Canada Must Forge Its Own Economic Fate
Posted on September 24, 2009 by murraydobbin
The SPP is dead. Good. That helps reduce dependence on a downbound US.
With virtually no fanfare or media analysis, one of the most transformative agreements ever signed by Canada and the U.S. (and Mexico) is officially dead. The Security and Prosperity Partnership of North America (SPP), the formal expression of a corporate lobbying campaign called deep integration, is no more. Its official U.S. government website declared last month: “The Security and Prosperity Partnership of North America (SPP) is no longer an active initiative… There will not be any updates to this site.” (It’s been edited since to be a little less brutal).
We should celebrate. It seems the economic crisis had a silver lining.
The SPP met a fate similar to the ill-fated MAI back in 1998: death by secrecy and hubris. Terrified of another public battle a la “free trade” its proponents knew they would lose, the Masters of the Universe chose not only secrecy but an exclusively executive agreement in overt partnership with a super elite, corporate committee of 30 CEOs from the three countries, called the North American Competitiveness Council (NACC).
Almost as important as the SPP’s demise, the NACC has been left cooling its heels. It was not even invited to the August trilateral summit in Guadalajara, where the SSP would normally have been discussed. According to David Ganong, a Canadian member of the NACC, “Whether the [North American Competitiveness Council] will be allowed to meet with the national leaders in 2010 remains unclear.”
That’s an incredible humbling for a group that is used to dictating policy to politicians.
SPP proponents virtually never talked about it, leaving the field open to relentless critics to the point that even capitalist advice columnist John Ibbitson at the Globe and Mail got disgusted with the lack of transparency, declaring, “If you’re going to negotiate freer trade sing it from the rooftops. Keep the media informed. Make it a Big Deal.”
Return of the dead?
Some on the left are so accustomed to losing that they make the claim the SPP will just re-emerge with another name. While some of the nastier initiatives are still in place, like energy “integration” and common regulations, a zip-locked North America is off the agenda. Now we have a weak version called the PPA — the Pathways to Prosperity in the Americas.
Launched by Bush last December and being expanded by Obama, the PPA is a neoliberal fantasy about revising the FTAA, the Free Trade Area of the Americas. Sorry, guys, it’s never going to happen because the U.S. has already lost the largest economies in South America to another agenda.
The PPA is a stalking horse for a weakened U.S. empire trying to reassert itself in its own backyard. The new version of the Canadian government carrying the bully’s coat is renewed Canadian “interest” in Latin America — the empire’s junior partner helping out in the hope that Uncle Sam will throw it a bone.
The SPP was the ultimate expression of Bay Street’s hare-brained determination to put all of Canada’s economic eggs in one basket — or in this instance, basket case: the U.S. economy. Barack Obama’s administration has apparently figured out that globalization is critically wounded if not dead and wants to retrench into the safety of protectionism and its old sphere of influence.
How trade liberalization crippled Canada’s economy
The demise of the SPP should provide Canada with an opportunity to have a serious debate about our economic future. One of the consequences of “free trade” and the pursuit of the SPP was that Canadian governments effectively abandoned the domestic economy as a driver and reduced all economic development policy to a single objective: increased trade with the U.S.
No one imagined that the whole world trading system could suffer such a catastrophic decline. But it did, and now the once-robust, high-wage Canadian domestic economy isn’t there to cushion the blow.
In the period immediately following the signing of the 1989 Free Trade Agreement with the U.S., federal governments of both stripes began an intensive program of structural adjustment. The program was sold as the creation of a level playing field with the U.S. so that Canadian companies could compete. But we savaged the domestic economy for nothing. Industry Canada reported that 92 per cent of the increase in trade with the U.S. was due to our low currency and the U.S. economic boom.
Waged and salaried employees got hammered in this nasty race to the bottom. One of the results was the shrinking of the middle class and the total stagnation of disposable income. This was largely the result of the policy of “labour flexibility” — a euphemism for driving down both the cost and the bargaining power of labour.
Liberal finance minister Paul Martin slashed unemployment insurance benefits, and he repealed the Canada Assistance Plan, freeing the provinces to gut their welfare programs. His radical low inflation policy deliberately kept unemployment at high levels (8-9 per cent) for most of the 1990s — essentially creating a recession to emasculate labour. This crude strategy for driving down wages was so successful that Canada ended up with the second highest percentage of low wage jobs (after the U.S.) in the OECD.
This was an unprecedented assault on Canadian living standards and workers’ safety nets. The middle class lost enormous ground in terms of real income, and lower income Canadians fared even worse. Between 1980 and 2005, the increase in yearly median income, in real (inflation-adjusted) dollars, amounted to a paltry $51. The amount of wealth and income lost was counted in the scores of billions of dollars; government tax revenue also took a huge hit.
The middle class did what you would expect: they went into more and more debt to maintain their lifestyle. The savings rate plummeted to near zero. And now that the economy desperately needs a strong domestic sector to counter the collapse of trade, we have a terminally indebted population, living from paycheck to paycheck, afraid to spend the money they do have because the safety net is shredded and there are precious few new jobs to replace those lost forever.
But the Canadian corporate elite, led for 30 years by Tom d’Aquino’s Canadian Council of Corporate Executives (CCCE), has learned absolutely nothing. It is holding on for dear life to the “promise” of the SPP, says d’Acquino, whether “it’s called SPP or it’s given a new name, which I predict will be the case.” Bay Street is still committed to the path of least resistance — i.e. least risk — and yearns for “open access” to the U.S. market.
But the U.S. economy will never recover from its current economic catastrophe. It has a gargantuan public debt and a huge balance of payments deficit. Consumer debt is equally enormous. The trillions pumped into the economy will eventually destroy the dollar even if it doesn’t lead to hyper-inflation. The U.S. recklessly de-industrialized, assuming that globalization would continue for ever, and lost millions of its best paying jobs. They will never come back. The U.S. dollar is doomed as a global currency. And it’s headed for another bubble as Wall Street spends millions lobbying to stop financial re-regulation.
Fully 50 per cent of the economic growth in the world since 2007 has taken place in the so-called BRIC countries (Brazil, Russia, India and China). Yet Bay Street is still blindly tying their future, and our own, almost exclusively to a fragile and sick U.S. economy.
But we need and deserve something better. Bay Street has been dictating economic policy to Ottawa for 25 years. They had their chance and failed. Now it’s Main Street’s turn.
Murray Dobbin’s State of the Nation column appears every other Thursday in The Tyee and rabble.ca.
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