Our liberal order: in with a bang, out on tiptoes?

I’ve been nostalgic for the ’60s ever since the interregnum presidency of good old Gerald Ford and the popular imposition of the War Measures Act in Canada, in 1970. Its music would still entertain us, but the lyrics of the ’60s were leading us nowhere. I don’t adapt to signals as fast as I did back then, while working in short pants on Parliament hill. But I never thought that in 2016 I’d already be missing the 20th century. It was a thing of beauty.

In the sphere of private passions and private virtues (in the rich westerly provinces of Europe and the northern regions of North America), we’re as free as the wicked visions of the Bloomsbury set. The liberal agenda we’ve set for ourselves today pretty well boils down to socialized suicide and a handful of leftover apologies for the sins of our dead tribal leaders. More importantly, our bread and butter agenda—our liberal ambitions for others, present and future—appears on hold.

The liberalism that stood on its own, that made it entirely different from all the stern, less human ideologies to its right and left, was a light in the dark: freedom for everyone, not just the boss’s clever sons, would ignite creativity and personal responsibility. And that the prosperity, what the hell, the awesome wealth that, together, they would generate would make life more tolerable and interesting.

Of course, after world war ended in 1945, peaceful competition for power resumed. But in the West, in emergencies and when operating in quiet times in Parliaments and in alliances, economic arguments ran within a liberal free-trade consensus: the factions of the left and right fought over means, adjustment supports, and timetables; when they procrastinated, they fought over adjectives, adverbs, and clauses in joint communiqués.

There were optimistic liberals and nervous liberals; unilateral, bilateral and multi-lateral liberals; liberals who were careful to preserve strong central governments and liberals who believed that healthier markets would best diminish corruption and reward innovation. Enjoying power within the consensus were politicians who even preferred to call themselves “social democrats” and “conservatives.” All pored over the same OECD, IMF, and World Bank numbers and studies to bolster their niche brands.

Yet, opinions about the times are a-changing.

We know the big data about global rising incomes, education, health, artistic activity, and living standards, whether in Mumbai, San Francisco, Trios-Rivieres in Quebec, Mexico City, or Philadelphia. Yet, today, we are told to set those facts aside and defer, if only for a while, to demagogues who don’t respect them.

Eminent Machiavellians are telling overflowing classrooms of political junkies and survivalists in government and big business that 20th-century Anglo-American free trade liberalism is overripe. It must quiet down and take a pause—wait out populist troublemakers or adopt that just-watch-me style that nearly destroyed Europe and as waking up Asia.

All those places that have been laissez-faire liberal for most of the last five generations are facing waves of refugees from wretched places ruined by anti-liberal regimes. While we open our arms to some of their victims, our leaders are cowed by signs of local disillusionment and outright opposition to core liberal interests.

My fear for the immediate future is based on the responses of our most influential liberal institutions and liberal leaders, not the menace of dilettante bullies. Our constitutional democracies can take a punch. The Trumps come and go. It’s the meekness of popular liberals and influential corporate leaders that may be making history, badly.

Here’s the underreported response to a growing “protectionist environment” by Jeff Immelt, CEO of General Electric—one of a handful of truly great global enterprises—to the Stern Business School’s graduating class, this May 20th:

 “We (GE) will localize” because “a localization strategy can’t be shut down by protectionist politics.

“We will produce for the US in the US, but our exports may decline. At the same time, we will localize production in big end-use markets like Saudi Arabia. And countries with effective export banks, like Canada, will be more attractive for investment.”

Welcome to the ’30s, indeed, right up to Jeff’s early childhood in Ohio.

A corporate vision of “branch-plant” agents negotiating with “import substitution” state bankers, probably, will keep General Electric in business. It survived in that political swamp in the ’50s and ’60s. However, there are societal consequences when the giants of business, and entertainers like Donald Trump and Bernie Sanders, are taken seriously when saying: “Let’s go back.”

And Harvard’s famous soft power scholar Joseph Nye can rip Trump apart for his sloppy attacks on the NATO alliance without uttering a passing reference to Trump’s rabid protectionist attacks on longstanding as well as recently negotiated free trade agreements. Nye apparently is now more exercised about maintaining the status quo in NATO than championing better commercial relations as soft power’s way to advance US influence without always putting ever more weapons and Americans on their soil.  

Retrenchment is back at the highest levels of free trade government.

The leaders of Canada and the United States, two immensely popular politicians, won’t risk a pinch of their popularity to defend and sell publicly the Trans-Pacific Partnership, a trade and investment agreement to reduce barriers within 40% of the world’s economy. A trade deal that would consolidate, if ratified—and undermined, if not ratified—the West’s presence and credibility in Japan and in emerging markets that, incidentally, have only one superpower alternative: China.

Here’s the G7’s battle cry over the signatures of Barack Obama and Justin Trudeau in the May G7 Summit Communique:   

“The signing of the TPP is an important step forward for the establishment of a platform for common trade rules and trade integration across the Asia-Pacific region, and we encourage each TPP signatory to complete its domestic process.”

The signatories are encouraged, whoever they are.

Classic passive abstractions coined by articulate bureaucrats to help passive leaders. Trudeau’s Liberal movement remains free to keep “studying” the agreement, and Obama’s former Secretary of State Hillary Clinton can reject their TPP, along with Donald Trump. American Democrats and Republicans now promise only US trade growth, not US eadership to fight protectionists in the West and globally.  

The spin amongst liberal sophisticates in Washington and Ottawa is that the TPP, let alone NAFTA, cannot be championed in the US presidential election. Along with carbon taxes and entitlement reform, free trade is best done but not discussed. TPP is something lame legislators might do later this year so long as other issues and personalities dominate voter passions.

It’s easy to imagine Republican Senators voting for the TPP and, gleefully, against Trump. It’s conceivable that President-elect Clinton would happily look the other way as Democrat Senators and Obama ratified the TPP shortly after the election. So long as all smart people keep quiet for now.     

So here we are: free trade, arguably the greatest liberal project of the last century, must now proceed by stealth.

Popular government by the people will prevail as good government for the people. The music will be turned down but it still will be played. Only the glorious open concerts will be a thing of the past.  

   

Hillary Clinton and “The Base”

Progressives have perfected a lethal poli-sci-sounding complaint about their right-wing opponents: they pander to their base—and, gosh, with a base full of small-minded bigots, it’s little wonder conservative leaders can’t be intelligent about the oh-so-complex challenges facing governments today.

After the Great Depression, conservatives—both the aloof elitists and the faux populists—toiled at marketing-pleasing labels for themselves. Nixon’s “silent majority” and John Diefenbaker’s “un-hyphenated Canadians” were especially successful; conservative politicians stopped being seen as incompetent WASPs.

In this new century, however, conservatives have largely suffered profitably in silence.  

Letting their opponents describe their supporters in almost lurid terms has helped keep that base militant. However, it complicates things for conservatives stuck in opposition or, in Stephen Harper’s case, without anywhere near enough votes to win in October.

Representing a militant base doesn’t win the center. Independents in both countries avoid cell groups and movements; they don’t vote for bigger government or for throwing civil servants living just next door out of work. They leave the unpleasant stuff to elected governments.

The qualifier for conservative and progressive politicians who want to win national elections is to serve a broader purpose than redressing the grievances and florid dreams of their most righteous partisans. 

The center isn’t smarter than the wings, who care the most. Its hot buttons, however, are different. The center wants presidents and prime ministers who are strong enough to represent them without having to hit the streets and make as much noise as the extremes.

Hillary Clinton doesn’t have an experience problem—or advantage. She’s spent all her quality time, all her life, with smart people, she ran for president before, and thrives in Manhattan. She doesn’t need training wheels and is given no slack for gaffes or innocent mistakes. 

Yet she’s already put her savvy and her character in doubt on a test no president has failed since the 1920s: free trade verses protection.

Her decision to oppose last week’s fast-track legislation to allow Barack Obama to complete the negotiation of a free-trade agreement with American allies and market economies next to China kept her “base” content—last week.

But last week’s pander won’t be her last. Her “base” didn’t kill the trade negotiations, negotiations that she helped launch. Instead she’s generated sticky questions about her political judgment, policy smarts and integrity. She has a lot more bowing to do.

Did her endlessly calculating machine figure out what she’ll say when Congress does, in fact, give Obama a second chance and, when he does, in the end, secure the TAPP free-trade agreement?

Will Clinton remain opposed? And if so, has she figured out how to confront China without allies who trust her?

Will she end up pressured to support Obama? If so, what happens to the family conceit of being smarter and tougher than the lame duck family in the White House?

Has she concocted a bold, courageous, original idea to wipe clean the impression today that she can’t stand up to the most reactionary elements of her “base” and Senator Bernie Sanders, an opinionated windbag from Vermont?

Centrists in the US and in Canada don’t see themselves as trade or diplomacy experts but they worry about the global economy and China. And they will likely not vote for leaders who worry more about the sensibilities of their “base.”

Market champions and the Canada trap (part 2)

Modern history has produced one non-lethal alternative to economic development’s reliance on capitalist markets — democratic socialism. By using public investment as an alternative to profit-seeking capital, socialists would deliver individual and community betterment more equitably.

Even after rebranding themselves as social democrats and befriending small business and Tory protectionism, however, they couldn’t match capitalist economies at making money or alleviating poverty. Socialist development produced fewer plutocrats. 

But the poor remained poor.

Left and right intellectuals offer different reasons for why they failed: cronyism, unpatriotic elites, US imperialism, bad harvests, vodka, the persistence of inefficient religious and ethnic prejudices, and the challenge of restraining public unions in societies that rely every day on numerous public monopoly services.

(Canadian progressives especially swooned over "public entrepreneurs" like Maurice Strong who promised professional politicians like Bob Rae and Pierre Trudeau that he could turn them into respected commercial investors as well as shrewd politicians.)

In any event, democratic socialist economics isn't offered to Canadians anymore as a nation-wide alternative by any major political party.

No reliable consensus exists, however, on how to best secure market capitalism’s promise.

We believe rhetorically that healthy economies — as well as political elites — need persistent competition. Markets that can’t be managed by yesterday’s winners are needed to drive progress. However, life here is too easy to submit wholly to market capitalism’s harsh logic.

The Canadian intelligentsia presumed Canada had two choices: continental Keynesianism or Canadian Keynesianism. In the trial-and-error of politics, the consistent winner is the latter. It wins elections not by its wins in economics but by the horror it makes of the American alternative. The USA, we are warned, is an awkward date internationally and a dying economic force as well.

A true economic union with the US may have been Stephen Harper’s first and true passion.  But Barack Obama is not interested in trying anything complicated that would merely excite Canadians. And, as important, Canada’s business leader, most high-profile economists, and consumer advocates haven’t given Harper any indication that they care that much.

Still, the status quo is fraying: after 25 years, Mulroney’s proud free trade agreement with the US still hasn’t closed Canada’s 20% productivity gap; only the resource exporting regions are holding up the Canadian dollar, competing successfully for private investment, and holding up the federal government’s generous transfer-payment system.

Often, the first step away from danger is to remember what’s past is past.

The great elixir for Canadian capitalism isn’t going to be an unfettered Canadian free market. The rest of Canada doesn’t exist even today as the primary market for Canadian traders.

In its most comprehensive, most recent summary of provincial input-output data and international and interprovincial trade flows, Statistics Canada spilled the beans.

In total, in 2010, Canadians earned $123 billion more from selling to foreigners than by selling to Canadian neighbors. And the US customer alone generated more income than all interprovincial trade. The largest, most urbanized, and most advanced provinces — British Columbia, Alberta, Saskatchewan, Ontario and Quebec — rely most heavily on the American consumer.

Nationalists can say the data is static. But nothing in the data is very new or offers any hint that the future will be more Canadian and less continental.

Of course, nationalist market champions are right to complain about interprovincial trade barriers. However, almost all the remaining barriers are in public procurement or caused by provincial monopolies in energy, food, and alcohol.

I’m for zero preferences in government procurement and full customer choice in energy services — and in wines, spirits, and dairy products. However, that’s because I want to pay less.

Conservatives would be more interesting and more credible by tackling big government for its rip-offs, phony business exploits, and infringements on our freedoms than by trying to make it smaller on behalf of an imaginary pan-Canadian market.

One transcontinental market for Okanagan and Niagara wines will benefit a few charming businesses but won’t secure decent middle-class incomes for the next generation living in Toronto and Vancouver. Building a fast rail line from Windsor to Quebec City will impress railway builders but won’t make Quebec an alternative to Michigan or Ohio for Windsor or London workers.

A perfect Canadian free market would attract intense academic interest.

But it wouldn’t earn us the money, security, and personal satisfaction that we would realize by being wholly awake and committed participants in the imperfect North American mixed economy we’re in this very moment.    

Brian Mulroney and the End of History?

Brian Mulroney’s pal Ronald Reagan is now considered one of America’s greatest presidents. For Canadians, memories of Mulroney’s two terms as prime minister are every bit as inflated. We don’t idealize the man. We grant him something even grander: we treat his accomplishments in Canada’s relations with the US—and his failures in constitutional reform—as the end of the journey.

Last week, Canadian opinion leaders celebrated the 25th anniversary of his Free Trade Agreement with the US; the FTA that eliminated nearly all Canadian and US tariffs, created a non-binding dispute settlement system, and provided national treatment for each country’s investors. This deal is not simply widely praised and sparsely reviled; it’s treated as a kind of final settlement in Canada-US economic relations.

After two centuries of progress and retrenchment, Canada’s place on this extraordinary continent appears settled: overseas, we’ll burnish our brand and sign trade deals; at home, we’ll tinker.

Like the sunny memories of Reagan’s economic policies by Reaganites, numbers don’t adequately express the FTA’s positive impacts. Kevin Lynch, once Canada’s highest-ranking civil servant and now Vice-Chairman of the Bank of Montreal, believes the real stuff is intangible:

“Free trade helped Canada to grow up, to turn its face out to the world, to embrace its future as a trading nation, to get over its chronic sense of inferiority."

“'It caused a sea change in attitudes,' he believes. The courage needed to take that free-trade ‘leap of faith’ equipped governments to tackle other seemingly insurmountable challenges: Establishing the goods and services tax, eliminating the deficit, reducing corporate taxes.

“Most important, FTA convinced Canadian governments, Canadian businesses and Canadians generally that this country had the knowledge and confidence to compete in any market.”

As it is in the US, bravado in Canada is also a sure sign of paralysis.

The right and the left see how little Canada’s economy has changed for the better. (Both Kevin Lynch and Jim Stanford, an economist with the Canadian Auto Workers union, accept that Canada’s productivity, just 74% of US levels, is actually slipping further behind the "declining" USA.) Nevertheless, neither protectionists nor free traders make much effort to either undo or outdo what Mulroney put in place.

"Trade diversification" has become the center of the action, the drug of choice by incrementalists in Washington and in Ottawa. At the same time, entrenched bureaucracies manage a Canada-US border that inhibits innovation, competition, and enterprise in both countries—as well as Canada’s security globally.

Currency unification, the physical elimination of the border, and, for instance, a common regime to manage the environment are European ideas, too radical for serious consideration in the New World.

Pros in Ottawa accept that Brian Mulroney pushed Canada about as far as Canadians would go. Indeed, on the constitution, he proved to them how dangerous it would be to try to improve on the success of the country’s last great closer, Pierre Trudeau.

This is a debasing form of respect for the good works of a different time.

Having given thanks, now let’s face it: the "coming of age" gift of the Mulroney-Trudeau years has been turned into a political straightjacket—a limiting sense of what’s possible in the very business of what is possible.

In fact, North Americans are stuck a generation behind European efforts to make their continent a more productive, efficient, and competitive economy. Furthermore, Canada’s constitution still includes two undemocratic and colonial institutions—at the very top.

Canadian optimists should stop watching for moves by the Chinese government to turn China into a law-abiding market democracy and waiting for the children of Canada’s last generation of politicians to stir their hearts.

Rather than feel left out, young Canadians should feel embarrassed. After that happens, they should look around for politicians who want to change things significantly.