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Thread: The U.S. Election - should Canada care?

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    [i]Tom Velk is chair of McGill University's North American studies program and a member of McGill's economics department. He has published dozens of articles and edited four books on Canadian-American public policy issues. He has also worked for the Board of Governors of the American Federal Reserve System and the World Bank. He holds a Ph.D. in economics, with a minor in law.[/i]


    Why should Canada care who wins the American election? Because the first axiom of political economy is trade makes everybody better off, and the second axiom is that trade succeeds best in an integrated market.


    Trade and integration win if George W. Bush wins. He is a believer in rational economics, and, during a second term, he will not fear the special American interests threatened by a free market.


    John Kerry, who blithely ignores economic axioms in favour of buying special interest voters, says he will change the American tax code to prevent the rationalization of the North American Economy and thinks "outsourcing" - a necessary corollary of trade - is a bad thing. Kerry as president would damage Canada's short-term job market, and permanently impair continental growth.


    The mystery of North America for an economist is "why is the market fragmented?" Why have the Kerrys and the Chrétiens - guys who failed Euclidian Economics - been able to keep North American Markets as separated as they are?


    Economists believe that the benefits of trade are so overwhelming that political, cultural and linguistic barriers to trade eventually fall, as their high costs, measured by both lost profit and forgone consumer satisfaction, are recognized. The move toward a United Europe is proof: if the Germans and the French can cohabit economically, how is it possible Canada and the United States do not? How can a Kerry get any votes at all, or have any support in Canada, when his policies imply less for all - the opposite of the payoff from trade, which is more for all?


    It works because the general public - the injured party when monopoly is supported - is inattentive, while the special interests are totally committed, giving election-winning political and financial support to cooperative politicians.


    In addition, European powers have, for all of the several hundred years since Columbus, been intent on impeding any kind of economically rational unity in the Western Hemisphere. At first, it was simply an attempt to make sure that no single European colonial power had all the territory. France, England and Spain fought one another so no one of them would have the immense treasure box of the Americas available to fund what would result, consequent upon coining the hemisphere's riches: the domination of Europe.


    Later, cunning diplomacy, especially from England, kept North America disunited, while the "lucky accident" of language and religion did the same for South America, even after the Iberian powers lost both war and diplomatic finesse.


    Canada was "protected" from becoming part of the United States, and later given its independence, partly by this process. Sir Guy Carleton, made Lord Dorchester in recognition of his cleverness, devised the Quebec Acts, English legislation giving the Catholic Church special powers, and cynically awarding the Ohio Territory to Canadian interests, all in a successful scheme that prevented Quebec from becoming the 14th rebellious colony.


    A later English government supported the South during the American Civil war. (Jefferson Davis lived in Montreal after the War.) Had that plan succeeded, not only would the "Satanic Mills" have earned even more profits from slave-cheap cotton, but the young Hercules that the Post-War United States became would not so quickly - perhaps would never have - push Britannia aside.


    As it was, the second-best English post Civil War plan - the 1867 creation of Canada, as a bulwark against the victorious and venturesome Union armies, was consistent with the permanent European national interest in keeping North America disunited, and so less effective as a World economic counter-power.


    But even if European Powers wanted the Western Hemisphere in political disarray, how could, for example, domestic Canadian economic players be dissuaded from making economic peace with their American Neighbors? By the creation, partly by planning from Europe, and partly by Darwinian accident, of local monopoly powers, who could benefit from separation, even if the general interest of most of their countrymen was sacrificed.


    These Canadian monopolies were sometimes simple and obvious, like the Hudson's Bay Company, and other times more subtle; for example in the special stature given, even now, to the "two founding peoples," and their languages, customs, and religion. In other words, Canada's political glue, to the extent it is proof against the solvent of a united market, is concocted by favoured groups whose powers would be diluted or washed clean in any Continental Union.


    Added to all of this, is what the International Monetary Fund calls, when applied to places like Saudi Arabia, "the curse of natural resources." Canada's "curse" is a per capita endowment - oil, gas, iron, diamonds, gold, uranium, timber, fertile soil, you name it - unmatched in the entire world.


    "Owned," extravagantly taxed by government, and used to fund a welfare state with a mentality inconsistent with market habits, these riches, in excess of domestic needs, needed by our rich and relatively undemanding neighbour, have been a source of unearned income for Canada's elites, since Canada's inception. As in the other countries similarly "cursed," these natural gifts tempt us to exploit our international customers in a way impossible were we to join with them in a single economic or political union, within which there would necessarily be a less disproportionate mutual sharing of benefits. The result is extra riches for "Canada as OPEC," but general losses for the continent as an aggregate.


    What has all this to do with the American Election? A Bush win will really benefit the entire continent, at least insofar as he is able to break down American monopoly resistance to market integration. But it will be presented to us, by the guile of Canada's special interests that have for generations tricked those outside the benefited elite, as a "cost" to Canada.


    These special interests will ask us to support Kerry, who, by serving the interests of his domestic special interests - themselves incapable of meeting international qualitative competition - will also serve the centuries-old national interest of the European powers, and the Canadian monopoly gatekeepers of the continent's endowment of natural resources.


    Don't be fooled.

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