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“Is Social Spending Productive?”, in Full Employment: Social Questions for Public Policy (1978)

Commentary by: Leon Muszynski

Income inequality has dramatically worsened since this report which underscored the critical importance of social investments, including the commitment to full employment as the foundation of both human health and shared prosperity. Image Source: https://theconversation.com/covid-19-how-rising-inequalities-unfolded-and-why-we-cannot-afford-to-ignore-it-161132 Hyejin Kang/Shutterstock

The Social Planning Council of Metropolitan Toronto of the early 1980s was a place of progressive intellectual ferment. It gathered together a wide array of Torontonians from the social services, community and religious groups, labour, business, and government, all concerned about problems of poverty and inequality, and what to do about them.

Marvyn Novick was a singular figure in the work of the Council during this period. He was a passionate advocate for social justice, bringing his very significant intellectual strength to the project.

Several factors led to the project in which Marvyn’s paper, Is Social Spending Productive, was situated. The long post-war expansion of the Canadian welfare state came to an end in the mid 1970s, as the Canadian economy faced both stagnation and high inflation (stagflation). These were the early years of globalization; Toronto as a manufacturing hub lost thousands of jobs. Rising and chronic unemployment and an inability of governments to improve conditions through fiscal stimulus gave rise to an argument that unemployment was due to structural problems in labour markets and that these problems were in part caused by overly generous social benefits.

In this context, in 1978 the Social Planning Council launched its Urban Seminar Series on Full Employment: Social Questions for Public Policy. Marvyn Novick was the leader of this work. Mike Lyons of the Toronto Labour Council and a board member was a key supporter of the idea that social policy thinking needed to turn its attention to the problems in the way labour markets and our employment systems operated. They both saw employment as the core element of economic and social well-being, and the exclusion from employment as the central force creating poverty and inequality. The seminar was intended to focus social policy thinking on the realm of labour market issues: rising unemployment, low wages, the shift to part-time employment, discrimination in employment, layoffs, and de-industrialization.

Marvyn’s contribution is a passionate and impressively researched paper in defense of social spending. Progressive opinion struggled against the increasingly dominant arguments in business, government and in economics that it was collective action, those activities financed through taxation to improve health, education, welfare, and unemployment benefits that were undermining labour market efficiencies. Those of us who worked with Marvyn during those years were always inspired by his incisive arguments about how this spending was not only essential to a socially just form of economic development, but it was essential to economic prosperity as well.

Marvyn drew from a deep academic and intellectual foundation to buttress his arguments. Referencing both Adam Smith’s The Wealth of Nations, and Karl Polanyi’s The Great Transformation, Marvyn argued for the historical and current necessity of regulation for economic markets to function effectively. Marvyn did not shy away from taking on all manner of economic analysis. He drew on O’Connor’s Fiscal Crisis of the State theory to point out that social spending is an investment in market production but one that has outstripped the ability of the state to sustain it. Modern capital theory, Marvyn pointed out as well, has a well-recognized appreciation for the productivity of social spending.

His paper pulls together a wealth of statistical data to illustrate that Canada was not a high social spender compared to other countries in the Organization for Economic Cooperation and Development, and nor did it have high levels of taxation. He demonstrated that Canadians valued public services, and that adequate social spending is essential to both social and economic well-being.

Though the analysis is more than 40 years old, it is still relevant today. Social and economic conditions have changed dramatically. We now know that inequality has grown over the past 40 years because the returns to capital have far outstripped the returns to labour and the growth of income transfer programs. We have learned that these issues have not diminished, but rather have become even more serious. Indeed, they are central to any understanding the contemporary social reality with increasing inequality that is so strikingly linked to the evolution of global employment systems.

Globalization, free trade deals and employment re-structuring, technological changes, the growth of part-time and contract employment (the so-called “gig” economy), persist and are intensifying many social problems. Concern for a just future demands that we continue Marvyn’s path of inquiry that seeks to frame and strengthen the role of governments as instruments of collective action in countering the tendencies of markets to create and deepen social problems.

It requires us to identify who is excluded and hurt by employment systems that appear to reward many so well, many more not so well, and many not at all. It is important to figure out what kind of future Canadians are committed to. Is it one relying on market distributed benefits that leave so many people out, or one that uses public policy initiatives that seek to achieve fairer and more desirable social outcomes?

Leon Muszynski was a Research Program Director at the Social Planning Council of Metropolitan Toronto and then an independent research and policy advisor to numerous government and non-government organizations before assuming the role of owner/ director of Camp Arowhon in Algonquin Park, Ontario.

The full document “Is Social Spending Productive” is available here.

Leon Muszynski
Leon Muszynski
  Leon Muszynski was a Research Program Director at the Social Planning Council of Metropolitan Toronto and then an independent research and policy advisor to numerous government and non-government organizations before assuming the role of owner/ director of Camp Arowhon in Algonquin Park, Ontario.
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