agreement knowing full well that, for the last 25 years of the contract, revenue would not even cover the operating cost of the station.
When energy prices skyrocketed, this soured the deal even further. In the 1990s, N.L. received $20 million annually for electricity that was sold to the U.S. for about $800 million. By the 2000s, the profit margin was in the billions. The N.L. government launched multiple appeals with the Quebec and federal governments and with the Supreme Court, to no avail. Compounding the financial toll of the Churchill Falls Generating Station, the N.L. government had to eventually buy out BRINCO’s water rights to the Churchill River and its shares in CFLCo. Newfoundlanders—whose own electricity bills, it should be noted, average $122 per megawatt-hour—have in effect paid several times over for the actions of these private and state corporations.
The Muskrat Falls project, an attempt to harness the remaining power of the Lower Churchill River not captured by the Churchill Falls Generating Station, has been equally riddled with problems. Muskrat Falls is managed by Nalcor, a provincial Crown corporation, and is at this point two years behind schedule and $6 billion over budget.
The construction contract had initially gone to the lowest bidder, an Italian company—Astaldi—with no experience working in northern, remote terrain. Astaldi could not meet project demands and, after being propped up with $900 million of Nalcor money, was fired. During the turnover, 122 non-unionized workers for Astaldi were left without pay. Construction was sucking up so much public money and raising such a public outcry that Muskrat Falls eventually became the object of an official inquiry, itself costing the province $16 million.
The inquiry ruled that the N.L. government lacked the will and the capacity to oversee the project, essentially handing over a blank cheque, while Nalcor withheld and misrepresented information about project risks, finances, and timelines. With the exception of the CEO, the senior Nalcor staff members identified as responsible have retained their positions with the company, while project contractors have fought to hide their earnings from the public. Meanwhile, billions of dollars of debt were once again piled onto the province.
Oil was heralded as the next saviour of the N.L. economy. Offshore oil extraction began in 1997 and is located at four oil fields in the Jeanne D’Arc Basin—Hebron, Hibernia, Terra Nova, and White Rose. In a notoriously volatile and short-term-profit-based industry, the approach to the N.L. oil fields has been to extend production on waning rigs by a decade or so and extract as much oil as possible in that time. When the pandemic hit last year, global oil prices plummeted, and oil companies responded with mass layoffs.
In September 2020, the federal government transferred $320 million of oil job recovery money to the province to keep the rigs afloat. At White Rose, for instance, despite owning only a five per cent stake in the project through provincial Crown corporation Nalcor, the N.L. government is fronting half of the costs of protecting workers’ jobs. Within days of receiving the government bailout, the lead partner at White Rose, Husky Energy, laid off dozens of workers. Trades NL, the union representing these workers, called this for what it was: a corporation using government subsidies to protect their own interests. For contrast, Husky Energy’s chairman and largest shareholder is the 30th richest man in the world, sitting on a personal wealth of almost $35 billion.
At Hibernia, the same pattern unfolded: federal government money is covering 40 per cent of employment costs, while shareholders like ExxonMobil, Chevron, and Suncor protect their bottom line. Although the N.L. government may decry the province’s runaway debt, it is only reaping what it has repeatedly sown: instead of making corporations pay for the wealth they take out of the land and out of workers’ pockets, the government gives them handouts.
Perhaps the greatest blow to the people of N.L. was the closure of the cod fishery. Fishing was Newfoundland’s primary industry for centuries, beginning in the 1500s when vessels from Europe began seasonally fishing off the coast. By the 1800s, when England had gained control over the territory and established permanent colonial settlements, technological innovations were increasing the scope and profitability of the fishery—profitable for the owners of the fish-trading companies, of course.
These merchants gave fishermen gear and supplies on credit, which the fishermen then paid off with their catch. Other capitalists invested in large vessels, taking crews of fishermen out onto the water. For their own survival, fishermen and their families worked all year round in subsistence farming and livestock rearing, hunting and trapping, and boat and house construction to supplement their meagre income from fishing. When this traditional fishery was at its peak, in the 1880s, 90 per cent of male workers were employed in fishing-related industries and 90 per cent of the colony’s exports were fish products, largely salted cod.
However, by the time N.L. joined Confederation in 1949, the demand for salt fish had declined, although fishing continued to be the largest—and in many communities the only—source of employment. At this point, N.L. had a small “modern” sector of the economy dedicated to construction and resource extraction and a large “traditional” sector of inshore fishing. The advent of industrialized fishing (e.g., the introduction of trawling and large processing and freezing plants) in the postwar boom, with competition from international fleets, both undermined this traditional sector and vastly depleted fish stocks.
From the 1960s to the 1980s, fishermen unionized and fought to improve working conditions and to keep factories open. Meanwhile, the Canadian government introduced fishing quotas and licenses to regulate the industry, but this did little to curb overfishing and corporate profiteering. These events culminated in the cod moratorium of 1992, costing the jobs of 40,000 workers across Quebec and Atlantic Canada, 30,000 of them in N.L.. The ban on cod fishing is still largely in place today and workers and communities in N.L. have never recovered from this economic disaster.
In the decade following the cod moratorium, NL’s population dropped by 10 per cent as workers were driven out of the province by unemployment. On the other hand, companies like Fishery Products International and National Sea Products, which made a fortune from the free-for-all in the North Atlantic, closed plants and fired workers in their attempts to restructure and regain profits. In the early 2000s, Fishery Products International’s policy at its remaining N.L. operations was to divide shifts and pay workers just enough that they could still qualify for Employment Insurance. How generous from a company posting $750 million in annual sales at that time! And again, how consistent to see money flowing into corporate coffers while the province’s industries are left paralyzed and workers are left penniless.
Because of the limited opportunities in the province, approximately 15,000 N.L. households rely on income from rotational workers employed in oil, mining, and aviation elsewhere in Canada. Workers follow a grueling schedule of usually two weeks away followed by two weeks at home, traveling as far as Nunavut and British Columbia.
The pandemic added to this strain, where initially workers had to spend their two weeks at home in isolation before leaving once again. Workers described being unable to hold their own children for months. They also reported facing harassment and ostracism within the province, as they were blamed for bringing COVID-19 back with them from their work sites. During the province’s second wave in February 2021, Newfoundlanders were employed at 13 out-of-province worksites with outbreaks at this time, 11 of them in the Alberta oil sands, which are notorious for unsanitary and overcrowded working conditions. For some, the constant travel and isolation has reached an intolerable level, where they are considering leaving the province permanently.
As the cod moratorium demonstrated, this is a longstanding problem for N.L. For the last two decades now, young workers have been steadily emigrating, leaving behind a shortage of skilled professionals and an aging population. This feeds into a vicious spiral that further cripples the N.L. working class: a smaller and smaller population, with less and less earning power, saddled with larger and larger government debt.
A crisis point
It’s clear that the economic problems the PERT report seeks to address are a real danger to N.L. Decades of economic downturn following the collapse of core industries due to capitalist exploitation and market chaos, culminating in the 2008 financial crisis, threatened to cause social upheaval and decimate the labour force in the province. To “fix” this, the government started a campaign of social spending to keep the economy afloat. However, after accruing debt for years, including by covering much of the costs of the large corporations operating in the province, the government can no longer afford to have these social services and also service their debt, the latter of which makes up a staggering 12 per cent of the province’s expenditure.
While the crisis was averted for a time, the politicians must now cut spending to restore economic equilibrium. But instead of making the corporations that put the province in this situation accountable, the Liberal government is poised to lash out at the working class.
A punishing austerity campaign
To pay back N.L.’s debt and get the province on stable economic footing, the PERT states that government operations and spending have to be re-examined. This includes what PERT chair Moya Greene calls “Big Resets.”
While the language used to define these “Big Resets” is quite vague, the real content of the report is in the recommendations made to Premier Furey. The general recommendation is a five per cent cut to provincial funding for core government spending and a minimum 20 per cent reduction in grants to government agencies. While already devastating for a province struggling to get by with what it has, these recommendations actually hide many other severe and more specific attacks. A list of some of the most significant attacks follows.
Nalcor, which oversees the Muskrat Falls project, is being recommended for merger into Newfoundland and Labrador Hydro, which itself is being recommended for privatization by the PERT report. The sale of Nalcor alone will mean the transfer of nearly $6 billion in assets into private hands and will preclude any significant future revenue from the Muskrat Falls project being seen by the public who paid for it.
While the Muskrat Falls project is mismanaged, transferring control of the project from one set of unaccountable bureaucrats to another is not the solution. The money for building and operating green infrastructure projects such as Muskrat Falls is there, it’s simply being handed to the bosses. Instead of privatizing Nalcor, the workers building and using the power from the Muskrat Falls should be the ones deciding how the project is developed directly. This is the only way to ensure the project is not mismanaged.
A ‘Future Fund’
The “Future Fund” laid out in the PERT report proposes to take 50 per cent of the money generated from privatization and volatile oil and mineral royalties and use it to pay down debt, as well as fund the transition to the green economy.
However, the devil is in the details, as according to the PERT, funding the transition to the green economy means “being proactive in seeking well-capitalized energy corporations, mining corporations and manufacturers that are trying to reduce their carbon footprint. The province’s approach must encourage large-scale private sector investment, and de-risk investments through tax and other incentives.” In other words, the so-called Future Fund will be used to bankroll the bosses in whatever endeavor they can argue is environmentally friendly.
The PERT report is recommending a 30 per cent reduction in operating grants to N.L.’s two post-secondary education institutions, Memorial University (MUN) and the College of the North Atlantic (CNA). This is combined with the recommendation that provincial policy be reworked such that the current tuition freeze at MUN and CNA be lifted, allowing the administration to raise tuition rates. This is a tactic being employed elsewhere in Canada, where the cost of an educated workforce is being increasingly put on the students themselves as opposed to the bosses who take home the profit from a skilled labour pool.
Wages and pensions
The PERT report also suggests the review of union contracts and compensation. Specifically, the report recommends introducing a wage freeze, converting some full-time positions to part-time or seasonal, and restructuring pensions for unionized public sector employees. The recommended pension restructuring is to move from a defined benefit plan, which gives a set amount of money on retirement, to a defined contribution plan, which leaves savings tied to the success of the market. This all-too-familiar tactic of the bosses to offload costs onto their employees was the catalyst for the lockout at the Federated Co-operatives Limited Regina refinery early last year. Moreover, the report recommends that the provincial government utilize back-to-work legislation “in the event that a negotiated settlement is not possible,” i.e. if unions do not give in to the government during bargaining and exercise their legal right to strike.
Health and social services
The PERT report advocates slashing social services currently in place in N.L. This includes a 25 per cent cut to provincial health-care operating grants over six years. The experience of the pandemic, however, has shown us that taking resources away from public health only leads to disaster. Take Jason Kenney’s attack on public health earlier in the pandemic, for example, which directly led to massive spikes in infection and many preventable deaths.
The report further proposes modifying social programs to “strengthen the social safety net” by eliminating “disincentives for individuals to take-up employment opportunities when they become available.” This is despite the fact that many currently aided by income assistance of any form are “worse off financially if they find employment or increase their employment earnings.” In essence, the report admits that the problem itself is not the presence of income assistance, but the fact that many employers do not pay their employees enough to live. Despite this, the report advises rolling back these programs for the sake of the budget.
However, the decrease in spending from reducing or eliminating social programs is marginal when compared to what’s being handed to the corporations. In reality, the cost of all income assistance is slightly more than three per cent of the provincial expenditure; meanwhile, the tax and royalty regime for oil and gas in N.L.—an industry that has generated a value of over $140 billion since 1997—is the lowest in all of North America. The report seeks to remove the safety net for working class people who are out of a job or on disability—not because the money isn’t there, but because it’s more important for the bosses that workers accept any job available, regardless of the wage.
A system on borrowed money and borrowed time
The content of the report makes sense given chair Moya Greene’s track record of heading up the privatization of Canadian National Rail, the Royal Mail in the U.K., and the deregulation of the airline industry. On Greene’s time as president and CEO of Canada Post, where her mandate was to cut expenditures, then-president of CUPW Denis Lemelin commented, “If you compare the four years before Greene with the four years under Greene’s management, the numbers show that injuries have gone up 15.4% and grievances have gone up 59.3%.” It’s quite likely that Premier Furey chose Greene for the job of leading the report for her experience in these ruthless roles.
Given this, it was no surprise when on May 13 Furey publicly announced that he agrees with the findings of the report, but at the time of writing has not offered any details on which recommendations he intends to act on and how. Regardless of whether or not he plans to implement the austerity proposed in the report, the Premier is bound by the system. The report is right in the sense that without breaking from capital, the province can no longer afford the social services it has in place. Furey’s hand, or his successor’s, will eventually be forced by the banks—either when the province cannot borrow any more money, or when interest rates increase from their historic low.
The PERT report is also a canary in the coal mine; for years, the N.L. government has put much more than it had into public spending to put off the current crisis. The rest of Canada and Quebec face a similar situation, although they did not start out in economic straits quite so dire as N.L.’s. All of the capitalist economies have been put on life support—in the form of quantitative easing and massive corporate bailouts—due to their inability to address the pandemic. N.L. is simply one of the first to start to fail. And when the cycle of printing money and handing it to the bosses does begin to fail elsewhere, the working class in these places will see attacks similar to those laid out in the PERT report.
An end to the crisis
The PERT report has drawn a line in the sand and shown once again that the Liberal government is on the side of the bosses, not the workers. Although handing money to the bosses put the province in its current situation, the PERT report is arguing this should continue and the workers should pay. As long as the system remains based on profit, the cost of any crisis will always be offloaded onto the working class. This is not the first time the government has attacked the workers in N.L., and workers should be aware that it won’t be the last. The recommendations made in the PERT report will not solve the problems created by the capitalist system; it only serves as a life raft for the rich and powerful. The government has tried to cover these problems with a veneer of public spending, but it seems that this era is coming to a close.
The working class of N.L. should be preparing itself for a coming period of class struggle. As the contradictions of capitalism deepen, the only way the workers can fight austerity is through class struggle methods. This is why to fight austerity in N.L. and elsewhere, the working class must revive its militant organizing traditions.
In 1971, the fish plant workers in Burgeo decided to join the Newfoundland Fish, Food and Allied Workers union (FFAW), but the bosses did not recognize their right to organize. In response, the workers went on strike. Even though the bosses brought in scabs, the workers adapted by blocking roads and even set up floating pickets so the scabs could not be brought in by boat. The strike lasted for nearly a year, and as the militancy of the rank and file only increased, and solidarity sit-ins and rallies began to spread across the province, the government became afraid that the labour dispute would ignite a desire for better working conditions for all workers in the province. The strike ended, not only with the recognition of the union, but with the nationalization of the fish plant.
This example from N.L.’s own history shows the gains that can be achieved through class struggle methods; when the bosses attack, the workers must fight back. However, it also points to the need for strong leadership in the working class movement. While still a massive victory, the 1971 strike in Burgeo did not question the system that put the fishers in their dire situation to start with: capitalism. Five years after the strike, National Sea Products was given the opportunity to buy the fish plant in Burgeo from the government and start the process of slowly clawing back many of the gains made during the strike.
For both organized and unorganized workers, the only way to effectively fight attacks on workers, like the austerity proposed in the PERT report, is to rally around bold socialist perspectives. N.L. can overcome its debt and establish a strong environmentally sustainable economy, but only if the workers break free of the parasitic bosses and take direct democratic control of the economy. The Canadian Union of Public Employees (CUPE) and the Newfoundland and Labrador Association of Public and Private Employees (NAPE), two of NL’s largest unions, have come out with statements against the PERT report. This is an excellent start, however it does not provide a concrete way forward for the workers in the province.
As the crisis of capitalism deepens, the working class movement requires a leadership oriented around socialist ideas. But this leadership will not simply materialize. We must build it. Fightback, the Canadian section of the International Marxist Tendency, aims to bring these socialist ideas to the working class movement. Fightback appeals to all workers and students in Newfoundland and Labrador to join us in the fight against austerity and for socialism.