The Staple Theory @ 50: Mel Watkins

We now present the final instalment in our autumn-long series of special commentaries marking the 50th anniversary of the publication of “A Staple Theory of Economic Development,” the classic article by Mel Watkins published in the Canadian Journal of Economics and Political Science in 1963.  We have invited Mel himself to provide a rejoinder to the series, reflecting on the significance and evolution of staple theorizing, and engaging as desired with the commentaries of the other contributors.  His piece is typically elegant, multidisciplinary, and passionate.

We have also published for your convenience an index (with weblinks) to all the contributions in the series.  In 2014 the whole series will be published by the Canadian Centre for Policy Alternatives as a compendium.  Many thanks again to all the contributors, and of course to Mel for your intellectual inspiration and continuing activism!  Here is Mel’s rejoinder:

Bitumen as a Staple

Mel Watkins

Birds foretell our fate

The canary in the mine

Chickens come home to roost

The owl flies into the gathering dusk

Ducks trapped in the tailing ponds

Feathered and tarred

Flight cancelled

I am deeply grateful to my friend and fellow progressive economist Jim (Jimbo) Stanford for initiating this series on staple theory. As the constant face of progressive economics in this country, I’m hard put to imagine how he found the time to do so. I am indebted as well to the numerous commentators he has persuaded to participate, and to those who volunteered. I thought I still knew a good deal about this topic, but I have learned much.

This has been for me a happy and humbling experience. To have my name and that of Harold Innis in the same sentence is for me always a joy and a compliment, something I could never have imagined when I attended his lectures more than sixty years ago. And, as I once heard the great Paul Samuelson say, the respect of one’s peers is a very special applause.

It feels good to have written something with a shelf life of half a century. It feels not so good that fifty years on the resource-based structure of the Canadian economy, and polity – with their dependence on global forces largely beyond our control and with their increasing capacity for environmental degradation – has actually deepened.

Born as an offshoot of Europe that, like other New World colonies, could not survive without a staple to export to the metropolis, Canada has actually managed (that is, been mismanaged) to regress to its origins. Sadly, bitumen is the worst of staples, matched only by asbestos; while it had little overall significance for Canadian economic growth, the governments of Canada and Quebec, while ultimately banning its use at home, wouldn’t ban its export to poor countries, with weak worker protection even until the last mine in Quebec closed. There is evidently a serious problem of addiction to resource exports with slight regard of the consequences for the world.

Bitumen is what economic historians have come to call a superstaple, with an impact bordering on the monocultural. For the New World, the dark side of cotton and sugar was slavery, with horrifying global consequences. For bitumen it is extreme climate change and its catastrophic consequences for the wellness of the world and of all of its species. Slavery was abolished in the face of protest (only in the US was war required). The same must be done to the mining of bitumen. (The ingenious comparison of human slavery and present servitude to oil is developed in Andrew Nikiforuk’s excellent book, The Energy of Slaves: Oil and the New Servitude.)

Oil has a track record – it is, of course, not just a staple export for Canada, and bitumen is not our first export of oil – and it is not a happy one. Compared with almost any other staple anywhere (for example, wheat in western Canada or fish in the Atlantic provinces) studies show oil comes out second-best even before climate change is factored in. The best of the linkages is fiscal linkage, royalties and taxes which can then be used to seed diversified, greener, development. But Canadian governments are too deferential to the oil companies, with their enormous power, too lacking in imagination, to do that. The weakness of linkages in general from oil almost guarantees Dutch disease and worse. (As I write, the business press, which has been replete with deniers of Dutch disease, is gleefully reporting that the falling Canadian dollar is helping those Canadian exports which, only yesterday, were not being hurt.)

Recent research on resource development for export in poorer countries, as in Africa, shows considerable scope for active state policies of pursuing linkages along lines advocated by the late Albert Hirschman. This suggests there could be significant room for aboriginal communities in Canada to promote economic development via fiscal linkage and that our historic denial of governance rights to aboriginal people is not only immoral but inefficient. (Indeed, there is already evidence of aboriginal people benefiting from resource development; see Susanne Mills and Brendan Sweeney, Employment Relations in the Neostaples Resource Economy: Impact Benefit Agreements and Aboriginal Governance in Canada’s Nickel Mining Industry, Studies in Political Economy 91 Spring 2013.) And there is the very real possibility that at least some aboriginal communities with a strong commitment to land and nature will say “No” to the oil industry when given the chance, and by serving themselves will also serve the world.

Staple theory finds its origins in Canadian economic history, particularly as written by Harold Innis and W.A. Mackintosh. Innis was self-consciously attempting to develop economic theory more relevant to Canada than that imported from imperial centres. Is that a useful exercise?

Consider the question: is free trade good for Canada in terms of economic growth and jobs? The conventional wisdom of neo-classical economics asserts unambiguous benefits and this becomes propaganda in the hands of corporations and governments. Yet benefits are, in fact, surprisingly hard to find. True, trade increases, both exports and imports, but that kind of mercantilist thinking in itself proves nothing about benefits even within neo-classical theory. The promise consistently made is that productivity will be given a kick start in Canada – a kind of shock effect – but after free trade has happened we find Canadian governments and business continuing to complain that we are laggards in productivity and that universities must do this and unions must do that and NGOs must shut up. Business elites engage in a litany that blames everyone but themselves. The bias of benefits toward the resource sector from free trade helps us to understand why Albertans, in Alberta and in Ottawa, are amongst the strongest supporters of free trade.

We should likewise note it is critical to our story of the coming of free trade  that Innis was never a narrow economist, that he understood the necessity to pay attention to power and its distribution. His writings are relevant not only to economics but also to history, politics, sociology. He was, in short, a political economist. So it is that staple theory became central to the creation of the “New Canadian Political Economy” in the past fifty years, which sees the Canadian capitalist class, which manages our relationship with the global economy, as having a staples fraction with the muscle to maintain the status quo of resource dependency while masking that behind the rhetoric of the inherent goodness of the market.

What would staple theory predict about the effects of free trade? It implies that the famous law of comparative advantage so loved by orthodox theory is very likely to enhance Canada’s advantage in existing exports of resources by improving access to external markets the obverse of this being that foreign buyers have improved guarantees of access to Canadian resources, hence, it so happens, virtually ruling out any national energy program for Canada rather than in manufactured goods where Canadian firms may be too inefficient to export while losing out to imports. In short, the Canadian economy simply becomes more entrenched as a staples economy.

Indeed, this is a pretty good description of what free trade has done so far for Canada. It has exacerbated the staples trap as the Canadian variety of path dependency. It has entrenched a mind set among Canadian elites that protects them from seeing that they are a big part of the problem.

Innis not only gave us the base for staple theory. He also pioneered the development of communication studies by examining the impact of media on human consciousness in terms of space and time. Aware of the long history of empires, he saw media as their staple. Writing in the middle of the last century, he feared that the spatial had totally trumped the temporal, that our reach exceeded our grasp, our understanding, our wisdom that we had become dangerously present-minded, prepared to blow up the world in order to kill communism. He thought that the flourishing of culture, the good life of communities, depended on a better balance between the spatial and the temporal, less attention to spatial dominance and more to respect for the past and the future. Since Innis wrote, we seem mostly to have experienced more imbalance.

Meanwhile, oil as a staple has intensified the obsession with space to the neglect of time. Trade spreads globally and, in corporate talk, gives us the grand new age of globalization the better to give a good face to the mad corporate drive to intrude everywhere. Power lies with the corporation which, in the oil business, tends to have considerable longevity. It exercises remarkable foresight in planning its own bottom line while blithely ignoring the long-term public interest though the very recent decision of a number of large American corporations, including Exxon/Mobil, to build a carbon tax imposed by government into its planning of future costs is good news. Still, Big Oil counts its known reserves as an asset on its balance sheet, and keeps trying to find more, though if they are in fact fully used up global warming could pass all tolerable levels. The reality is a spreading ecological footprint, unambiguously adding to carbon emissions and thereby to catastrophic climate change. The market, the holy grail of orthodoxy, destabilizes nature – drilling on the bottom of oceans, “fracking” and when the known externality of global warming causes ice to melt to then, in a spiralling positive feedback, step up drilling in the Arctic with more global warming. For the Harper government, the possibility that it might be compelled to do something about climate change in the future becomes the occasion to press for more rapid exploitation, to sell off our oil before that happens. We are in the world of the absurd, the insane.

Mr. Harper, as he likes to boast, does not take “No” for an answer from anyone. As long as he can hold his support in the prairie provinces – managing even to persuade the NDP premier of Manitoba to resign in order, as his Canadian ambassador to the US, to shill for the Keystone pipeline to carry bitumen to US refineries – and add the ring around Toronto where suburbanites want cheap gas for commuting (and gave us Harper-supporter Rob Ford as mayor), he can head up the Canadian petrostate.

Resource extraction rapidly draws down resources created over billions of years with wanton disregard of the long-term consequences. To follow the wisdom of Innis is to see the terrible folly of what Canada is presently doing. In the New Yorker (Dec. 23 & 30, 2013), Elizabeth Kolbert reports the views of the Nobel Prize-winning chemist Paul Crutzen on atmospheric change from greenhouse gas emissions: Just a few more decades of emissions may bring atmospheric carbon dioxide to a level not seen since the mid-Miocene, fifteen million years ago. A few decades after that, it could easily reach a level not seen since the Eocene, some fifty million years ago.  On what this incredible finding means for the future, Kolbert quotes Crutzen as having written that global climate is likely to depart significantly from natural behaviour for many millennia to come  (italics added). We barely know what we have done – much less what can be done about it.

Which is not to say that there is not a study waiting to be done on “Staples and Protest” with a final chapter on how pipelines were stopped. Wheat was in most respects a good staple for Canada, though certainly not for aboriginal people who were starved off their homeland and otherwise pushed around to permit settlement. The grain farmers of Saskatchewan gave us the CCF (now the NDP), and Tommy Douglas, and medicare. The new staples “potash, uranium, oil and gas” have facilitated the replacement of social democracy by neo-conservatism, though note must be taken of the blocking by the Harper government, no less, at the insistence of the government of Saskatchewan, of the foreign takeover of Potash Corporation. Above all, we must praise those who protest pipelines, and particularly those, notably aboriginal peoples, who are prepared to stop them by non-violent means. (Read Joel Harden’s just-published Quiet No More: New Political Activism in Canada and around the Globe, and be impressed by how much is already happening.)

It would, of course, help if President Obama would say “No” to the Keystone XL pipeline, but is it not the most revealing part of the story of staples in Canada that the decision is his, not ours, and we have let that happen? Mr. Harper has led us into a corner of his making and tightened the grip of the staple trap

Should Obama say “Yes”, which is still distinctly possible, that will not cause Big Oil and the federal government and various provincial governments to cease pushing for pipelines to transport bitumen west to the Pacific and East to the Atlantic and on to China or elsewhere, though their doing so will deal with neither the staple trap nor the carbon trap.

My 1963 article has perhaps encouraged some readers to think too much about linkages and how to enhance them, to focus on incremental change when it is a transformative change that is necessary. (The economic historian Tom Easterbrook, one of my teachers and, later, one of my colleagues, liked to distinguish between growth and development, between a pattern of persistence (aka staple trap) and a pattern of transformation.) Fifty years on I have grandchildren, and know that the world must move ASAP from dependence on fossil fuels to reliance on green technologies. This will involve a wrenching change for Canada because bitumen is now the superstaple driving our economy and our polity. With our location and our abundance of resources both being matters simply of luck it is possible that we will, relative to most of the world, not do as badly from global warming, and be tempted to pretend all is well. To do so would be, morally, ethically, a crime against humanity. In the nature of things, it is those with the greatest capacity to do terrible damage who have the greatest obligation to cease and desist.

In the attempt, following Innis, to find some balance between the spatial and the temporal, we may find solace in the possibility put forth independently by the American environmentalist and activist Bill McKibbin, the Canadian philosopher Charles Taylor, and the American writer and activist Rebecca Solnit.

To be concerned, as McKibbin is, about our very survival on this planet that we have made increasingly catastrophe-prone, is to be conscious of the need for “deep economics” (the title of one of his books), of the understanding that the economy is both embedded in society and deeply embedded in the ecology, cognizant of the billions of years behind us and ahead of us, and of our obligation to be respectful of nature so as to permit of life. Thereby the banality and barbarism of the spatial, so evident in today’s corporate discourse and practice of globalization might be tempered by Innis’s plea for time, that has come to mean literally more of it for us on this planet.

Taylor, in his deep reflections on our secular age (in his book The Secular Age), foresees in the fullness of our reason and our being certain ecological ethics of our day, particularly deep ecology. Out of this foresight comes “communitas” a drawing together as a community which, in its fundamental egalitarianism includes everyone. This underlying community, this deep solidarity, breaks out in moments of exceptional danger – danger of the kind that extreme climate change is already creating. In fact, communal rallying in the face of catastrophes past and present is what Solnit finds, and documents, in her A Paradise Built in Hell: The Extraordinary Communities that Arise in Disaster.

These may not be the best of times, and they may well get worse, but there is room for hope if we will but face up to our situation. In Canada, that means escaping both the staple trap and the carbon trap by weaning ourselves from the export of bitumen.

And, finally, should you be in Los Angeles for any reason, do visit the La Brea Tar Pits in the city itself. Tar a.k.a. bitumen has been seeping upwards for thousands of years, during which animals have been trapped and their bones preserved, with specimens now on display in a museum next to the pits. School children visit and it’s a major tourist attraction. Count that as a linkage of bitumen, and, I suppose, should tourists be trapped, the skeletons can be displayed in some distant time as remnants of a civilization foolishly built round the worship of bitumen.

One comment

  • This is a very interesting and insightful analysis.

    I have one small correction to make – for Bill McKibben’s name is consistently misspelled in this article.

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