Re: “The Past Reframes Itself,” by Mel Watkins

How fitting it was for you to have Mel Watkins, the elder statesman of Canadian economic development policy, review two recent books on the “golden age” of Canadian economic development policy. As Watkins put it, “the history of the 1960s in Canada is a history … of hope,” and Mel himself generated a lot of it with both his economic research and his political activism. Now he looks back with the perspective of time—somewhat jaded obviously, but still hopeful—to examine what was accomplished in those years, and what was not.

The two books that Watkins surveyed—Auto Pact: Creating a Borderless North American Auto Industry, 1960–1971, by Dimitry Anastakis, and Dancing around the Elephant: Creating a Prosperous Canada in an Era of American Dominance, 1957–1973, by Bruce Muirhead—portray Canadians’ efforts to seize a bit more control over their economic destiny, in a context of U.S. geographical and economic dominance. Some of these policies (the Auto Pact chief among them) worked brilliantly, others not so well. But what was fundamental to all this proactive economic policy making was a shared conviction that the market alone could never guarantee Canadians a full, well-rounded role in the larger continental and global economies. Watkins’s intellectual mentor Harold Innis had proven long before that the market alone would relegate Canada as a supplier of resources to more advanced colonial (or quasi-colonial) masters. To counteract that powerful influence, we had to twist, curtail and prod the market, working deliberately, using both carrots and sticks, to eke out a more diversified, more stable and more prosperous economic future.

Today, of course, we’ve been living in an era of unrestrained markets, represented most powerfully (but not exclusively) by the almost two-decade reign of continental free trade. The impacts of that regime have been exactly what Watkins himself predicted: a powerful reinforcement of Canada’s role as resource supplier and the steady erosion of whatever gains in industrial development and diversification were accomplished during the 1960s and ’70s (a time when, not coincidentally, Canadian living standards and social conditions advanced much faster than in the U.S., so that we ceased being the poor continental cousins).

Moreover, the speed of this historic reversal has been accelerating. In 1999, higher-technology finished goods industries (including machinery and equipment, automotive products and other consumer goods) accounted for 56 percent of Canada’s total merchandise exports, and Canadian-made products (from cars to airplanes to personal telecommunications devices) were recognized around the world. By 2006, just 43 percent of Canadian exports consisted of finished goods—down dramatically. The clear majority of our exports (surprise, surprise) once again consists of unprocessed or partially processed resources: forestry, agriculture, minerals and energy. Especially energy.

Canada’s energy exports have tripled since 1999. Canada is by far the largest source of imported oil for the United States—supplying more than Saudi Arabia, Iraq and Kuwait put together. Canada now produces more energy for the U.S. economy than we do for ourselves. And NAFTA requires that we continue supplying most of that energy to the U.S., even in the event of a supply emergency. (This provision is so onerous even the Mexicans wouldn’t accept it; Canada is unique in the world for “sharing” our own resources so willingly, and permanently.)

We badly need another group of Canadian economists willing to push the envelope of the market in the interests of our national development—a third wave, following Innis and Watkins. Watkins’s thoughtful review reminds me how urgent that need has become.

Jim Stanford
Canadian Auto Workers
Toronto, Ontario

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