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  • Boom, Bust and Consolidation November 9, 2018
    The five largest bitumen-extractive corporations in Canada control 79.3 per cent of Canada’s productive capacity of bitumen. The Big Five—Suncor Energy, Canadian Natural Resources Limited (CNRL), Cenovus Energy, Imperial Oil and Husky Energy—collectively control 90 per cent of existing bitumen upgrading capacity and are positioned to dominate Canada’s future oil sands development. In a sense they […]
    Canadian Centre for Policy Alternatives
  • A new Director for CCPA's BC Office: Message from Mary Childs, Board Chair October 24, 2018
    The CCPA-BC Board of Directors is delighted to share the news that Shannon Daub will be the next BC Director of the Canadian Centre for Policy Alternatives. Last spring, Seth Klein announced that, after 22 years, he would be stepping down as founding Director of the CCPA-BC at the end of 2018. The CCPA-BC’s board […]
    Canadian Centre for Policy Alternatives
  • Who Owns Canada’s Fossil-Fuel Sector? October 15, 2018
    The major investors in Canada’s fossil-fuel sector have high stakes in maintaining business as usual rather than addressing the industry’s serious climate issues, says a new Corporate Mapping Project study.  And as alarms ring over our continued dependence on natural gas, coal and oil, these investors have both an interest in the continued growth of […]
    Canadian Centre for Policy Alternatives
  • Pharmacare consensus principles released today September 24, 2018
    A diverse coalition representing health care providers, non-profit organizations, workers, seniors, patients and academics has come together to issue a statement of consensus principles for the establishment of National Pharmacare in Canada. Our coalition believes that National Pharmacare should be a seamless extension of the existing universal health care system in Canada, which covers medically […]
    Canadian Centre for Policy Alternatives
  • Kate McInturff Fellowship in Gender Justice September 19, 2018
    The CCPA is pleased to announce the creation of the Kate McInturff Fellowship in Gender Justice.This Fellowship is created to honour the legacy of senior researcher Kate McInturff who passed away in July 2018. Kate was a feminist trailblazer in public policy and gender-based research and achieved national acclaim for researching, writing, and producing CCPA’s […]
    Canadian Centre for Policy Alternatives
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Inequality-redistribution in Canada update

Two years ago I posted my first guest blog focused on income inequality, specifically how changes in Canada’s redistribution over the last three decades have increased after-tax income inequality, and how these changes compared to OECD trends. The figures and analysis in this post update the earlier blog, based on the most recent OECD data to 2015. I also look at the market inequality-redistribution relationship and find that Canada is the only country that combines low market inequality with low redistribution.

Figure 1 presents market and after-tax income Gini coefficients for Canada and selected OECD countries. Market income is before taxes and government cash transfers, while after-tax income is after such taxes and transfers. The Gini coefficient varies from 0 to 1.00, with higher values representing higher inequality. Figure 1 includes data on the USA, the four larger Nordic countries (“Nordics-4”): Denmark, Finland, Norway and Sweden) and the other eight OECD countries for which data are available from the mid-1980s (“Other OECD-8”: Australia, France, Germany, Italy, Japan, Netherlands, New Zealand and UK). I have annotated Figure 1 to explain these inequality-related concepts and data. Focusing on the last few years (readers can refer to the earlier blog for a longer-term analysis), Figure 1 shows a general continuation of recent trends. Market inequality in the Other OECD-8 and Nordics-4 has continued to increase, while the long-running economic expansion in the USA appears to have finally (and perhaps only temporarily) paused the long-term increase in market inequality in that country. Canada continues to have relatively low market inequality and average after-tax inequality.

 

Figure 2 shows the percentage point difference between market and after-tax income Gini coefficients and reflects the extent to which Governments reduce market inequality by taxes and cash transfers. The Nordics-4 have traditionally had the highest level of such redistribution, currently lowering inequality by about 50% more than Canada does. Over the last decade Canada and the USA have had about the same low levels of redistribution (the two lowest among the OECD).

 

Figure 3 shows the political-economy outcome of the market inequality-redistribution relationship. For each of the 14 OECD countries listed above, Figure 3 includes average market inequality plotted against average redistribution (as measured above). Figure 3 appears to include three distinct “clusters” of countries:

  • Low market inequality with medium redistribution, including Denmark, Netherlands, Norway and Sweden.
  • Medium market inequality with low redistribution, including Australia, Japan and New Zealand
  • High market inequality with high redistribution, including Finland, France, Germany and Italy.

These three clusters include a total of eleven countries, leaving three “outliers” that do not belong to any particular cluster. Canada is one of these outliers, being the only “low inequality / low redistribution” country. Others are the USA (high market inequality with low redistribution) and the UK (high market inequality with medium redistribution).

Each country’s inequality-redistribution outcome is the result of a series of complex national political-economy interactions. The cluster analysis in Figure 3 shows, however, that international and regional influences also matter. It is perhaps not surprising that Australia and New Zealand are in the same cluster, as is Japan. The “Nordic” cluster (including Netherlands but excluding Finland) could also be expected given proximity and historical ties. France and Germany being in the same cluster is also consistent with this hypothesis. That the UK is an outlier is perhaps not surprising (e.g. Brexit, etc.). The USA has always followed its own path and therefore is also a high inequality / low redistribution outlier.

Which brings us to Canada, another outlier, the only low inequality/low redistribution country. It has maintained Nordic-type levels of low market inequality via the public provision of universal human-capital-enhancing programs (e.g high quality health care, education, etc.), while implementing only USA-type levels of redistribution. Current political battles and outcomes related to the minimum wage, taxes and social assistance indicate that market inequality-reducing measures (e.g. minimum wage, etc.) continue to be more politically-feasible than those that increase redistribution and reduce poverty outcomes (e.g. more progressive taxation, increased social assistance, etc.). While fighting to maintain and expand universal social programs, progressives should work harder to prepare the political ground for Canada to increase redistribution, especially for when market inequality increases.

 

 

Homelessness and employment: The case of Calgary

I’ve just written a blog post about homelessness and employment, with a focus on Calgary (where I live and work).

Points raised in the blog post include the following:

-Persons experiencing homelessness usually have poor health outcomes, making it especially challenging to find and sustain employment.

-There are several non-profits in Calgary that assist persons experiencing homelessness to find and sustain work.

-Persons finding the most success in those programs tend to be relatively healthy (compared with their peers) and be between the ages of 25 and 60.

-In some cases, persons experiencing homelessness are overqualified for jobs.

-There is some evidence that subsidized housing can improve employment outcomes.

The link to the full blog post is here.

How to Measure and Monitor Poverty? LIM vs LICO vs MBM.

The federal government has promised to launch a Canadian Poverty Reduction Strategy in the coming weeks or months on the basis of now completed consultations with Canadians and the still ongoing deliberations of an advisory committee. As part of this process, there has been discussion about which poverty or low income measure or measures should be used for the purpose of monitoring levels and trends in the incidence of poverty and gauging the impact of poverty reduction policies. At various times, there have been calls for an official Canadian poverty line, as exists in the United States and some other countries, and some have called for poverty reduction targets which would require the specification of a poverty line or lines. (See https://www.canada.ca/en/employment-social-development/programs/poverty-reduction/reports/proverty-reduction-strategy-what-we-heard.html#section9 )

It should first be noted that any poverty line dividing the poor from the non poor at a given level of income and for a given household size is arbitrary and value-based. It explicitly or implicitly involves a judgement as how far below the mainstream people should fall before they are considered to be poor in terms of either their income or their ability to obtain the essentials of life. And any line must be used to tell us not just how many persons are poor at any point in time, but how far the poor fall below the poverty line. (For example, most social assistance recipients live in deep poverty, while most seniors in poverty are clustered just below the poverty line due to receipt of the Guaranteed Income Supplement to Old Age Security.)

The line should also be used to inform us how long the poor remain poor. (For example, social assistance recipients with disabilities tend to remain in low income much longer than the working poor who cycle in and out of poverty.) Finally, a useful poverty line should inform us of the incidence of poverty by age, gender, racial status and aboriginal status, disability status, economic family type, and so on, as well as by province and region.

A single poverty line as called for by some has the merit of being relatively simple and potentially easy to communicate. As well, a clear indicator showing the impact on the incidence and depth of low income of policies such as increased child and senior benefits could help build public support for a poverty reduction strategy.

However, choosing a single measure risks glossing over different concepts of poverty and overly minimizing the complexity of the issue.

Currently, Statscan provides annual data based on three different measures of low income – the LICO AT, the LIM AT and the MBM. (See CANSIM Table 206-0041 for detailed data on poverty using these measures.) LICO estimates are also presented on a pre tax basis but these are seldom used. While the three measures in use today are not described as poverty lines, they are generally used as such, and they all allow for assessment of levels and trends in a disaggregated fashion.

The LICO AT (after tax) tells us that a person or family is spending a much higher than average percentage of its income on the essentials of food, shelter and clothing (based on family size and with account taken of the size of the community in which the household resides.) The LICO line is based on 1992 living costs, so trends tell us how much progress has been made over time in terms of the ability of Canadians to purchase a basic basket of goods at 1992 spending weights..

The poverty rate in 2015 based on this measure was 9.2%, down from a high of 14.0% in 1983, but it can be questioned if poverty has really fallen so significantly. The LICO has fallen into disfavour because it does not tell us how many persons are unable to achieve a basic standard of living in terms of what Canadians are consuming today, as opposed to twenty-five years ago. For example, the LICO basket does not include the cost of internet access. The LICO does, however, give us some sense of the very long-term trend in the living standards of the poor, and tells us that there has been some absolute income growth over time among the poor.

The Market Basket Measure tells us that a household – in after tax terms, adjusted for family size – has insufficient income to purchase a modest basket of goods and services. The MBM was called for by federal and provincial ministers, and the composition of the basket was determined by government officials rather than by Statistics Canada. It has been calculated since 2002 for a reference family in a large number of communities, so it varies with the local price of housing and food. It is more than an extreme bare bones, basic needs budget insofar as it includes child care costs and the cost of a modest vehicle where transit is unavailable.

That said, there has been a lot of disagreement about the contents of the MBM basket, and many argue that it is a poor measure of the consumption gap between low income Canadians and the mainstream. MBM does not centrally view poverty as being about distance from the mainstream, bur rather as having an income which is insufficient to meet the basic needs of a low income family.

In 2015 the MBM rate at a national level was 12.1%.

The LIM measure (Low Income Measure After Tax) draws a low income line based on 50% of the income of a median household of the same number of persons. It is a purely relative measure with poverty being seen as having an income well below the norm defined as the income of a mid point Canadian family.

In 2015, the national LIM rate was 14.2%. This measure is based only on income relative to the national median income, and is not a measure of basic needs based on consumption.

LIM is very useful in terms of telling us how the bottom of the income distribution is doing compared to the broad middle-class, and how that is changing over time. It is also very useful in terms of international comparisons, telling us that the gap between the bottom and the middle is much wider today in Canada than many European countries, but that low income is much less prevalent in Canada than the United States.

The big problem with the LIM is that it does not take account of large differences in living costs between cities and regions. For example, no account is taken of very large differences in rents between big cities, or the high cost of food in many remote and rural communities.

There is not a great difference between the LIM and MBM measures when it comes to calculating the overall incidence of low income. Over the past five years, the LIM rate has averaged 13.5% compared to 14.2% for the MBM rate. Both rates have remained fairly constant since 2002. (The gap in 2015 – a 14.2% LIM rate compared to a 12.1% MBM rate – was unusually large.)

However, there have been some important differences over time and for some sub populations.

There is a huge difference between the LIM and MBM poverty rates for seniors (14.3% vs 5.1% in 2015.) Also, there have been big changes over time in the LIM based poverty rate for seniors. This fell from 33.1% in 1977 to a low of 3.9% in 1995, before increasing to 14.3% in 2015. The income gap between seniors and other families narrowed initially due mainly to improvements in public and private pensions, but in recent years the incomes of many seniors have been falling behind those of working age families in relative terms. This is not captured in the MBM measure. (As an aside, the LIM poverty rate for seniors would likely not rise if Old Age Security and the Guaranteed Income Supplement were to be indexed to wage growth and not just inflation.)

The apparent stability of the LIM rate over time also hides a long-term increase in the low income rate for the working age population, especially single persons, and, importantly, a major decline in the low income rate for single parent families headed by women reflecting a significant rise in participation in the labour market.

There is also a big difference between LIM and the MBM when it comes to calculating the incidence of low income in Quebec. The Quebec LIM rate is 16.2% compared to a 10.9% MBM rate. The LIM rate in Quebec is 2.0 percentage points above the national LIM rate, but the Quebec MBM rate is 1.2 percentage points below the national MBM rate. This difference is likely due to low housing costs in Quebec compared to other provinces.

The key point is that the conceptual and measurement differences between LIM and the MBM result in significant differences in rates of low income for important sub populations. It is important to have both measures to account for this complexity.

It is also important to appreciate that the drivers of the LIM rate and the MBM rate are different. The LIM rate reflects changes, not just in the incomes of low income families, but also in median incomes. The LIM rate could rise if median wages began to grow after years of stagnation, and if bottom incomes did not follow suit. By contrast, the MBM rate could fall due to increased income supports which lowered the real cost of living of the poor, even if the gap between the middle and the bottom were to grow. Both measures should register major changes in the labour market and in income transfer programs.

By way of conclusion, the LIM and the MBM are conceptually different measures, both of which provide useful and important information for analysts and policy makers. We need both to get a handle on overall low incomes and trends in different populations.

Budget Fails to Crack Down on Private Corp Tax Shelter

The federal Budget changed the rules a bit re the taxation of passive investment income in private corporations, but falls well short of what was promised in terms of extra revenues and more tax fairness. The “small business” lobby helped the wealthy big time.

http://www.broadbentinstitute.ca/andrew_ajackson/wealthy_get_off_lightly_from_budget_2018_changes_to_the_private_corporation_rules

 

 

Clarksonian Mega-Challenges for Canada and North America Michèle Rioux

Stephen Clarkson

 

This is the final essay in the PEF series to commemorate the life of Stephen Clarkson.  It is fitting that it is written by Michèle Rioux, a colleague in Quebec.  Stephen worked closely with many in Quebec and the relationship between Quebec and Canada was an important part of his analysis of North America.

Michèle Rioux is a Professor in the Department of Political Science, UQAM and Research Director at the Center for research on integration and globalization (Centre d’études sur l’intégration et la mondialisatieon).  Stephen loved Quebec and Montreal and was frequently invited to the Centre to speak, including attending the event to mark the 20th anniversary of NAFTA at la Maison du Développement Durable.

 

Clarksonian Mega-Challenges for Canada and North America

by Michèle Rioux

 

The Neoliberal Trade Agenda @ Bay

North America has been an experimental model of trade and integration for at least the last 25 years. Stephen spent his life understanding North America and how the region shaped the Canadian political economy and society. An excellent, innovative researcher, he kept asking questions, many without clear-cut answers that led to a dozen high impact publications. Always kind and generous, intellectually challenging, he had an engaging personality and a very contagious smile. In this short article, remembering his critical influence he had on my research and in the field of Canadian political economy, I will specifically explore three topics that are central to his many contributions:
• The singular importance of the world economic system and the emergence of powerful multinational corporations as pivotal actors in diminishing the role of state everywhere.
• The asymmetrical growth in social inequality from new market access and free trade in North America and their “capture” of the public policy process.
• The transformative impact of regional economic integration models on the dynamics of state sovereignty and comparative international political economy.

Burned At The Stake Of International Competition

Stephen’s first major influence is to be found in his contribution to the most important debate on the highly controversial role of US MNCs and their impact on Canada’s economic sovereignty. Stephen had a leading role along with other experts stressing the dangers of a globalization process in Canada that left unchecked, would lead to economic domination by the US capitalism and the eventual loss of Canadian sovereignty through what Kari Polanyi has called a “silent surrender” in her book with the same title.

The debate on trade and industrial policies took place in the 1970s under the government of Pierre Trudeau and did not lead to a very successful interventionist state- centered Canadian policy ‘independentiste’ model. What was called the Third Option never went anywhere as a policy idea requiring Canada to reduce its dependence on the American market through targeted diversification. Instead, successive Liberal governments did exactly the reverse and opted for closer integration with the United States, along with an aggressive policy of deregulation and privatization of the Canadian economy, its primary policy orientation of the 1980s and 1990s.

Nowadays, the dangers of this economic domination are still significant for the Canadian state and a range of public policies. As Clarkson stated at the end of his book Uncle Sam and Us:

Rather than proposing yet another big idea to achieve still further leaps of integration with the United States on the dubious assumption that erasing the economic border will magically increase the standard of living, the Canadian state needs to recommit itself to its historical task of strengthening its own democracy.
The issue of the role and rights of foreign investors in Canada is still of great significance and has played a central role in the debates surrounding the Comprehensive Economic and Trade Agreement (CETA) and the renegotiation of NAFTA. Foreign investors are powerful agents in the world economic system, They have gained economic, political and legal authority with few binding obligations in terms of protecting the public interest. This can be viewed as the continuation and exacerbation of the ‘silent surrender syndrome’ .

The globalization process has undermined national and international regulatory frameworks and in their place supported the emergence of new ‘globalist’ institutional and normative frameworks. Such frameworks are much more complex than those from the past since they deal with issues like investment, competition, services, public procurement and intellectual property; all of these areas that were outside of international negotiations in the past. This structural shift from national economic space towards a global economy has enormous implications on societies and on the behaviour of international relations. A long-term momentous shift in competitive strategies between global corporations for market share in regional markets the world over has given them unprecedented leverage to control where production is located and investments are made to support the unprecedented growth in global value chains, one of the key organizational principles of the crisis-ridden global economy. Stephen was one of the early Canadian researchers to analyze the important role of free trade agreements in the shift from Keynesian to a globalized economic policy model.

 

NAFTA, Neoliberalism and The Trouble with Bad Ideas

Clarkson did not agree with orthodox trade policy. He labelled them as ‘economic constitutions’ and described how they shape societies economically and politically. In an article entitled Apples And Oranges: Prospects For The Comparative Analysis of the EU and NAFTA as Continental Systems, he develops the idea of NAFTA as a comprehensive constitution setting the rules and regulations of state-market relations and as an American mode of regulation.

This is a very powerful idea and was highly provocative at the time. Nowadays, it is very clear that if trade agreements are not constitutions, they have great implications not only at the border but also behind borders. We now understand that these trade deals have developed into a very powerful intrusive legal instrument that affect policy and regulatory systems at different levels of the political order. The relation between states and markets, for Stephen, was at the very core of his perspective.

He critically understood the North American integration model as a reflection of changes in the relationship between states and markets in the region and compared with integration models elsewhere (see, for instance, his article Apples and Oranges). Indeed, North America emerged in the 1990s as a strong and influential regional model of integration. As such, it brought about new regulatory and strategic instruments deployed at multiple and diversified levels of governance. From the US point of view and, to a lesser extent from that of Canada, one of the initial and most important objectives of the North American Free Trade Agreement (NAFTA) was to improve the competitiveness of the region by relocating in Mexico, especially in the area of border production, where production functions were low-tech and labour intensive in auto assembly, light manufacturing and other industries that benefited the American consumer at the checkout counter. It was the ‘trump card of the United States’ both before and after negotiations (Rioux et Deblock, 1993). NAFTA has spread beyond North America, and we can agree with Stephen’s most important insight that neoliberal trade governance has entertained a complex relationship with globalization.

One very important factor and structural element shaping governance and regulation of economic integration in North America is the importance of Asia and more specifically of China for the region. The now defunct Trans-Pacific Partnership (TPP), was to meant to transform NAFTA beyond the original three countries involved. This would have been a de facto renegotiation of NAFTA. The last time I met Stephen was at a conference on “NAFTA at 20” and the TPP negotiations were perceived as a way to ‘modernize’ NAFTA on the Trans-Pacific front. The TPP allowed the three countries to negotiate new trade related regulatory issues with the strategic goal in mind to deal with inter-regional issues linked to the development of new global value chains. It meant that, instead of being a ménage à trois, North America was immersed into an intense model of coopetition shaped by global value chains across the Pacific.

In this new context, the conference participants saw emerging transnational regulatory responses accelerating the disappearance of the boundary between the public and private spheres at various levels ?local, national, international and global? giving way to a complex system of networks between authorities endowed with overlapping rights and obligations from the perspective of the trade deal. The exact relationship between national sovereignty and transnational trade governance was never clear in a third generation of regional/interregional trade agreement. Does this contribute to the convergence of regulation and governance models or to the hegemonic diffusion of the US regulation model? Of course, once Donald Trump scrapped the TPP, challenged NAFTA and TTIP, the US regulatory model was no longer in the driver’s seat even have it remains a powerful force in its own right. Yet, this might also be a strategic move to ensure that the contested US model is accepted in exchange for access to the US market. Since the 1930s, the United States always promoted trade liberalization based on a system of legal rules and principles “organizing” the trading system and their relations with trading partners.

I want to quote from the preface of the conference proceedings to emphasize this point:
“The tragic misrule in North America’s three-state space and in most of Latin America over the last few decades has undermined the significant achievements of the post-World War II Keynesian state which achieved high rates of economic growth while developing publicly financed education, health, employment, and pension policies and consequently reducing the inequality between rich and poor. Neo-liberalism’s populist, anti-government rhetoric has blinded public consciousness to the costs of empowering market actors freed of responsibility for the destructive environmental and social consequences of their corporate actions.” (Préface in English, Rioux & al. 2016).

North American trade deals have increasingly shaped our societies and they can, as Clarkson suggested, be considered like new global trade constitutions empowering multinationals and constraining governments.

The Contradictory Impacts of Regional Economic Models

The third Clarkson narrative concerns regional integration models. He compared regions mostly North America with Europe and how both regions differed in their approach to integration processes. As regions are increasingly negotiating trade agreements with one another, he contributed to the development of the concept of inter-regionalism to explain both the dynamics of convergence and divergence across highly dissimilar regional economies.

When comparing the North American regionalism with the broader European model, Stephen was evidently disappointed. In North America, regional integration is a less ambitious project. It has developed as a mainly contractual and essentially strategic model, oriented on economic issues. In North America, there was no plan for a gradual and incremental process leading to a single market or to a monetary and political union. The goal is primarily opening up markets and adopting rules for markets in an attempt to boost competitiveness. Partners work to eliminate restrictive policies and regulations rather than to build a common and supranational approach in a multidimensional perspective; i.e. taking into account the public good in economic governance as part of a wider social and political integration project. Nowadays, the European Union is an economic, legal, monetary and political reality, even though an imperfect and contested one. Fiscal and social policies and the pressures linked to the 2008 economic crisis and the management – or the lack of – of the migration issues in the recent past have paved the way for new risks of institutional implosion such as Brexit, which is underway, and in the recent past, the forced upon departure of Greece or Grexit.

Clarkson was pragmatic about how far he could take this comparison. Even though, he liked the European model, he also knew that it could not be adopted in North America. He distinguished between the two models of regionalisms, the first developed in Europe and a second generation type emerging in North America in the late 1980s and early 90s. In the European case, the economic dimension would be completed by adding a very elaborate supranational legal and political institutions evolving over time. There is a strong sense of community and identity that speaks volumes about the national and sub-national layers of governance in the European Union. Like Robert Pastor who, in the United States, deployed much time and energy to define and promote the concept of the importance and value of an emerging North America community that existed beyond the free trade ideal, Clarkson also pushed the idea that a sense of community could and should emerge in North America.

More recently, CETA, the negotiations of TPP and the Transatlantic Trade and Investment Partnership involving the United States and the European Union, have launched a new process of inter-regionalism that would incorporate and articulate a developed regional integration models of regionalisms. Stephen also sought to grasp these new realities of integration processes in his later writing and research.

When Canada and the EU negotiated an ambitious agreement like CETA, how does this agreement compare to the regional integration processes underway on both sides of the Atlantic? What does it mean for their respective lives of citizens and for their interactions with government and nonstate actors that will increase over the next years as the Agreement become a living experiment and eventually take a life of its own. For some, this indicates the emergence of a third generation of integration processes that is increasingly interregional in nature. Recent trade agreements are very ambitious, more ambitious than NAFTA, but there are no plans or possibility of creating a single unit like the EU. New words, like comprehensive and partnership, combine to define what Christian Deblock depicted as an ‘interconnection’ model that is essentially geared towards regulatory cooperation and governance. He writes that:

In the current decade, two trends closely related to the new issues of globalisation have begun to emerge. First, trade negotiations increasingly revolve around cross-border trade, digital trade and value chains. Second, they are characterised by their interoperability. Today’s globalisation does not so much integrate as connect. And with interconnection, the problem of international regulatory cooperation arises. This issue is now at the core of discussions within the OECD, APEC or new trade agreements, according to terms and principles very different from previous negotiations. (Deblock, 2016, p. 9)

CETA involves regulatory co-operation in many domains and certainly has the potential of significantly changing national regulations. The intent of the TPP also placed emphasis on regulatory co-operation across the Pacific. The Transatlantic Partnership (TTIP) negotiations between Europe and the United States also involved such far reaching regulatory cooperation. The EU negotiator for the TTIP made no secret of it. Important issues are the investor-state dispute mechanism, electronic commerce, norms and standards, including labour standards and rights. Undoubtedly, this interconnection model does not imply loss of sovereignty, but it certainly will have a great impact on many policies and regulations. This raises several questions, including that of the democratic legitimacy of a new and further shifts of power and regulatory authority between states and markets.

Pessimist or Eternal Sceptic?

Building on the fundamental complex relationships between states, markets and North American integration, Clarkson identified the powerful and often dangerous dynamics unleashed by globalization, Clarkson always paid attention to power relationships and asymmetries in the light of Canada’s relations with its continental global neighbour. He was critical but never pessimistic about North America. Yet, I think he wished for more cooperation and more balanced relations between countries and between states and markets. At that time of pessimism and national retreat, we will miss his insights but we are lucky to have such a rich legacy of scholarship and intellectual research to draw on.

It is hoped that trade deals will also strike new balances between states and markets. Transparency, more participatory process during negotiations and enforcement, and more balanced agreements taking into account the social and environmental dimensions are key elements for the future of globalization. North America has to invent new types of cooperation and governance, regulatory schemes in this world of transnational and global networks. In my view, this is the biggest challenge we have before us and one that Stephen was always motivated to undertake with boundless energy. He believed that Canada would find a way to provide answers to the complex challenges of North American integration. Perhaps the trump card of NAFTA is the Trump Presidency which has triggered a wider discussion on North American regional integration. Canada is now promoting a new progressive trade agenda in North America with its trading partners around the world. Last May, Ed Broadbent challenged the perspective and its depth in these words:
“One part of a response to growing inequality is to change the rules of the game in international trade. The Liberal government has suggested it wants such change. It claims to believe in “progressive trade.” However, in the recent negotiations with Europe, the government signed on to a pact, the Comprehensive Economic and Trade Agreement, that pays only lip service to labour rights.”

It is also the case that Canada is intent to negotiate several new trade agreements, particularly with China and Mercosur, and has started NAFTA re-negotiations. The interaction between globalization and social progress is becoming increasingly important in the public debates. Many international instruments exist; however, they remain largely ineffective to produce a socially responsible globalization process. More ambitious social and environmental clauses in trade agreements might be elements of a wider solution, but significantly there is a deeper questioning of the social and political significance of what states are attempting to achieve while multiplying trade agreements.

In these new conditions unquestionably Canadian political economy will be subjected to powerful and volatile structural forces determined by the wider North American political economy. But there is no doubt that Clarkson also believed in Canada and its potential in playing a key role within the international system as well as in the world economy. Yet, for this to occur, one must learn from history and understand how to steer collective action nationally and internationally towards a better life in North America. In this regards, it is important to end with the one more quote from Clarkson:

Whatever label one uses to describe the centrality of the past in limiting the options available in the present which determine the shape of the future, it is important to keep it in mind since, because world power relations are in such a constant flux, so much analysis has focused on immediate happenings that “change” is typically presented with little attention being paid to the historic roots of the reality experiencing change. (Préface in English Alena conjugué au passé, présent et futur. Rioux &al. 2015.)

It is in this context that Canada faces numerous challenges. Not only regional integration has changed, but Canadian economic productivity has also lost ground to American industries and lags further behind the US commanding presence in new global value chains and digital trade. Clearly, Canada also needs to move towards a more innovative and progressive trade agenda. In this new setting, Stephen Clarkson’s contribution to the study of political economy of North American regionalism and globalization has much to teach us

 

REFERENCES
Ed Broadbent, « Let’s make human rights central to a new NAFTA » The Globe & Mail, May 5th, 2017.

Stephen Clarkson, Uncle Sam and Us: Globalization, Neoconservatism, and the Canadian State. Toronto; Washington: Toronto UP and Woodrow Wilson Center Press, 2002

Christian Deblock, “From regionalism to cross-regionalism”, Great Insights, December 2016, p. 8-9.

Michèle Rioux, Christian Deblock et Laurent Viau, L’Aléna conjugué au passé, au présent et au futur, PUQ, 2015.

Michèle Rioux, Mathieu Ares and Ping Huang (2015), Beyond NAFTA with Three Countries: The Impact of Global Value Chains on an Outdated Trade Agreement. Open Journal of Political Science, 5, 264-276. doi: 10.4236/ojps.2015.54028.

Michèle Rioux and Christian Deblock “NAFTA: The Trump Card of the United States?”, Studies in Political Economy, no. 41, 1993, pp.7-44.

Douglas A. Ross, “Clarkson, Stephen. Uncle Sam and Us: Globalization, Neoconservatism, and the Canadian State”, International Journal, October 1, 2004.

Five Things to Know About the 2018 Federal Budget

I’ve written a blog post about the 2018 federal budget.

Points made in the blog post include the following:

-Important new housing investments were made for First Nations, Inuit and Métis people.

-The Working Income Tax Benefit was expanded, made automatic and rebranded (i.e., renamed).

-Canada’s official unemployment is now the lowest it’s been in decades.

-Canada’s federal debt-to-GDP ratio is (by far) the lowest of any G7 country.

The link to the full blog post is here.

The Stock Market Jitters

The real problem is the absence of a sustainable growth model.

My latest Globe ROB column.

 

 

“Nationalism versus Continentalism: Clarksonian Perspectives”

 

 Greg Inwood

This is a contribution from Greg Inwood for the series commemorating the work of Stephen Clarkson who died in 2016.

Greg Inwood is a Profesor in the Department of Politics and Public Administration, and a member of the Yeates School of Graduate Studies at Ryerson University.  He is the author of Understanding Canadian Public Administration and The Politics and Legacy of the Macdonald Royal Commission.  He is the recipient of the Donald Smiley Prize in 2006 for the best book published on government and politics in Canada.

This tribute to Stephen Clarkson begins with his personal connection, where Stephen, in very Clarksonian style, dismissed Greg’s choice of thesis topic as ‘boring.’

Stephen Clarkson

Nationalism versus Continentalism:  Clarksonian Perspectives

by Greg Inwood

In perhaps my first encounter with Stephen Clarkson in the Fall of 1986, we were seated beside each other at a seminar in the Department of Political Science at the University of Toronto where I had just arrived as a graduate student undertaking a PhD. We struck up a conversation, and he asked what I was planning to write my PhD dissertation on. I was still undecided, but told him someone suggested that I might write a biographical study of the constitutional expert Eugene Forsey. Stephen looked at me and quickly and emphatically pronounced on the idea: “how boring,” he said, rather to my surprise. He then suggested that there was a dissertation just waiting to be written on the recently-completed Macdonald Royal Commission.[1] I looked at him and thought – but did not have the temerity to say out loud – “how boring.” But Stephen was persuasive, and the idea percolated in my mind. The Commission’s signature recommendation had been that Canada enter into a free trade agreement with the United States, an ideas taken up with alacrity by the Mulroney government, and central to the great free trade debate just beginning to unfold across Canada in the run-up to the 1988 election. In the end I undertook a dissertation on that very subject focusing on the debate between nationalists and continentalists. I did so under the guidance par excellence of Stephen Clarkson, whose expert combination of laissez faire and active interventionism as dissertation supervisor proved to be the perfect formula for success.[2]

The other significant early encounter with Stephen was in a graduate course he co-taught with Mel Watkins called Canadian Political Economy. After having taken legions of political science courses, I had finally discovered that there were scholars and a literature which I had previously assumed what political science was all about. Their course had an immense impact on me, as did working as Stephen’s TA for his undergraduate course on Canadian political economy.

As we move into the post-globalization era marked by the renegotiation of the North America Free Trade Agreement (NAFTA),  Brexit, the cancellation of the Trans Pacific Partnership trade deal, the reassertion of “America first,” and the revocation of international free trade principles and practices by the current American administration, it is interesting to look at Clarksonian conceptions of nationalism and continentalism as reflected in Stephen’s thinking over the trajectory of his remarkable career.

Stephen began in the 1960s and 1970s with assessments of the ideational ferment of the times and with a normative and theoretical approach that eventually evolved into a sharply tuned analysis of the pragmatic institutional features of free trade and continentalism. Stephen started with assessments of the policies of the Diefenbaker Conservatives, Walter Gordon, the Pearson and Trudeau Liberals, and left nationalist critiques emerging at that time. He posed provocative questions about the extent of Canadian autonomy, for instance in the collection of essays he edited for the University League for Social Reform entitled An Independent Foreign Policy for Canada? (Stephen always pointed out there was a question mark at the end of the book title) (Clarkson 1968). His Canada and the Reagan Challenge (Clarkson 1985) explored the exercise of American approbation toward the nationalist turn in Canadian government policy regarding the National Energy Program and the Foreign Investment Review Agency (and was dedicated, by the way, to the father figure of liberal Canadian nationalism, Walter Gordon). By the 1990s and 2000s, Stephen turned his focus more sharply to the institutional realities of the Canada-United States Free Trade Agreement (FTA) and NAFTA, as well as the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), dissecting the meaning of the new supra-constitutional regime and pointing to the legal, institutional and legitimacy limitations of the neoconservative project to make Canada and the world safe for transnational capital.

Underlying Stephen’s work was a normative dimension which reflected the broad currents of nationalism and continentalism in Canadian life. He identified with a value system rooted in nationalism giving top priority to political autonomy, social equality, labour rights, and environmental sustainability; continentalists, on the other hand, he felt saw integration as top priority and prioritized economic growth thereby entrenching reliance on factors beyond national control (Clarkson 2002, 9).

Stephen identified how problematic the gulf in value systems between nationalists and continentalists could be, resulting in a “dialogue of the deaf” (Clarkson 2002, 10). Vilification of each side by the other prevented any meaningful exchange, with continentalists condemning nationalists as either ignorant of elementary economics or outright demagogues, and nationalists condemning continentalists as the forces of evil as represented by transnational corporations and neoconservative apologists. These differing perspectives extended to perceptions of the role of the state, with continentalists believing that “who governs least governs best,” and nationalists preferring an activist state. One of the most intellectually rewarding aspects of being one of Stephen’s students and later his TA was that he brought prominent representatives of both these broad perspectives into his classrooms and seminars to air their views. He even sometimes put them in the same room together. The fireworks were remarkably instructive.

By the late 1980s and early 1990s the battle had tipped appreciably in favour of the continentalists whose ideological predisposition to free markets and neoconservatism had seen them enact a widespread program of not only free trade, but also privatization, deregulation, lower taxes, and greater corporate freedom. These measures, the nationalists felt, were inimical to the public interest while privileging private interests. Stephen looked on many of these developments with some dismay. But he was conscious of the dangers of nostalgia, even as he took the activist, interventionist Keynesian state of Diefenbaker, Pearson and Trudeau the elder as the point of comparison against which to assess the neoconservative era of Mulroney, Chretien and Harper. Still, Stephen’s sympathies were always clear. In 2002 he wrote that after the ratification of the 1989 FTA:

I mentally wore a black armband. I was in mourning for the exuberant, liveable, creative, hopeful Canada that my generation had tried to build and that ‘free’ trade seemed to have condemned to a lingering death. I had shared, and helped articulate in my research, the concerns of the millions who opposed Mulroney’s deal. Deeper integration in the American system, we believed, would doom the efforts of many generations to build a better society on the northern third of the continent. CUFTA signalled the end of Canada as we knew it. It would strike at the heart of the government structures and programs in which we had lodged so much of our shared identity (Clarkson 2002, 14).

But Stephen moved from mourning to critical analysis pretty quickly, and produced a series of important works that took the continentalist policies and placed them under a microscope. If the continentalists were going to make claims about the virtues and values of free trade, Stephen was going to subject each and every claim to careful, thoughtful and precise scrutiny, He produced an analysis of astonishing breadth and depth, consisting of a series of dozens of case studies over a thematic trilogy (Clarkson 2002, 2008, Clarkson and Mildenberger 2011) and several other important books, journal articles, reports, public commentaries and studies.

Stephen often observed that one of the conditioning features of the North American relationship was its asymmetry. There is one hegemon and two peripheral powers. This aspect of realpolitik has come home to roost in the recent statements by the current US administration that it would tear up and renegotiate NAFTA, or perhaps just “tweak” it, before issuing a directive in May 2017 instructing Congress to begin renegotiations on NAFTA’s future. But Stephen frequently signalled the significance of the power imbalance in the trilateral continental partnership that emerged in the latter part of the late 20th and early 21st century.

Stephen noted that from Bush to Obama, successive efforts to institutionalize the relationship and create a form of North American governance were of little interest to the Americans. With virtually no legislative, executive or administrative presence, with an enfeebled and ineffective dispute-settlement regime and therefore no real judicial capacity, NAFTA was an ephemeral institutional reality. The fact that corporate North America felt impelled to create parallel institutions such as the doomed Security and Prosperity Partnership, or promote the annual Leaders’ Summit between the Prime Cinister and the two Presidents, or create the North American Competitiveness Council signalled the institutional shallowness of NAFTA. So too did the ineffectiveness of NAFTA’s North American Commission on Labour Cooperation and the North American Commission on Environmental Cooperation.

This all added up to the observation that essentially, what the Americans want the Americans get. Consider for instance, the power to renegotiate NAFTA. In 2002, Stephen presciently wrote:

The threat of abrogation has a very different weight in the hands of Washington than in those of Ottawa or Mexico City…. Disaster would be the assumed impact on either of the peripheral states should the United States abrogate. Following their virtual complete integration in the continental economy, they would be forced to their knees if Washington threatened to terminate its participation in the agreement… (Clarkson 2002, 41).

I suspect this is an aspect of realpolitik not well understood by the current regime in Ottawa.

Just look at the tremors that shook the Ottawa and the Canadian business establishment when the tweeting president-elect announced in early January 2017 that the major auto companies better produce cars in America or he was going to make them pay heavy border taxes for cars imported from other countries. Or in any of the other examples of Trump shooting off his Twitter, or his appointment of a hard line protectionist as his Trade Representative: In a release issued by the transition team, Trump said Robert Lighthizer will fight for trade deals that “put the American worker first.” These developments are reflective of an earlier crisis in Canadian-American relations which Stephen analyzed – the ascension to power of the Reagan government in 1980 with its own “America first” agenda, and the resulting crisis in the relationship characterized by Reagan’s (and corporate America’s) attack on Trudeau’s nationalist initiatives (Clarkson 1985). One key difference today, however, is that while Reagan eventually succumbed to dementia at the end of his presidency, Trump started his as just plain crazy.

Among Stephen’s insights is that the Americans always set the agenda, and if they permit themselves to be the object of policies dictated by the perimeter (ideas Stephen put forward with Matto Mildenberger in 2011 in Dependant America? – note the question mark again), America nonetheless holds the residual power to alter the trajectory of continental relations more or less at will. Stephen noted that the Canadian government negotiated the original FTA “on its knees” before their American counterparts. And he observed that Canada jumped into NAFTA as a defensive response to an initiative between the Americans and Mexicans, rather than as a strategic approach to national economic development. And if there was the need for any further proof of the American proclivity for pursuing its own self-interest, the 9/11 terrorist attacks on New York and Washington dispelled any doubts, “promoting an instinctually territorial and autarchic response…” (Clarkson 2008, 369). The failure on the part of Canadian policy makers to appreciate the “America first” position of America is a recurring theme in Canadian-American relations. The continent is a function of American power. Trump is only articulating, in “Make America Great Again” a sentiment that is consistent with the assumption and reality of American predominance in the continent.

In the early 1980s when the Macdonald Royal Commission was being established, it created the largest social science research project in Canadian history. Stephen suggested a paper on the determinate power of the US Congress in setting the course for Canada-US relations. He was turned down, and the inquiry did not even commission a single piece of research dedicated to the Canada-US relationship – remember, this was the important national inquiry whose signature recommendation for free trade with the US, quickly taken up by Mulroney, became the new cornerstone of Canadian economic policy to the present day.

As Stephen contemplated the broad implications of the continentalist era, he asserted the emergence of “supra-constitutionalism” in the relations between Canada, the United States and, once NAFTA was implemented, Mexico. What did this mean? The continental political economy was overseen by a new set of institutional mechanisms articulated through trade agreements. NAFTA, along with the WTO, had “re-constitutionalized” Canada’s legal order. In effect, a new regime of norms, rules, and rights had developed that limited the powers of governments at all levels while also giving foreign corporations a powerful new capacity to challenge domestic regulations (Clarkson and Mildenberger 2011, 263). Stephen, again demonstrating the range of his intellectual curiosity, pursued the political-legal dimension of NAFTA and globalized governance more generally in considerable depth with Stepan Wood in A Perilous Imbalance (Clarkson and Wood 2010).

Stephen’s insight was that the political supra-constitution was underdeveloped even as the economic forces unleashed in free trade arrangements proceeded to integrate the three countries of North America and constrain state power. He wrote that “NAFTA was carefully designed to prevent any form of continental governance from developing” (2002, 41). He extended this line of inquiry as the early 20th century unfolded, asking the provocative question “Does North America Exist?” (Clarkson 2008). Essentially, he argued, NAFTA reconstituted American hegemony. But having drawn this conclusion, he was not yet satisfied – it required further testing. So he assessed the North American relationship from a counterintuitive perspective challenging conventional wisdom in Dependent America? (Clarkson and Mildenberger 2011) by asking to what extent American power was constructed and constrained by its two continental partners. The answer was mixed. In some matters the peripheral countries contributed to America’s hegemony, but in most cases they were constrained by it.

Recent events seem to support the imperative of American hegemony. As the American President castigated his NATO partners, cozied up to the Russians, pulled out of the Paris climate change agreement, the evidence adds up. Even the current President’s apparent on-again-off-again animosity toward NAFTA is a code for “we will do it our way.” So too is the continuous program of trade harassment policies on steel, softwood lumber, the attack on Canadian supply management dairy policies, on wheat and so on.

The paradox of the Canadian position is that the further we continentalize our political economy, the worse off we get, but the policy response then is to try to get in even deeper. The FTA was a lousy deal – we negotiated on our knees and were kicked in the derriere by the Americans; NAFTA was worse. We insisted on joining those negotiations as a defensive counter to the idea of a spoke-and-hub trade regime dominated by the US, and we were kicked in the gut; and now with Trump, Justin Trudeau and his foreign affairs ministers Chrystia Freeland are engaging in shuttle, email and telephone diplomacy, dispatching their key officials Katie Telford and Gerald Butts to no doubt prostrate themselves to the likes of Steve Bannon (before he was ushered out the White house door) and Gerald Kushner. Trudeau has even enlisted the aid of Brian Mulroney and one of his key FTA negotiators, Derrek Burney, to assist in pleading the Canadian case. These are the same two architects of the failed FTA and NAFTA. Canadians should prepare to get kicked in the head. This trifecta full body assault is the product of 30 years of repeating the same behaviours and expecting different results – the definition of insanity.

Stephen and Matto Mildenberger wrote in 2011 about possible future scenarios for North America. They suggested one path would see the US:

…go beyond its present mild economic nationalism and reinforce its historical proclivity for isolationism. It could become a Lone Ranger vigilante focusing on sealing its borders rather than promoting connections with its periphery…. To the south it could try fortifying its border still further against would-be Mexican workers and narcotics merchants, without paying heed to the economic distress, political chaos, and security bedlam pushing people across the Rio Grande (Clarkson and Mildenberger 2011, 281-2).

These words seem prophetic, but they are more the product of careful and thoughtful analysis that was Stephen’s hallmark.

This does leave us with questions about the current state of Canadian nationalism. In a 1988 essay entitled “Continentalism: The Conceptual Challenge”, Stephen reminded us of Samuel Moffat’s 1907 assertion not that Canadians would one day become American, but that they already were and did not know it. But Moffat also held that the complete political, economic and cultural absorption of Canada into the United States was inhibited by what Moffat called a “spirit of nationality.” This spirit, Stephen said, evolved through the 20th century experiences of two world wars, the flag debate, the patriation of the Constitution and Charter of Rights and Freedoms, the referenda on sovereignty association and other events and episodes in the collective conscious of Canadians.

How persistent and resourceful this “spirit of nationality” remains in the face of 30 years of unrelenting neoconservative attacks on the key structural state-level supports for this spirit is hard to gauge. Like Stephen in 1989, I sometimes find myself figuratively wearing a black arm band to signify my own uncertainty about the continued existence of Canadian autonomy and nationalism under the current conditions. However, to assuage these feelings, I can once again turn to a Clarksonian perspective on future prospects for Canadian nationhood. Stephen made note of a rarely considered dimension of continentalism – namely that the Americans would never stand for annexation of Canada. It would upset the balance of power in the US Congress, he argued, by adding 24 million English speaking Canadians (he assumed Quebec would go its own way) who skew heavily toward the Democrats and for whom state supplied medical care was a core part of their identity. The political headache would be too much to bare.

In such moments, I remind myself that a search for balance infused Stephen’s perspective and work. Nationalists need to articulate and operationalize an approach that begins to rebalance the power of various actors and institutions in the Canadian and continental political economy and that reclaims and reinvigorates a role for the state. I foresee a strategy of quiet, incremental and subtle policy initiatives – nationalism by stealth if you will – that both reflects and supports a paradigmatic shift of the sort which launched the neoconservative continentalist revolution. Eventually, perhaps a new royal commission advocating a “leap of faith” into a more boldly autonomous and outward looking approach connecting Canadian interests to the broader global landscape through carefully constructed economic relations which privilege people, the environment and community over private profit and transnational greed might be the launching point.

As I look back on that fateful day when I first met Stephen, I am certainly thankful that he persuaded me to undertake that dissertation on the Macdonald Royal Commission. I also sometimes wonder if any grad student, bright eyed, bushy-tailed and naïve as I was back then, ever wrote that political biography of Eugene Forsey. If so, I am sure it would have been a thoughtful, careful and insightful piece of work, if indeed a rather boring one. I am glad it wasn’t me, though, because among the many things Stephen helped me to understand, was that the ongoing problematic of nationalism versus continentalism is never boring.

 

Bibliography

Clarkson, Stephen, ed. 1968. An Independent Foreign Policy for Canada? Toronto: McClelland and Stewart.

Clarkson, Stephen. 1985. Canada and the Reagan Challenge: Crisis and Adjustment 1981-1985. Toronto: Lorimer.

Clarkson, Stephen. 2008. Does North America Exist? Governing the Continent after NAFTA and 9/11. Toronto: University of Toronto Press.

Clarkson, Stephen. 1993. “Economics: The New Hemispheric Fundamentalism,” in Ricardo Grinspun and Maxwell A. Cameron, The Political Economy of North American Free Trade. Montreal: McGill-Queen’s University Press, 61-9.

Clarkson, Stephen. 2001. “The Multi-Level State: Canada in the Semi-Periphery of both Continentalism and Globalization.” Review of International Political Economy. 8, 3 (January), 501-27.

Clarkson, Stephen. 2002. Uncle Sam and US: Globalization, Neoconservatism, and the Canadian State. Toronto: University of Toronto Press.

Clarkson, Stephen and Matto Mildenberger. 2011. Dependent America? How Canada and Mexico Construct U.S. Power. Toronto: University of Toronto Press.

Clarkson, Stephen and Stepan Wood. 2010. A Perilous Imbalance: The Globalization of Canadian Law and Governance. Vancouver: UBC Press.

[1] Canada. 1985. The Royal Commission on the Economic Union and Development Prospects for Canada.

[2] The dissertation was transformed into book form, again with Stephen’s help, and published as Gregory J. Inwood. 2005. Continentalizing Canada: The Politics and Legacy of the Macdonald Royal Commission.  Toronto: University of Toronto Press.

Parental Leave and Pay Equity

Budget 2018 is being advertised as a truly comprehensive gender budget, with two key pieces of that being use-it-or-lose-it paternity leave, and action on pay equity.

Last year’s gender budget implemented the Liberal campaign promise to extend EI parental leave from a total of 12 months to 18 months, despite the fact that the idea was universally panned by feminists, Canada’s unions, and business groups.

The problem? Other than the fact it doesn’t recognize that the primary issue facing parents of young children is the need for a national childcare system, the plan didn’t increase the total amount of funding, it simply extended the current allotment over a longer period of time. Instead of getting 55% of your average earnings for 35 weeks of parental benefits, you can choose to get 33% for 61 weeks. If you earn more than the maximum insurable earnings threshold of $51,700, the 35 week maximum benefit is $547/week, and the 61 week maximum benefit is $328/week. The main benefit for parents taking the 18 month leave would be the accompanying change in the duration of job-protected leave, and some parents might have collective agreement top-ups that make the 18 month leave more attractive (although that will likely change rather quickly).

On the whole, an excellent example of how not to do gender budgeting.

So what should we be looking for to make sure that this year’s changes to parental leave and pay equity will be meaningful?

Well, for any measure we should be looking for how it will affect differently located women – women with disabilities, racialized women, women in rural areas, women with different levels of income … you get the idea.

For parental leave specifically, it is useful to look at Quebec’s program. Andrea Doucet, Lindsey McKay, and Sophie Mathieu, have found that Quebec’s QPIP does a better job of reaching low income families. There are several features that contribute to this – lower eligibility requirement ($2,000 of income vs. 600 hours of EI eligible employment), dedicated second parent leave, and a higher 70% replacement rate for both the dedicated maternity leave & the dedicated second parent leave, as well as the first seven weeks of parental leave. Any modification of Canada’s parental leave program that only does part of this will likely fall short.

On pay equity, many stakeholders are expecting stand-alone legislation to implement proactive pay equity at the federal level. In the budget, we might see set-asides for what this could be expected to cost the federal government as an employer, as well as funding for independent Pay Equity Commission and Hearings Tribunal, and a commitment to funding to support workers’ and advocacy groups’ access to advice, information, training, and participation in the pay equity process.

Last year I asked how it could be a gender budget without “higher minimum wages, better employment standards enforcement, proactive pay equity legislation, and affordable childcare”. Those are still the questions I’ll be asking this year.

Ten proposals from the 2018 Alternative Federal Budget

I’ve written a blog post about this year’s Alternative Federal Budget (AFB).

Points raised in the blog post include the following:

-This year’s AFB would create 470,000 (full-time equivalent) jobs in its first year alone. By year 2 of the plan, 600,000 new (full-time equivalent) jobs will exist.

-This year’s AFB will also bring in universal pharmacare, address involuntary part-time employment among women, eliminate tuition fees for all post-secondary students in Canada, speed up implementation of the federal carbon tax, and increase the corporate tax rate from 15% to 21%.

-I’m particularly intrigued by the AFB’s poverty reduction measures, which include a sizeable top-up to the GST rebate, a $4 billion annual transfer to the provinces and territories, increases to seniors’ benefits, and $3.5B in new spending for housing.

The full blog post can be found here.

The Working Poor and the Working Income Tax Benefit

Here is a short research paper I wrote for the Broadbent Institute.

https://d3n8a8pro7vhmx.cloudfront.net/broadbent/pages/7073/attachments/original/1519312305/Canada’s_Working_poor_and_the_Working_Tax_Benefit_-_Report.pdf?1519312305

And here is a short summary:

The Liberal government have promised to make progressive changes to the Working Income Tax Benefit (WITB) in next week’s budget.

Let’s hope that they deliver. The increased insecurity of work and low hourly wages for many workers mean that many Canadians live in poverty even though they have a significant attachment to the paid work force.

The WITB is directed to the working poor, that is, individuals and families who have significant earnings, and sometimes even work full-time for a full year, but still live in poverty. About one half of all working age persons living in poverty have significant earnings.

Higher minimum wages in some provinces mean that a single person working full time for a full year will earn enough to be above the poverty line. But most of the working poor can only find part-time and insecure jobs, and need additional income support

The WITB currently delivers a meagre average benefit of just $807 per year, and the benefits for a single person are phased out once income passes a very low threshold of just $12,000, well below the poverty line.

The benefit should be significantly increased, and phased out at a much higher level of earnings.

The WITB was also intended to make work pay and to help people transition from social assistance. But just 8.8% of social assistance recipients get any benefit from the program.

Many social assistance recipients would like to work, but face multiple barriers such as loss of health and housing benefits and high claw back rates on every dollar of earnings. The WITB could help, but benefits are paid only after a long lag of up to one year.

The WITB could, together with decent minimum wages, help lift the working poor out of poverty.

But major changes are needed.

 

 

 

Homelessness in BC

In anticipation of tomorrow’s provincial budget in British Columbia (BC), I’ve written a blog post about the state of homelessness in that province.

Points raised in the blog post include the following:

-Public operating spending by BC’s provincial government has decreased over the past 20 years.

-Even after controlling for inflation, average rent levels across the province increased by 24% between 1990 and 2016.

-Over the past several decades, various reforms to BC’s social assistance system have made it harder to qualify for benefits and have resulted in lower benefit levels to those who are eligible.

-A lack of affordable housing is making it very challenging for front-line practitioners to practice the ‘housing first’ approach (i.e., providing a homeless person with immediate access to affordable housing).

-BC’s new NDP government has undertaken important initiatives that may have the effect of reducing homelessness.

The full blog post can be found at this link.

Panel discussion at federal NDP policy convention

Yesterday I spoke on a panel discussion on economic inequality, along with Andrew Jackson and Armine Yalnizyan. We were guests at the federal NDP’s policy convention in Ottawa. The panel was moderated by Guy Caron.

Topics covered included the minimum wage, basic income, affordable housing, the future of jobs, gender budgeting, poverty among seniors, Canadian fiscal policy in historical perspective, and Canadian fiscal policy in comparison with other OECD countries.

The discussion was 30 minutes long. You can watch it here.

Toward a Better World

That is the well chosen title of a marvelous new book by Gerry Helleiner,  sub-titled Memoirs of a Life in International and Development Economics. Helleiner, from his home base at the University of Toronto, tells us in this most readable book, in his own modest way, the stories, notably from Africa, of how he devoted his life as an economist to that end. His rewards include his membership in the Order of Canada.

Helleiner describes himself as a progressive economist and is so judged by scholars. He has a strong commitment to social justice, to aiding the cause of poor countries, particularly the smaller of them, and the poorest within those poor countries.

His advise has been frequently sought by those involved in economic development in what we now call the Global South.  His students have pursued successful careers in developing countries and with NGOs in the developed countries, and he is justly proud of that.

There is an abundance of quotable quotes. “Economics is not where everyone goes for inspiration or excitement. But I must say that my life as a teaching and practicing economist has been deeply fulfilling and at times wildly exciting.” Surely a great recommendation for being a progressive economist.,

For Helleiner economics is not a dismal science. “I believe the record of the past half century [with particular reference of Africa] which, in truth, does make some despair, can instead inspire hope for the kind of dramatic positive change that is possible.” This is a powerful message to progressive economists of hope in hard times.

On an issue that should be dear to the heart of progressive economists, Helleiner appeals for graduate studies in economics to be more heterodox, and less theory-driven . He describes how his own department at Toronto fell victim to these North American tendencies and how this  has adversely affected the program in  economic development. (So too was my own field of economic history.)

Ultimately, of course, economics which preaches the virtue of markets must itself respond to their evident failures. Helleiner’s passionate pleas should hasten that day.

The Clarkson Story up until Now and the Uncertain Future of The WTO

Stephen Clarkson

The following is a contribution in the blog series on the exceptional contribution of Stephen Clarkson to Canada.  Stephen Clarkson died in 2016. The substantial work he undertook on Canada and international trade is particularly relevant today as negotiations on NAFTA and other trade agreements occur.

 

Stephen Clarkson receiving the Order of Canada

 

Daniel Drache

Daniel Drache was a long-time colleague and friend of Stephen.  He is Professor Emeritus of Political Science at York University and former Director of the Robarts Centre for Canadian Studies. His work focuses on understanding the changing character of the globalisation narrative in its economic, social and cultural dimensions. He has worked extensively on the WTO’s failed Doha Round with particular focus on TRIPS and public health, food security and nutrition, and poverty eradication. 

The Clarkson Story up until Now and the Uncertain Future of the WTO

Daniel Drache

The Clarkson Gaze

The story so far is about the events roiling the global economy and Stephen’s unique gaze in the way in which he interpreted them. His inexhaustible appetite for research on North America, globalization, political parties, political leaders and, above all, the power dynamics between Uncle Sam and stick figure Johnny Canuck gave him an over-sized palette.[1] He was focused on big ideas, instinctively drawn to the most important: the continuing relevance of sovereignty and state power at a time of interdependence.

In a way that makes history full of surprises, the story until now is that many governments also share a growing scepticism about the effectiveness of the WTO dispute resolution mechanism, a topic which loomed large in Clarkson’s writing and research. In 2014, only seven new cases were filed, a paltry number in a trillion dollar plus commercial world. For the two previous decades, there were 450 cases, the majority were North South and North North. The US, Canada, and the EU were the most litigious, as well as Brazil and India have become  “trade warriors” in defence of their core interests. Most other Global South countries had neither the legal culture nor the money to roll the dice in the WTO trade dispute lottery-like system.

In 1994, when the system was brand new, the number of cases averaged about 40 per year, and, since then, with more than 100 new members the trade gendarme of the world barely averages a baker’s dozen. Where have all disputes gone?

Clarkson was aware that WTO rules are very confrontational and thought-provoking in this regard. The WTO permits states to use protectionist policies not always, but frequentlNumerous experts and scholars believed that globalization had made the world borderless, where people, ideas and commodities all moved across the world with few constraints. Conventional wisdom argued that the once mighty Westphalian state was so porous that it could no longer defend national values and goals.[2] Many scholars embraced the notion that, in an age of global cultural and economic flows, borders were dysfunctional barriers in need of further dismantling. Stephen did not.

Instead his work was a curious hybrid of seeing the world through the eyes of an increasingly bleak dystopia about Canada’s chances of surviving the python-like embrace of market-driven integration. On better days, he became a hard-nosed sceptic about these mega-trade deals when Canada’s policy élites were stumbling over each other to ink new ones, first with Uncle Sam, Mexico and then a whole host of other countries including the EU, China, India, Korea and Israel, to name but the most important. He was arguably the best Canadian researcher at documenting and de-constructing this neo-liberal universe, thereby exposing Canada’s chronic dependent relationship on the US with less and less policy-space to manoeuvre with each passing decade.[3] In his own words,

“With NAFTA and an emboldened WTO, Canadian programs suddenly found themselves subject to invasive WTO commercial norms and export centric policies that marginalized any need for industrial strategies to diversify and build stronger Canadian industries as a buffer zone against the excesses of resource dependency.”

He raged against the Liberal state machine that was always eager to go with the continental flow of power and resources, and he believed that the big red machine of the Liberal Party could be stopped although it was likely not to happen. So, he was a unique figure who had at the very least two voices: a critical observer of the trade governance system and, in moments of lucidity and despair, an advocate of more radical institutional surgery, namely, to sink the investor state dispute settlement provision (ISDS) and, along with it, much of the system of trade governance.

There is much we can learn from the Clarkson gaze about the tightly-written future and the unpredictable wild swings of global dynamics from global economic integration. With hard Brexit, the election of Trump, the cancellation of the TPP and now the unilateral re-opening of NAFTA, we’ve entered a different and dangerous age with less stability than ever. US President Trump has become Canada’s worst nightmare, attacking Canadian dairy and lumber practices, and demanding fundamental change to the NAFTA agreement. All these projects gave Clarkson a vast canvas and focused his attention on the incompatibility between the requirements of these trade agreements and the anxieties that citizen experience about job loss, threats to the environment, and growing inequality. He also worried that the rise of powerful ‘nixers’ in Washington and the corrosive forces of structural adjustment had irreversibly transformed the landscape of international relations from everything that went before.[4]

These tropes are still very much with us today to fix, shrink or sink trade governance.[5] We need to think a lot about fear and anxiety, not only because of the ‘mad king’ Donald in Washington, but because the pillars of trade multilateralism are no longer coherent, even though they continue to be a force to be reckoned with. We will look at two big picture ideas of his. First, what Stephen identified occurring around us is the emergence of a highly flammable situation. When institutions fail to adapt to novel conditions, frequently like these times contagious, dangerous state policies migrate towards the center right and hard right neo-populist end of the spectrum. Secondly, analytically and intellectually he was absorbed by the deteriorating dynamics of the nixer-fixer crisis-fraught binary many states and social movements adopted in the search for options. This geopolitical positioning inevitably led them and him to radically different solutions about the uncertain future of trade governance.

Paralysis, Fear, and Decay

The growing paralysis triggered by polarized conjunctural politics as well as structural stagnation has its convoluted roots in the architecture and agenda of the WTO, which was oversold to governments as a guarantor and regulator of the world trading system.[6] It promised a level playing-field for all and a development accelerator for the Global South plus new market-access and increased competitiveness for industries on both sides of the global divide.

In the Clarkson view of the world, he saw something dramatically askew. The institutional wheels had fallen off these clichéd policies because trade deals had become an omnibus multipronged policy. In the process export-centric mega-deals went far beyond their original mandate. Instead, they became invasive investor-centric agreements that ubiquitously challenged the state’s competence to regulate effectively in the public interest. The predictable result was that governments are facing a backlash and push-back from social movements, non-scripted actors, and highly informed non-governmental organizations.[7]

In a primary sense Clarkson understood that that trade agreements were marketed to largely indifferent and often passive publics because there were no credible alternatives to the widely-subscribed belief that “There is no Alternative” (TINA). Doom and fatalism were the red lines of political discourse that could not be crossed. However, since 2008, (and often before the global financial crisis in the ‘Battle for Seattle’), a Niagara of campaigns, street demonstrations and social media mobilization energized publics, particularly in the EU where, in Germany, Belgium and France, grassroots social movements mobilized hundreds of thousands of protesters against the proposed Canada-EU free-trade agreement (CETA).

Still Clarkson’s dark pessimism about the unstoppable momentum of third-generation trade deals found itself on the right side of history. The future of many trade and investment deals are in limbo because European public opinion is increasingly suspicious and hostile to trade and investment deals. In 2017, the explosive decision of the Court of Justice of the European Union (CJEU) on the EU’s exclusive competence to enter into trade treaties without the approval of national legislatures was dealt a death blow. The Court found that the EU would have to submit ISDS agreements to all 30 national and subnational parties for individual approval.[8] Even critical observers could not have predicted such an outcome. The EU had hoped that the Court would give it exclusive jurisdiction without having to submit a trade treaty for national ratification. Brussel’s expectation was to be able to approve these trade and investment routinely. It did not want a re-occurrence of the Walloons casting a veto that held up the entire CETA ratification process, as it had done in 2016. The CJEU ruled against the EU. In shared jurisdictions with an ISDS provision, individual Member States will be required to give their assent.

One part of the Court’s decision re-inforced the national authority of Member States, but another extended the principle of transnationality. The ECJ gave the EU a green light to take the ISDS clause out of trade and investment treaties and move it into the institutional hands of an International Investment Court which is still to be established.

Stephen would have savoured and probably savaged this landmark decision because the Court not only shrunk the legal authority of the EU’s unilateral power, but it also removed labour, the environment, intellectual property rights, and public procurement as shared competencies that had previously been awarded in an earlier legal judgment. Had these shared competencies remained, it would have made signing new investment deals almost impossible and extremely arduous to negotiate, let alone ratify.

It is not surprising that the CJEU required Brussels to submit ISDS provisions to national governments. India has already imposed legislative restrictions on access to ISDS, Ecuador has withdrawn from 16 of its investment treaties, and South Africa has begun the process of terminating its investment treaties. In 2012, it passed new legislation that gives exclusivity to domestic remedies. Brazil has never signed into law investment-treaty provisions for privatized arbitration.[9]

All these countries are encouraging alternative dispute resolution outlined in “cooperation and investment facilitation” kinds of agreements. All this “nixing and fixing” of state activity would not have been possible without social media and popular mobilization against governments being sued by powerful corporate interests.

Now, the Court of Justice of the European Union has come out against such clauses unless they are submitted to national ratification procedures. Indeed, in the words of Steven Toope, “the world order is shifting”. The WTO will not be “great again” because its relative position in terms of its hard legal power and the political consensus that once made it unchallengeable has dimmed, if not, decayed. What is different is that, with the fragmentation of the global economy, it is also the time – to the surprise of many experts – to negotiate new rules, as we have just seen. For Clarkson he understood that there is no possibility of a new ‘grand social bargain’ to support new rights for citizens and labour but, at the margins, popular forces seem to have gained the capacity to mobilize despite neoliberalism and the politics of austerity.

WTO Marginalization in its Core Competence

Clarkson will be always remembered as a fierce critic of neoliberal embeddedness of the WTO. Perhaps the fact that Canadian governments had so unreservedly embraced its legal elite culture pushed Clarkson to embrace the rhetoric of the anti-globalization movement. Other developments have also cooled the ardour of many governments to put their faith in the efficacy of the crown jewels of the WTO dispute resolution system to protect them from the gale-like force of global competition. One of Clarkson’s persistent themes is that governments have turned away from this mechanism to seek relief for their battered industries from the consequences of structural adjustment triggered by open, highly de-regulated, economies. Increasingly, many countries have preferred to seek redress for trade grievances before national tribunals rather than bring cases to the world trade court of the WTO.

It is worth reminding ourselves that 80 per cent of the WTO membership has never used the dispute resolution panels because the majority of the WTO do not have the experience, the money, and the confidence in the system that is slow, unpredictable, and very costly, with no positive track record of handling, let alone, addressing within the terms of reference of its legal culture, the non-commercial aspects present in every trade dispute. These include food security, the need for state subsidies, the limitations of the principle of non-discrimination for industrial policy, the creation of fair labour standards, and the legal support for sustainable environmental practices – each a hot button issue of our times. Does not the narrowness of the WTO’s legal culture explain why so few Global South countries want to chance addressing more substantive issues through this trade body?

Put another way, there are very few WTO victories for “we the people”. One of the most iconic articles on the WTO’s legal straitjacket is by Joseph Weiler,[10] entitled The Rule of Lawyers and the Ethos of Diplomacy. In it, he warned against the rule of lawyers because the most optimal outcome in most interstate conflicts between governments is the need to find a trade compromise about conflict over a disputed subsidy, stockpiling for food security, incentives to develop local industry rather than an adversarial victory for the strongest state and profit-seeking multinationals.

Weiler predicted that legal principles masquerading as statecraft would eventually erode the underpinnings of its unbalanced legal culture. Weiler’s expectation about the growing illegitimacy of the WTO’s legal culture in the minds of many is dead accurate and has been one of the central factors in sustaining successful mobilization campaigns against third-generation trade and investment deals.

Growing State Scepticism towards the WTO

y when they experience the volatility of global markets endangering employment and entire industries.[11] The WTO gives states the green light to adopt protectionist policies under very restrictive conditions. Countries file complaints against predatory pricing, subsidy abusers and the nuclear “option-of-all-options”, safeguards for reasons of national security to protect the national interest when threatened by global conditions such as employment loss, import surges or the open-ended category, “unfair advantage” of some kind that governments can use to defend the imposition of tariffs or import duties before a national trade tribunal constituted to litigate such claims.

The Clarkson gaze is an excellent guide to what has happened in the last two decades with respect to countries turning their back on the WTO’s legal crown jewel. It is astonishing to realize that the number of anti-dumping petitions has exploded, totalling more than 4,300 compared with about 400 disputes filed with the WTO.[12] If we are looking for examples of de-stabilization, the contracting out of legal ordering to other authorities, surely, this is it. Countries are turning to their national tribunals and trade courts for short-term relief and can impose tariffs or countervailing duties n order to protect their industries under threat.

In the 1970s, voluntary export restraints were used successfully to protect US interests against Japanese auto imports. This strategy gave the US auto industry breathing space to modernize and upgrade. Of course, trade lawyers and economists rail against anti-dumping as going outside the WTO rules and its jurisdiction. What the experts are opposed to are competing national adjudication bodies which they claim are biased and unreliable. But there are many studies that show that, since these national tribunals largely follow the WTO rules of evidence, norms and practices, their win rate – the test for bias for the home team – are within standards of international practice. This parallel system operates – with all its strengths and weaknesses – quite efficiently to defend the “local” from powerful “global” interests.

It did not escape Clarkson’s attention that Washington has its own parallel and highly active dispute system accessible to all Americans industries as well as to groups including unions to demand an investigation into allegedly unfair competition.[13] It can impose tariffs, punishing duties and quotas on foreign imports for short-term, medium-term and long-term periods. A large part of the legislation is discretionary and arbitrary. It can give American industries breathing space and restrict foreign competition. Super 301 is an interim measure that cannot reverse the de-industrialization of American jobs and industries, but it can – and does – provide short-term relief to declining American industries and jobs that are at risk![14]

If we want better outcomes to address real dislocation, we require a body akin to the Court of Justice of the European Union or the European Court of Human Rights with a commitment to balance commercial market-based interests with sovereignty norms and practices that sets the standards for citizen-based rights and obligations. The European Court was set up to rule on individual or state application alleging violations of civil, political and human rights. Individuals can apply directly to it and it is delivered more than 10,000 judgments that require governments to change their laws and administrative practices. Is this the kind of Court needed to replace the creaky outmoded legal culture of the WTO?

The Privatized and Secretive Alternative: ISDS

Clarkson understood as well as anyone why trade governance is so dysfunctional at present. Anti-dumping provides an escape hatch against structural adjustment market forces imposed by the neo-liberal global economy. De-globalization paradoxically strengthens and extends neo-liberal norms and practices – often at the local level.  In the Clarkson lexicon it  represents a new and different phenomena in the globalization narrative – namely, the ability of global multinationals to challenge the regulatory sovereignty of nations in the public interest.

The investor state dispute settlement mechanism (ISDS) is highly problematical from a public policy point of view because of the very broad grounds that multinationals have to sue governments, including “fair and equitable treatment”, “expropriation of benefits”, “non-discrimination”, and “national treatment”. All these trade-related doctrines impose a heavy burden on governments to demonstrate that foreign multinationals receive “special consideration” in private courts, which is not available to nationally-domiciled companies.

State investor disputes are always about money and inevitably about environmental standards and review, health services, access to generic drugs, industrial policy, and labour standards. The rules favour investors, as they challenge the sovereignty and authority of democratically-elected governments to reduce their ability to legislate and defend the public interest.

According to the UNCTAD monitor, in 2016, there were 62 new ISDS cases filed, a record high. The 10 year average is a steady 45 filings a year – compared to the 12 complaints cases filed at the WTO. In the most recent 12 year period, there were more than 550 new cases worth hundreds of millions and millions of dollars in awards against governments without including the 50 billion USD award against Russia. Not surprisingly, the most frequent users are from the advanced block of countries. In the Dutch study of Arbitral Awards, multinational corporations are favoured by a ratio of two to one over states in the arbitral win-loss sweepstakes.[15]

These outcomes are critical standard-setters. Most decidedly, they have become a central feature promoting the growth in privatized commercial arbitration. It is safe to conclude that these out-of-public-sight in-camera arbitrations have outpaced and probably outperformed the WTO disputes resolution mechanism body as far as global capital is concerned. The explosive growth in privatized dispute resolution is itself evidence that  Clarkson’s research led him to the conclusion that free trade agreements are about expanding, protecting and prioritizing investment rights for global finance with its own global dispute resolution mechanism – both characteristically non-transparent and invasive of national sovereignty. Global trade politics reinforced Clarkson’s nationalism and made him a strong defender of Canadian sovereignty in a country whose national narrative is weakly and erratically nationalistic. This, too, is part of the story so far in Clarkson’s long view of trade politics.

The Fixers-Nixers Binary and Conundrum

What he understood at a deep level is that at one end of a very long spectrum of conflicting ideas were those who accepted the idea that the system can be reformed; hence, the term “the fixers”. A second group starts at the other end of the spectrum that the mandate of the WTO needs to get back to trade basics, the so-called “shrink it” alternative policy option. Finally, a lot of radical social movements accept as true that the WTO is too flawed to save, hence, they want “to sink it” and replace it with a different kind of global trade governance organization.

Of the three options, the first believes it is possible to find a way to put the WTO back together again like a Humpty-Dumpty character. Some kind of fixing could make its trade and organizational architecture less clumsy, more fleet of foot, transparent, accountable and functional. There are technical fixes such as scrapping its “all or nothing rule” that makes consensus among 160 governments with over 70 per cent from the Global South almost impossible. Before members agree on any new trade round with its dozens of committees, all members have to agree unanimously to it. Effectively, this gives the Global South and the BRIC countries a veto over so-called deal breaking proposals coming from the old coalition, composed of the US, the EU and Japan, a fact that did not escape Clarkson’s acute grasp of the power dynamics that kept the organization deadlocked. But institutional paralysis could not prevent fundamental changes to the global trade agenda and the most important was to expand the rights of global capital to hold governments to account.[16]

The Massachusetts Senator Elizabeth Warren calls the highly contentious investor state dispute settlement (ISDS) the “clause everyone should oppose” , a position he heartily endorsed and that plays a large role in Clarkson’s concept of international political economy, precisely because it diminishes state sovereignty and it enhances multinational power to beat back the regulatory authority of government. Under the ISDS, corporations have sued the Mexican government for over 200 million USD and Canada for 157 million USD. At present, a U.S. company is suing Canada for another 250 million USD over a moratorium on fracking for natural gas, and another firm – suing for more than 100 million USD over the rejection of a mining permit after a Canadian environmental impact assessment proved the project to be detrimental – won its case.

So, removing the ISDS clause, a source of bitter and prolonged controversy, would be an obvious candidate to drop from trade agreements. The EU and recently Canada have gone on record to support the creation of an International Investment Court to address the growing number of investment conflicts that multinationals face. This, too, is a source of controversy, and it may take years before the Court is established and approved by all 27 parliaments.[17]

The Narrow Ledge of Trade Governance

The fact of the matter is that the WTO, since its establishment, is exclusively a producers’ organization for large multinationals and states, not for consumers, not “for the people”. This is why it has such a narrow focus and mandate, an institutional feature that Clarkson pushed to the center of his research analysis. What he documented was that, when commercial interests are found to conflict with environmental protection, access to generic drugs, labour standards, or industrial strategy, global commercial interests inevitably carry the day in the WTO’s court system with its highly constrained legal culture. Why, for instance, is “fair and equitable” treatment of a private investor given the status of a constitutional right when it only serves the needs of special interest groups? It is this threshold test, among others, that is so central to WTO legal culture that requires resetting. Without it how could the WTO have a fresh start with a different purpose and organizational architecture around aims such as egalitarianism, development and other socially progressive goals?

If the governance agenda for negotiating a new trade round is limited to only trade issues, the most contentious part of the agenda – intellectual property rights, investment rights, public procurement, access to generic drugs, food security and environmental sustainability require a different solution, one which does not come through the narrow lens of trade. In the Clarksonian gaze, complex policy issues have to be addressed through a different kind of governance body that is equipped to handle the goals and objectives of a broad-based jurisprudence and the right of individuals in all countries to seek redress and transparent arbitration.

It is not a good idea that we think of this new body as setting hard law legislative standards in many areas at the global level. Instead, what is needed is a legal culture of balanced adjudication and arbitration, a European-style court. This is the high standard to consider. The important corollary is that legal cultures are subject to many constraints and the most important is when global standards are low, no global organization can substitute itself for national decision-making bodies.

At present, in a way few predicted the WTO is in relative decline as a global governance body, marginalized by atrophy and growing irrelevance for many nations in the global South. For experts from the advanced industrial countries it is a mistake to think that international institutions are forever, the ‘eternal, unchanging guardians’ of the world order. The WTO is in a Braudelian “time bubble chamber” unable to adapt to the new set of circumstances after the 2008 financial crisis. Its institutional paralysis, if anything, has deepened in the post-Brexit, post Trump era.  The gravitational shift from trade-focused organization to an investment-centric institution has complicated the incredibly difficult task of building a new consensus.

Nor does the WTO have the resources to derail China’s well-advanced plans to create a parallel trade and investment global order with 100 or so countries. For the moment, only India and the United States are boycotting the One Belt, One Road (OBOR) and the Asian Infrastructure Investment Bank.(AIIB) To the surprise of few, bilateralism and regionalism are rapidly becoming the twin pillars of the new international order, largely, and surprisingly sponsored by China , through its $2 trillion global infrastructural initiative. And whatever strong doubts you may have about the efficacy of Beijing’s leadership, Chinese multilateralism is patiently waiting in the wings with its alternative institutions. For the moment we have entered a long transition period.

A Sartrian Dilemma: A World without Dominant Agency

In his last writings Stephen understood instinctively that in a multipolar world we cannot speak of a hegemonic order any longer because the world is so fragmented and fissured. Instead, it is more like a Sartrian moment, Huis clos: L’enfer, c’est les autres. But as Clarkson might have asked who exactly are the others?

Isn’t it more precise to say that it is ourselves and our dystopian fatigue who are responsible for the new age of high anxiety in some important way? This is the dilemma of our time which preoccupied Stephen Clarkson in his research and teaching. In an era of authoritarianism versus democracy, we need to rethink and re-engage with a global order that bears very little relationship with the precise rules and governance practices of global multilateralism. In his dystopian gaze,  Clarkson’s large, expansive  and rich narrative left little room for doubt that for him at least, there is no  single scripted or unscripted actor waiting to rescue a deeply troubled global order, today, tomorrow or anytime soon.

[1]    Among his many works are: Uncle Sam and Us: Globalization, Neoconservatism and the Canadian State, 2002, Trudeau and our Times (with Christina McCall),1990 and 1994, The Big Red Machine: How the Liberal Party Dominates Canadian Politics, 2005, Canada and the Reagan Challenge: Crisis in the Canadian-American Relationship, 1985, Does North America Exist?: Governing the Continent after NAFTA and 9/11, 2008, A Perilous Imbalance: The Globalization of Canadian Law and Governance (with Stepan Wood), 2010, Dependent America? How Canada and Mexico Construct US Power (with Matto Mildenberger), 2011.

[2]    Kenichi Ohmae, A Borderless World: Power and Strategy in the Interlinked Economy, HarperCollins 1994; Daniel Drache, Borders Matter: Homeland Security and the Search for North America, Toronto: Fernwood, 2004.

[3]    Clarkson, Uncle Sam and Us, note 1 above.

[4]    Stephen J. Toope, “In a Darkening World, It’s Time Canada Moved beyond Fear”, The Globe and Mail, 24 May 2016.

[5]    Daniel Drache, “The Canada European Free Trade Agreement: Ought we to be Worried?”, Transnational Law Institute, King’s College, London, 2016.

[6]    Dani Rodrik, The Globalization Paradox: Democracy and the Future of the World Economy, New York: Norton, 2011

[7]    Paul Blyth, Austerity: The History of a Dangerous Idea, 2013

[8]    International Economic Law Blog, Anthea Roberts, A Turning of the Tide Against ISDS? 19 May 2017. Accessed https://www.ejiltalk.org/a-turning-of-the-tide-against-isds/ ; Arthur Beasley, “EU Singapore ruling charts possible Brexit path”, The Financial Times, 16 May 2017.

[9]    Roberts, op.cit.

[10]   Joseph H.H. Weiler, accessible at http://www.jeanmonnetprogram.org/archive/papers/00/000901-01.html

[11]   See WTO articles, Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement) and Article XIII. Article 12.

[12]   Daniel Drache & Yin Jiyuan, “A Comparative Analysis Of Unfair Trading Suits By China, India, Canada, The United States And The European Union, 1995 to 2011,” in Daniel Drache and Lesley A. Jacobs eds. International Economic Law and Global Governance Crises and Resilience, Vancouver: UBC Press, forthcoming 2018.

[13]   I.M. Destler, American  Trade Politics, 4th ed. New York:PIIE, 2005.

[14]   Toope, note 5 above.

[15]   Dutch study of ISDS Awards, accessible at http://investmentpolicyhub.unctad.org/Upload/Documents/treaty-based-isds-cases-brought-under-dutch-iias-an-overview.pdf

[16]   Ed Broadbent,” Let’s make human rights central to a new NAFTA”, Globe and Mail, May 5, 2017, accessible at https://beta.theglobeandmail.com/opinion/lets-make-human-rights-central-to-a-new-nafta/article34898657/?ref=http://www.theglobeandmail.com&, Dani Rodrik, note 6 above, Rorden Wilkinson, What’s Wrong with the WTO and How to Fix it, London, Polity, 2014.

[17]   Anthea Roberts, IELP, 19 May 2017. https://www.ejiltalk.org/a-turning-of-the-tide-against-isds

Smooth Sailing Ahead For the Global and Canadian Economy?

The consensus forecast of just about everybody – the IMF, the OECD, the Bank of Canada, the Canadian banks – is that Canada will share in a global recovery from the stagnation which followed the financial crisis of a decade ago. All of the major economies – the US, the EU, China, Japan – are growing; business investment is finally on the upswing from depressed levels; world trade is on the rise again; and fiscal austerity has more or less run its course. Central bankers, we are told, can be counted on to only gradually increase ultra low interest rates even as growth returns to near normal levels and employment recovers.

The world economy is forecast to grow about 3.7% in 2018, and Canada is forecast to grow at a respectable 2.5%, a bit below the rate in 2017.

This relatively optimistic outlook may well be true for next year. Many economic indicators are indeed very positive. But there are grounds to think that structural obstacles to a global recovery remain formidable. Indeed this view is registered by the financial markets in continued very low long term interest rates, which are based on an expectation of slow growth and low inflation over the next decade.

As widely noted, the recent upturn has been felt almost everywhere only very weakly in terms of wage growth, which is in turn by far the major determinant of household demand. Wages are generally lagging behind even weak labour productivity growth despite a significant fall in unemployment rates in the United States, Canada and even the European Union. In Canada, household spending growth has remained dependent upon increased debt rather than rising wages, even as the job market has seemingly tightened.

While the consensus forecast assumes that wages will gradually pick up, it is unclear what mechanism will reconnect wages to productivity growth in the absence of major structural changes such as the revival of a shrinking labour movement or hikes to minimum wages. The rise of insecure work seems to be limiting wage increases even at low levels of unemployment.

High and rising economic inequality is also a structural drag on growth. The continuing tilt of income growth to the most affluent means that a relatively high proportion of income gains will be saved rather than spent. The excess of financial savings over real investment is another reason why long term interest rates remain low.

High levels of household debt in many countries, again very much including Canada, also weigh against consumption and thus final demand growth. The pace of borrowing is likely to slow as interest rates creep up, making spending even more dependent upon wage growth.

Again as widely noted, following a very slow recovery, business investment remains sub par despite expectations of growth, and a large share of buoyant corporate profits is still being hoarded as cash or paid out to shareholders rather than re-invested. Part of the reason seems to be that growth has become more tilted towards the “new” high tech/digital economy where costly physical capital requirements are low compared to the “old”economy where expansion was based on major investments in new machinery and equipment rather than in intangible and relatively cheap intellectual and human capital.

Productivity growth remains low. For all of the talk of the emergence of a highly dynamic digital economy and the threat to jobs from artificial intelligence and the robots, growth in output per hour has been generally low, not least in the United States, and even more so in Canada. Pessimists point to the still small weight of the digital economy in the overall economy, which tends to low productivity growth due to the increasing weight of labour intensive services which cannot easily be automated.

The lack of global economic co-ordination also undermines the potential for sustained growth. The basic economic strategy of most countries, certainly including Canada, is to increase global market share through higher business investment combined with a competitive cost structure. Global competition and labour cost arbitrage by global corporations weighs against wage and income growth, fettering the growth of the overall global market. This structural problem may be exacerbated by openly protectionist trade policies if Trump prevails against liberal trade deals such as NAFTA and the WTO. Part of the solution is to co-ordinate expansionary fiscal policies and also to promote labour rights and standards across the global economy.

Added to the structural barriers to growth is the potential for systemic financial problems to once again undermine stability. A decade long run of very low interest rates has inflated numerous asset bubbles. Many countries, including Canada, have highly inflated housing markets which are vulnerable to a correction which would have a big negative impact on household wealth and spending. Equity markets are widely considered to be significantly over-valued, as are high risk corporate securities, creating risks for the financial system should prices fall. Many corporations have taken on excessive debt to pay out dividends to shareholders.

In sum, there are reasons to believe that the prospects for a sustained recovery of the global economy are not quite as robust as the new consensus would have us believe.

Extreme Wealth Inequality Persists

There was little or no media coverage of the release of data on the distribution of the wealth of Canadians in 2016 last week, perhaps because there has been little or no change since the last Survey of Financial Security in 2012.

The top 20% of Canadians own 67.3% of all net worth (assets of all kinds minus liabilities), almost exactly the same as in 2012.

The bottom 20% have no net worth, and the bottom 40% collectively own just 2.3% of all net worth.

The top 20% also own 74.6% of all financial assets (stocks, bonds, bank deposits etc) held outside of RRSPs and registered pension plans, while the bottom 40% collectively own just 3.5% of such assets. Financial assets outside of pensions total $1.4 trillion.

Unfortunately, the new data does not detail the breakdown within the top 20%. Even within this group, wealth is highly concentrated in the hands of the top 10% and top 1%.

Clearly, taxable income from financial assets (interest, dividends, capital gains, stock options) flows overwhelmingly to a relatively small number of people. If the federal government was serious about progressive tax reform, they would be reducing the preferential treatment of such income in the personal income tax system. Over to you, Minister Morneau.

Canada’s newly-unveiled National Housing Strategy

Over at the website of the Calgary Homeless Foundation, I’ve  written a blog post about the Trudeau government’s recently-unveiled National Housing Strategy.

Points raised in the post include the following:

-One of the Strategy’s stated objectives is to reduce chronic homelessness in Canada by 50% over 10 years.

-The Trudeau government claims that this is Canada’s “first ever” national housing strategy. That claim may not be accurate.

-The Trudeau government appears to be overstating the likely impact of the Strategy. Specifically, they claim this will result in four times as many new builds (annually) going forward as were built annually between 2005 and 2015. Yet, the evidence does not appear to support that claim.

The link to the full blog post is here.

Ten considerations for the next Alberta budget

On November 17, the working group of the Alberta Alternative Budget (AAB) sponsored a one-day workshop at the University of Alberta. The event’s main purpose was to discuss recent developments in Alberta public policy, as well as expectations for the upcoming Alberta budget. Twenty speakers presented in total.

In light of what was discussed at the event, here are 10 considerations for the upcoming provincial budget:

  1. Governments often face pressure to privatize important public services—yet, privatization sometimes comes with its own costs. According to my long-time social policy mentor Allan Moscovitch, privatization “refers to the movement from public to private service delivery.” Governments of all stripes typically want to reduce the short-term cost of delivering important services. However, privatizing important public services can result in higher costs of services, reduced quality of services, and a deterioration in working conditions. For example, during her presentation, Hitomi Suzuta noted that public long-term care facilities (operated by Alberta Health Services) provide approximately four hours of direct care per senior in a typical day, while for-profit facilities in the long-term care sector provide just three hours of direct care per day (for more on this, see this recent report by David Campanella).

Read more »

Gimme shelter: is Core Housing Need a useful measure?

For a new CCPA blog post on housing (un)affordability, I dove into the latest Census data for Metro Vancouver. I used two series on shelter cost and shelter-to-income ratio, and found that 32% of households were paying more than 30% of income on shelter (all households, owners and renters) and 16% of households more than 50% of income on shelter. The latter number is pretty alarming: one in six households in Vancouver paying more than half their income just to keep a roof over their heads; that’s 150,430 households!

Then I noticed that “core housing need” (CHN) in Metro Vancouver was 17.6%, a figure that is way lower. I have always understood CHN as three dimensions: affordability, measured as households paying more than 30% of income; adequacy, whether the housing is in need of repair; and suitability, if you have enough rooms for everyone.

So, my thinking went, CHN should be all of the un-affordability I discovered, and then some to reflect the other two dimensions. How then could CHN be so much lower than the share of households with shelter-to-income ratio above 30%? My instinct was to go back and check my sources and my math, hoping I had not made a major error somewhere. But that was all solid. So I did a deeper dive on CHN to figure this out.

First, some households paying more than 30% of income on housing but are just taken out. Those who are paying more than 100% of income are pulled out. This would be folks who have a relative paying their bills, for example, but also people who are using debt or other income not captured in their total (perhaps capital gains or inheritances).

Also exempted are students, and I found this on the CHN entry in the Census dictionary:

Non-family households with at least one maintainer aged 15 to 29 attending school are considered not to be in ‘core housing need’ regardless of their housing circumstances. Attending school is considered a transitional phase, and low incomes earned by student households are viewed as being a temporary condition.

This seems odd to me, saying you are too young to be in housing need, even if you are spending a large share of income on housing.

Next, there is this page with the new Census data on CHN, which states that after tallying the three dimensions of CHN I cite above, then:

The second stage established whether the household could be expected to have affordable access to suitable and adequate alternative housing by comparing the household’s total income to an income threshold based on local housing costs. Only those households who could not afford alternative housing would be considered in core housing need.

That’s a bit of a muddle. I also found this 2008 article discussing the concept, which notes:

Much work has been, and is being done, to examine those who spend 30 per cent or more of their household income to determine if they do so out of choice, through having the means and preference to spend more than the norm for housing, or out of necessity, because of their low incomes.

In other words, there are some households who pay more than 30% of income, but do so by choice, and if they wanted to they could move into cheaper digs and no longer pay more than 30% of income for housing. There’s some logic to this, I suppose, but in Vancouver the vacancy rate is below 1%, and that’s driving up rents. For ownership, home prices have surged such that few can afford to buy the house they live in –  if they did not already own it. Unless you have a super-high income, on the margin you are looking at more than 30% of income in Vancouver for shelter.

The second stage is a black box, and perhaps that black box needs fixing. Whereas the share of households paying more than 30% is easy to understand, the determination of “comparing the household’s total income to an income threshold based on local housing costs” is not transparent. Rents in Vancouver according to CMHC have not gone up much in recent years, but that is because they are only counting decades-old purpose-built rental , while not counting the secondary suites and condos that have become a substantial part of the rental stock more recently. It is among the latter where loopholes allowing landlords “renovictions” and “fixed term leases” undermine rent controls, and have fed the dizzying cost of renting on the margin.

So Core Housing Need is looking to me more like the Low Income Cut Off is for measuring poverty: it is not straightforward in terms of measurement; was instead created by Canadian statisticians a long time ago to provide a more nuanced statistic; but, may no longer be relevant or helpful given changes in housing markets. There may also be some measurement issues.

Finally, I note that Steve Pomeroy makes some comments about CHN, welfare incomes and the feds’ national housing strategy plans in this piece for the Caledon Institute. He concludes:

As this analysis has revealed, core need is an ineffective and distorted measure of outcomes. Indeed, the federal and provincial/territorial governments could invest hundreds of millions of dollars to reform welfare and create a national housing benefit only to find that the levels of core need have not declined, even though housing affordability problems for many households had been alleviated.

So there you go, if you were wondering what the difference is between shelter cost greater than 30% of income and core housing need.

 

 

When Will the Fiesta Start? Mexico-Canada Relations in a New North America

Stephen Clarkson

The following is a contribution in the blog series on the exceptional contribution of Stephen Clarkson to Canada.  Stephen Clarkson died in 2016. The substantial work he undertook on Canada’s relationship to Mexico is particularly relevant today as NAFTA negotiations occur.

Stephen Clarkson

Laura Macdonald is a Professor in the Department of Political Science and the Institute of Political Economy at Carleton University. Her research is focused on the role of non-governmental organizations in development, global civil society, citizenship struggles in Latin America, Canadian development assistance and the political impact of the North American Free Trade Agreement. Among her publications are the following books: The Politics of Violence in Latin America and the Caribbean (forthcoming); North American in Question: Regional Integration in an Era of Economic Turbulence (2012) Contentious Politics in North America, Palgrave Macmillan (2009); Post-Neoliberalism in the Americas: Beyond the Washington Consensus?  (2009); and Women, Democracy, and Globalization in North America: A Comparative Study (2006)

Laura Macdonald

When Will the Fiesta Start? Mexico-Canada Relations
in a New North America

Laura Macdonald

North America and The Solidarity Of The Weak

Stephen Clarkson’s career began as a student of Soviet politics and his dissertation concerned. The politics of his own country, Canada, and he was part of the group of left nationalists who founded the “new Canadian political economy,” he retained a strong interest in the world and moved beyond the sometimes parochial concerns of that approach and its sometimes single-minded focus on Canada’s relationship with the superpower to the south, the United States. The signing of NAFTA in 1994, which brought Mexico into a close relationship with both Canada and the United States, led to an important shift in his focus toward comparative regionalism. He also developed a deep appreciation and knowledge of Mexico and contributed important insights to Canada’s relationship with that other “periphery” as he termed both countries.

While always clear-eyed and somewhat skeptical about the possibilities for cooperation between Canada and Mexico, he remained hopeful about the possibility to “diffuse American preponderance through a solidarity of the weak.” (Clarkson 2004, n.p., my emphasis). In the current conjuncture, this possibility remains more important than ever. While early phases of the Trump presidency showed Canada and Mexico somewhat predictably retreating into their own corners to deal with his disruptive influence, more recently the two countries seem to be moving toward a closer alliance. What can Stephen’s thinking tell us about the possibilities of cooperation between the two weaker partners in the NAFTA alliance in the face of a Trump presidency, and can they collectively achieve some shared objectives in the face of the Trump onslaught?

In this paper I will first examine Clarkson’s thinking about the nature of the Canada-Mexico relationship within the broader North American region, how it changed over time, and then will examine what his thinking tells us about the possibilities and perils of partnership between the two peripheries and the future of North America. For all the talk we’ve had of “three amigos,” the disparities and asymmetries of the relationship have seriously undermined regional cooperation even before the arrival of Trump.

The Disproportionate Power of the Hegemon in the North American Region

Clarkson began his study of the Canada-US relationship as a young academic caught up in the public outrage against the war in Vietnam. This deep moral commitment led to the publication of An Independent Foreign Policy for Canada (1968). In it, along with fellow contributors to the volume, he argued passionately for an independent voice for Canada, advocating not independence for its own sake or an idealized notion of the Canadian nation, but in order to spur the country to promote a more egalitarian and just social order both abroad and at home. He did not view the Canadian past in a rosy, idealized fashion, referring approvingly to David Wolfe’s description of the Canadian case as “bastard Keynesianism,” and to Jane Jenson’s reference to “permeable Fordism,” “whose bargain between business and labour leaders excluded other social forces” (Clarkson 2001: 503).

He also objected to the doom and gloom he perceived among some intellectual approaches to understanding the shift from a world of nation-states to the “post-sovereign” or “post-Fordist” order. He retained an optimism of the will. I argue, however, that he did remain a nationalist in that his ontological understanding of the global system rested upon the nation state as a still fundamental actor, even if its powers might be constrained by other actors, including supranational forms of governance like the World Trade Organization, and multinational corporations (see Clarkson 2001). And this position led him to reject the idea that NAFTA represented a “world region” in the sense that Europe was (a position that would also disqualify almost every other region from that terminology).
Clarkson’s approach also emerged out of the practice of teaching. In a 1972 article, he lamented the lack of social science courses on the Canada-U.S. relationship, caused by the lack of serious literature, of appropriate conceptual tools, and the “continentalism” of the Canadian scholarly community (referring here to the role of Europe and then the United States as the site of “professional finishing schools”). He devoted much of his career to the task of developing a body of analysis and adequate conceptual and theoretical tools to understanding that relationship, not just for analytical purposes but to help develop a Canadian academic community as a “motor of national development” (1972: 271).

Once the Canada-U.S. FTA was followed by the NAFTA, which included Mexico, his intellectual approach shifted and it can be argued that unlike most students of the agreement, he approached the three partners as deserving equal attention. With Maria Banda, he recognized that despite the fact that both “peripheries” faced a common challenge in their relationship to the partner in NAFTA, the United States, each continued to view their own problems separately “since the evolution of scholarship on Canada’s and Mexico’s place in the North American continent had long proceeded in its own two vacuums” (2004, n.p.). Because of the differences in the two countries’ historical and cultural origins, their commonalities did not become clear until the signing of NAFTA. Even then few analysts followed his path in systematically examining these commonalities as well as differences. These commonalities rested on the nature of their relationship with their common neighbour. Both countries had struggled with their relationship with the continental hegemon and world superpower for many years, but had struggled alone, failing to overcome those historical, linguistic, economic and cultural differences.

Neoliberals (who he insisted on referring to as neoconservatives) view FTAs as based on an equal playing field, in which all parties will benefit even if inevitably there will be some individual winners and losers. In contrast to neoliberal approaches, Clarkson emphasized the asymmetries and imbalances that prevailed in NAFTA. Based on his reading of history, and contra Trump, Clarkson argued (with Mildenberger) that the United States benefited enormously from its relationship with its weaker partners in terms of its wealth, domestic security, and international influence (2011: 247). In Uncle Sam and Us, he argues that  “NAFTA was carefully designed to prevent any form of continental governance. …CUFTA and NAFTA do indeed represent a sea      change for the two peripheral members of North America. Far from producing a system of continental governance in which Mexico and Canada would have had some influence their texts have reconstituted American hegemony in the form of an economic rule book that establishes an unevenly liberalized market and a set of supraconstitutional constraints on the policy-making options of both Canada and Mexico” (2002, 41-42).

Asymmetry The Fundamental Imbalance

In stark contrast to the uninformed rhetoric of Trump and his populist allies, Clarkson shows clearly that NAFTA was not a “a catastrophic trade deal for the United States” but rather a highly asymmetrical arrangement whose design the hegemon, the U.S., was able to dominate, and which drew much more benefit than its two weaker partners, Canada and Mexico. Nevertheless, his methodological nationalism may lead him to underestimate the harmful impact of the agreement on workers and marginalized groups in the United States – not that he did not recognize this impact, but it was not his main area of interest.

In a prescient discussion of the situation we soon might face, he noted that the asymmetry of the relationship comes out perhaps most clearly in the prospect of abrogation:  “De facto asymmetry characterizes NAFTA’s formally symmetrical clause defining how any ‘party’ can abrogate the agreement: it needs only to give its partners six months notice of its intention. The threat of abrogation has a very different weight in the hands of Washington than in those of Ottawa or Mexico City. American interests would be affected – but not radically so – if Canada or Mexico defected from NAFTA. Disaster would be the assumed impact on either of the peripheral states should the United States abrogate. Following their virtually complete integration in the continental economy, they would be forced to their knees if Washington threatened to terminate its participation in the agreement, a technique it used when it forced Hawaii to join the United States late in the nineteenth century” (2002: 41).

Clarkson advocated for a systematic comparison of the situation of the two weaker countries partly for analytical reasons, but also for political reasons, since the possibility of constructing a “solidarity of the weak” represented an important (perhaps only) tool for counteracting the disproportionate power of the United States in the agreement. He was, however clear-eyed about the obstacles to such cooperation.

In addition to the asymmetry that characterizes the North American region, he also recognized the fundamental “imbalance” – the discrepancy between the US-Canada relationship and the US-Mexico one. In Does North America Exist he asks whether this discrepancy is being diminished “as the two peripheral countries become more similar in their US relations” (18). In particular he focuses on the possibility that “the development of the third North American bilateral has helped Mexico to become more like its northern counterpart and so reduce the imbalance with Canada of its periphery-centre relationship.” He also asks whether North America has evolved away from its origins as essentially “two separate bilateral relationships to a more trilateral space” (19). I think he is saying no to the second question but yes (somewhat) to the first one, and that the current situation seems to point to the possibility of greater convergence between the two peripheral partners.

Canada and Mexico – Toward a Partnership of the Weak?

In Chapter 18 of Does North America Exist, Clarkson focuses directly on the development of the “third bilateral” relationship, that between Canada and Mexico. He begins with a recognition that a feature of the “old North America” (pre-NAFTA, even though Mexico was then still geographically part of the continent) was “Canada’s manifest disinclination – in terms of both economic self-interest and intellectual curiosity – to connect with Mexico. The opposite was equally true: even though Mexico’s exports to Canada were considerable, its political and cultural connections were minimal.” (2008: 417).

This lack of mutual knowledge or interest is developed more extensively by other scholars, including our mutual friend, María Teresa Gutiérrez-Haces. In Los Vecinos del Vecino (The Neighbours of the Neighbour), Gutiérrez-Haces traces the way in which the character of the Mexican and Canadian states have been modified as a result of the relationship with their neighbour, the United States. She examines how “the two semiperipheries of the United States, represented by Canada and Mexico, have responded in a parallel, sometimes simultaneous, and on numerous occasions inconsistent fashion, to the U.S. neighbourhood” (2015: 14, my translation).
Canada was initially alarmed about Washington’s decision to agree to Mexico’s request to enter into an FTA that would threaten Canada’s privileged access to the U.S. market, and decided to agree to a trilateral agreement in a defensive move to protect its hard-won gains in the earlier negotiations. Clarkson elaborates on how Canadian and Mexican officials slowly began to overcome their mutual disinterest as they first negotiated the NAFTA agreement, and after the agreement came into force senior officials interacted and got to know each other more (Clarkson 2008: 418). Economic interaction also increased fairly rapidly, although Mexico still represented a tiny market for Canada.

At the same time, the two countries continued to view each other as rivals for U.S. affections, and Mexico was concerned about Canadian multilateral involvement in promoting international human rights in the late 1990s (419). Despite occasional opportunities for collaboration, Canadian diplomats “resisted being associated in US politicians’ minds with a Mexico that translated politically as illegal immigration and narco-traffic”. (420). Canada also rebuffed the proposals of the first democratically elected Mexican president Vicente Fox, who in 2000 pushed for a deepening of the North American partnership to promote greater investment in Mexican development (421).

According to Clarkson, the September 11, 2001 attacks changed North America considerably because of the effects of U.S. (over)reaction to those attacks on the bilateral relationship between Canada and Mexico. Even though there was no increase in trilateral forms of consultation, let alone new continental institutions, the crisis led both Canada and Mexico to recognize their common dilemmas. And the two countries’ foreign policies converged in opposing the U.S. decision to invade Iraq.

One sign of increased cooperation was the creation of the Canada-Mexico Partnership (CMP) in 2004 (based on the model of the 2003 US-Mexico “Partnership for Prosperity”). Five working groups were established on the topics of urban housing, sustainable cities, human capital, competitiveness, and agribusiness. Copying the structure of the US-Mexico Partnership for Prosperity, each working group was headed by one representative from government and one from “civil society” (normally the private sector) from each country. The groups operate in a non-transparent fashion, closed to observers.

As a result, they are hard to evaluate, but, according to Clarkson, appear to be excessively bureaucratic and “oriented to do little more than help the Canadian private sector drum up some business in Mexico” (425). Nevertheless, they contributed to increased interaction between government and business elites from the two countries. Clarkson also discusses the Seasonal Agricultural Workers Program, which is viewed in a highly positive fashion by both countries, despite criticisms that have been raised by academics and civil society organizations.

Overall, then, by the late 2000s, levels of interaction and limited coordination had been built between the two countries, even if the relationship was still overshadowed by the other two bilaterals – between the US and Canada on the one hand and the US and Mexico on the other. Clarkson judged at this point that this pattern of interaction had “helped Mexico reduce the asymmetry of its relationship with the United States and so diminish the imbalance of the two prime North American bilaterals. With North America’s peripheral members having developed an independent relationship of their own, it is clear that the continent’s governance is more than just a sum of their two relationships with the system’s hegemony”(434).

Constructing The Center Periphery Dynamic- ‘The Two Davids’

However in order to overcome centrifugal tendencies, the periphery could “play a special role in rebuilding the continent’s ‘regionness’ and so constructing US power itself”. This would require change on the part of the United States, but would also require Canadians to sacrifice. Canadians should “accept their own responsibility – and long-term self-interest – in helping Mexico break out of its vicious circles of corruption, criminality, and social disintegration” (Clarkson and Mildenberger 2011: 282); and Mexico itself, as this passage indicates, would have to embark on a difficult project of social, economic and political change.

In Dependent America, Clarkson and Mildenberger decry the fact that under the Harper government, Canada did exactly the opposite of taking responsibility for the situation Mexico faces. Instead, “Canada has played its own part in breaking down whatever trilateral solidarity NAFTA originally represented. Because it feared that its influence in Washington was contaminated by being associated with Mexico, Ottawa has taken pains to turn its back on Mexico. Openly, it instituted offensive visa requirements on Mexican travellers to Canada. Privately, it expressed reticence for a continental trilateralism that would link itself with Mexico in Washington’s eyes. Although the political, economic, and military conditions that had sustained Canada’s cordial transnational political culture with the United States have long since eroded, the Harper government is bent on resurrecting the two countries’ special relationship.”

They thus recognize that in order to break down the region’s disparities, the two “Davids” need to move beyond their differences (without ignoring their different economic, social, and political situations), and learn to work together. And in another prescient passage they warn: “The North American periphery has been Uncle Sam’s gold-laying goose for as long as most can remember. It would make an ironic epitaph for the United States’ hegemonic decline if alienating its most valuable and cultivated foreign asset accelerated its self-induced fall” (272). While Clarkson might not mourn the decline of U.S. power, which Trump’s pitfalls and machinations seem to be accelerating, he also recognized that the collateral effects on the former empire’s neighbours would be devastating.
What does a broad political economy perspective, that incorporates historical structures of oppression and is attuned to the asymmetries of the existing North American region contribute to understanding our current situation? And what can Canada and Mexico do to mitigate the damaging effects of Trump’s actions on their individual and mutual interests?

Trump, North America and Canadian Political Economists – “I told you so”

First, Canadian political economists are entitled to say: “I told you so”! While neoliberals continued to trumpet the clear benefits of free trade (without open borders) for decades, against substantial evidence to the contrary, political economists like Clarkson warned against the potentially devastating impact of the free trade agenda on the lives of ordinary citizens of the region. Although perhaps none of us could have foreseen the exact form blowback might take in the politics of the hegemon, it was not difficult to see that growing inequality would threaten the social contract on which Canada and the United States had built their (limited) versions of Fordism.
And in the case of Mexico, the threats of NAFTA and other neoliberal policies adopted by neoliberal technocrats since the early to mid-1980s were also not difficult to identify, even if few could have predicted the wave of deadly violence that the country has suffered since President Felipe Calderón unleashed his war on drugs in a bid for legitimacy after his closely contested electoral “win” in 2006 over leftist candidate Andrés Manuel Lopez Obrador.

And secondly, Clarkson’s analysis indicates the importance of an alliance of the two peripheries in response to the threat they each face in light of the Trump threat to rip up NAFTA, and other threats Trump has wielded against Mexico and Mexicans in the United States in particular.

The instinct of Canadian leaders (and many Canadians) is to distance themselves from Mexico’s problems and insist on the continued relevance of Canada’s supposed “special relationship” with the United States, a notion which, as Clarkson implied, was long obsolete.
This instinct was on display before Trump came to power when Stephen Harper imposed the visa requirement on Mexico, our NAFTA partner, in 2009. This move seemed to defy economic and political logic, since Mexico was one of the few countries where Canada could possibly expect to see significant economic prospects of diversification away from the declining U.S. economy at that moment. Most Canadian economic elites criticized this decision. In 2010, Canada also placed Mexico on a list of “designated countries of origin,” as part of Bill C11 – the “Balanced Refugee Reform Act”. This move suggested that Mexico was a country that was not producing legitimate refugee claimants, in defiance again of logic and evidence, given that country’s high levels of violence, serious record of human rights abuse and widespread impunity.

In the process, Canadian officials shifted from justifying these moves in terms of Mexican “queue jumpers” and “bogus claims,” to linking them in a xenophobic fashion to fears of criminality spreading to Canada as a result of Mexicans’ unrestricted access to the country (Gabriel and Macdonald 2014). This decision of the Harper government caused enormous shock and disappointment among Mexicans at all levels of society, who were accustomed to thinking of Canada as a remote, but friendly partner, and less racist than the United States. One op ed in El Universal, Mexico’s leading newspaper, for example, asked, “How to explain such a clumsy measure as the visas for Mexicans? It is an inefficient decision, since it corrected a relatively small problem by causing one of greater dimensions….[Harper] tried to confuse Mexicans by claiming that a North American trusted traveller program would be adopted. This doesn’t mean eliminating the visas. Furthermore, lacking solid arguments, immediately on returning to Canada he linked the problem of the visas with the incapacity of Mexico to control illegal migration – to Canada? – and even with problems derived from organized crime. This shift in his discourse is at least negative and ultimately counterproductive” (Reyes Heroles 2014, our translation, cited in Gabriel and Macdonald 2014).

The result was a diplomatic showdown and the decision of Harper to postpone and eventually cancel the North American Leaders Summit, scheduled to be held in Canada in 2015, partly because of the tension with Mexico. The deterioration of the relationship between the two peripheries thus contributed to sidelining the entire North America agenda in this period.

The Trudeau Rebuilding Exercise: Summitry and Lifting The Visa Requirement

In contrast, when Justin Trudeau came to office in 2015, one of his main goals was to “renew and repair our relationships with our North American partners”. The Liberal Party election platform stated: “For the past decade, Stephen Harper has led a government that is increasingly partisan, suspicious, and hostile when dealing with our closest neighbours: the United States and Mexico. We will end this antagonism and work with our partners to advance our shared interests. As a first step, we will immediately lift the Mexican visa requirement that unfairly restricts travel to Canada, and commit to rescheduling and hosting a new trilateral leaders’ summit with the United States and Mexico.” (https://www.liberal.ca/realchange/the-united-states-and-mexico/).

Trudeau made good on this promise by hosting the North American Leaders Summit in June 2016 (where his bro-mance with both of his North American counterparts was highlighted for public relations purposes) and lifting the visa requirement for Mexicans in December 2016.

In addition, in October 2016, then-Foreign Affairs minister Stéphane Dion met with his Mexican counterpart, Claudia Ruiz Massieu, Secretary of Foreign Affairs, in the first Canada-Mexico High-Level Strategic Dialogue The meeting was designed to advance on commitments made during Peña Nieto’s state visit to Canada and to promote cooperation in areas such as “cooperation in security and student mobility, best practices in consular management and increasing prosperity for Canadians and Mexicans.” Dion and Ruiz Massieu also discussed the political situations in Colombia, Venezuela and Haiti, reflecting increased willingness to coordinate foreign policy positions on issues in the hemisphere.

They also announced the creation of an annual bilateral dialogue on human rights, reinitiated an annual dialogue on multilateral and global issues, and established a high-level task force bringing together various government departments to address challenges within the extractive sector in Mexico. The creation of the human rights dialogue was especially significant as it displayed the Canadian government’s recognition of the need for serious and open discussion of the many human rights issues facing Mexico, and the Mexican government’s willingness to discuss these sensitive issues with Canadian counterparts, at least behind closed doors.
The election of Donald Trump in November 2016 ended these gradual signs of improvement of the North American relationship. Trump’s rhetoric represented an attempt to re-assert U.S. hegemony in the region and the world. The rhetoric was particularly hostile toward Mexico, with threats to “build a wall” and to make Mexico pay for it, the threat of deportation of 11 million undocumented migrants (and the attendant impact of the drop in remittances), about 5 million of whom are Mexicans, the threat of a border adjustment tax, and the threat to rip up NAFTA. All represented blows to Mexico’s economic and political stability and national pride represented most vividly perhaps in the online ripostes of former President Vicente Fox. The peso hit a record low of 22.03 to the dollar, pressured by concern over a potential trade war between the United States and Mexico.

The economic implications for Mexico are disastrous if even some of these threats are enacted. One Mexican analyst predicted that if Trump fulfills his campaign promises we could see a fall of 4.9% of GDP in the first year of his mandate. These economic problems would aggravate long-standing economic problems with the Mexican economy – the country has experienced low levels of growth since NAFTA took force and poverty and inequality rates remain extremely high.

In response to these threats, the Liberal government initially appeared to retreat to Canada’s long-standing default position, which is to prioritize the U.S. market. Dion was replaced by former trade minister Chrystia Freeland, who was given responsibility for U.S. trade relations and the NAFTA file. On her list of “top priorities” in her mandate letter was to “maintain constructive relations with the United States, Canada’s closest ally and most important economic and security partner”. Dion had been told in his mandate letter to both improve relations with the U.S. “and strengthen trilateral North American cooperation with the United States and Mexico” (MacCharles 2017).

The Canadian Pivot Betting On The Canada US Relationship Most of All

Freeland was apparently selected because of her strong connections in the United States and the perception that the cerebral Dion would not make a good negotiator. The Trudeau government also launched a campaign to make connections with the Trump team, especially with Trump’s influential son-in-law, Jared Kushner, and mobilized a group of well-connected Canadians like former Prime Minister Brian Mulroney, to try to get the ear of the new U.S. administration to convince them they had little to gain from picking a fight with Canada. There was much talk of “throwing Mexico under the bus” (Carmichael 2017). Although Freeland stated after taking on her new position that Canada supported NAFTA as a trilateral agreement and had spoken with Mexican colleagues, senior officials were quoted as saying there was no intention of creating a common front against the U.S. over NAFTA since this could bring heat onto Canada (Ljunggren 2017).

A January 24th, 2017 Reuters article quoted government sources on the sidelines of a cabinet retreat who stated that Canada would focus on its own bilateral relationship with the U.S. and would not step in to protect Mexico from being targeted: “We love our Mexican friends. But our national interests come first and the friendship comes second,” The same sources stated Canada and Mexico had little in common: “Trump is unhappy about the large U.S. deficit with Mexico and has promised to punish firms with manufacturing bases there.” Another source quoted in the same article stated: “Our negotiating positions are totally different. Mexico is being hung out of a skyscraper window by its feet,” (Ljunggren 2017).

Former Canadian ambassador to the U.S. under Brian Mulroney and NAFTA negotiator Derek Burney has been called upon to provide advice to the Trudeau government on the current situation. Burney told Maclean’s Evan Solomon (2017) that Canada should immediately abandon its relationship with Mexico: “We should not indulge in ridiculous posturing – like getting together with Mexico to defend our interests, when Canada has very different economic interests than Mexico. It is a fundamental error to conflate them.” Trump appeared to be engaging in “divide and conquer” rhetoric by talking about merely “tweaking” the relationship with Canada while engaging in fierce attacks on Mexico that led to the cancellation of the planned visit of President Peña Nieto to Washington.

Mexicans were certainly not oblivious to the Trudeau government’s wavering commitment to its NAFTA partner. Prominent Mexican academic and media commentator Denise Dresser published a blistering op ed (2017) in the Globe and Mail, which stated that despite the presence of many Canadian companies in Mexico, “Mexico has never been part of Canadians’ mental map. It remained a distant, unknown, uninteresting place, rarely covered by the media, rarely part of the conversation.” And since Mexico became Trump’s “whipping boy,” she noted with disappointment the “weighty silence” of Trudeau, Freeland and Canadians in general about the depiction of Mexicans and the idea that Canada would dump Mexico and negotiate a bilateral FTA with Washington:  “But today, we are disappointed and with good reason. It seems that Canada is compassionate, but on a case-by-case basis. It appears that Canada extolls its inclusive identity, but when push comes to shove, that identity is not tied to North America or to Mexico. Canada has the right to renegotiate NAFTA on its own terms, to ignore the plight of displaced and persecuted Mexicans. It can even turn a blind eye to the recently discovered mass grave in the southern state of Veracruz, with 250 victims of the country’s continuing violence.

But please, at the very least, don’t wrap yourselves in the flag of moral self-righteousness. Canada’s treatment of Mexico reveals the country as it truly is: a place not that different from the United States, where interests matter more than principles, where interests are more important than ideals. And please remember the next time you open the door to a Syrian, you just slammed it in the face of a Mexican.”

Is Canada Dumping Mexico?

Former Mexican foreign minister Andrés Rozental (2017) also denounced the strategy of dumping Mexico: “The Trump presidency should bring Mexico and Canada much closer together, not tear us apart. Whatever trade or investment measures the U.S. applies to our country may end up harming Canada as well and destroying the competitive advantages that the North American value chain has brought since NAFTA came into force 23 years ago.”

Other long-time NAFTA analysts and advocates like Colin Robertson have urged the Canadian government to establish common cause with Mexico, expressing the view that Canada could not avoid experiencing collateral damage with any Trump administration protectionist measures against our NAFTA partner, even if Canada was not the main target. John Weekes, Canada’s chief negotiator for NAFTA, responded to suggestions that he had received that Canada should pre-emptively pull out of NAFTA, reverting to the 1988 Canada-U.S. free-trade agreement, to distance itself from Mexico. “I understand the psychology,” They think the Trump administration sees Canada as good guys, “and the Mexicans as a bunch of rapists,” so we can do better without them. “But we don’t know what the hell [the U.S.] will propose…What’s the advantage in acting?” (Clark 2017).

Former Canadian ambassador to Washington, Michael Kergin, stated, “He’s certainly got Mexico in his sights but it’s a three-way agreement. What hits Mexico will inevitably have an impact on us.” Similarly, former CUFTA negotiator Gordon Ritchie stated, “If barriers are put up against Mexican imports into the United States, we would be affected because of supply chains” (Freeman 2017). Flavio Volpe, president of the Automotive Parts Makers Association of Canada claimed that the “sentiment ‘we can do this bilaterally’ will damage the prospects for the auto sector, which relies on trilateral relationships and [product] flows” (Fife 2017).
These reactions suggest that Canadian elites recognize that North America is indeed a region, however dysfunctional, and that any disruption to one of the “prime bilaterals,” in Clarkson’s terms, would seriously affect the other. In any case, it appears that the Trudeau government realized that its early reaction was short-sighted. As well, a month later, in the light of the chaos and ineffectiveness of the Trump regime, it appeared that standing beside Mexico was not as risky as it had initially thought. On February 21, 2017, Freeland assured Mexico that Canada would stand beside Mexico and would not seek a bilateral deal with the U.S. Freeland phrased this as a technical response to the nature of NAFTA: “…we very much recognize that NAFTA is a three-country agreement, and if there were to be any negotiations, those would be three-way negotiations,” even if some issues would be discussed with the United States on a bilateral basis.

Trade minister François-Philippe Champagne reiterated in a visit to Mexico in March that “NAFTA is a three-nation agreement. So the way to renegotiate a three-nation agreement is on a trilateral basis”. Nevertheless, when push comes to shove, it is possible that Canada may revert to its bilateralist impulse if Canada and Mexico are unable to agree on negotiating positions, or if Trump insists on punishing Mexico while somehow exempting Canada from protectionist measures.

The Clarkson Legacy

Stephen Clarkson has left us – too early – but has left behind a rich body of analysis that will help us interpret the monumental challenges we face as a country and a region. There is much to be learned from his work about the limitations of the NAFTA model and what measures states and leaders can and should adopt to achieve a better neighbourhood. As I have discussed in this short essay, despite his nationalist political leanings, he was an early and consistent internationalist in his intellectual interests. Nowhere was this more evident than in his treatment of the Canada-Mexico relationship. The emergence of the Trump challenge has heightened both the insecurities and vulnerabilities of both countries, and the importance that they work together.

Clarkson was highly critical of the anachronistic and close-minded tendencies of Canadian leaders who reflexively tend to shy away from the Mexican liaison. Most of his work focused on the actions wise Canadian leaders could take to improve our country’s position, but he viewed Mexico as an inevitable and necessary partner in limiting the power of the U.S. hegemon in the North American region. Unlike some government and business spokespersons who also advocate working with Mexico, he also recognized that in order to build a healthy region Mexico needs to undertake tough reforms to address the problems of inequality, poverty, corruption and violence that afflict that nation. Moving away from the neoliberal model that Mexico has embraced since the mid-1980s is a fundamental first step toward that objective, even though such a shift would not be welcomed by business elites.

References
Ayres, Jeffrey and Laura Macdonald. 2012. “Introduction,” in Jeffrye Ayres and Laura Macdonald, eds. North America in Question: Regional Integration in an Era of Economic Turbulence. Toronto: University of Toronto Press, 3-32.

Carmichael, Kevin. 2017. “Canada shouldn’t throw Mexico under the bus to placate Donald Trump”. Canadian Business. February 6.

Clark, Campbell. “Trump’s negotiation tactic for NAFTA? Creating chaos”. Globe & Mail. January 27.

Clarkson, Stephen “Reform from Without versus Reform from Within:NAFTA and the WTO’s Role in Transforming Mexico’s Economic http://homes.chass.utoronto.ca/~clarkson/publications/Reform%20from%20Without%20versus%20Reform%20from%20Within%20-%20NAFTA%20and%20the%20WTO’s%20Role%20in%20Transforming%20Mexico’s%20Economic%20System.pdf

Clarkson, Stephen. 1972. “Lament for a non-subject: reflections on teaching Canadian-American relations” International Journal, Vol. 27, no. 2.

Clarkson, Stephen. 2001. “The multi-level state: Canada in the semi-periphery of both continentalism and globalization. Review of International Political Economy, Vol. 8, no. 3, 501-527.

Clarkson, Stephen. Uncle Sam and Us.

Clarkson, Stephen. Does North America Exist?

Clarkson, Stephen and Matto Mildenberger. 2011. Dependent America? How Canada and Mexico Construct U.S. Power, University of Toronto Press.

Dresser, Denise. “Canada is suffering from a case of selective compassion.”

Fife, Robert. 2017. “Canada won’t abandon Mexico in NAFTA talks, Freeland says”. Globe & Mail, February 22.

Freeman, Alan. “Trump has aimed his NAFTA criticism at Mexico. But Canada is now worried.” Washington Post. January 19.

Gabriel, Christina and Laura Macdonald. 2014. “At Cross Purposes: Refugee and Immigration Policy versus Foreign Policy in the Canada-Mexico Relationship,” Paper prepared for 2014 Canadian Political Science Association Meetings, Brock University.

Global Affairs Canada. 2016. “Minister Dion concludes successful visit to Mexico, Guatemala and Honduras”. October 15. http://news.gc.ca/web/article-en.do?nid=1138179

Gutiérrez-Haces, María Teresa. 2015. Los Vecinos del Vecino. La continentalización de México y Canadá en América del Norte. Mexico City: Universidad Nacioanl Autónoma de México and ARIEL.

MacCharles, Tonda. 2017. “Mandate for Canada’s foreign affairs minister is now to focus on America first”. Toronto Star. February 1.

Reyes Heroles, Jesús. 2014. “Visas Harper,” El Universal, February 27.
Robertson, Colin. 2017. Canada and Mexico must stand together amid trade threats”. Globe & Mail, January 16.

Rozental, Andrés, “Mexico – and Canada – stand to lose in the Trump years,” Globe & Mail, January 27.

Solomon, Evan. 2017. “Why Canada – and its economy – has plenty to fear from Trump”. January 24 http://www.macleans.ca/politics/ottawa/why-trump-is-an-exceptional-worry-for-canada/

Louis Pauly on Clarkson’s Great Transformation

Lou Pauly

The following is a contribution in the blog series on the exceptional contribution of Stephen Clarkson to Canada.  Stephen Clarkson died in 2016.

This piece is by Louis W. Pauly who is the J. Stefan Dupré Distinguished Professor of Political Economy at the University of Toronto. He is cross-appointed to the faculty of the Munk School of Global Affairs.   His publications include twelve books with his most influential work focusing on the politics of global finance, economic crisis management, and multinational corporate structure and strategy.

Stephen Clarkson’s Great Transformation
Louis W. Pauly

From Innisland to Polanyi

Stephen had a complicated relationship with a country that had changed dramatically during his lifetime. He was a 68er, who came from what would have accurately been described as the elite of his generation in what used to be called Upper Canada. Even if they hardly appreciated it at the time, the members of that group had inherited the rapidly expanding Canadian political economy of the post-war years. That economy was somewhere between Innis’ commodity-based dominion of the British Empire and the emerging continental production system of our own time. Stephen learned to like neither—despite being a prime beneficiary of both. Like Abe Rotstein, Mel Watkins, and his friend Daniel Drache, he yearned for a relatively more autonomous, prosperous, and egalitarian country—a country different from the late-imperial one that had benefited him at Upper Canada College, Trinity College, and Rhodes’ Oxford.

Needless to say, the nationalism born of that yearning, that aspiration, was complex.
The frustration created by the gap between aspiration and reality defined Stephen and his generation. That generation truly lived through a great transformation. No wonder they were inspired by Polanyi! They were born in Innis-land. They grew old in the land of the continental supply-chain, a land that seemed destined to be ever more deeply integrated into a financial and innovation system grounded in political structures south of the border. The best of both worlds? Some say so. But Stephen rejected that rosy view. He saw only a transfer of colonial allegiance. In the days of Trump, who can plausibly argue that he was wrong to hope for something better, something more noble.

Personally, I’m glad that Stephen did not have to witness the abomination currently unfolding in the USA. He might have liked it too much. It would have taken away more of the shades of gray that lie in between the urge for Canadian autonomy and the reality of deepening social and economic integration. It would not have led him to optimism.
The Legacy of ’68 and Stephen’s Elite Past

One thing, though, always did leave a smile on Stephen’s face. He loved his students, and he loved teaching them about Canada in a changing world. Of course, he had some unfair advantages. At the end of every year, he would visit the undergraduate office in the Political Science Department. There he would find out who were the top undergraduates finishing third year. He would gather their names and addresses, and over the course of the summer he would write personal letters to them. The letters invited them to register in his famous fourth-year political economy seminar. Ah, despite the legacy of ‘68, the old instincts persisted! He wanted to work with the best, he wanted to shape the leaders of the next generation, albeit now a truly multicultural generation. And he did work with them. During his last decade, he found ways to take his seminar-students—the survivors of a rigorous selection process—abroad. Every year, he led them on serious research missions, which would always lead to a collaborative publication. And despite his stated disdain for the glittering prizes of his own elite past, he would quietly but exceedingly diligently work very hard to help the brightest of his students win Rhodes, Commonwealth and other prestigious graduate scholarships.

For present purposes, it is quite interesting to note the research theme that his students and he pursued in those seminars during his last years. It was the same theme that continued to win him distinguished research grants in Canada and Germany—so much for the idea of retirement, which he detested! The theme was comparative continentalism. It was not exactly clear where that research was going, but let me take some guesses and put it into the longer term context of contemporary political economy.
Stephen’s doctoral dissertation dabbled in Marxist thought. In retrospect, it can be hard to distinguished from a critique of hyper-liberalism: a global division of labour, the rise of boundary-spanning markets beyond the control of nation-states, the inherent value of labour inexorably usurped by capital, the inexorable rise of an impoverishing system that in the end would surely collapse. Alas, that nightmare abated in the post-war years and especially in the wake of rising nationalism in the 1960s. By the 1970s, the Vietnam War rendered the prospect of globalism seriously problematic, for here was a misguided venture opposed by national and international capital, the defense industry notwithstanding, but pursued to its hideous conclusion by a hegemonic state that could no longer calibrate its own fundamental interests but could indeed control markets.

Clarkson’s Pan Canadian Nationalism: One of His Red Lines

In its wake locally, though, came not Stephen’s dream of a new pan-Canadian nationalism, or Abe Rotstein’s and Mel Watkins’ infrastructure for an independent Canada. No, in its wake came the Auto Pact, the FTA and then NAFTA. And during the same era, Canada itself almost fell apart with the Quebec referenda of 1980 and 1995. Stephen was not happy. Eventually, his unhappiness found a focal point in the Investor-State Dispute Settlement Mechanism at the heart of NAFTA, a structure that seemed to lock Canada into a single continental economic system with an accountability flaw at its heart. The US Congress still held the ultimate whip-hand, but Canadians had no representatives in that ultimate decision-making body. There is no doubt that had he survived to the present moment, his attention would have been riveted on this particular, and particularly ironic, aspect of the NAFTA renegotiation demanded by Trump.

For Stephen, I think, whether one’s political economy priors have Marxist, liberal or even Gilpin-style realist roots, the resulting research questions today are three: was the North American experience of transformation and trauma in traditional authority relations happening elsewhere? If so, was the direction of change toward fragmentation or integration? And what were the most consequential political reactions locally?

Stephen’s research guided by these questions was still underway when he died, but a couple of books had come out along the way and many papers were in the pipeline. I do not know where his unfinished magnum opus would have landed on these questions. But my guess would be as follows.

The Terrible Spectre of a Contested Future

Continentalist ideologies remain ascendant in the real world of political economy. Who can doubt the existence of a US-centered North and South American economy—linked by finance, goods and services, drugs, labour mobility, and a US-defined rule of law? Who is not asking him or herself right now if that regional economy is being matched by a rapidly evolving German-centered Europe? (By the way, I’m sure Stephen did sense that during his last years; he was as attracted by German culture and by the post-war German idea of the social market economy. Note in this regard that by his own request half of his ashes are now buried in Germany.) And finally, who is not fascinated these days by the implications of China’s rise in Asia?

By the time he left us, though, I think Stephen was aware of the fragility at the core of each of these continental economies, the continuing, even deepening, linkages across them, and perhaps most importantly the ideological weakness of continentalism. Unlike most variants of nationalism, it seems not to call forth any potentially constructive passion. But around the world, it certainly does seem to inspire a spirit of passionate resistance. And thus might Stephen have concluded.

His students, though, could not stop there. For they had begun to see clearly the immensity of the challenges in front of their generation. The problems of collective action looming—from climate change to financial instability to refugee-generating conflicts around the world—could not be avoided. If the nation-state was no longer up to the task of problem-solving, if nascent continental polities were incoherent, if supranational institutions were absent or ineffective, that only serves to clarify things. If they remain inspired by Stephen Clarkson, they will take that clarity as a challenge, the starting point for new and urgent research.

If Stephen had lived long enough to be inspired by that next generation and to write yet another book of his own, he might have looked to his past work for an appropriate title. He might have called it “Canada and the Global Challenge.”

Andrew Cooper on Stephen Clarkson’s Foreign Policy

The following is a contribution in the blog series on the exceptional contribution of Stephen Clarkson to Canada.  Stephen Clarkson died in 2016.

This piece is by Andrew F. Cooper, who is a Professor at the Balsille School of International Affairs and the Department of Political Science at the University of Waterloo.  He is also the Director of the Centre for the Study of Rapid Global Change.  Andrew Cooper is the author of 9 books including Group of Twenty (2013) Internet Gambling Offshore (2011) and Celebrity Diplomacy

Stephen Clarkson’s ‘Foundational Text’ on Canadian Foreign Policy

Andrew F. Cooper

Canada and The World Then

 We collectively miss Stephen Clarkson but our individual intellectual understanding and appreciation of his work are quite different. Stephen was idiosyncratic, in the sense that it is difficult to typecast him too tightly via a particular framework although the new Canadian political economy comes closes (Cameron, 2016). He was hopeful for Canada’s future, but his analysis led him to pessimistic conclusions. He despaired about the limitations of Canada’s ‘mandarins’ (especially its diplomats) but had high expectations for both citizen based activity and some technocratic driven policy solutions. And he appreciated ‘big’ individuals in a manner rare for a political scientist, but was duly worried about the nature of that personalism, especially emerging from the US with bouts of go it alone zealousness.

To try to tease out some of these fascinating features about Stephen’s thinking with regard to Canada’s position in the world, I have gone back to what is his foundational work – his edited collection An Independent Foreign Policy for Canada? Published in 1968 this volume attracted attention not only from established academics but aspirant scholars (including myself as an undergraduate). Although I didn’t know Stephen at the time, I was intrigued and to some extent inspired by his animation of this collection.

Organizationally there is a lot about An Independent Foreign Policy that speaks to Stephen’s personality. This was not a work with one tightly controlled view. Rather it was a pluralist endeavor containing chapters by many of the big highly argumentative academics of the day (if with only a single female contributor, Pauline Jewett, a gap Stephen made up later in life with an array of female collaborations).

Substantially the topics especially in the opening section remain – in a time of Trump – highly relevant. The Myths of the Special Relationship, Quiet Diplomacy revisited, Retaliation? Confronting Uncle Sam!

Stephen’s own contributions in binding the collection together are significant in locating major points of continuity and adaptation in his later (prolific) writings. Therefore, although not as well-cited now as many of these subsequent works it is a valuable exercise to go through An Independent Foreign Policy as we remember Stephen and celebrate his contribution.

Canada’s Potential versus Structural Limitations

At the core of Stephen’s work is what he considers the Canadian conundrum, the tension between Canada’s (unrealized) potential versus the formidable structural limitations (Clarkson, 1968: x). Indeed, it was this tension that underpinned An Independent Foreign Policy.

In general mindset Stephen was an optimist. Indeed, in many ways, he was the godfather of a wave of books (many decades later) that advocated Canada go beyond its traditionally cautious and modest habits, and go big in terms of ambition. A primary example of this evolution is Jennifer Welsh’s book, At Home in the World (2004), framed by the aspiration that Canada should be a model international citizen. Another example of this ambitious construct comes from Michael Byers, of the University of British Columbia, in his Intent for a Nation (2007). The core themes of this ‘model citizen’ approach is to look to a fully post-colonial Canada, with a deep distrust for the status quo.

What is striking from the start then is a rejection of the positioning of Canada as a quintessential middle power, at least how that framework has been identified and utilized by practitioners and mainstream academics. While of course he comes back to the middle power notion later on in his career, he never embraces the middle power model in terms of its familiar diplomatic toolkit.

The Search for Alternatives

Nor however does Stephen embrace the alternative notion that Canada is destined to be a principal or foremost power. Although this school – led initially by James Eayrs (also at University of Toronto) gained some strength by the mid-1970s, Stephen kept his distance. Stephen was extremely interested in institutions, but the institutions that grabbed his attention were almost always exclusively economic (and in large part continental) in nature. Unlike other University of Toronto colleagues (such as Bill Graham and John Kirton) he did not engage deeply in the debates about the G7/8.

What was salient to Stephen – and increasingly so after the publication of An Independent Foreign Policy – was the substance of political economy rather than the practice of diplomacy or geo-politics. In this shift we can see a fundamental split between Stephen and other key individuals that advocated a revisionist foreign policy in the mid to the late 1960s.

It is pertinent here to also note the divergence between Stephen and Lloyd Axworthy. Akin to Stephen, Axworthy departed from the established tenets of the past with considerable impatience with the static quality of Canada’s traditional middle power diplomacy.  Explicitly, Axworthy wanted to liberate the middle power model from its identification with the fixed ‘order’ driven worldview of the Pearson era. This impatience was a long-standing condition, which may be traced back to Axworthy’s younger days as a critical observer of Pearson’s “worth[y]” but “grey and oh so solid” diplomacy. As neatly captured, for instance, in a series of newspaper articles that Axworthy wrote for the Winnipeg Free Press in September 1965, this sense of impatience pointed – like Stephen’s – toward diplomatic activity that was more noisy and public-oriented (Axworthy, 1965).

But the divergence between Stephen and Axworthy after the late 1960s is illuminating. Shut out of the NAFTA debates, Axworthy’s focus as minister was towards a more fluid focus on ad hoc, normative driven issue-specific coalitions of the willing. The most dynamic expressions of this narrative come on the issues of land mines, the ICC, and the advance of the Responsibility to Protect (R2P) The narrative of the Axworthy doctrine puts orthodox conceptions of security and national interest on the defensive; at the same time, it is an implicit criticism of traditional Pearsonian conception of middle power diplomacy, as it regards this approach as being too slow and too cautious.

Stephen retained an interest in these sorts of diplomatic initiatives. In a 2010 talk he pointed to how the land mines and ICC initiatives were examples to how pressure from civil society could influence government (Clarkson, 2010). Yet, this was not at the heart of his concern, as he privileged less specific cases of diplomatic success but the need to address structural conditions.

Such ambition fitted into his original desire and optimistic spirit to reach Canada’s unrealized potential but also to highlight his enveloping concerns (even pessimism) that the structural constraints were simply too great. As he suggested: “These examples give some sense of how citizens have tried to correct the constitutional imbalance that is constraining the regulatory state, exacerbating global inequalities and threatening the planet’s survival as a hospitable environment for human life. But activism is not enough. If the market’s capacity to self-destruct is to be contained, governments must get in step with their citizenry to give clear priority to human emancipation” (Clarkson, 2010).

Stephen’s appreciation of the structural constraints facing Canada pushed him further into the analysis of political economy. If the Independent Foreign Policy volume was animated largely by the Vietnam war, over time it was the issue of how ‘Continentalism’ compromised the Canadian economy and constrained the Canadian state that dominated his work.

Clarkson:  The North American Political Economist

Others in this collection will deal with Stephen’s association with the study of new Canadian political economy in greater depth. What I will add is above all my appreciation not only of the depth of Stephen’s knowledge but also the extent of his normative commitment on these issues. Even scholars who disagreed with Stephen acknowledge the nuanced approach that Stephen used to tease out the contours of Continentalism, and the full implications of these conditions. As rehearsed most specifically in  his book 2008 Does North America Exist? Stephen revealed the highly varied nature of those contours, with some sectors, for example, water management and the steel industry, far more integrated than would be expected.   In others (like intellectual property and financial services), bilateral relations and globalization are more powerful forces than regional convergences (Clarkson, 2008).

In terms of normative concerns where Stephen has had the most influence of later debates is his showcasing “Canada’s Secret Constitution” Consistently, Stephen emphasized the undemocratic manner by which NAFTA – along with the WTO – “create a new mode of economic regulation with such broad scope and such unusual judicial authority “that it entrenches certain inviolate principles or norms that are above the reach of any politician to alter.”(Clarkson, 2002).

As always with Stephen he continued to expand his intellectual horizons, moving from a concentrated focus on Canada to extended studies of the trilateral North American relationship including in considerable detail Mexico, and the comparative study of NAFTA and the European Union. In both cases not only did he tap into some valuable themes, not least the huge asymmetries among the three partners, and the absence of a European-style system in North America of multi-level governance.

Gaps in the Clarkson Oeuvre

All of this is not to leave Stephen free of criticism (although he would be quick to debate these issues). His focus on structural conditions has a mercantilist air about it, with a conflation between US state and commercial interests. As we see to some extent through the Nixon years, and more robustly at the beginning of the Trump administration, however, this connection can be broken. It is not only the asymmetry between the US and its North American partners that needs study, it is also the asymmetry between different winners and losers in the US as well as Canada and Mexico that merits attention. Stephen put a heavy weight on the ‘hollowing out’ of corporate Canada, but without the same appreciation of how corporate America has hollowed out investment and jobs in the US, leaving space open for a populist backlash. Stephen could argue that, “NAFTA cannot be blamed for the growing income inequality within the US economy [- whereas] free trade appears causally related to the various factors increasing economic disparities within Canada and Mexico” – this is not the message drummed home with considerable impact by Trump (Clarkson, 1998).

A second criticism at least for liberal internationalists is the disjunction between Stephen’s normative-oriented criticisms about NAFTA, the WTO and indeed many other institutions and the hold of the more pragmatic attitude of Canadian citizens and politicians. Dealing with the US in terms of institutions might be bad, but dealing with the US without institutions is worse. The Trump attacks on NAFTA, the WTO, and NATO brings this embedded attitude out. Whatever the difficulties of having NAFTA in place – with a US imposed Chapter 11 highly prominent in terms of policy output – are the difficulties of dealing with a unilateral ‘rogue’ US without some ‘insurance’ from increased risk of arbitrary and unfair treatment.

And finally, there is the question of the EU model as a suitable alternative design. Stephen is highly laudatory of the EU model, both in terms of “the strength of its institutions or the sophistication of its jurisprudence. Yet, no less than in North America, the process towards continental integration could be viewed by the peripheral countries as “fast but secretive, controversial, and divisive, privileging business interests and excluding social partners” (Clarkson, 1998).

All of this is not to detract from Stephen’s contribution. On the contrary, in many ways what we find with the Trump phenomenon is a reinforcement of the accuracy of many of the other themes that Stephen concentrated on. No less than when he edited An Independent Foreign Policy, it is the centrality of the US relationship to Canada that comes to the fore. When there is space – for example – in the aftermath of the Cold War Canada could downplay this relationship as it main game. But when things get tough, as in the Reagan years or with Trump the main stream dominates. So, in this sense, Stephen’s work remains a crucial guide for understanding Canada’s position in the world.

The Deficiencies of Canadian State Practice Still Haunts Us

A second major theme that comes out of An Independent Foreign Policy is an intense frustration with the bureaucracy ‘managing’ Canada’s place in the world. If the structural conditions imposed enormous constraints on Canada’s freedom of action, these limitations were exacerbated by a combination of “traditional elitism and secrecy” (Clarkson, 1968: xi). Such a culture immobilized big creative thinking and action.

As in later eras, Stephen was appreciative of some of the contextual difficulties, especially the need to work under conditions of the communications revolution. But there was a deep concern whether under any circumstances Canadian mandarins had the will to things differently beyond a crisis management approach.

This critique was another sign of Stephen’s distance from orthodox scholarship about Canadian foreign policy. For most academics up to the late 1960s celebrated Canadian diplomats and policy makers more generally for their skills.

Stephen punctured this sense of pride and image of superiority. Not for him the art of the possible, or mere problem solving. In many ways, this distaste connected with his suspicion that the functional approach in regard to institutions undersold Canada, with an onus on joining and status enhancement as opposed to a transformative ethos.

Stephen came to see Canada as a middle power in terms of its place in the hierarchy of nations (a semi-peripheral country) but he never embraced middle power diplomatic techniques. In some areas this was by omission, as there was only brief mentions of mediation as a primary focus of attention.

The main cause of contestation was on the primacy of quiet diplomacy in the Canadian repertoire. For the traditional ‘External Affairs’ mandarin this was the dominant practice in the tool kit. What was important was access and influence in Washington DC. Urges to criticize the US and US leaders should be tempered. Changes in US policy should be anticipated before they go public in an atmosphere of controversy. And there should never be the utilization of retaliation via linkage of issues.

In hindsight much of Stephen’s critique in An Independent Foreign Policy seems quite moderate. After all he played down the revolutionary dynamics. Arguing that Canada did “not need the mountain moving voluntarism of Mao. simply needs a leadership that can make it clear to the public – if not in a little Red book at least in a White Paper- what role Canada can play and how its objectives are to be achieved.” (Clarkson, 1968: 268).

Moreover, some of the changes pushed for by Stephen were coming into being albeit unevenly. One of the first things the government of Pierre Trudeau did was to start a conversation about foreign policy – a conversation that continued in a variety of structured forms in later years. Plus, we can see bursts of activity trying to do things differently in foreign policy, from the Third Option to the National Energy Program (NEP) related initiatives in the early 1980s.

Stephen was supportive of these efforts, and of course distressed when the momentum for both opening up the debate on Canadian foreign policy and the implementation of robust policies dried up first in the Mulroney years and then the Harper years. In doing so he became a key source of memory in the championing of an open autonomous foreign policy.

Yet as with any robust template for foreign policy there are points of contradiction and gaps. For the paradox of moving towards an autonomous and robust policy template in the early 1980s was that the actual policy making process reverted to the closed format that Stephen was so frustrated about in the 1960s. The only difference was that instead of a generalist elite dominating foreign policy it was now a centralizing cohort of technocrats inside central agencies.

Trudeau’s Failed Third Option:  The Reagan Cowboys

The NEP shows off this problem of reconciling dialogue among Canadians and the pursuit of robust policy making. As Stephen appreciated the process of decision making was secretive not only in the context of public dialogue but bureaucratic interaction: “remov[ed] from the normal process of interdepartmental consultation..[with DEA] ‘not informed until the last moment” (Clarkson, 1982: 79).

At the same time US retaliation showed itself to be no paper tiger. With the US first Reagan administration in place retaliatory pressures increased, with the Trudeau Liberals shifting from the practices of accommodation of the past to a “complacent and superior” positon that was premised on the notion that the “Californian cowboys” needed time to learn their job (Clarkson, 1982: 32).

The hard-line position of the Reagan administration was complicated further by the fact that the Trudeau government had expected some support for a global initiative on North-South relations. Not only were these (unlikely hopes) dashed but Canada found itself under pressure from Washington’s “institutionalized and unpredictable vulnerability” a doctrine of reciprocity that pushed the Trudeau government (again to Stephen’s frustration) to seek again the “advocacy of indirect means of influence” on issues such as Cruise missile testing. As Stephen suggested – very much in the mindset of An Independent Foreign Policy– this backtracking marked “a striking resemblance to the old quiet diplomacy approach and offers as little concrete evidence of its effectiveness” (Clarkson, 1982: 282).

Where the mantra of retaliation did creep into the Canadian agenda was at the sub-national level, a domain allowing for some considerable fragmentation on issues of provincial responsibilities. This type of action was of course most recently highlighted by BC Liberal leader Christy Clark, who on the eve of the recent election pushed for retaliatory trade threats to pressure for a softwood deal: “With our ban on moving thermal coal, we have got the Americans’ attention…We aren’t going to be weaklings” (Bailey and Hunter, 2017).

Stephen’s main contribution to the debate about Canada’s own practice was as a catalyst for change in change. Arguably more than any other text An Independent Foreign Policy for Canada opened up the debate about how accepted practices had run their course. Few pushed back to defend the Department of External Affairs as the core ingredient in the making of foreign policy. And the manta of quiet diplomacy lost ground accelerated over time to new and sophisticated practices of public diplomacy and national branding designed to cushion Canada from retaliatory activities).

Nonetheless, Stephen set himself a high bar to pass in terms of wanting both an open citizen based and coherent technically sound foreign policy. As the experience of the Trudeau government showed in the early 1980s robustness commonly combines with a revised form of elitism. What is more, under the structural constraints that Stephen so ably depicted, any departure in the traditional habit by legitimizing retaliation runs risks especially in the context of an America first administration – whether Reagan or Trump.

Continentalism and Canada’s Perennial Leadership Dilemma

Arguably the main point of departure of Stephen with most of his counterparts studying political economy – or International Relations more generally – is his appreciation for not only agency but the individual agency. Although to be sure a good deal of his work focused on the structural imposed by Continentalism, space opened up over time concerning how of major individuals influenced policy making decisions.

Here it is not so much An Independent Foreign Policy for Canada that acts as the foundation for this appreciation, but arguably his earlier work on Nehru and other ‘third world’ leaders focused upon in his thesis and subsequent publication on The Soviet Theory of Development (Clarkson, 1978: 265).

As alluded to by the reference to Mao and Canadian public policy, Stephen did not show expectation in An Independent Foreign Policy for Canada for a dynamic form of personal leadership in Canadian public policy. Nonetheless, he clearly expected more in terms of leadership than what was on offer by Lester Pearson in the 1960s.

To Stephen, Pearson’s instincts for quiet diplomacy (if useful at the time of the Suez crisis) had become a weakness weighing Canadian foreign policy down. As he writes Pearson’s has turned an “unobtrusive” style of diplomacy – “tactics which lead to his own international successes in the mid 1950s into a dogma that frustrates” (Clarkson, 1968: 265).

As well rehearsed in a host of later publications, Pierre Trudeau was far more Stephen’s image of a leader. And although on many specific occasions frustrated by his actions, Pierre Trudeau was the model that Stephen used to judge other leaders right up to the time of the government of Justin Trudeau (Appel, 2015).

If he found Trudeau fascinating (and in many admirable) Stephen became just as taken up by the personality types of American leaders. An indication of this shift from structure to agency in studying Continentalism is his tile of Canada and the Reagan challenge (as opposed to the neo-conservative challenge).

NAFTA and Market Integration

As a consequence of this shift Stephen became a close observer of bilateral (and later trilateral) summits between North American leaders. In the actual benefits of these summits Stephen was ambiguous. In some appearances, he supported greater institutionalization: “it’s amazing actually to think that, given all the attention spent on NAFTA, the three heads of government don’t meet regularly. They didn’t even meet after September 11, 2001, when the borders were blockaded, which put the whole notion of NAFTA in jeopardy” (Clarkson, 2005). At the same time, though, he was as worried as other observers that such meetings could be highly problematic, animating a securitization of North America.

But the importance of Stephen’s bringing individual agency in is that he was (or could have been!) well situated to take into account new unanticipated and disruptive changes at the apex of the US political system. A major contribution of his in the 1980s was to capture the individual importance of the Reagan challenge: “Reagan was serving notice on the world that America’s decade of instability and indecision was over [with a) simplistic and self-serving moralism” (Reagan, 1982: 21).

While a topic never allowed to be elaborated upon, Stephen was early on aware of the “tsunami” like implications of a Trump victory (Metro, 2015). In a December 2015 public event in Toronto he signaled that the Trump revolution would go beyond that animated by Reagan or George W. Bush “He’s off the map, even for conservatives”. Stephen stated, adding that Trump would “create an earthquake with Canada suffering tidal wave” (Metro, 2015).

The Clarkson Legacy

From his editorship of An Independent Foreign Policy for Canada, therefore, Stephen indicated his unique attributes as a scholar and a commentator. While building on his expertise in political economy in comparative perspective, he honed in on the Canadian continental condition. Although immersed in theory of economic development, what jumps out is his eclecticism: his concern with history and his blend of an analysis of structure and over time an appreciation of big personalities, albeit not always in a positive fashion.

For all of these of reasons– and many more- Stephen stands out among Canadian intellectuals. Yet if we miss him, we can still learn from him, not the least about how to balance tough interrogation of what is happening in everyday politics and policy making with an enthusiastic expectation that we can move beyond cautious and limiting habits.

References

Appel, Jeremy. 2015. “The Harper Doctrine in Red? Justin Trudeau’s Foreign Policy” Canadian Dimension, 1 June < https://canadiandimension.com/articles/view/the-harper-doctrine-in-red-justin-trudeaus-foreign-policy>

Axworthy, Lloyd. 1965. “Canada’s Role as a Middle Power.” Winnipeg Free Press, 8-9 September.

Byers, Michael. 2007. Intent for a Nation: What is Canada for? Madeira Park, BC :Douglas & McIntyre.

Cameron, Duncan. 2016. “Why is Justin Trudeau invited to the White House?” Rabble, 8 March 2016 < http://rabble.ca/columnists/2016/03/why-justin-trudeau-invited-to-white-house>

Clarkson, Stephen. 2010. “The unbalanced world of global governance,” Globe and Mail, 19 March https://www.theglobeandmail.com/opinion/the-unbalanced-world-of-global-governance/article4311549/

Clarkson, Stephen. 2008. Does North America Exist? Governing the Continent after NAFTA and 9/11. Washington, D.C., Woodrow Wilson Center Press.

Clarkson, Stephen. 2005. Presentation to the 38TH PARLIAMENT, 1ST SESSION STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE, 2 November  < http://www.ourcommons.ca/DocumentViewer/en/38-1/FAAE/meeting-66/evidence>

Clarkson, Stephen. 2002. “Canada’s Secret Constitution: NAFTA, WTO and the End of Sovereignty?” CCPA, October < https://www.policyalternatives.ca/sites/default/files/uploads/publications/National_Office_Pubs/clarkson_constitution.pdf

Clarkson, Stephen. 1998. Fearful Asymmetries: The Challenge of Comparing Continental Systems in a Globalizing World http://homes.chass.utoronto.ca/~clarkson/publications/fearful_pub.html 

Clarkson, Stephen. 1982. Canada and the Reagan Challenge. Toronto: Canadian Institute for Economic Policy.

Clarkson, Stephen, ed. 1968. An Independent Foreign Policy for Canada? Toronto: McClelland and Stewart for the University League for Social Reform.

Metro (Toronto). 2015. “A president Donald Trump would be a ‘tsunami’ for Canada: Prof”,  (Toronto) Metro, 2 December < http://www.metronews.ca/news/toronto/2015/12/08/what-president-donald-trump-would-mean-for-canada.html>.

Welsh, Jennifer (2004) At Home in the World: Canada’s Global Vision for the 21st Century. Toronto: Harper Collins.

 

 

 

Ontario’s Electricity Sector IV: Pre-Election Update

My first, second and third posts on the Ontario electricity sector described how policy and administrative decisions by different Liberal Governments gave rise to excess electricity generation with an inflated cost structure, leading to higher electricity prices. In anticipation of June 2018 elections, the Liberal Government recently implemented a costly and first-in-Canada financial scheme to fund its “Fair Hydro Plan” (FHP) to provide a short-term 17% price reduction. Given that the FHP is now a financial reality, this post focusses on the options available to a new Government with respect to both the FHP and the main driver of Ontario’s inflated cost structure, long-term contracts with independent power producers (IPPs).

Read more »

Why Toronto needs a national housing strategy

Dr. Colin Phillips is an up-and-coming scholar in Canada’s homelessness sector. He has an opinion piece in today’s Toronto Star titled “Why Toronto needs a national housing strategy.”

Points made in the opinion piece include the following:

-The City of Toronto has worked hard to develop good practices on the ground to address homelessness.

-But, like all of Canada’s major urban centres, it can’t properly address homelessness without substantial increases in funding from the federal and provincial governments.

This opinion piece is quite timely, as a new “national housing strategy” is expected to be unveiled by the Trudeau government later this month.

On Monday, the Calgary Homeless Foundation will be publishing a peer-reviewed report authored by Dr. Phillips. That report’s focus will be Toronto’s Streets to Homes program (a program that provides immediate access to housing to persons experiencing homelessness).

The Private Corporation Tax Loophole and the Ultra Rich

The 2017 Economic and Fiscal Update provides some detailed data (see pp. 51-53) on who will be impacted by the government’s plan to limit how much passive investment income can be earned in a private corporation.

Income from investments held in a private corporation is taxed at a lower rate than investments held by a person in a non registered account such as an RRSP or TFSA. For most small businesses, there is no incentive to save in a private corporation rather than an RRSP of TFSA.

Responding to anguished cries from small business, the vast majority of which are not impacted at all, Minister Morneau will allow $50,000 of income to be earned within a private corporation. This is equivalent to assets of more than $1 million.

The government estimates that putting a cap on private corporation investment income will affect just 3% of private corporations with investment income. But this small group of just 8,400 companies accounts for a stunning 88% of private corporation passive investment income.

Crunching the numbers shows that the affected 8,400 companies have average assets of $35.7 million.

The Department of Finance estimate that earning investment income in a private corporation instead of a personal account provides a higher annual after tax rate of return over ten years of 12.5% compared to 6.9%.

Again crunching the numbers, this means that the after tax return for the average private corporation impacted by the changes will fall from about $4.5 million to $2.5 million per year. (This depends on the details of how the new cap is to be applied, which will be in future legislation.)

Minister Morneau is entirely correct to argue that his proposed changes to taxation of passive investment income will have no impact on genuine small businesses, and are squarely aimed at a very small group of wealthy Canadians seeking an unjustifiable tax advantage.

Update on Jimbo’s Minimum Wage Wager

It’s been over a week now since I challenged the authors of 5 business-friendly economic reports to a friendly wager over the future trajectory of employment in provinces that are raising their minimum wage to $15 per hour.  The challenge was issued in my Globe and Mail column of October 3.

I was responding to the several business groups and business-funded think tanks that had issued several reports predicting job losses from the higher minimum wage, in the run-up to the coming vote in the Ontario legislature on the policy.  I summarized some of the major flaws of the various studies: including their misreading and misapplication of recent economic research on the employment effects of minimum wages (which typically find very small, or even slightly positive, effects); their misleading arguments regarding the connection between minimum wages and poverty; and their spurious concerns about the supposedly undue pace of the increases in Ontario and Alberta (in fact, of course, business lobbyists stridently oppose higher minimum wages on any timetable).

My main concern, however, was not these methodological critiques, but rather that the headlines generated from these reports about “coming job losses” resulting from higher minimum wages were very misleading, and in fact misportrayed the reports’ actual findings.  The reports generally describe an implicit counterfactual simulation relative to some base case forecast (which presumably incorporates normal ongoing employment growth).  At worst, in their scenarios (even if we accept their pessimistic approach), employment would grow more slowly than would otherwise be the case.  That doesn’t really mean that “jobs are destroyed by higher minimum wages.”  But that is how the results were portrayed in media coverage.  The scale of potential job losses in even the more negative of these studies will almost certainly be overwhelmed by normal job creation, and hence employment will continue to grow even after minimum wages are raised.

It’s important to note that this is not because of higher minimum wages (the economic research suggests that the expansionary effects of higher minimum wages through stronger consumer spending roughly balance out potential contractionary effects experienced primarily through slower business investment).  I am not arguing that a higher minimum wage in and of itself creates new jobs; only that fears they will destroy jobs and reduce employment are not valid.  The small effects of minimum wages (in either direction) will be overwhelmed by the other, more important determinants of employment.  Meanwhile, the distributional effects of higher minimum wages (shifting income from capital to labour, and towards low-wage workers in particular) will be very positive.

To highlight this point, I challenged the authors of five different critical studies to a $500 wager (each) that total employment in the relevant province they analyzed would be higher (not lower) one year after the minimum wage is increased.  To propose this wager, I have corresponded personally with the lead authors of the studies published by the Ontario Chamber of Commerce, TD Bank, the C.D. Howe Institute, the Fraser Institute, and the Ontario government’s own independent Office of Financial Accountability.  (That last group is in a different category from the others: it is not a business-friendly think tank but rather a government-funded body meant to provide arms-length analysis of government fiscal policy matters; its mandate apparently allows it to wade into broader economic issues like this one. I remain deeply suspicious of the FAO’s decision to wade into this particular debate, and I think there should be a broader critical discussion of its mandate and governance.)  The C.D. Howe report was focused on Alberta – and hence my proposed wager is based on the change in Alberta’s employment.  All the others focused on Ontario, and the bet was defined accordingly.

In my correspondence I indicated that if I won the bet, I would donate both my winnings and my original ante to the Workers’ Action Centre (the fine organization which has spearheaded the Fight for $15 in Ontario), or in the case of the Alberta study to the Fight for Fifteen network based in Calgary.

To date I have heard back from three of the five authors.  Two of the authors (lead authors of the TD Bank and Ontario FAO reports) replied noting that their own research in fact indicates their expectation that total employment in Ontario will indeed grow after the minimum wage is increased (although more slowly, in their judgment, than it would have otherwise).  They were understandably puzzled why I would ask them to bet against their own forecasts!  The lead author of the Ontario Chamber of Commerce study sent me a pleasant but noncommittal reply, referring me to a posted response which restates their key arguments, expresses concern at “ideological” misrepresentations of their findings, and declines the proposed wager.  The reply (like the original study) makes no mention as to whether the authors expect total employment in Ontario to rise or fall after the minimum wage is increased (that is, whether the job losses they expect from the minimum wage will outweigh the normal expected increase in employment).  I repeated this explicit question to them in subsequent correspondence, with no reply.  I should note that all three of these authors also indicated they did not think betting on an important economic issue was appropriate or ethical.

I have not yet received a reply from the authors of the Fraser Institute and C.D. Howe reports.  I will update this blog post (in the Comments section below) if I have any subsequent correspondence regarding the proposed wager.

For now, this offbeat exercise has confirmed my argument in the original column that none of the minimum wage critics are actually arguing that employment is going to decline in any of the provinces lifting the minimum wage to $15. Highlighting this point – that employment growth has been relatively strong in all three provinces (Ontario, Alberta, and B.C.), and will almost certainly continue even as the minimum wage increases – is an important way of responding to the fear-mongering of the business critics.

New book on Indigenous homelessness

I’ve recently reviewed a new book on homelessness among Indigenous peoples. The book, published by the University of Manitoba Press, was edited by Evelyn Peters and Julia Christensen.

My review can be accessed at this link.

Stephen Clarkson: An Introduction to a special blog series

Stephen Clarkson: Political Economist with a Global Vision (1937 – 2016)

Marjorie Griffin Cohen and Daniel Drache

Stephen Clarkson died early in 2016 in Freiburg, Germany and Canada lost someone very special. Stephen was a Professor in Political Science at the University of Toronto and engaged in teaching, research and writing until his death. He has contributed, in an extraordinary way, to the public understanding of Canada and North America in the 20th and 21st centuries, Europe in the 21st century, and the politics of globalization in the Western World.  He was one of Canada’s leading experts on Canada/US relationships and in this, his absence is acutely felt now as we are in the midst of renegotiating NAFTA.

At the annual gathering of academics in Toronto at Congress 2017, we organized a series of panels related to Stephen Clarkson’s work. We constructed the panels with the idea of bringing together experts who work in the various areas related to what interested Stephen to understand Stephen’s impact in the area.  The papers that were presented at Congress will each appear in the PEF forum. The point of the papers was not necessarily to be a comment on or critique of his work per se, but to show his influence on the entire thinking in an area of political economy, relating to issues such as the mega-trade deals, the machine politics of the Liberal and Conservative Parties, corporate influence, North American integration, and the new issues arising for regional and world politics such as the investor state dispute settlement mechanism trade court.

Stephen’s work was centered on the leading issues of the day foremost of which was the erosion of national sovereignty facing the unstoppable, far-reaching invasiveness of globalization and WTO’s complex, difficult legal culture.  He authored 14 books, and edited four others.[1]  He was a gifted linguist and fluent in French, Russian, Spanish, Italian and German.  He could present in each of these languages (in their home countries) what many of us struggle to do in English in Canada – deliver an academic paper or lecture without notes.

He received many honours and awards – some of them the most prestigious this country can give, such as the Order of Canada.  Stephen was also a gifted teacher and loved that aspect of his life.  He particularly enjoyed teaching undergraduates (another departure from many colleagues).  He even managed, through his charm and determination to include undergraduates on panels at Congress (the yearly gathering of Canadian academics where undergraduates are not permitted to present papers).

He has had an exceptionally productive career with a great many significant publications that have affected thinking in this country. An Independent Foreign Policy for Canada, 1968 is an edited collection, in which he wrote a chapter that presaged Trudeau’s Third Option and began his life-long concern researching the Canada’s declining importance in the global economy.

Uncle Sam and Us,: Globalization, Neoconservatism, and the Canadian State 2002 provides a powerful study documenting the massive reorientation of Canadian state policy, the rise of North American corporate power and the increasingly toxic role of neo-liberal ideology as a separate commanding policy space. The Big Red Machine, 2005 delved into the exercise of power, disappointments, betrayals and leadership battles of Canada’s Liberal Party, once the country’s unchallengeable hegemonic political party whose grip on power seemed unassailable at the polls despite a string of minority governments and the shift of power regionally from Quebec to the West.

These massively documented volumes are an excellent example of his vast knowledge and deeply analytical approach to Canada-US relations.  Before this book, his earlier book, Canada and the Regan Challenge:  Crisis in the Canadian-American Relationship, 1985 was one of the best contemporary studies of Canada/U.S. relations available from a critical Canadian perspective. His book became a classic of the new critical nationalism of English Canada of the 1980s, along with Kari Levitt’s earlier work Silent Surrender (1970), and was used extensively in universities all over the country on the asymmetrical, nuanced relationship between the two countries.

Another major initiative was to undertake a two volume magisterial study of the career, personality, ideas and exercise of power of the protean Pierre Elliot Trudeau during his decade long, tumultuous time as Prime Minister. He wrote this with his wife, at the time, Christina McCall Newman, a well-known journalist.  The vibrancy of their exhaustive reckoning and biting assessment of the Trudeau years in part came from their finely-honed writing skills exemplified by their unforgettable opening line of the first volume of their biography, “He haunts us still”.  Its impact also, derived from the dozens of interviews carried out in Ottawa, London and Washington about Canada’s larger than life Prime Minister who transformed modern Canada linguistically, economically and constitutionally. As these volumes showed, for many Trudeau became the ideal love-hate polarizing actor, change-agent, activist, theoretician, global celebrity with a grand federal vision for a newly constituted English Canada. In the Clarkson/McCall authoritative account we relive the nail-biting excitement and high and low drama of Canada’s constitutional wars particularly through Trudeau’s struggle against René Levesque’s and later with Lucien Bouchard’s la grande stratégy pour l’independence. Stephen and Christine won the Governor General’s medal for the first volume.

After the liberalism of the Trudeau years Canada changed, and Clarkson continued to focus on power, ideology, and state policy. In addition to his broad knowledge of Canada/US relations, Clarkson published extensively on North American political economy along with a proliferation of studies and reports, with a special emphasis on NAFTA and its implications for Canada and Mexico. While working on issues related to free trade, he became fluent in Spanish, developed a close working relationship with significant scholars in Mexico, and spent considerable time in Mexico doing research for publications.

It is a tribute to his perseverance that he not only learned Spanish to be able to better communicate with Mexican scholars and government officials, but also shifted his focus of analysis to include the implications of North American trade relations on Mexico as well.  One large-scale project (and most of his books are what he called “his big book projects” e.g. Does North America Exist, 2008, running over 500 pages) is innovative analytically in that he examines whether North America is becoming a cohesive economic and political unit akin to the European Union, with its increasing integration of political, economic, sociological and cultural integration.  Because of the dominant power of the U.S. he felt it is incorrect to think North American integration was an embryonic form of European integration. There is no separate political center, and no governance equivalent to that in the EU.  He concluded with a sense that the asymmetrical power system in North America might be the template for the regionalism emerging in the twenty-first century.

In a book he co-authored with Matto Mildenberger, Dependent America?  How Canada and Mexico Construct U.S. Power, 2011, they turned the usual Canadian approach to the US on its head by examining the impact of Canada and Mexico on the U.S. policy making process.  This book contests the idea that US power is self-determined and a result of the autonomous actions of its own citizens’ industriousness.  Rather it shows the myriad ways that the US in both the past and present derives benefits from other states’ resources, but even more significantly they delineate and how both countries, rather than recognizing this power, constantly demonstrate dependent-country comportment toward the U.S.

Dependent America is a piece of bold scholarship that takes the entire continent and gives the current economic and political relationships an analytical and grounded historical context.  It also gives a framework for understanding the current NAFTA negotiations and the highly volatile political relationships post-Trump.

In all of Stephen Clarkson’s work, his expertise does not lose sight of the knowledge that institutions are grounded in the lives of people and communities. Throughout his work he is acutely aware that the pushback of social movement actors in search of large-scale political change can become change-makers, even when the institutional universe is heavily stacked against them. It comes as no surprise then, that for Clarkson there is no straight line of causality between the fatalism of  ”there is no alternative” to the powerful and  seemingly unstoppable forces of markets globally and the empowerment of citizens to act collectively and locally.

Stephen resumed his interest in the German language and Germany in the later years of his life.  With his wife, Nora Born, he spent about half the year in Canada and half in Germany, where he would lecture and pursue research and writing on subjects related to regionalism.

We very much miss him personally as a good friend but also as an intellectual presence in Canada.  He was forthright and fearless in his public commentaries, and was frequently heard on the CBC and Radio-Canada.

The papers to appear in this series in PEF are as follows:

  1. Andrew F. Cooper, “A Critical Appreciation of Stephen Clarkson: Looking Back at his ‘Foundational Text’ on Canadian Foreign Policy”
  2. Greg Inwood, “Nationalism versus Continentalism: Clarksonian Perspectives”
  3. Laura Macdonald, “When Will the Fiesta Start? Mexico-Canada Relations in a New North America”
  4. Louis W. Pauly, “Canadian Political Economy: The Legacy of Stephen Clarkson”
  5. Michele Rioux, “Globalization and the Neoliberal Trade Agenda @ Bay: New Challenges for Canada and North America
  6. Daniel Drache, “The Clarkson Story Up Until Now and The Uncertain Future Of The WT

 

[1] Among his many books are: An Independent Foreign Policy for Canada 1968, Canada and the Reagan Challenge: Crisis in the Canadian-American Relationship 1985, Trudeau and our Times (with Christina McCall two vols.) 1990 and 1994, Uncle Sam and us: Globalization, Neoconservatism and the Canadian State 2002,  The Big Red Machine: How the Liberal Party Dominates Canadian Politics, 2005, Does North America Exist?: Governing the Continent after NAFTA and 9/11, 2008, A Perilous Imbalance: The Globalization of Canadian Law and Governance (with Stepan Wood), 2010, Dependent America? How Canada and Mexico Construct US Power (with Matto Mildenberger), 2011.

 

 

Self-insurance for workers doesn’t work

This is a guest post from Rod Hill, a Professor of Economics at the University of New Brunswick, Saint John campus. A previous version of this post first appeared in the New Brunswick Telegraph Journal.

In a report this month for the Halifax-based Atlantic Institute for Market Studies (AIMS), entitled “An Alternative to Employment Insurance”, Justin Hatherly proposes replacing the Employment Insurance (EI) system. A look at the proposal quickly reveals how unsatisfactory it is.

Instead of EI, Mr. Hatherly wants individuals and employers to contribute to Personal Security Accounts (PSAs). These accounts would be the property of the individuals, which they could draw upon in certain circumstances in the event of unemployment. The funds would be invested in the stock market by an independent board.

In effect, he is proposing to eliminate EI while expanding the current Registered Retirement Savings Plan (RRSP) system with some compulsory contributions, while restricting the withdrawal of those additional funds.

He writes “Persons who lose work through no fault of their own can draw 55 percent of their wages [up to the insured maximum] for 24 weeks, provided they had contributed for 960 hours” (about 24 weeks of full-time work). “Those who left their prior employment voluntarily would be ineligible” – but why deny them access to their own savings? Quitting a job get a better one is something to be encouraged.

Crucially, “those with insufficient savings receive benefits from a common fund financed by general revenue. However, they incur a negative balance and must pay back the government before contributing to their PSA” to be eligible for further withdrawals or loans.

AIMS is proposing that individuals should rely entirely on their own savings or borrowed money to survive during a period of unemployment.

Every insurance system, public or private, has the feature that those who experience a bad outcome (a house fire, a car accident, a health crisis, layoff, and so on) have benefits that are paid by those who have not (yet) experienced a bad outcome. That is the whole point of insurance. Risk for everyone is reduced as risk is pooled across the whole population.

Instead, Mr. Hatherly is inviting people to ‘self insure’ like people do if they fail to buy house insurance. We all know how that turns out if your house burns down.

A few lengthy periods of unemployment would be no more pleasant. When people self-insure, they bear the entire risk themselves. Those with high and steady incomes may be able to shoulder that risk, but most people, particularly those with lower incomes, would not.

I did a calculation to see how this system would work. Someone earning $50,000 a year and making contributions of 4 percent could take 6 years to accumulate enough resources to cover the proposed maximum withdrawal from their Personal Security Accounts. (Under the current EI system, such a person would be guaranteed a minimum of 36 weeks of benefits, not the 24 in the AIMS scheme.)

This assumes that the invested funds would grow steadily. When the last recession began in 2008-2009, the national unemployment rate rose from 6.1 percent to 8.3 percent, while the Toronto Stock market index fell by more than 40 percent. If unemployed workers had been relying on Personal Security Accounts, their funds would have been decimated at the time they needed them the most.

In his report, Mr. Hatherly notes that even unemployment might not diminish the Personal Security Accounts very much because of “restrictive conditions on benefit withdrawal and duration” – a point which underscores the inadequacy of his proposal for maintaining income and spending after job loss.

An important feature of EI is that benefits and the spending they support kick in quickly where and when layoffs occur. This helps shorten recessions by maintaining total spending.

Mr. Hatherly is right about one thing. With workers left to support themselves during periods of unemployment, they will have an incentive to find employment quickly – assuming, as he seems to, that jobs are available. (Particularly in recessions, the number of people looking for work far exceeds the number of job openings.)

However it’s better for both workers and employers if people to take time to find a job well suited to their skills. As well, a lack of income support during unemployment would increase the bargaining power of employers and push down wages.

No one would argue that the existing EI system is perfect. A much criticized feature is its division of the country into regions where eligibility criteria and benefit duration vary greatly.

In those with the lowest unemployment rates, typically urban areas, a minimum of 700 hours of work are required to be eligible for only 14 weeks of benefits. A minimum of 1820 hours (about 46 weeks of full-time work) are needed for 36 weeks of benefits.
In regions with the highest unemployment rates, 420 hours of work gives eligibility for 32 weeks of benefits. The result is a permanent subsidy to regions of high unemployment and inadequate access to EI benefits for many in urban areas. Just because the unemployment rate is low does not mean that it is easy to get a job. Many people are increasingly stuck in ‘precarious work’, temporary or part-time with no job security.

Any change to this system towards one with greater national uniformity would have to be done gradually to avoid undue hardship in high unemployment regions. It would be best done in conjunction with other changes to income supports, such as guaranteed minimum incomes, an idea governments are now seriously considering.

However, but AIMS’ radical proposal to scrap Employment Insurance completely and to leave individual workers on their own to bear all the risk of unemployment is not an improvement.