Friday, March 27, 2009

Australia: Canada’s Antipodean Twin

Canada’s twin---the two were parted at birth---is Australia. Like all permanently separated twins, living very far apart, the differences between them are enormous. In Australia’s night sky, you see the Southern Cross, which Canadians never see, while Canadians look up at the Great Dipper and the North Star, which is never visible to Australians. In Australia, the sun always moves to the left in the sky and in Canada it always moves to the right. That said, the twins share striking similarities.

Canada and Australia were established as settler colonies whose founding populations occupied territories that had been the homelands of aboriginal peoples for thousands of years, in the case of Australia for about forty thousand years, in the case of Canada for ten or twelve thousand years. French settlement in what is now Canada began in the early 17th century. Permanent British settlement in Australia commenced in the late 18th century. And while the conflict between France and Britain for control of Canada and the permanent fact of English and French populations were a defining feature of Canadian existence, both countries came of age as continent-spanning enterprises during the Victorian age at the height of British imperial power. In downtown Toronto, Sydney and Melbourne, Victorian British street names---King, Queen, Albert, Wellington, York etc.---enjoy pride of place.

Sparsely populated countries with large diverse sophisticated cities, Australia and Canada are advanced nations that rely enormously on their role as commodity producers that export their products to other countries. For over a century, the two countries have been rivals in the production of wheat and other grains to meet the demands of global markets for these commodities. Times of high prices have been a boon to farmers in Manitoba, Saskatchewan and Alberta, as well as in South Australia, Victoria and New South Wales. Similarly when prices fall, farmers in these regions, though they are separated by thousands of kilometers, have suffered simultaneously.

Australia and Canada share a history of making enormous public investments to construct roads, railways, other infrastructure, and educational facilities in regions whose economies are devoted to farming, as well as to the extraction of coal, iron ore, uranium and other resources for export markets. The public in both countries has been saddled with the high fixed costs that go with expenditures to support primary products industries. When commodity markets boom, Australia and Canada prosper. When commodity markets go bust as they have during the present economic crisis, their economies suffer. The rise and fall of external demand for products from minerals to wheat and the changing technology that affects the value of specific commodities is a major source of economic vulnerability in Australia and Canada.

In the early years of the 21st century, Australia and Canada are respectively the hot and cold twins and the dry and wet twins. Both countries are highly vulnerable to the threat of climate change although in quite different ways.

Much of Australia, especially the south and southeastern states of South Australia and Victoria and much of Western Australia have experienced a severe drought for many years. Adelaide, the fine English style city that is the capital of South Australia, was parched when I visited in February 2009. The Barossa Valley, just north of the city, is one of Australia’s most prestigious wine producing regions. When I toured it by bus, the vineyards were sparkling green thanks to massive irrigation efforts. But the surrounding countryside was brown and dry, with the beds of streams completely dry and rivers reduced to a trickle. Our guide spoke continually about the rising threat to wildlife and human activities as a consequence of the drought. Later on a tour through the Grampian Mountains and along the Great Ocean Road in the State of Victoria, the consequences of drought and of fire, its dark companion, were even more starkly apparent. A couple of weeks earlier over two hundred people had died in the terrible fires in Victoria in the worst natural disaster in the history of Australia. Without being too apocalyptic about it, the viability of heavily populated regions of Australia is at stake as a consequence of potential long-term shortages of water and the threat of climate change.

While Canada’s supply of fresh water is much more ample than Australia’s, there are important regional exceptions. The western prairies have been afflicted with major droughts. The massive use of fresh water in the process of producing synthetic crude oil in the Alberta oil sands poses a threat to the supply of water available to meet the needs of agriculture, industries and cities.

The oil sands, it should be noted, are the largest source of green house gas emissions in Canada. In that sense, Canada’s oil sands emissions add to the greenhouse effect that is generating climate change, not least in Australia as well as in Canada’s north, where temperatures have been rising with dire consequences for the wildlife of the region.

The global markets for Australian and Canadian commodities plunged in 2008 and the currencies of both countries dropped appreciably against the U.S. dollar. Australia and Canada rode high during the commodity boom, especially Canada, whose oil industry roared ahead as the price of oil peaked in July 2008. Given the structures of their economies, with their dependence on commodity exports, both countries waited anxiously for the return to economic health of the countries that were home to their export markets.

The conundrum of Canadians and Australians is that of prosperous peoples with plenty of capital of their own in a world that is entering a new age. Do these countries that have served as suppliers of primary products for others have to remain in that role in the future? In a time when the key to the future is development that is sustainable, can other options open for these peoples?

It would make a good deal of sense for Canadians and Australians who are thinking about the crash and its aftermath to consider these questions together. The similarities and differences between Australia and Canada should provoke sparks of insight helpful to these long separated twins.

Tuesday, March 10, 2009

After the Crash: A Time for New Bearings

A world age ended with the Great Crash in the autumn of 2008.

We live in a time when technology and science have given people in the rich countries the sense that, serious crises aside, things will go on as before, and life may even improve if technology, science and common sense are permitted to have their way. For Canadians, who last saw their world torn apart, and paid in blood with tens of thousands of soldiers killed, in the 1940s, the past sixty years, on the whole, has been a comfortable time. Over these decades, to be sure, there have been booms and recessions, natural disasters, human tragedies such as the Air India bombing in 1985, the ugly loss of Canadian lives in Afghanistan and the near division of the country in the Quebec referendum of 1995. But on the whole, Canadians have been traversing one of the sunny uplands of history. For most of us, this experience has given us our bearings for navigating the world.

Now it's time for us to acquire new bearings. A world age has ended, which is something that happens more often than Canadians generally think. While there have been some long periods of time in which life went on much as before and the great questions appeared to have been answered---the Roman Empire, for instance, during the second and third centuries A.D.---shock and transformation have been the regular accompaniments of human existence. Think of the fall of Carthage or the peoples of the Americas undergoing European conquest and you are on the way to conceiving of human existence as rife with swift change and destruction.

The age that ended in the autumn of 2008 was the American-centred age of globalization. That age had been a long time in the making. It had taken shape as a consequence of the interactions of forces of different durations. A central narrative in its construction was capitalism, technology and science. Another narrative, closely associated with the first, was the rise of the United States and the American Empire to the zenith of global power, an achievement fully realized in the decades following the Second World War, and consummated in triumph with the collapse of the Soviet Union and its empire between 1989 and 1991. A third narrative, more limited in time, was the methods and practices of capitalism over the past thirty years, a time of global markets, de-regulation, and neo-liberal ideology.

Not without an element of perverse humour has been the launching of schools of business on university campuses around the world in recent decades that are dedicated to training business executives, economists and accountants imbued with the propositions of neo-liberalism. These propositions have played a not insignificant role in driving the world economy over the precipice. The hundreds of thousands of graduates of these business schools now must make their way in the world equipped with notions about economics that have as little explanatory value as Ptolemaic astronomy, Thomist theology, or King Canute's ideas about the workings of the tides.

While human beings are adaptive creatures, otherwise they would not have survived, they also have a remarkable capacity for rigidity, stubbornness and a ferocious attachment to ideas that are no longer useful. One of the benefits, perhaps dubious, of civilization is that provided there is a sufficient surplus for some to live off the labour of others, institutions, organizations, temples, churches and political parties devoted to keeping alive useless and counter-productive schools of thought can exist. They can even thrive. During difficult times, the attraction to the occult, to the reassurance of fundamentalist simplicities, and to wacky new age fantasies is very great.

In the political sphere, the pull to the irrational can also be very strong. Take for instance the case of the Republican Party in the United States. Having led the United States into unsustainable current account and government deficits, wars that have become quagmires, and the ballooning of the housing bubble that has now burst, one might have anticipated reflection and rethinking among influential party leaders.

Exactly the opposite has occurred. Talk radio powerhouse Rush Limbaugh, a man who proudly denies that human activities have caused global warming, has become the party's leading figure. In his bombastic, bullying manner, he is unashamed to proclaim that he hopes President Barack Obama fails. Limbaugh and less extreme Republican leaders have responded to the global financial crisis with a return to the old verities. Instead of generating stimulus through direct government spending on infrastructure, transit systems, refitting homes for energy efficiency, education and health care to offset the descent into depression, the Republicans favour tax cuts and cuts to government programs, the very recipe that fostered the economic crisis in the first place. Small government remains their cherished ideal even though it was the Republicans who insisted on gigantic military budgets, trillion dollar wars, and an agenda that made the super rich grow richer while the rest of the population faced rising debt and income stagnation. The Republicans contributed greatly to breaking the system that made their backers wealthy and helped ring down the curtain on a world age. This monumental failure, however, has not prevented the Republicans from calling for more of what did not work.

Over the past month, those who believed that this sharp crisis would soon give way to an early recovery have been shown to have been profoundly wrong. As it turns out, neo-liberalism, a system designed to reap the surplus from production the world over for a tiny minority of the population, impregnated the global economy with worm holes of debt that lead everywhere. The full extent of these multi-trillion dollar forms of indebtedness is not yet known, indeed in the case of derivatives, it is unknowable.

Bailing out a system that has rotted from within may be undoable, even with the brilliant and effective Barack Obama at the helm of the Titanic.

A new world age has begun. Canadians continue to be led by politicians who have remarkably little inkling that everything has changed. It should be noted that for the past couple of decades, Canadian politicians have not made any basic decisions about the economy. All they’ve done is to administer the neo-liberal system on behalf of those who have been running it. It’s not easy for such people to deal with the prospect that they might have some real decisions to make in the future.

We need new bearings to cope with a new world. Then we can rid ourselves of the political leadership we have had so we can construct a new and sustainable Canadian economy, with different rules about the distribution of rewards that can endure in a new age.

Saturday, February 07, 2009

New Jobless Numbers Expose the Utter Inadequacy of the Harper Budget

When the terrible Canadian job loss numbers for January came out yesterday, the horror of the economic crisis hit home as it had not before. The Canadian figures were worse than those in the United States. Canada lost 129,000 jobs last month, compared to 598,000 jobs south of the border. Ontario was hit with the loss of another 71,000 jobs. The manufacturing sector is not simply being hit. It is being devastated.

What the numbers make clear is the utter inadequacy of the Harper government’s budget. Ottawa’s plan, which involves direct spending of only about $6 billion this year and the same amount next year is not nearly enough to lift our $1.5 trillion economy out of the downward spiral in which it is caught. Last month alone, Canada lost twice as many jobs as the government’s whole stimulus package will create. And the numbers in future months, as even Stephen Harper acknowledges, will continue to be bad.

When confronted with the numbers and the demand to do more, Harper’s reaction was that “we cannot have in Parliament, quite frankly, instability every week and every month, every time there’s a new number, people demanding a different plan…”

Hard luck, he’s saying to the opposition parties, and much more importantly, that’s what he’s saying to Canadians. South of the border, meanwhile, where proportionately the rising toll of job losses was less severe that in Canada last month, there is a president who does understand the scale of the crisis and what it means for people and their communities.

In Ottawa, we have no such good fortune, politically. We have a government that did the little it did in the budget because it was forced to do it. The leading members of the government still cling to their Friedmanite delusion that cutting interest rates and letting wage rates fall ought to be enough to turn the nation’s economy around. Harper and Finance Minister Jim Flaherty are not much different from the large majority of Congressional Republicans who refuse to vote for the Obama administration’s stimulus package. Antediluvian and proud of it…

In Canada, though, despite the Conservative government’s minority status, Liberal leader Michael Ignatieff blew it when he had the chance. He could have brought down the government and formed a new one in coalition with the NDP, a government that could have come up with a program that suited our times. The program could have created jobs on the needed scale and could have pointed our economy down the road, not only to recovery from the present crisis, but toward the renewal of our manufacturing sector around the theme of sustainability. The centerpiece could have been the rebuilding of Canada’s transportation equipment sector---automobiles, trains, urban public transit, and aircraft---to meet the needs of this century.

But Ignatieff would have none of it. Instead of leading the country in its time of need, he asked for report cards, more than one, to be fair to him. He said the Liberals would watch the performance of the government like “hawks”.

Just what will Michael Ignatieff, the Hawk, do in coming months, as the layoffs continue? He could ask for even more reports from the Conservatives, I suppose. That would put a few people to work, churning them out.

The Hawk had his chance. At his press conference last week, the Hawk pulled the trigger and out came a little flag that read “I am a Liberal in a land of Liberals.” Harper’s back in charge and he knows it. He shrugged off a Liberal hint yesterday that if the jobless toll continues to rise, the party might force additional spending in June. Harper faced down the Hawk when the threat was serious. He’s not likely to be stampeded by the sight of his feathered foe next time.

Thursday, January 29, 2009

The Liberals and the Road Not Taken

In this life, there are times when you have to make fundamental choices. You go one way or you go the other. The Liberal Party had such a choice to make: between the formation of a progressive coalition government with the NDP, or propping up the Harper government. The first choice would have allowed for the presentation of a budget to parliament that really would have offered hope to Canadians in a dark time. The budget would have provided stimulus through direct government spending on the scale needed to deal with the rising tide of joblessness in the country. I believe, and I’ve argued the case in previous posts, that the direct spending would have to be at least $50 billion this year and again next year. Fifty billion dollars amounts to about three per cent of Canada’s GDP. That level of spending would have created about half a million new jobs, perhaps more, depending on the capital intensity of the projects undertaken.

Such spending on carefully chosen projects, many to begin immediately, would have made a major contribution to renewing the nation’s dilapidated infrastructure and would have made our economy more efficient, more productive for the future. (I’ve spelled out my ideas on this in previous posts.)

The Harper-Flaherty budget doesn’t do the job. New spending of about $6 billion this year and again next year, will create about 60,000 jobs. It won’t make a dent in the rising tide of new joblessness that is forecast to engulf Canadian communities from coast to coast. The layoff notices are going out every day. The descent of our economy into deflation is proceeding. Within a few months, the utter inadequacy of the government’s policy will be evident to millions of Canadians.

In the face of this, Michael Ignatieff and the Liberals have made the second choice. They have decided to prop up the Harper government. If I had to speculate about the reason for this, I’d conclude that they are more comfortable with the Conservatives and the business community than they are with social democrats, trade unionists and wage and salary earners.

So be it. This is not a personal matter. Although the media is trying to make it seem that social democrats are miffed because they have been jilted by Ignatieff who is now dating the Prime Minister, it’s really about whose basic interests a party chooses to serve. The Liberals have made things very clear. That’s sad, not for Jack Layton and the NDP, but for Canadians who deserved better.

Over the next six months, at least, we are going to be reading about layoff notices every day. We are going to be seeing families unable to pay the mortgage, send their kids to college, or meet their basic obligations.

For those progressive Liberal MPs who believe their party has made the wrong choice, the alternative is to rise in the House and take a few steps down the floor to join Jack Layton and the NDP.

Wednesday, January 28, 2009

Jack Layton Is Now The Real Leader of the Opposition: Ignatieff Plays Hamlet

Michael Ignatieff began his press conference in the National Press Theatre in Ottawa today by saying that the Harper government’s budget was deeply flawed. For a moment, I thought he was about to do something interesting, to propose serious and substantive amendments to the budget. But then he dropped the clunker. The Liberals, he said, will propose an amendment requiring the government to provide periodic updates on how the budget is working.

There you have it. Michael Ignatieff went away last night, laboured, and brought forth a mouse.

Explaining himself in answer to questions from the media, the Liberal leader was embarrassingly sophomoric. The Liberal-NDP coalition had been useful, he said, because it had forced the government to put many useful measures in the budget. On the other hand, he said the budget remained a “Conservative” budget that likely would not work. Nonetheless, he said he intended to vote for it. Provided, of course, that his “Mickey Mouse” amendment is acceptable to Stephen Harper. By turns, Ignatieff sounded like Demosthenes, thundering down condemnation on a government that has repeatedly failed Canadians, and then like an apple-polishing pupil asking for a report card from the head master. Rule number one in politics: you can’t have it every which way. If you vote for the Conservative budget, it becomes your budget Mr. Ignatieff, no matter what font the government uses to print its reports for you.

In answer to questions that suggested that perhaps he had thrown the game away, Ignatieff could have replied in the manner of Hamlet: “Do you think I am easier to be played on than a pipe.”

Having decided “not to be” as a serious opponent of the Harper government, Michael Ignatieff could consider a career on the stage.

Meanwhile, Jack Layton has become the real leader of the opposition. He showed courage when he reached out to the Liberals to form a progressive coalition that could provide Canadians with the leadership they need to cope with the economic crisis. He tried the option of working with the Liberals. Michael Ignatieff has walked away from that option. Layton has retained his integrity and his clear understanding of what the country needs. Progressives now have one party and one party only available to them: the NDP.