Most of the problems we have discussed so far are internal but Canadians, and most other people around the world, also face a serious external threat from the so-called "global economy." Globalists say it's the way of the future but actually it's just the old colonial economy in a new form.
In colonial days France and later Britain told Canadian settlers what raw materials to produce and which finished products to buy. At the height of the British Empire we were a small part of a global economy planned by and for England.
The new imperial powers are the trans-national corporations, (TNCs) which can make or break the economies of small countries by deciding where to buy their raw materials and make their finished goods; and which dominate markets with enormous advertising power.[1]
The corporations are privately held and they are richer and more powerful than many supposedly independent countries. And they are accountable to no-one. Not even to their own shareholders, because their stock is so widely held that any individual shareholder can safely be ignored. Each of the 15 biggest TNCs has a gross income bigger than the GDP of any one of 120 independent countries.
The 350 biggest TNCs control about 40% of the world's merchandise trade, and their sales are equal to about one third of the GDP of the industrialized countries.[2] They can not be controlled by individual nations because if one government tries to control a TNC, the corporation can move to a country with a more cooperative government.
Many trans-nationals are based in the United States, Japan and England but others are based in Switzerland, Germany, France and even Canada. The country of origin does not matter much because TNC's are, in effect, sovereign states in their own right.
And they all live by Ricardo's rationale. David Ricardo was an early 19th century English economist who took one of Adam Smith's ideas farther than Smith did.
In the opening to Wealth of Nations[3] Smith describes a workshop in which ten men make pins. The operation is divided into steps, each man performs one step, and together they make more pins than they could if each man worked alone.
Smith's pin-makers are efficient because they divide the work up and each man specializes in one job. Ricardo suggested that communities and whole countries should specialize and produce only the goods they could produce more efficiently than any other. Even when two countries could produce the same kind of goods, he said, each one should produce the kind of goods in which it has a "comparative advantage."
"Two men can make both shoes and hats," he wrote, "and one is superior to the other in both employments; but in making hats he can only exceed his competitor by one fifth or 20 per-cent, and in making shoes he can exceed him by one third or 33 percent. Will it not be in the interest of both that the superior man should employ himself exclusively in making shoes and the inferior man in making hats?
Thus even if one community can make every product more efficiently than another, it should specialize only on those items it produces most efficiently, in relative terms, and trade for others. Each community, and ultimately each nation, should specialize in what it does best."[4]
The rationale looks good at first glance and, because of that, many people never give it a second look.
It's obvious, for example, that Florida has a "comparative advantage" over Canada as a place to grow oranges, and that it makes more sense for Canadians to buy oranges from Florida than to grow them in Canada. For people who live by imports, it makes sense to import anything we can buy cheaper abroad than in Canada.
But Ricardo's rationale assumes that the only value to be considered is profit and it ignores all other standards. Ricardo himself wrote that unemployment was no problem as long as rents and profits could be maintained at a level that encouraged investment. His attitude is best summed up in his famous "law of wages."
"The natural price of labor is that price which is necessary to enable the laborers, one with another, to subsist and perpetuate their race, without either increase or diminution."[5]
Ricardo expected that most people would live on the edge of starvation, with no hope for more than survival.
The "globalization" of India's cotton industry was one example of Ricardo's rationale at work. When the English came to India in the 18th Century, India produced some of the finest cotton goods in the world and the fore-runners of the British East India company made their fortunes by selling Indian cotton to England and other European nations.[6].
About a hundred years later England's industrial revolution developed steam-powered spinning wheels and looms. With them the new mills could spin and weave Indian cotton cheaper than India's village-based textiles industry.
Now England bought raw cotton from India and offered finished cloth in return. The cash price of the cloth was cheap, but the secondary price included the destruction of India's local industry and unemployment for millions of spinners and weavers. Local Indian princes and governors wanted to ban the import of English cloth but the British East India Company had an army to enforce its version of free trade.
English cloth was allowed free access to India but Indian cloth imported to England was subject to tariff. The British East India Company even taxed Indian cloth sold in India, and imposed a special tax on household spinning wheels.
By this time the British East India Company ruled most of India, but the company's rule was so abusive that 1784 the British government took control. Other Asian nations were allowed to retain nominal independence but they were forced to accept manufactured goods from England or from another European power.
Through most of the 19th century Europe and the US had free access to the resources of the world, and were able to flood non-industrialized countries with mass produced products that were cheaper than the products of traditional craftsmen.
Partly because they could not compete with European industrial power and partly because Europeans would not allow it, most countries outside Europe and the US were not able to develop much modern industry of their own. It was because of this that most of the national inequities of the modern world developed.
Paul Bairoch, director of the Center for International Economic History at the University of Geneva, estimates that about the year 1750 per-capita GDP was about the same in most countries around the world. The common people of Europe were not as well off as the common people of Asia, but the difference was not significant.[7]
By 1900 the world was divided into industrial -- mostly Europe and North America -- and non industrial countries, and per-capita GDP was about three times as high in industrial countries as it was in non-industrial countries. By 1938 the disparity was about four to one, and by 1950 about five to one.
GOOD INTENTIONS, BAD RESULTS
Our modern "global economy" got it's official start at an international economic conference at the Mount Washington Hotel in Bretton Woods, New Hampshire in July of 1944. Henry Morgenthau, US Secretary of the Treasury and president of the conference, said the intention was to create "a dynamic world economy in which the peoples of every nation would be able to realize their potentialities in peace."[8]
The conference organized the World Bank and the International Monetary Fund, and paved the way for the General Agreement on Tariffs and Trade. For more than 50 years the World Bank and the IMF have pressured third world countries to forget about self-sufficiency, and to concentrate on production for export.[9]
Since then world trade has expanded by a factor of about twelve but the poor countries are poorer than ever before. From a ratio of about five to one in 1950 the disparity in per-capita GDP between rich and poor countries rose to seven to one in 1970 and nearly eight to one in 1977. It's now about 18 to one, and still rising.[10]
And that's not because the people of the industrialized countries are getting richer. In fact our average incomes are falling, but incomes in the third world are falling even faster than ours. In the fall of 1999 a TV news story reported that more than 1.3 billion people in the third world worked for wages of less than one dollar a day.
But promoters of the global economy keep trying. A few years ago the "Uruguay Round" of GATT talks formed the World Trade Organization, and agreed to regulations which give private corporations the right to challenge "nontariff barriers" that conflict with their "right" to trade around the world. The challenge will be judged by a closed council in Geneva.
WTO regulations will not allow governments to buy from their own citizens in preference to foreigners, and they could annul some environmental and health regulations.
Critics of the organization say the WTO will over-rule US clean air laws that ban the import of goods made by methods that harm the ozone layer of the atmosphere. Even though American fishermen are not allowed to use drift-nets that kill porpoises, the WTO may not allow the US to ban the sale of fish from countries that allow the use of drift nets.
In the summer of 1998 Canada's federal government agreed to allow the use of methylcyclopentadienyl manganese tricarbonyl as an additive to gasoline. MMT, as it's usually called, is illegal in the U.S.A. because it is known to cause damage to human nervous systems. It was illegal in Canada until our federal government submitted to the threat of a lawsuit by Ethyl Corporation. Now Canadian law has been changed to allow it.[11]
After details of the new trade agreement were worked out in the Uruguay talks individual governments had to decide whether to accept or reject them. In the fall of 1994, when the US Congress was about to vote on the agreement, a group headed by lawyer Ralph Nader offered a $10,000 donation to charity in the name of any congressperson who would swear that he or she had read the 500-page document and could answer ten simple questions about its contents. There were no takers.
When the vote was delayed until December of 1994 Colorado Republican Senator Hank Brown took the challenge. He read the document, answered the questions, and then called a press conference to tell the world why he would vote against the agreement.
He supported free trade, he said, but having read the agreement he did not think the US should accept it.
On Dec 1 1994 Congress approved the agreement by a wide margin, even though the evidence indicates that most of the members who voted for it did not know what was in it.[12]
Nader and others say that in effect the agreement hands over control of the world economy to TNCs, to run as they will.
Boosters of the global economy say it will "optimize" production and allow global corporations to take full advantage of the "economies of scale" possible in a world market. In fact "economies of scale" for most industries can be optimized in relatively small factories, and many TNCs choose to optimize profits by producing goods in countries where labor is cheap, where there are no unions and where environmental controls are slack.
Most of the so-called "economies of scale" that big companies offer are related to advertising, not production. A big company may not be able to produce goods any cheaper than a small company but, because the big company can afford more advertising, it can sell more.
In fact many of the advantages of companies in the global market are achieved by manual workers who squat on grass mats in crude huts. Their "comparative advantage" is that they are in no position to demand a living wage.
But that is an advantage for TNCs. In 1993 a survey of 10,000 corporations in West Germany found that one in three intended to transfer part of their production to Eastern Europe or Asia, where wages were lower and environmental controls less stringent.[13]
The global economy is good for big business but it's a disaster for the world as a whole, for the people who live in it, and for most national economies.
The most obvious benefit to big business is that TNCs can buy or manufacture products in countries where wages and working conditions are minimal, where environmental controls are a joke and where people who bribe politicians can practically write their own laws. They can then sell those products for high prices in the richest countries of the world, and make very high profits.
An article in the March 30/98 issue of Time magazine says that Nike pays workers $3 a day to make shoes that sell for $100 and more a pair in the US. With sales of $3.77 billion, Nike sold nearly half the athletic shoes in the US in 1997.[14]
Some Canadian politicians use the global economy as an excuse to take friends and potential supporters on luxury tours of the world. The theory is that the businessmen-supporters go to sell Canadian goods abroad, but it also gives them a new opportunity to buy goods abroad or to move abroad themselves. At least one Canadian company got so many foreign orders on a government-sponsored tour that it decided to build an Asian factory to fill them.
World trade is also good for ship-owners, and it helps merchants increase their profits because they can buy goods at third-world prices and sell them at Canadian prices.
But in most ways the global economy is a disaster for Canada and the world. It has already wiped out most of our production of consumer goods, some of our mines have lost business to third world competition and we can compete in the global paper and lumber markets only by raping our forests.
The global market helped destroy the fishery of the Grand Banks. Once the richest fishing grounds of the world the Banks could support the pressure of Spanish and other fishermen fishing for their home markets, but not for the world. Fishermen who caught everything they could for sale in Africa, Asia and other global markets, helped destroy the fishery.
The global market scenario assumes that some-day we will develop huge "world scale" factories to manufacture specific goods, but even if that happens we will be vulnerable on two counts.
One is that there is only one global market, and no one can hold it forever. Even if we develop the best whiggles in the world and dominate the market for five or ten years, we know that some day we will lose out to lower wages or perhaps to a better product made somewhere else.
Sooner or later every company that dominates a global market will lose it, because nothing lasts forever. Canadian manufacturers lost the Canadian market to lower wages and, in some cases, better technology.
But we could lose a world market for other reasons. Even if we keep Canadian wages below and Canadian technology above world averages we could lose a world market if our customers have economic problems and are not able to buy, or if our competitors have economic problems and have to sell below cost. We could lose if our customers choose to buy from a competitor because of racial or religious prejudice, or for political reasons, or simply because they have a trade surplus with another country.
ONE GLOBAL MARKET DISASTER
Global markets are fickle and countries that depend on them are always in danger. That's a serious problem for about 100,000 farmers who produce about 95% of world's vanilla on the islands of Madagascar, Reunion and Comoros, in the Indian Ocean.[15]
Natural vanilla is very expensive because the flowers have to be hand-pollinated and the seeds harvested and cured by hand. It sells for $1,200 a pound and it provides 10% of the export earnings of Madagascar and 66% of the earnings of Comoros.
But the three islands face hard times in the future because gene-splicers in California can now produce commercial quantities of vanilla in laboratories for about $25 a pound. The vanilla farmers may some day be able to find another crop but their "comparative advantage" is gone and the chances are that they will never find another global market.[16]
Like the vanilla farmers Canadians depend on imports, and that makes us vulnerable to world events. One serious problem is the fact that we have lost control of our food supply.
I saw part of that process back in the early 1960's, when I worked as a newspaper reporter in Belleville, Ont. In less than ten years before I came to town one big California-based company bought nine of the ten canneries in Prince Edward County, south of Belleville, and closed them all. By the time I got to town most local stores sold vegetables canned in California, and many of the farmers in Prince Edward County had gone broke.
Since then we have seen another change. Now most of the stores in Canada sell fresh fruits and vegetables from the southern US and Mexico. We like to think that year-round fresh vegetables represent an improvement in our standard of living, but in fact most canned vegetables contain more vitamins than most of the so-called "fresh" vegetables sold in most stores.[17]
The difference is that canned vegetables are cooked and canned within a couple of hours after they are picked, while so-called "fresh" vegetables may be two weeks old by the time a housewife buys them at a store. Most vegetables lose half of their content of vitamin C, and some other vitamins, in two days after picking. Canned vegetables retain more than half of most vitamins.
But the biggest loss is to the economy, because we have lost most of our working farms. That looks like a small matter because farms are a small part of a modern economy -- but they are a key part.
Only 3% of the population of the United States lives on farms but the food and fiber industries, which depend on farm crops, employ 22% of the work force and make up 20% of the GDP. Obviously, the goods grown by the 3% are a crucial part of the economy.[18]
Farming is less important to the Canadian economy for several reasons. One is that we can't grow cotton here, and without cotton plantations we have no need for the spinning and weaving industries that depend on cotton. In the future we might be able to make that up with hemp -- now legal as a farm crop in Canada-- but that remains to be seen.
Our big crop is wheat -- a classical colonial crop because it takes lots of land and relatively little skill to grow it, and because it can be shipped raw and in bulk to more advanced countries for processing. Much of the Roman Empire was built on wheat, grown in subject states for use in Rome. It's not a good crop in the modern world because we seem to have too much of it and prices are very low. Modern farmers can't make a good living by growing wheat but governments in Canada, the United States and Europe all subsidize them.
We could produce most of the fresh fruits and vegetables we need but instead we choose to import them from California, Mexico and South America. That's a danger, because those imports deliver our food supply into the hands of foreign business.
What if our dollar were to crash, as currencies of other mis-managed countries have crashed in the past? If we grew or raised all our own food we could still afford to eat no matter what happened to the dollar, but we don't raise our own food and our cost of living is tied directly to the price of the Canadian dollar on international markets.
With a cheap dollar hundreds of thousands of Canadians have to get all or part of their food from charitable food banks. If our dollar crashed, tens of thousands will go hungry.
But economic problems are not the only danger we face. We know that cyclical climate change is playing havoc with crops in some areas and that the El Nino current is a recurring threat to the farm areas we buy our food from. If the scientists are right we may see widespread crop failures and starvation on a continental scale within ten years. If either the Americans or the Mexicans lose their crops, Canadians will go hungry.
Our own crops would be just as vulnerable to climate change as others but most natural disasters are geographically limited and the problem that destroys a crop in the southern US, Mexico or South America might leave crops in Canada untouched.
If we lose our crops we will have to buy from others, but if production is widespread the chances are that someone will have crops to sell. If the Americans lose their crops they will want ours, but we need only sell what we can spare and we can charge a high price for it. In the uncertain climate that scientists expect for the next few centuries, farming may become a high-stakes gamble in which many farmers will succeed only with occasional crops, but will make big profits when they do succeed.
We can import clothes but we can also make them and we should, for a couple of reasons. One is that if our currency collapses we won't be able to afford imports. Another is that if the sources that supply us now find a more profitable business or a better market they will go to it and leave us without a source of supply. If we have our own industry, we have an assured supply.
We also have to build our own homes and that's no problem for now -- but we can expect problems in the future. In the past ten years American and Canadian companies have turned pre-packaged housing into a global business, and they make big profits selling homes around the world.
So far so good, but there is a kicker. At least one Canadian company has tried to open a packaged-home factory in Asia, to fill some of the orders it wrote on a government-sponsored tour to sell "Canadian" products. Last I heard the plan was on hold, perhaps because Asians are not as willing as Canadians to hand control of their economy over to foreigners.[19]
But whether the Canadian company is allowed to build in Asia or not we can be sure that some day Asian companies will build their own packaged-home factories and, with cheaper lumber and more-efficient labor, they will turn out Canadian-style homes cheaper than we can make them in Canada. The Asians will make them for their own market first but, sooner or later, they will also sell them in Canada.
KNOWLEDGE INDUSTRIES
Bafflegabbers say the loss of Canadian industry is not important because we have passed through the industrial revolution and are now in a "post industrial" phase of development. Now we are too advanced to make things for ourselves so we will work in "knowledge industries" and leave the production of physical goods to the people that poet Rudyard Kipling once described as "lesser breeds without the law."
That's supposed to be good for them because it gives them work, and good for us because it leaves us with the nice clean "knowledge industries." It sounds good, but it's just not so.
The truth is that since the beginning of time, every industry has been based on knowledge. Hunters and gatherers needed knowledge to hunt and gather the food they ate, to avoid dangerous animals and to find shelter. Neolithic axe-makers had to know where to find the best stone and how to work it, and neolithic traders had to know where the best axes were made, and where they could be sold.
And in earlier days knowledge really was worth something, because it could be kept secret. The Romans who paid fortunes for Chinese silk could not make their own because they thought silk grew on trees. Japanese and other Asians knew about silkworms but they did not know the secret of unwinding the cocoon without breaking the strand of silk. For hundreds of years Europeans thought steel was a rare and exotic metal that could be found only in secret Asian mines, and they paid fortunes for swords and tools made of Damascus and other Arabic and Asian steel.
One of the most valuable bits of "knowledge" in human history was Abraham Darby's discovery, in 1709, that he could smelt iron with coke. Up to that point iron was smelted with charcoal and, because of that, it was very expensive. Iron smelted with coke was so cheap that Darby was able to make iron pots to compete with brass. That discovery was one of the key developments that led to the industrial revolution.
Darby's "knowledge" was literally world shaking but it was valuable because Darby was able to use it in a foundry, to produce material goods.
Many of the old secrets were worth a king's ransom in their time and they were the foundations of world monopolies. By contrast most of the "knowledge" that modern "knowledge industries" are based on is common to the world, and a "knowledge industry" in one country has no special advantage over an "industry" selling the same "knowledge" in another.
But modern bafflegabbers tell us that knowledge itself will some-day be valuable, even if every other country shares it and we have no way to put it to work. The theory is that we will think deep thoughts and that, somehow, the physical goods we need to sustain life will appear.
But it doesn't work that way. Even people who work in so-called "knowledge industries" need food, clothing and shelter, and we have to get them somewhere.
If you want food we either grow it ourselves or trade it for other Canadian products. If you want a car we either make it or trade it for other Canadian products. If we don't have the products to trade, we have to borrow money or sell off part of our country to pay for imports.
And too often we have chosen to sell off our country. If you count foreign investment and the resource industries we have a positive "balance of trade," but that's an illusion. The money we count as "gross domestic product" includes the profits of foreign-owned resource industries and branch plants, which will be sent to our foreign masters, and the money we count as "foreign investment" is in fact the receipts for the sale of our country.
Even the goods we describe as exports may not be real exports. Studies show that a considerable portion of Canada's manufactured "exports" are actually internal transfers of components from a branch factory in Canada to another factory in the United States. These exports are sold at cost by the branch plant and many of them are then re-imported to Canada, at much higher cost, as components of goods manufactured in the United States.
Statistics Canada recognized this development with an article in the Canadian Economic Observer in November of 1999.[20]
Exports now make up about 40% of Canada's gross domestic product, the article says, but the import content of exports has increased from 25.5% in 1987 to 32.3% in 1995.
Some goods contain more imports than others. Machinery and equipment including electronic goods and computers accounted for 9.8% of all Canadian "exports" in 1998, but nearly 50% of the content of the goods we exported were actually re-exports, which were manufactured somewhere else and imported into Canada.
And this is a significant sector of our economy. As we noted before "A Survey of Canada" in the July 24/99 issue of The Economist magazine reports that exports and imports are equivalent to 82% of Canada's gross domestic product, compared with 21% in Japan. The number for the United States is 24%. Most of the trade in wealthy countries is internal.[21]
A POST INDUSTRIAL ECONOMY?
Apologists for the loss of our manufacturing pretend that we have gone beyond normal industry to a so-called "post-industrial economy" that is based on services and "information" rather than on physical products. That sounds very progressive and futuristic but it doesn't wash. I am a typical Canadian and I spend much more on food and physical goods -- including the apartment I live in and on manufactured goods -- than I do on "services" or so-called "information."
As an urban Canadian aspiring to middle-class status I buy a new car every few years, I spend a couple of thousand dollars a year on clothes and I have a couple of computers, a photo copier, TV, VCR, stereo and other electronic toys.
My apartment comes with stove and fridge, and I also have a microwave oven, blender and other toys in the kitchen.
I spend about $15,000 a year on rent, most of which goes to pay for a building made of manufactured components, and probably $10,000 a year on other manufactured goods. My wife pays for her own clothes, and spends about $7,500 a year on food for the two of us.
Between us we spend perhaps $30,000 a year in the industrial and the pre-industrial economies. From "knowledge" industries I bought the word processing program I use in my computer. It cost me several hundred dollars, eight or ten years ago.
My car, TV, VCR and other industrial goods have computers and software built into them, of course, but the computers and the software are part of the industrial goods. Some of the software in imported goods might be Canadian but I doubt it. Even if it is, it's a small part of the cost of the goods.
My wife and I spend a few dollars on books but not many of the authors are Canadian, and we go to some American shows. Other people may spend more on computer programs and Canadian literature, but the numbers still don't work out. We all spend most of our money on agricultural and manufactured goods, and if we don't grow and make the products ourselves we have to import them.
That means we have to pay for them, but how? With resource industries? We have already given most of our resources away to foreigners, and even they don't have many left. Resource industries produce big profits for the owners, but when the resources are developed by foreigners the profits go to foreign countries.
Service industries include low paid jobs like washing cars and high paid professions like law and accounting, but they all have two things in common. They do not produce the goods we need to survive and, for the most part, they do not produce goods that we can sell to other countries.
If it were true that one dollar is as good as another we could live on the so-called "service economy" but the fact is that services and trade do not create wealth and as we spend wealth without creating it, we all get poorer.
THE TOURIST INDUSTRY
Even the tourist industry, which pretends to bring in money from outside the country, is a loss to the economy because it sucks up investment that could be put to much better use.
It costs at least a million dollars to build a 25 room motel that provides minimum-wage jobs for four hotel clerks and three or four maids. That's at least $100,000 per seasonal, minimum-wage job.
The same price per job will open a modern factory. Low-tech machine shops, which can still pay top wages to skilled men, can be opened for about $50,000 per job. Machine shops have to find work, of course, but a high-tech shop can compete in the world market and a low tech shop will still find work as long as Canadian people use material goods.
Tourist operators like to quote numbers about the amount of money tourists bring into the country but if they spend it on imported food and wine, and on imported goods, the local market does not gain much.
But the most serious problem of the tourist business is that it is not dependable -- or perhaps we should say that it is too dependable. We know exactly when it will fail.
People travel for pleasure when they have money to spare, but travel is a luxury that is easy to give up. If we depend on the tourist industry we know that we will be among the first to lose and among the last to recover from economic downturns in other countries. If the United States has problems, we will be hurt before Americans are.
THE OLYMPIC GAMES
The ultimate tourist promotion is the Olympic Games and, as I write this, a group of Toronto citizens and the city itself, are spending tens of millions of dollars in hopes of attracting the 2008 Games to Toronto. The promoters figure it will cost about $2.6 billion dollars to prepare the city and stage the games, and that the games will return about $2.8 billion from broadcast rights, ticket sales, merchandising and licensing.
That sounds like a good deal and a profit for the city, but history suggests that it is more likely to be an economic disaster.
Montreal Mayor Jean Drapeau said of the 1976 Olympics could "no more have a deficit than a man can have a baby." He thought it would cost about $124 million to stage the 1976 Olympics but, because of mistakes, bad planning, labor problems and corruption the final cost was $1.5 billion. It took the city 20 years to pay off the debt.[22]
Toronto's last experience with big-time sports promotion was the construction of the Skydome stadium, in the late 1980's. The city and the province agreed to invest $30 million each in the project but when it was finished the taxpayers had invested about $350 million of the $600 million total.
In 1994 the private partners bought the provincial government's share of the dome for $151 million. Four years later when the whole dome was offered for sale for $100 million, independent appraisals valued it at $43 to $62 million."Creditors take swing at Skydome, rejecting bid could cause "irreparable harm" by Tony van Alphen, Toronto Star, Dec 12, 1998, P E1. see also "Sale of Skydome puts final cap in the Greed Decade" by Stephen Brunt, The Globe and Mail, Nov 15,1991, p C14.]
Even if Toronto could stage the games for the $2.6 billion estimate, that would leave the city with more than a billion dollars worth of stadiums and other properties which the citizens did not want enough to build for their own use, but which would require maintenance for the next 50 to 100 years.
As part of the attempt to attract the games the federal and provincial governments have agreed to invest $1.5 billion in improvements to Toronto's waterfront area. That sounds like a good idea and I'm reluctant to knock it, but let's not forget that this offer is comparable to the "infrastructure" grants of 1995 - 96. The public works that are planned for the waterfront are cost goods and they will be planned to attract the games, not to be of use to the people of Toronto.
The Olympic games would be an economic disaster for Toronto and Canada but they would be good for the tourist industry, and some Canadians see tourism as our last hope for prosperity. Fifty years ago we had the start of a good industrial economy but for most of the last 30 years we have been running on hot air. Because we started with a rich country we got away with that for a while, but now reality is catching up with us.
We have given away our manufacturing industries and, like other first world countries, we are even losing out so-called :knowledge industries" to the global economy. Thanks to telecommunications "knowledge" jobs are even more portable than manufacturing jobs and they too are moving to low-wage areas.
Within Canada, New Brunswick captured hundreds of minimum wage jobs by building a high-tech telephone system that gave it a "comparative advantage" in the exciting field of telephone soliciting, but that's just the first step.
Through the internet any computer can work from anywhere in the world and now millions of computer-based jobs are moving to the third world. Some high-tech service companies in Europe use computer programmers based in India's "New Electronic Export Zones" near New Delhi, Bombay, Calcutta, Cochin, Kandia and Madras, where programmers earn less than $3,000 a year. Like New Brunswick, the NEE zones have state-of-the art communications.
In 1993 Andersen Consulting estimated that US banks and other financial institutions will cut about 700,000 jobs by the turn of the century. In fact the loss in the United States was even greater, because many of the jobs that were not eliminated were exported.[23]
INTERNATIONAL CONSULTING
Some pundits like to pretend that as Canadian industry winds down we can sell our expertise to industry in other countries, but that's just a bad joke. Pardon me while I indulge in a brief scenario.
Joe Blow, the Canadian consultant, walks into the office of Him Got Bucks, the Asian billionaire who owns 36 major corporations that make automobiles, ships, aircraft, electronic goods, chemicals and so forth. Joe speaks.
"Hi Mr. Bucks, I'm Joe Blow from Eager Beaver Consultants Incorporated. As you know we in Canada were the fourth industrial power in the world, fifty years ago. Because of our management methods we now have millions of unemployed, beggars on the street and our manufacturing industry now consists of only a few branch plants.
"In forty years you've turned a population of agricultural peasants into an industrial powerhouse.
"So my people have decided that your people need help, and they've sent me here to show you how to run your business."
Let's hope Mr. Bucks has a sense of humor.
The fact is that consultants sell knowledge and experience, and they get the experience by working in industry. If our industry can't keep up with the best in the world nobody will need our knowledge and experience, and nobody will want Canadian consultants.
Even now the consulting business is not all gain for the national economy. When Canadian consultants work on projects paid for by Canadian aid programs they do not earn foreign exchange, they're just another drain on Canadian taxpayers.
ROBBING THE THIRD WORLD
The global economy is also a disaster for the third world because it enables foreign-controlled export-based development to preempt real development.
Real development for a third world country would come from the ground up. Every country needs farms and factories to make farm tools, roads and vehicles, clothes and houses and furniture.
But every country needs farms and farm tools and roads and vehicles and clothes and houses and furniture that are appropriate to the country, and to its stage of development -- and third world countries won't get them through the global economy. That's not a prediction, it's history that we have already seen around the world.
It happened when Europeans developed tea, rubber, oil-palm, sugar and coffee plantations in Asia, Africa and the Caribbean, and Americans developed parts of Latin America. I've seen some of the American coffee and banana plantations so I'll write about them and the "banana republics" they created.
Lowland farming in the tropics is a specific technique and it's only in the past few years that white men began to understand how well some Indians developed it. For a long time we thought they all used "slash-and-burn" agriculture, in which they cut and burned a patch of forest and then planted crops for a few years.
Now it turns out that some Central American Indians had developed very sophisticated high-intensity agriculture in which small patches of forest were turned into giant food baskets. White men didn't notice the small farms because they looked about the same as the rest of the forest and we never saw people working them because the Indian farms were self-sustaining and they didn't have to be worked.[24]
White men didn't see the native agriculture but some Americans saw an opportunity to grow bananas for the American and European markets. They chased the natives out, burned and bulldozed the forest and the native farms it contained, and established huge plantations. When the locals objected, some of the planters installed their own governments and the term "banana republic" was born.
The plantations "developed" the banana republics in their own way, with railways and electric power and modern buildings, but the development was confined to the plantations and to a few areas of the main cities. Most of the local farms were destroyed, and people had to buy food. Because only people who worked for the Americans could afford to buy food, some of the others went hungry.
Because the plantations dominated the countries most of the local culture was lost. People stopped making stone and wooden farm tools because the steel tools that were thrown away or stolen from the plantations were obviously better, but in most cases the local people did not open mines and build smelters and forges to make their own steel tools. Like colonial people everywhere, they learned to depend on imports.
After more than 100 years of development most Latin American countries have a prosperous modern surface but in many of them it is only a surface. The cities are modern but they depend on imported technology -- on elevators, wiring, lighting and other accessories made in the first world -- and some countries which have modern cities would be unable to build or maintain a modern village without imports.
Wealthy people in those countries import more first-world luxuries than most people in the first world can afford; but millions of others live in huge slums without sewers, clean water, or hope for a reasonable future.
The slums are growing fast, in many areas, because more and more people are being pushed off the land. In some areas that's because small farms are still being taken over by big planters who grow fruit and vegetables for sale in Canada and the US. In others it's because traditional farming methods have been lost and "modern" farming can't feed people on the land available.
Cash crop plantation farming in Latin America makes big bucks for a few TNCs, but it's a disaster for people who are pushed off their land to live in the shadow of a technological world they can not ignore, but which they can not join.
Imported factories in the third world have the same effect, and create the same problems, as the plantations. They may pay better than the local average wages but, aside from the wages, they make no contribution to the local economy.
If the host country supplied raw materials before the move the imported factory will buy the same raw materials, but the factory is an extension of the first world and it will not buy machines or designs from the host country, or produce goods that the host country needs.
Because most of the investment is in imported machinery and technology, imported factories do not offer much stimulus to local economies. Like the branch plants that American manufacturers established in Canada, they may stunt the growth of local industry.
And it is often in the best interests of modern plants in the third world to intentionally cripple local industry. Once the Beebop Sporting Goods Company is established in Boogleoogle it wants local wages to stay low and it will not do anything that might increase them.
Some of the workers may even be slaves, or children who work like slaves. A survey released in October of 1996 by the government of Pakistan and the International Labor Organization estimated that about 3.6 million children from five to 14 years old were working full-time in Pakistan alone.
According to a story in the Dec 15/96 Toronto Star, a skilled teen-age craftsman in Pakistan was paid one dollar to hand-sew a soccer ball that sold in Europe for $80. One European company planned to sell two million made-in-Pakistan soccer balls in 1997-98.[25]
In Bangladesh an estimated 80,000 children under 14 years old, most of them girls, work at least 60 hours a week in garment factories. In India an estimated 55 million children work, many of them as bonded laborers, under atrocious conditions. Former Indian chief justice P. M. Bhagwati has testified that he saw young boys working 14 to 20 hours a day. If they do not please their masters they are "beaten up, branded, (with red hot iron rods) and even hung from trees upside down."[26]
A UN survey estimates that there are 150 million child laborers in Asia, 80 million in Africa and 17.5 million in South America, Some of the children have been sold outright, others are "rented," for wages paid in advance to their parents or to labor contractors.[27]
Around the world tens of millions of third world children work to make clothes and toys for the children of the first world. We pretend we don't know about the slaves and the children, and we believe that most Germans did not know about the Nazi death camps. In fact people everywhere can shut their eyes to things they don't want to see.
Apologists for the global economy suggest that if we buy enough from third world countries their working conditions will improve, but that's not a logical expectation. Governments defend national advantages and if the economy of Boogleoogle is built on child or slave labor, we can not expect the government of Boogleoogle to make a serious effort to eliminate child or slave labor. If it depends on lax ecological controls, we can not expect it to tighten those controls.
An article in the Par 20/98 issue of Time magazine notes that the primary school dropout rate in Latin America has risen since 1994.[28] This is good news to anyone who wants to maintain a supply of cheap labor, but bad news to anyone who thinks formal education would help Latin America develop a modern economy.
Another problem with the global economy is that many goods are manufactured in the third-world only for export, and would be no use at all to the people who make them. I have a down-filled windbreaker that was made in Bangladesh, but I don't think the people of Bangladesh need down-filled windbreakers for their own use.
That may be a problem in the long term because we can assume that the market won't last. At one time some Canadian winter coats were made in Singapore and I have seen others from Indonesia and Malaysia and I have to assume that when a Canadian importer finds a country where coat-makers work cheaper he will buy from the new source and abandon the old -- and the workers who will be left jobless.
Migration is another questionable aspect of the global economy. If the economy of one country does not develop, some of the inhabitants can move to another.
On a simplistic level that makes sense. Why not let people live where they want to? Surely both humanity and our own self-interest demand that we allow qualified migrants from the third world to live in the first world and share our wealth?
Yes -- but. The problem is that migration is a sorting process and, if it's not controlled, it will tend to move most of the brightest and most aggressive and best-educated people in the world to the rich countries and leave all the others, with a few predators to prey on them, in the poor countries.
If we assume that all races are equal then the native populations of any one country should be about equal in intelligence, ability and initiative to the population of any other. There will be differences between individuals within each population of course -- some will be smarter or have more initiative than others -- but the average will be about equal.
Until we allow large-scale migration. Let's look at the effect of migration from the third-world country of Povertania to the first-world country of Affluentia.
Because it requires initiative to migrate, the average level of initiative among migrants will be higher than the average level of initiative among non-migrants. Because it also takes intelligence and general smarts to get through the immigration process and be accepted by another country -- especially by a country which can afford to choose immigrants -- the average migrant will also be more intelligent than the average non-migrant.
Migration also sorts people by education and here the sorting takes a vicious turn. Relatively few citizens of a poor country graduate from high school and the education of the average high school graduate represents a significant investment for the people of a poor country. If education has any value the poor countries cannot afford to lose their educated people -- but educated people are the ones who find it easiest to migrate.
Result -- after a few years of migration the average levels of initiative, intelligence and education in Affluentia will be higher, and the averages in Povertania will be lower. Affluentia will develop even faster and become even richer, and Povertania will be hard pressed to maintain the same level of poverty.
I began wondering about this years ago, when I met a medical doctor from a third world country who came to Canada to study medicine under an aid program, and stayed here to practice.
Even as a high school graduate that man was in a very fortunate position, by the standards of his country. When he got a scholarship to study medicine in Canada, his future was made.
If he had gone home he could have lived very well in his native country, and he could have provided medical service that his countrymen needed. That's why Canada gave him the scholarship, and that's why his government helped him to come.
But he chose to stay in Canada and -- because he was well educated and obviously qualified -- he was accepted as an immigrant. He told me he didn't owe his country anything, because he had "earned" the scholarship by hard work. It made no difference to him that poor people in his own country had paid for his high school, and that his own and the Canadian governments had put him through medical school so that he could help his own country, not so he could live in Canada.
That was a special case but all immigrants are special, in their way. They have to be smarter and have more initiative than average to be able to migrate, and these are just the people that no poor country can afford to lose.
Almost any individual case of migration can be justified, but together they add up to a disaster for the third world
Some Canadians feel that we have to accept immigrants because "we're all immigrants here." That's a good point, but it's not quite true.
My ancestors were immigrants, but they did not come to an empty country. If I were a Canadian native I might feel that my country had been taken by immigrants, and I'm not sure that I would admire the generosity of those immigrants if they tried to atone for the theft of my country by handing it over to another lot of immigrants.
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