Thursday, June 28, 2007

Mel Watkins on Foreign Investment in Canada

Mel Watkins was a key member of the Waffle group as well as author of the Watkins report. This article strikes me as quite weak, accurate enough on many points but completely idealistic and out of touch. The present global capitalism is hardly laissez faire. The world is replete with agricultural subsidies and and intellectual property rights that are meant to prevent competition and ensure profits. The hegemon's (US) economy is best described as crony capitalism in which success depends as much on connections to the elite as free trade and entrepreneurial skills.
There is tremendous regulation most of it in the interests of larger corporations.
When Mel Watkins talks of the real economy being one where efficient resource development benefits local areas-he must mean ideal! Of course resource development does usually in some ways benefit local areas but as in the Tar Sands it will also cause negative effects for others such as aboriginal people or any who depend upon water resources etc. that may be negatively affected by development. And where does efficiency come in? If all the environmental costs of oil development in the Tar Sands were figured in there might not be even a net benefit even in conventional economic terms. But this is irrelevant. The whole development is tied in to the needs of the US hegemon and political goals of becoming less dependent on "unreliable" oil. That is the real economy.
Watkins in the end does not even seem to call for public ownership. National ownership by which he means Canadian private ownership he sees as a necessary first step. THe reasons why Canadian capitalists are better than international capitalists is not clear to me. Historically many Canadian owned companies such as the now defunct Eaton's have been reactionary to the bone. The idea of a democratic socialist Canada seems to be banned from the discourse of this champion of the Waffle Manifesto. Maybe it is still there but just banned from being mentioned as too radical!

Laissez-faire isn't working
Canada's non-policy on foreign takeovers is sheer folly -- we need to act in our own interests, and those of the world

Mel Watkins
Citizen Special

Thursday, June 28, 2007

Forty years ago, in Canada's centennial year, eight economists laboured in Ottawa to produce a report for the Pearson government on foreign ownership and what to do about it, this being a matter much on the public's mind. Though it was disowned by the government when it was published in early 1968 and, by default, named the Watkins Report after its chief author, a young and little-known economist, in the subsequent decade its key recommendations, to create the Foreign Investment Review Agency and the Canada Development Corporation, were implemented.

The elections of Margaret Thatcher, Ronald Reagan and Brian Mulroney meant the death and undoing of such interventionism in Canada and elsewhere, in the name of laissez-faire and globalization and the fuller reign of the market.

But if you live long enough, the wheel turns full circle and the old becomes new again. So it is that the business press is now dominated by stories about takeovers and mergers and rising foreign ownership in Canada. What is to be done?

There are, as always in such matters, two answers: do nothing and do something. With Stephen Harper at the helm, do nothing is the policy of choice. But as policy goes, it seems to miss the point of what is happening.

Canadian economic development has from the outset been dominated by resource development for export. There is a logic to Canadian capital finding its strength in those sectors where Canada has its comparative advantage. It would seem to make sense, if the Canadian business class and the Canadian state are serious about playing the capitalist game, that it would create and nurture national champions in its resource sector.

But, as York University political economist Daniel Drache puts it, Canada is a careless country. Rather than creating national champions, if one emerges anyway, like Inco slowly over the years, we stand idly by and actually invite its takeover. In the 21st century, with resources such as oil and gas and uranium and nickel becoming the jewels of the global economy, Canada's non-policy is sheer folly. The great liquidity created by escalating commodity prices is being used to deprive Canada of ownership of its own resource industries. Somehow, this does not compute.

Companies themselves have become mere commodities to be bought and sold on a day-to-day basis. The relationship between that casino economy and the real economy of efficient resource development creating local benefit is obscure. Forty years ago the concern was with American ownership. Now our companies are targeted by Brazil, Russia, India and China, but our corporate and government elites remain passive.

It so happens that all of these countries have state-owned companies in the petroleum sector. Once upon a time we had PetroCanada but it was privatized. Now the response of the Harper government is not to reconsider state ownership but to worry that other countries' state enterprises may not be "neutral." This does rather miss the thrust of what is now happening in the world.

We now know something else that we didn't know before, and that is that the exploitation of resources, notably oil, can spell the end of the world at least as we know it. The fact is that the history of Canadian resource development is also the history of environmental degradation. What was once a local issue, a matter of national shame, is now a global matter in which everyone has a stake.

Countries that are resource-rich, it might be thought, have a special obligation to control development in the name of the global good. Alienating resources into the hands of giant corporations run from elsewhere and, in the last resort, accountable to no one, is unlikely to be helpful.

As mergers and the increasing concentration of capital sweep the world, it may just make sense not to embrace globalization yet more tightly but to contemplate some de-linking, some loosening of the ties. National ownership is a necessary first step. It builds a better base for Canadian companies to go outside Canada but, frankly, given what such companies are already doing to aboriginal rights within Canada and human rights abroad, this should not be seen as a priority.

It turns out that managing Canadian resources wisely in the interest of Canadians may be the best way to serve the good of humanity.

Mel Watkins is professor emeritus at University of Toronto and adjunct professor at Carleton University. He headed the federal government's Task Force on Foreign Ownership in the 1960s.

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