bout de papier, Vol. 11, No. 3 (1994) — Fall 1994 // Automne 1994, pp. 44–48
SHIFTING GEARS: THRIVING IN THE NEW
ECONOMY by Nuala Beck, Toronto, Harper
Collins, 1992, 190 pages, $14.95; NO
SMALL CHANGE: SUCCESS IN CANADA’S
NEW ECONOMY by Dian Cohen and
Guy Stanley, Toronto, Macmillan, 1993,
216 pages, $24.95; A MATTER OF SUR-
VIVAL: CANADA IN THE 21ST CENTURY
by Diane Francis, Toronto, Key Porter, 1993,
216 pages, $19.95; FALSE GOD: HOW THE
GLOBALIZATION MYTH HAS IMPOVER-
ISHED CANADA by James Laxer, Toronto,
Lester Publishing, 1993, $14.95; and
DISMANTLING A NATION: CANADA AND
THE NEW WORLD ORDER by Stephen
McBride and John Shields, Halifax, Fernwood
Publishing, 1993, 208 pages, $19.95.
Over the past three years, I have been reading extensively about globalization. I am trying to understand its impact on the Canadian economy and its implications for the future evolution of Canadian trade and other economic policies. Most of what I am reading is American in origin or drawn from highly specialized academic literature that touches on individual aspects of what is taking place around us, but provides little in the way of synthesis or policy advice. The amount of material that treats this issue seriously and usefully from a Canadian perspective is disappointingly small. This is surprising, given the stake Canadians have in the global economy, and in the further development of a global trade regime.
There is, of course, some Canadian literature, some of it very good. Scholars like Dick Lispey, Richard Harris and Sylvia Ostry are all contributing to a better understanding of these issues. Generally, however, Canadian treatments of international economic issues are disappointingly uneven, parochial and often off the mark. To illustrate my point, let me review five recent popular book balratide a Canadian
For the last five years we have been going through a period of alternating recession and slow growth, accompanied by persistent high unemployment and major structural adjustments. The media keeps reporting this as a recession, i.e., as a slowdown in the business cycle. We are not going through a recession. We are experiencing something much more fundamental. We are undergoing the fallout from what Richard Lipsey has called a techno-economic paradigm shift, i.e., a transformation in the technological basis of our economic life. Changes in the technology and organization of production flowing from developments in communications, transportation and information-processing are fundamentally altering the way the economy works. A Canadian
They are doing so at two levels. The new information economy is spawning new products and industries at an unprecedented rate and creating pressures for new approaches to industrial organization, management and production techniques. Second, advances in information-processing technologies have led to a quantum leap in the internationalization of the economy. Business used to think largely in local and national terms. Today, in order to survive, they must think in global terms. These two developments taken together underpin what has been called the globalization of the economy.
There is, of course, much more to it than just the economy; we are also seeing a convergence in political and other values. Much of the anger we hear from nationalists, in Canada and elsewhere, for example, reflects a reaction to the erosion of local values and modes of expression and their replacement by more universal ones. Nationalists believe that local values are by definition of higher order than those espoused on a much broader basis. The most immediate issues raised by globalization, however, are economic and it is economic analysts who have been most active in trying to understand what is going on. Economists, however, are not of one mind on these matters.
Mainstream economists divide themselves into a number of groups including neo-classicists, structuralists, business-school historians, supply-side monetarists and Keynesian aggregate demand managers. The result is often a cacophony of professional debate about very fine nuances which gives the false impression that there is very little that economists agree about. That is not true; most mainstream economists agree, for example, on the importance of the market and the positive signals provided by the price system. These economists can properly be called mainstream because their analysis proceeds on the basis of values shared by most Canadians; they also represent the preponderance of the profession. Conventional reasons
Radical economists, such as Marxists and socialists, on the other hand, believe the market to be a force of evil; they consider the price system to be a tyranny that perpetuates injustice and which must be controlled by political forces. This judgement is often shared by their political science brethren. In Canada, radical economists and political scientists sometimes give the impression that they represent the mainstream because they tend to be noisier and more articulate than their more orthodox rivals. That image is reinforced by the media who find commentary from the more radical elements in the social sciences more congenial; it accords more closely to be supposedly progressive views held by many in the media, i.e., it shows more overt concern for the marginal groups in society and an appropriate disdain for the views and interests of the corporate sector. Their work, however, is even more value-driven than that of mainstream economists; their values, however, are not those with which most Canadians are comfortable.
The distinction between these two schools of thought is important. It reflects two competing visions of how the world does and should function. One vision is grounded in concepts of individual responsibility and is philosophically committed to the ideal of equality of opportunity; the other is grounded in ideas of collective responsibility and is committed to the ideal of equality of results. Understanding these two competing visions helps to provide an analytical framework within which to examine conflicting approaches to the challenges raised by globalization.
When it comes to the role of government, for example, the equality-of-opportunity perspective sees a relatively small role for government involving largely negative prescriptions. Government’s principal function is to guarantee and protect the right of individuals to pursue their interests. The equality-of-results perspective envisions a much larger and more activist role for government, dedicated to the promotion of equal results and the removal of obstacles to their achievement. Equal-opportunity government is small and unobtrusive; equal-results government is large and expensive. For the former, government can be a source of interference and an obstacle to the achievement of individual goals; for the latter, government is the source of solutions and the basis for achieving societal goals.
Equality-of-opportunity government is rooted in community values such as the family, and in individual responsibility; equality-of-results government is collectivist and rooted in statist values. On the economic front, equality-of-opportunity government is based on market principles; it believes that the market is the most efficient allocator of resources; government’s role is limited to ensuring that markets are not abused and that individuals unable to compete within the market are protected.
Equality-of-results government, on the other hand, is dedicated to the proposition that the market allocates resources unfairly; instead, governments are best able to balance competing political, social and economic values and objectives and ensure that all members of society gain their fair share of society’s economic fruits.
Of course, no government or society is organized on a basis wholly consistent with one vision or another. These visions compete with one another for attention and power in democratic societies and each has left its imprint on the way governments function.
Of the five books under review, three stand in the mainstream of Canadian economic values while two partake of the radical tradition. All seek to provide a guide to the forces of change and adjustment sweeping across Canada and the rest of the world.
For James Laxer, the threat of globalization can be found in the fact that it is the product of business needs and greed. Consequently, any accommodation to its requirements holds dangerous potential to aggravate social divisions. Laxer’s False God: How the Globalization Myth has Impoverished Canada starts with the assumption that the Canadian economy is in deep trouble, but not for the conventional reasons of debt, international competitiveness, lack of native entrepreneurship and so on. Laxer has a simpler explanation and it is rooted in the election of the Conservatives. Prior to 1984, Canadians were nation builders, developing a model based on sharing and community values. Then the Conservatives came along and destroyed this by bringing in an alien US model and mountain a willful attack on native Canadian institutions. The FTA was both the centrepiece and the symbol of this transformation. It locked Canada into a US-dominated North American economy based on alien values. In his view, the FTA established a trading bloc within which the US corporate order could successfully dismantle national sovereignty and impose a fourth level of government that would take precedence over the will of the people. As a result, he sees the central challenge faced by Canadians as one of coming to grips with the new age without being sucked further into the nightmare of the US socio-economic agenda.
Integral to the US agenda is the achievement of a global economy. He thus characterizes globalization as the work of analysts in the English-speaking world trying to explain what must be done to arrest the decline of Anglo-American political and economic hegemony. Ironically, he adopts the analytical model of US commentators like Lester Thurow to substantiate his claims. They believe that there are three sub-systems of global capitalism: the discredited, competitive Anglo-American model; the more robust, corporatist German or continental model; and the cooperative, communitarian Japanese or Asian model. To drive home his point that Canada has hitched its wagon to the wrong star, Laxer paints a caricature of the US economy reminiscent of Dickens’ portrayal of Victorian urban slums. This US nightmare is then juxtaposed against the success of Germany and Japan — something which quickly dates the book, given the economic woes now being experienced in Germany and the economic and political instability that have buffeted Japan over the last two years.
To bolster his social criticism, Dickens needed to paint the idyllic but fictional picture of happy rural peasants transformed by industrialization into the mean urban poor of his day; today’s caricaturist uses the equally idyllic picture of the happy industrial worker of the 1950s reduced to penury by globalization, hastened along by the greed of the Reagan-Mulroney corporate agenda. This caricature bears little resemblance to the richly varied American and Canadian experiences, but Laxer gives it an air of credibility with the occasional useful insights, such as his compelling description of the isolationism of the American mind Even this image, however, is devalued with that snide moral superiority that is the special preserve of the Canadian left.
For those who may think that Laxer represents an isolated rant from the NDP Waffle past, a quick perusal of McBride and Shields, Dismantling a Nation: Canada and the New World Order, and its extensive notes and bibliography — should dispel this notion. It offers a more subtle version of the same thesis. Globalization marks a threat. Brian Mulroney and the FTA brought it to Canada. Only a socialist revolution can undo it. While this too may read like a Marxist tract, it is in fact a popular text used on campuses around the country to introduce students to Canadian political economy. I read Vincent Bladen; today’s students read McBride and Shields and similar tomes. It is well written, carefully footnoted and seriously misleading.
Like all too many books written by the current breed of progressive Canadian political economists, it is a triumph of ideology over analysis. Facts are carefully poured into a class-based analysis of Canadian and global economic circumstances. Governments are portrayed as consciously and systematically pursuing ideologically-based strategies — i.e.., neo-conservative in the case of Canada over the past few decades — rather than the more haphazard reaction to circumstances within the constraints of global and national political and economic realities with which most of us are familiar. McBride and Shields may not represent mainstream economics, but their analysis sure is mainstream political economy. It is also very disheartening. The image that emerges is that of a country being sucked into the maelstrom of globalization, hurried along by the evil intentions of international capitalism (e.g., the debt crisis is a business myth). A central tenet is that over the past two decades, Canada has become a meaner place as governments retrenched and responded to the demands of the business class. The truth, of course, is that social spending has risen steadily in Canada over the past twenty years for a wide variety of reasons, while revenue at the provincial and federal has not kept pace, creating an increasingly unsustainable fiscal situation.
The FTA is again given pride of place in the pantheon of neo-conservative devils and its rules are characterized as a major departure from the past, never mind the fact that many of the rules that most trouble leftwing analysts are straight incorporations of GATT rules and procedures. As a result, the FTA can be described as imposing significant restraints on progressive public policy. This oft-repeated but rarely explained charge rests on the FTA’s national treatment obligation, one of the oldest principles underpinning international agreements and one that has served Canada well.
Suffice it to say that both students and general readers deserve better. The world is more complex than this. Unfortunately, we are not served much better by business-oriented, non-academic authors. Nuala Beck’s book Shifting Gears: Thriving in the New Economy affords a good example. Here we have a book that contains a critically important message for all Canadians but is written in such an annoying way that most people will not get through it. It is not that Beck does not know how to write; she writes extremely well in a breezy, very readable style. But she undercuts her message by insisting she is the first and only person to have discovered the thesis she propounds. She isn’t and if she were to have acknowledged at the beginning that she is a pygmy standing on the shoulder of giants, more people would be prepared to accept her message. She is a popularizer of the impenetrable prose that deeper thinkers use; this is an honourable and important profession and works best if the sources of the ideas and analysis are acknowledged.
Beck’s basic thesis builds on the insights of such giants of economic thought as Joseph Schumpeter and Nikolai Kondratieff about long waves and discontinuities in economic growth and the important role of technology in defining its parameters. A lot of very useful work is being done on these ideas at, for example, the Science Policy Research Unit at the University of Sussex by researchers like Chris Freeman and Giovanni Dosi. In Canada, Dick Lipsey’s work under the auspices of the Canadian Institute for Advanced Research is similarly exploring the role of technology in stimulating economic growth and development. In essence, Lipsey is working on a much more sophisticated version of the thesis that Beck explores, one that has been very well received in government, business and academic circles.
The thesis is relatively straightforward. We are going through a transformation from the old, mass-production, resource-intensive old economy to a new, information-based, flexible-production, new economy. This transformation is not only creating adjustment problems for labour and business, but has profound implications for a much wider range of societal institutions, policies, practices and values. Resistance to these changes is not surprising, but they are adding to the stresses and strains we are experiencing. Beck is right to say we need to recognize the deep-seated nature of this transformation and to counsel that we get on with making the necessary adjustments. But I wish she would get a little less shrill and a little more humble about it.
Three of the books are excited about the prospects presented by a much more open global economy; two are frightened by it.
The latter are the product of Canadian university political scientists with huge anti-American, anti-business chips on their shoulders; the former are largely the product of economists earning their living as consultants or journalists.
Diane Francis’s A Matter of Survival: Canada in the 21st Century similarly means well but her analysis is also disappointing. She has the journalistic talent for writing clearly but she lacks the essential knowledge to make a credible case. She plays fast and loose with the details that add authenticity and credibility to any book on a complex and sophisticated issue. While : daily journalism may manage to get away with this kind of sloppy work because of its ephemeral nature, a book cannot or should not. There is time to check and verify and get it right. Much of her information seems to come from the daily media, thus compounding her own sloppy research. For example: she states that the GATT was established at Bretton Woods in 1944 (that was the IMF; the GATT was originally negotiated in Geneva in 1947); Europe formed a customs union in 1993 (the EC-92 program that went into effect on January 1, 1993 in fact deepened a customs union that dates back to 1958 for the original six members). She also throws in a lot of simplistic and unnecessary generalizations and annoying judgements, e.g., the growth of a Fortress Europe, the preference of Australia and New Zealand for a free-trade agreement with North America rather than Asia.
Despite these weaknesses, Francis demonstrates a good awareness of the close interaction between political and economic factors, e.g., the refugee problem flowing from the collapse of communism and the end of the cold war is being compounded by the economic dislocation flowing from globalization. She thus provides a good appreciation of the geopolitical dimensions of globalization but an insufficient one of the social and political aspects.
Writing about complex issues for a general audience is a tough task. It requires an ability to take complex ideas and phenomena and reduce them to their essentials, without distorting the facts. It helps if the author can find metaphors that illustrate rather than confuse. Francis does not meet this challenge. The partnership of Dian Cohen and Guy Stanley, however, does. This collaborative effort between a business journalist and an academic business economist is the most satisfying of the five books.
What distinguishes Cohen and Stanley’s No Small Change: Success in Canada’s New Economy from Beck and Francis is that they offer not only a straightforward and credible explanation of the wrenching transformation taking place in the world around us, but they also provide a wealth of sensible advice about how we can adjust to and gain from this transformation. Their work is based on a careful appreciation of a wide range of business and economic analysts. It provides a convincing mix of searing criticism of our complacency and traditionalism and cautiously optimistic conclusions about our ability to meet the challenges of the future. Cohen and Stanley are convinced that with the right attitudes and actions — individual, corporate and governmental — Canadians can be among the big winners in the global economy. They correctly point to the FTA as an important if only partial step in the right direction. Their analysis indicates that the United States is not an economy in decline, but one that is adjusting rapidly to the demands of the new economy. They thus see Canadian integration into the US economy as a positive rather than retrograde development.
The picture that emerges after reading all five books is of a world in a state of considerable flux, with Canadians right in the middle, whether we like it or not. What separates these books from each other is their attitudes towards the possibilities offered by these changes. Three of the books are excited about the prospects presented by a much more open global economy; two are frightened by it. The latter are the product of Canadian university political scientists with huge anti-American, anti-business chips on their shoulders; the former are largely the product of economists earning their living as consultants or journalists. As these books show, Canadians don’t lack good ideas. The problem is rather that some of us have trouble escaping from old ideas that are no longer applicable or that were never very good to begin with. The world is changing; the safe assumptions of the past will not help Canada face its current economic problems. We need to think boldly and creatively. For my money, Cohen and Stanley provide the best point of departure for that kind of thinking.
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Originally published in bout de papier, Vol. 11, No. 3 (1994) — Fall 1994 // Automne 1994, pp. 44–48. Read the rest of this issue →
