Williamsburg provided, as Professor Abraham Rotstein has pointed out, an excellent metaphor for dealing with concerns that have engaged me since the Honourable Walter Gordon’s budget of June 13, 1963—the vulnerability of the Canadian economy and the recognition that our status, in American eyes, was simply that of an economic and political satellite.1 While I had vigorously opposed the minister’s budget, it became clear to me in December, 1965, when the United States government imposed guidelines on their subsidiaries operating in Canada, that Mr. Gordon had been right to express his anxieties. For the guidelines had involved a principle—the principle that the American government had the right to dictate the investment and reinvestment policies, the purchasing practices, and the financial operations of Canadian companies in which Americans had more than a 10 per cent interest. What price Canadian sovereignty and jurisdiction in such a state of affairs?
Canada was later granted an exemption from these particular directives by a foreign government, but this is beside the point. The brutal fact of Canada’s vulnerability to a neighbour’s economic and political pressures had been bared for all to see. Henceforth the issue became—“Is Canada sovereign or is it not?”
When David Ricardo formulated his doctrine of comparative advantage, he was writing about trade between sovereign and independent nations, each choosing its own areas of specialization. He was not talking about trade between a motherland and its colonies where the size of the home markets and the direction of investment made the colony a supplier to the needs of the heartland. This was not trade but rather an in-house transfer of resources. In an imperial federation, the colonies and dependencies have no room to pursue the balanced growth of their own economies. Their role is to consolidate and strengthen the empire by undertaking those patterns of development that will converge with the needs and objectives of the empire.
If one wants to create a world economy, one does it in the Soviet manner. One creates a bloc, a collection of nations and peoples ruled over and dominated by a powerful state. The centre is supreme and imperial and all the rest are satellites. Then, and only then, can one speak of a collective world, a world economy in which the factors and resources of all the member nations are integrated in the pursuit of one set of goals, the goals of the governing bloc. The cohesion of the bloc is effective when the goals of the satellites—balanced growth, as an example—are sacrificed to the imperial aims of the bloc itself. Then the supreme power in the heartland can speak of combining the labour of some members, the minerals and petroleum resources of another, with the technology and capital of the centre to produce an optimum output geared to heartland objectives—world domination or whatever. In such an integrated economy, East or West, we can be certain of two results—the subordination of consumer interests in all parts of the bloc (including the dominant centre), and the vulnerability and dependence of the satellite members as their own specialized contributions to bloc production creates imbalance and distortion at home.
Within the Soviet world economy, the nation-state, as an independent political unit free to choose its own principal directions, no longer exists. The argument in 1983 seems to be, at least in the current Washington orthodoxy, that a similar cohesion must be assented to, if not imposed, in the West. The emphasis is tilting from the alliance outlook, all for one and one for all, to the imperial view—all for one and the one is all.
Economists who speak of a new world economy are thinking of the world, or the Western part of it, as one vast production line, turning out so many machines or gallons of paint or whatever. It is international production, using “the capital of one nation, the land of another, the labour of a third.” The economic region is not a nation but the world itself.
The same people generally think of themselves as the core, the heartland, with all the rest a periphery. American economists, in particular, who describe the concept of international production as a breakthrough replacing classical (Ricardian) trade theory and salute it as a profound insight of great intellectual power forget, or do not know, that the Soviet bloc has been organized in this fashion since the days of the first five-year plan. Canadians, of course, see nothing new in all this, since Great Britain organized her colonies in this fashion and, at least since 1854, the United States has so regarded Canada as its economic appendage.
Extending the Monroe Doctrine to cover Europe and Japan made the commitment to the policies of international production and a supranational allocation of resources seem as natural as the night following the day. The result would be an economy of the Western world via the restoration of the hegemony of the United States. This unified conception of the world is not an economic arrangement of production, consumption, and distribution patterns designed to satisfy the varying needs and objectives of nations in differing circumstances, but rather an arbitrary and ruthless imposition of productive processes geared to securing nuclear supremacy and undisputed world dominance as the first and major objective of a tightly controlled Western bloc.
Efficiency in international (or national) production of anything is easy. Settle on what it is that you want to produce and then produce it. The economic problems do not lie in the production process. They surface later in the exchange process, in the market place, in the consumption and consequent distribution of incomes arising from the particular production if it is consumed. The pattern of production in a market economy is dictated by the adding up of the choices of consumers, which, being infinitely varied, do not admit of less than numberless producing units—from family units and selfless communities willing to work for no reward or very little, the growing informal (bartering-services) economy espoused by the Vanier Institute, to the local, provincial, regional, and national markets that integrate the myriad decisions to exchange and the even greater number of decisions not to exchange.
In a world-command economy, which is not a market economy, the organization of production and consumption obviously lends itself to international production. Nuclear missiles come to mind. But in this instance, production may be divided between a Soviet bloc and a United States bloc. Surely, according to the logic of the one-world economists, the two should then get together and meld their technology, resources, capital, and labour and produce at optimum efficiency, say, fifty thousand nuclear missiles. Since this production is its own consumption, they could each take twenty-five thousand missiles home, to do with as they will, so long as they leave the rest of us with the freedom to look after our own problems of poverty, unemployment, inflation, and pollution of the environment.
To withstand the Soviet might, it is not necessary for the nations of the West to regroup themselves into provinces within a great United States empire and so become the very thing that we despise. Yet there are many in the corridors of power in Washington who bitterly regret the decline in the capacity of the United States to control and direct the course of political and economic change, as it was able to do in the two decades following the Second World War.
The following lectures were recorded prior to the United States intervention in Grenada. The circumstances surrounding the invasion make clear that the United States has little faith or confidence in alliance systems (and even in some allies) and is in fact determined to play a role that emphasizes its power, both military and economic, to control events—and this with or without the consent of members of the alliance.
To have power is to use it. The sources of United States power are the nuclear force, a market well in excess of three trillion dollars, and a veto power over IMF decisions on the granting of loans and credits to nations.
The nuclear umbrella is of incalculable benefit to Europe and important to Japan. Canada would be severely damaged by even a partial closing of the American market to our goods. The less affluent nations, living with the burden of monstrous debts and interest repayments, depend on U.S. good will as they plead their case for further loans. These are strong cards, and, in the game of power politics, there should be little doubt that the United States can and will play them.
The view from Washington holds that the policies of the nation-states of the West must conform to the needs of global security as defined by the United States. The use of such terms as “alliances,” “participation,” and “interdependence” has been abandoned as foolish rhetoric that influences no one. The remaining nation-states of the Western alliance, therefore, face the double challenge of maintaining their own sovereignty and independence in face-to-face confrontation with their dominating partner while, at the same time, making clear to the Soviet bloc that there is in this diversity the real strength that comes from knowing that freedom is worth defending and that it will be defended at all costs.
Twenty-two years ago a director of a large Swiss bank gave me his view of Canada as seen from his boardroom in Geneva. “Your country is all but faceless,” he said gently, describing our passivity and inertia in the face of American initiatives.
Later, in the rather long discussion, he mused, “You do have cards of your own to play, if you would only act instead of being always acted upon. After all, if the United States cannot get along with Canada, who can they get along with?”
If we do not want to live in the bipolar world of perpetual confrontation, we, as a people, should say so—loud and clear.
PROFESSOR ERIC KIERANS
Department of Economics,
Dalhousie University,
Halifax, Nova Scotia.