Pubdate: Sat, 28 Feb 2009
Source: National Post (Canada)
Copyright: 2009 Canwest Publishing Inc.
Author: Conrad Black
Bookmark: (Decrim/Legalization)


With global markets tanking and unemployment soaring, Canadians are 
pinching their pennies. But as National Post contributors have 
explained in a week-long series ending today, economic doom and gloom 
has its upside.

In the present economic context, austerity means more savings, more 
investment and less elective spending on consumable or depreciating 
assets. It is not as grim a regime as a diet, which requires 
self-denial. Savings, investment and the growth associated with each 
can be a good deal more and durably satisfying than prodigious 
consumption. Where a diet --and, in most cases, austerity -- are the 
consequences of one's excesses, in Canada, austerity will have little 
to do with Canadian public policy errors or bad public spending habits.

Canadian leaders since Brian Mulroney -- and especially Paul Martin, 
(one of the outstanding finance ministers in the country's 
history)--and successive governors of the Bank of Canada, have all 
shown commendable fiscal prudence. Not so in the United States. The 
U. S. government, under both parties in the Congress and the 
administration, deliberately eliminated private savings by reducing 
interest rates and facilitating home ownership with uncommercial 
mortgages and encouragements to consumption generally.

Canada has as high a percentage of family home ownership as the 
United States without recourse to financial leger de main. When 
serious financial problems eventually arose, not only the U. S. 
banking systems, but those of Britain, France and many other advanced 
countries, were severely shaken, but not Canada's. No Canadian bank 
has needed or asked for a bail-out. Stephen Harper and Jim Flaherty 
had no reason to know how serious a problem non-performing mortgages 
would be in the United States and elsewhere, and how they could affect Canada.

Since the core of the Canadian economy is extracting and exporting 
natural resources, the recession has entered through the back door of 
declining demand for our base metals, forest products and even 
energy. Essentially, Canada need not do much more than roll back 
natural-resources production by about 10%, and assure that the social 
safety net is strengthened to provide adequate assistance to everyone 
in need of it.

The fact that austerity is imposed on us by the gluttony of others 
rather than by our own impetuosity makes it more irritating but less 
humbling. As Canada enters this crisis with clean hands, it has an 
opportunity for moral suasion as well as bargain buying. We have the 
opportunity to use the credibility accumulated by the economic common 
sense of successive governments to play a larger role in 
international economic policy making, and to use accumulated wealth 
to buy back foreign assets in Canada and to invest advantageously in 
foreign countries.

The federal government should, with the co-operation of the provinces 
and the private sector, establish a fund for acquiring chunks of 
Canadian industry from voluntary but perhaps hard-pressed foreign 
vendors, for redistribution, by sale or proration to Canadians.

Instead of playing footsie with Castro and Chavez as it has, Canada 
should play a distinct role in Pan-American affairs by advocating the 
extension of the North American Free Trade Area (NAFTA), to all 
politically compatible states in the Americas; and the systematic 
pursuit of the return of the cheap manufacturing industry from the 
Far East to the Americas. This could be worked together with the 
problem of under-documented immigration in the United States, as 
migrant workers could be more generously accommodated there, or 
retained in Mexico, as those industries are repatriated to the 
Americas to employ them.

We should explore a common currency zone to embrace most of the 
Americas and Japan, with possibilities for further expansion. Because 
Japan is ageing quickly and has national debt worth 180% of GDP, 
(more than twice the corresponding figure for either the United 
States or Canada), currency equivalences would have to be calculated 
carefully. But the present large U. S. trade and debt imbalances 
would be largely and painlessly absorbed into the America-Pacific 
currency zone.

Canada should assist Mexico and other countries in convincing the 
United States to abandon its catastrophic war on drugs. Apart from 
its domestic consequences -- a trillion dollars spent, two million 
people imprisoned, while over US$25-billion of illegal drugs enter 
the United States from Mexico each year, and are in more plentiful 
supply and at lower cost than when this so-called war began -- other 
countries, especially Mexico, are being torn to pieces. Mexico 
suffered 6,000 drug-war deaths last year, and the drug gangs number 
up to half a division of warriors each, with armoured vehicles, 
rocket-propelled grenades, howitzers and drug-delivery submersibles.

It is an illustration of the mad, presumptuous egotism that can be a 
permutation of American effusion and optimism that it imagines it is 
the duty of other countries to stop the production of drugs, rather 
than of the United States to reduce internal demand or at least 
prevent importation. Such huge volumes of illegal drugs could not 
possibly enter the United States without the collusion of many 
corrupt U. S. officials; nor if the U. S. armed forces, and not just 
a hodge-podge of Homeland Security agencies, were conducting this "war."

The United States has fallen into the sloppy habit of declaring 
"wars" rather cavalierly and then pressuring others to fight the 
battles for them. In this one sense, it is emulating the Muslim jihad 
and fatwa.

There are absurdly severe sentences for marijuana use, and up to life 
imprisonment for growing 1,000 plants, yet marijuana is the largest 
cash crop in California and 40% of Americans are marijuana users at some point.

This is nonsense, a caricature of witless American self-importance 
and a worse fiasco than Prohibition, which didn't significantly 
reduce alcoholism but delivered the liquor and beer and wine 
industries into the hands of the underworld.

Canada is uniquely placed to tell the United States, in a hemispheric 
context, that if it wants to reduce domestic drug use, it should try 
the same methods that it and many other countries have used to reduce 
tobacco consumption, and in any case, should stop asserting 
disintegrating pressures on other countries.

Canada does not want to become a busybody, and austerity does not 
usually translate into hectoring neighbours, but as I wrote here last 
week, eventually the Americas are going to have to group more closely 
together to counteract economic growth in China and India with a 
larger market. This hemisphere's strategic objective should be to 
approach a level of unity that keeps us well ahead, by all relevant 
indicators, of India and China, with a comparable population.

Contrary to the claims of alarmists, this should not be difficult, as 
China's restriction of procreation to one child per couple, and the 
terrible complexities of Indian sociology, will prevent those 
countries from approaching the social cohesion or economic 
efficiency, much less the wealth in natural resources, of this 
hemisphere any time soon.

Canada's credibility has risen in these travails, and the United 
States should become accustomed to negotiating with allies and not 
just raising a flag and expecting everyone to follow. This kind of 
austerity could be both useful and satisfying. And for individuals, 
watching positive bank and investment account balances grow can be 
more pleasing than watching assets, often bought with borrowed money, 
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MAP posted-by: Jay Bergstrom