December 2003: The Vanishing Country (Part II of III)

Personal incomes rise much more slowly in free trade years
December 1, 2003

The noted Canadian economist Pierre Fortin tells us that,

“during the 1990s, Canada’s aggregate economic performance has been the worst since the great depression, and very nearly the worst among all industrial countries.”

For those of you who might think that Canada has improved substantially in the new millennium, you should know that this country still ranks only 65th in GDP growth rate.

According to Andrew Sharpe of the Centre for the Study of Living Standards, in the year before the free trade agreement came into effect, Canada’s GDP-per-capita was 87.5% of the American level, but by 2001, after 13 years of free trade, it had fallen all the way down to 77.9%.

Now let’s zero in on the important questions of employment and unemployment during the first decade of free trade, remembering the oft-repeated promises of “Jobs! Jobs! Jobs!”

First, the growth of employment in the 1990s was lower than in any decade since the great depression!

In the decade before the FTA, employment in Canada increased by over 2.3 million jobs. During the 1990s, employment increased by only 1.5 million jobs, a huge decline.

Perhaps most startling of all is that in the 1980s, full-time jobs accounted for almost 60% of all new jobs created in Canada, but in the 1990s, under free trade, they made up a pathetic 18% of new job creation.

In the 13 years before the FTA, we created over 3 million full-time payroll jobs, well over twice as many as in the free trade years, and that was when our population was much smaller, and so were our exports--much, much smaller.

Now let’s look at unemployment. Canada’s unemployment rate during the 1990s was the highest of any decade since the Great Depression, averaging an annual rate of 9.5%.

And of the jobs created since the FTA came into effect, a disproportionate number were temporary or part-time. In 2001, in terms of the percentage of the employed that had only part-time jobs, 20 of 30 OECD developed countries had a smaller percentage than Canada’s, which was higher than the averages of the G-7, the E.U. and the OECD.

Today, 18 OECD countries have a higher percentage of employed youth, and almost all have a smaller percentage of low-wage workers than Canada.

“There’s no question,” says Fortin, “that Canada’s poor employment record has been the major event of the 1990s.”

Now let’s consider how average Canadians made out during the first decade of free trade. The answer, in a word, is awful.

In June of 2001, Brian Mulroney reminded us that the massive increase in exports to the United States “gives you an idea of how our well-being is tied to free trade with the U.S.”

It certainly does--but certainly not at all in the way Mulroney had in mind.

If the FTA and NAFTA were supposed to improve the well-being of average Canadians, why was it that in the free trade decade of the 1990s personal income increases in Canada were less than one-third of what they were before free trade in the 1980s, the 1970s, and even the 1960s?

During the 1990s, workers’ wage increases in Canada fell farbelow the level of the previous five decades, and were well below the average of the E.U. and OECD countries.

* * *

Now let’s return to the growing gap in productivity and competitiveness, the two areas where Mulroney et al waxed so lyrically about the huge inevitable benefits during the free trade debates.

According to Industry Canada, the trend is “quite unexpected and worrisome, especially in view of the dramatic increase in Canada’s outward orientation, partly due to the FTA/NAFTA, and the implementation of a number of structural reforms. There has been almost no growth in labour productivity in export sectors.”

In another paper, prepared by three employees of the Micro-Economic Analysis Division of Industry Canada, we learn that, “despite the growing economic linkages, Canada’s productivity and real economic performance lagged far behind the U.S. in the 1990s, and the Canada-U.S. productivity and real income level gaps widened significantly, exactly opposite of the expectations.”

When I asked Industry Canada why they thought this had happened, the answer was that it was “mainly because Canadian firms were not investing in R & D and new machinery and equipment, and as a result there was poorer innovation.”

Could they, by any chance, be referring to the 150 big corporations that make up the Canadian Council of Chief Executives?

During the 1990s, in a list of 26 OECD countries, Canada placed 20th in the growth of productivity.

As Andrew Sharpe puts it: “Ultimately, it’s the private sector that has to take responsibility for private sector productivity. . . There is no conclusive evidence that taxes, social policies, unionization and regulation accounted for a significant portion of the growing Canada-U.S. productivity gap.”

So, again, why the gap? It’s easy to explain.

Big business in Canada has been pouring money out of the country since the FTA came into effect, instead of investing money in the needed technology, machinery, equipment, R & D and innovation necessary to keep Canadian workers competitively productive.

As for Canada’s oft-lamented “high” taxes, Sharpe points out that high-tax countries such as Belgium, Norway, Germany, France, and the Netherlands all have higher levels of output per hour than the U.S.

The growing Canada-U.S. productivity gap is particularly serious in the manufacturing sector. In the early to mid-1990s, the gap was 17%.

By 2001, it had jumped to 33%.

A reminder: manufacturing in Canada is over 50% foreign-controlled.

No doubt some will point out that last year Canada’s economic performance was quite good. And so it was.

But, while 2002 was a relatively good year, 2001 was the worst year since the recession of the early 1990s.

And, at the end of last year, there were 208,000 more unemployed Canadians than there were before the FTA. Moreover, the Canadian unemployment rate was significantly higher than the OECD average.

And then we all know by now that this year, 2003, our economic performance will be poor, likely coming in at a GDP increase of just under 2%. In fact, since the end of 2000, Canada’s GDP growth rate has averaged under 2%.

One of the reasons we have so much poverty in Canada, compared to most other developed nations, is that we also have so many poorly-paid workers who struggle to support their families with incomes well below the poverty line.

It’s also interesting to note that in the “boom” year of 2002, our unemployment rate was higher than it was in 1999, 2000, and 2001, and we’ve already had a loss of some 89,000 manufacturing jobs since November 2002.

Contrary to what you’ve often been told, a very long list of countries will have a higher GDP growth rate than Canada this year--countries such as Australia, Russia, China, Indonesia, Hungary, Turkey, Peru, Colombia, Chile, Argentina, Thailand, New Zealand, South Korea, the Philippines, and Malaysia, to name but a few.

* * *

Now let’s look at what is happening with public opinion in Canada today. It’s remarkably insightful and contradictory.

On the one hand, the overwhelming majority of Canadians want our country to go in one direction, while a wealthy, well-organized, well-financed and influential plutocracy want the country to go in an entirely different direction.

Let’s look at who these people are, and at their agenda.

A major theme in The Vanishing Country is the remarkable and growing contrast between the wishes of the vast majority of Canadians and the small but powerful plutocracy that has largely set the Canadian political and economic agenda in recent years. The plutocracy now is telling us that “the big idea” and “the grand bargain” require “urgent action” and policies that are “inevitable” and will be “irreversible.”

Who are these people--the people we used to call “continentalists” back in the 1960s and ‘70s?

First and foremost, its big business, the CCCE, representing the 150 largest companies in Canada, many of them foreign-owned and controlled.

Second, it’s Brian Mulroney and his old gang, Peter White, Derek Burney, Paul Tellier, Allan Gotlieb, Stanley Hart, Bill Dymond, to name a few.

Third, it’s our Big Five Canadian banks.

Fourth, it’s the business-funded research institutes like the C.D. Howe and Fraser.

The Fraser Institute was once properly regarded as a bunch of far-right-wing Neanderthals, but now in our far-right-wing media, its every word is reported as gospel.

The right wing, continentalist Institute for Research in Public Policy (IRPP) is led by Hugh Segal, the Conservative who wants new joint North-American political bodies, “common social and economic goals,” and “free movement of capital”--all in a new “comprehensive treaty of North America.“

Then there’s the Donner Foundation, led by “Grand Bargain” Allan Gotlieb, the foundation that gives large six-figure donations to the Fraser Institute.

In sum, they’re Americanizers--powerful, influential, and quite out of sync with what public opinion polls in Canada report year after year after year. But definitely not out of synch with most of our political leaders, or the owners and publishers of most of our media, who report these institutes’ “studies” as if they were balanced and objective documents, and prominently report some of their wonky public opinion poll results, sometimes without bothering to report the actual slanted questions.

What do all of these Americanizing organizations have in common?

Quite a few things:

First, they are, for the most part, largely financed by the very same far right-wing people and corporations.

Second, they adamantly refuse to disclose who gives them how many dollars; i.e., where they get their money from. Some, like the influential Donner Foundation, don’t even publish an annual report.

Much of the money these groups receive comes from secret sources--far-right and fundamentalist organizations in the United States.

As for our commercial media, we obviously don’t have to dwell on the American Post, which calls itself the National Post, but let’s look at the mandated Asper editorials that must appear in the 14 key former Southam newspapers. What do the Aspers want? Try this brief list: A flat tax, the export of Canada’s water, and a two-tier health care system. And, of course the local editorial boards and columnists of these key newspapers across the country must not contradict the head office editorials.

No doubt you’ve seen the recent polls that show most Canadians are now in favour of free trade. But how would Canadians possibly know otherwise? Certainly not from our media. Certainly not from our politicians.

A common characteristic of many of our Americanizers is that they don’t think there’s much difference between Canada and the United States. For the likes of historian Jack Granatstein, “No doubt Canadian values are very close to American values.”

For Bill Dymond, now of Carleton University, “We’re basically the same societies.”

What, then, is the agenda of all or most of these people, foundations and institutes?

First, there’s dollarization, or the absurd fantasy of a “common U.S.-Canadian dollar.”

Next, let’s get rid of, for all intents and purposes, the border. Welcome guns, the N.R.A., snipers, the nut-cases like Timothy McVeigh, and the anthrax planters. Welcome the KKK and the Kansas group that wants to burn the Canadian flag on Parliament Hill because Canada is a “goddamn whorehouse fag country.” Welcome organized crime and illegal, minimum-wage labour.

They want a customs union or a common market.

They want much more privatization of our health care system and other public services. They want “the free flow of capital,” meaning abolishing all foreign ownership restrictions. So let’s sell the rest of the country that isn’t already foreign-owned. They want full military integration, so get ready to send your kids and your grandchildren to the next American Vietnam or Iraq, or will it be Iran or North Korea?

Along with getting rid of the border, they want us inside the American “perimeter” with the laughable premise that we would thereby not be abandoning sovereignty, but would somehow, being the bus-boy at the table, have important influence over U.S. policies in defence, security, and foreign policy.

Our Minister of Trade, Pierre Pettigrew, wants to eliminate the border as an impediment to investment and business development. The CEOs of the CCCE are not waiting. They are “already engaged in discussions about North American approaches to the management of our energy needs and resources.” They are pushing hard for greater integration, “NAFTA-plus,” expanded continental decision-making, and the harmonization of standards and policies. “I strongly favour a customs union,” CCCE director Tom d’Aquino told the Senate Foreign Affairs Committee. “It happens to be a strong preference of mine.”

And they also favour dollarization--“a common currency” with the U.S.--despite all the obvious reasons why this would be harmful to Canada, and impossible in any event since the U.S. would never abandon its own currency.

As one Laval University economist puts it: “It always makes me laugh to hear the word ‘common.’ If we are talking about adopting the American dollar, I do not see how that can be called a common currency. It is the currency of another country.”

Ask the people of Argentina about their terrible experience with dollarization. Today almost 60% of the entire population of this once-prosperous country live in poverty caused -- at least to a very large extent -- by their inability to control their own monetary policy.

For Wendy Dobson, the long-time Canadian queen of continentalism and former head of the C.D. Howe Institute, “time is running out. . . The initiative, the Big Idea, must be “spearheaded by the private sector, ”and  the CCCE could be the catalyst.”

So, once again, not government but big business will boldly lead the way.

What’s this “Big Idea” all about? Why will George W. Bush be coming to Canada after Paul Martin’s coronation as Prime Minister? Go back to Graham Fraser’s report in the Toronto Star earlier this year:

“Canada could give up the ability to regulate its energy resources if a sweeping proposal being discussed by Foreign Affairs and International Trade officials is accepted--an accord for a far-reaching continental approach to the North American economy that could eliminate Canadian regulation of its energy resources, including oil, gas and electricity.”

Far-fetched? Watching DFAIT in action, listening to some of the large number of influential continentalists in the Liberal caucus, and given what I know of Paul Martin, it’s not far-fetched at all.

As I have been forecasting, it won’t be too long down the road before our sell-out Americanizers start pushing the idea that we must start electing Canadians to the U.S. House of Representatives and to the U.S. Senate--not that the Americans would ever accept such an idea. Forget the idea of a 51st State. It’s not going to happen. What could very well happen instead is a new northern Puerto Rico--a trust territory, an American colony called Canada.

Don’t the likes of Mulroney, Gotlieb, Dobson, Sherry Cooper and d’Aquino understand the profound negative consequences of their proposals for a sovereign, independent Canada that is supposed to be capable of establishing its own policies and standards that properly reflect the values of its people?

Well, of course they do. They understand it very well. Simply put, they don’t like the kind of country that Canada has become. They want us to become much more like the United States. They are quite unconcerned that Canada will have much less freedom to establish its own policies that might be different from American policies, in taxation, in labour standards, in food and drug standards, in monetary and fiscal policies, in defence and foreign policy, etc.,etc., etc.

The entire basis of the “Big Idea” and the Grand Bargain” rests on convincing the Americans that their countervailing and anti-dumping laws must not apply to Canada. This might conceivably happen if Canada became a fully U.S.-administered American colony, say a North American Iraq, but to suggest otherwise is the epitome of foolishness and folly.


(Mel Hurtig is a noted Canadian publisher and the author of many best-selling books, including his latest, The Vanishing Country, the main themes of which he discusses and updates in this three-part series. In Part III, in our February issue, he continues to describe the betrayal of Canada by its business, political, and media leaders, and urges Canadians to wake up and start resisting their country’s Americanization before it becomes too late.)