Hard Bargain

A bold business case for the U.S. acquisition of Canada

<p>In 1965, philosopher George Grant told us that Canada had already “ceased” to make sense but that the nation would not disappear as an independent country for some time. Union with the U.S. “empire,” he proffered, would require extraordinary decisions. Politicians, however, find it easier to be loyal innovators, within the status quo. He called this uncertainty about the details of his bleak prophecy the “kindest of all God’s -dispensations.”</p>
<p>Nearly 50 years later, in <i>Merger of the Century: Why Canada and America Should Become One Country</i>, Diane Francis offers a vivid, bold reply: what makes no sense must finally stop. Let’s deal! The business journalist who divides her time between Toronto and New York is not tethered by Grant’s pessimism or his sense of tradition or his affection for ideas that do not work anymore.</p>
<p>Here is the merger deal as Francis sees it: the Americans pay us $16.9 trillion for our over–contribution of resources, a figure reached—to open the discussion—by weighting equally ten shared value metrics including oil and gas reserves, foreign exchange and gold reserves, and total land and water resources. Canada’s negotiators would divvy up these winnings to individuals, according to years of residence. “Canadian-born families,” she exclaims, “would hit the jackpot” ($741,600 per capita for 60 years of residence, $1,236,000 per capita for a hundred years!).</p>
<p>Temporarily, as the partnership’s biggest creditor, Canadians would be entitled to “managerial rights and fiscal oversight”: literally, the equivalent of the chair and a majority on the board of the Federal Reserve, the National Economic Council, Congress’s own budget office, plus the vice-presidency and office of treasury secretary. Permanently, Canadians would get at least 10 percent of the important jobs. Francis offers ways to manage a halfway merger: conceivably, commonwealth association for Quebec, and binational institutions to manage, for instance, an expanded currency area. “If the economics of a deal work,” Francis insists, “the political planets will align.”</p>
<p><i>Merger of the Century </i>is essentially a business case laced with alarming anecdotes, economic projections and geopolitical tough talk about China. Its deliverable is the “greatest country,” with the most stuff, in the “history of the world.”</p>
<p>We need this merger because, Francis believes, state capitalism outperforms free enterprise, America’s northern frontier is vulnerable and a merger of state-friendly Canadians with slightly paranoid American entrepreneurs could develop winning strategies. Yet Chinese-style state capitalism is not beating market capitalism now (see, for example, “Back on Top,” the special report in <i>The Economist </i>from September 21, 2013), and Canada is already safely within the U.S. commercial and security orbit.</p>
<p>So does Francis’s proposal really make sense?</p>
<p>I believe—like Francis—that there is a strong, honourable case to be made for union. But while she confronts nationalism and enthusiastically embraces the future, her focus on money carries too much weight. For Canadians, all that money would probably be enough to unleash the greed that “peace, order and good government” has kept in check. Unfortunately, her case to Americans is weak.</p>
<p>Francis develops a debt-equity scenario to finance the $16.9 trillion to compensate us for our additional worth. (The Americans would “issue long term bonds to Canadians as payment. In other words, Canadians would ‘take back a mortgage’.”) However, she does not explain to the new partner how this gigantic deal would beat the status quo. She offers no reason to expect that First Nations’ land claims, nimbyism, environmentalists, “social licence” concerns and local governments would be significantly less troublesome with fellow Americans than they are with friendly developers today.</p>
<p>Why would Americans expend nearly all their limited financial discretion on Canada? If China is the menace of the century, and America’s human and organization assets are failing, why not purchase the Republic of Korea and modernize America’s infrastructure? According to James Surowiecki in the November 4, 2013, issue of <i>The New Yorker</i>, for $1.2 trillion, Americans could write off all American student loans. Could Congress turn instead to inflate Florida real estate by subsidizing fresh waves of snowbirds from Canada?</p>
<p>Francis does not sell our Canadian votes in any of her options. But her merger models ask Americans—the most boisterous democrats in the world—to surrender eye-popping slices of their sovereignty to us.</p>
<p>The American and Canadian federations did not expand westward by concocting binational institutions to seduce each new entrant. Germany did not become the world’s second-most-powerful federation by offering $2 trillion to Germans behind the Wall. In each success, dominant regions agreed to water down their political power according to the prevailing rule: one citizen one vote. Elected politicians, accountable to the wider electorate, would manage risks, rewards, pork and old scores later.</p>
<p>Francis does not demonstrate how we could govern ourselves as well together as we do now apart. She does, however, expose what must light up the idea.</p>
<p>In 2012, Gallup found 96 percent of Americans ranked Canada as their favourite country—apart from their own, of course. In 2007, a World Values Survey suggested 77 percent would have opted for union if it would enhance their quality of life. Francis asserts refreshingly that Canadians’ “greatest asset is that the most powerful, innovative country in history really, really likes and respects them.”</p>
<p>Mutual respect and care, not compatible business cultures, tariff-free trade or common threats, are the critical ingredients in building federations. Alone, liberal values—ones both sides call universal—have not pulled us together in the past. And dreams of outsmarting the other side’s negotiators, or screwing Republicans, or escaping Quebec and southern racists will not work either.</p>
<p>In crisis, we are allies. That is settled. But Francis treats too lightly two questions that demand more attention: how does America meet the competition in this century, while remaining a decentralized, liberal federation? And, second, do Canadians want to help only in emergencies—or as fellow citizens?</p>
<p>Staying ahead of authoritarian competitors such as China would be best served not by racing to exploit the riches in the North, but by taking down all the artificial political divisions that divide the centre of our continent, where most of us create and live.</p>
<p>A bold parliament now could open the border by pursuing a Canada-U.S. security and currency union, and could do it without sacrificing meaningful economic flexibility or my civil rights. That would give everyone greater freedom, would reduce the distances between our great cosmopolitan cities, and would appeal to strategic interests in both countries.</p>
<p>Being more effective North American citizens will not happen, however, until Canadians stop relying on diplomacy and decide that they want to play politics with Americans, in elections and in Washington.</p>
<p>Forget about our vast spaces and petulant regions. We know already that citizens do not have to all like one another; love covers a multitude of sins. Uniting our federations should appeal to futurists. And one rather foolish proposal should not end the search. First, however, the idea needs a lover.</p>