Glen Pearson, my former MP and a community leader here in London, recently blogged about globalization, free trade and the negative impact he believes both have had on Canada over the past few decades.
While I share some of Glen’s concerns, I take issue with a few of his arguments:
- “Globalization and free trade were designed to give the stronger economic countries like Canada a global advantage.”
Wrong. The purpose of trade liberalization, especially multilateral trade agreements through the World Trade Organization, is to optimize the use of resources throughout the whole world. Since the WTO was established in 1995, the world’s population has increased by 1.16 billion people (+20% from 5.68 billion to 6.84 billion). If we do not produce good and services as efficiently as possible, how can we accomodate this kind of population growth? There are lots of benefits to a negotiated, rules-based trading regime. Cheaper imports and a lower cost of living, in all countries, not just Canada, are two of these benefits.
- “government and economic leaders didn’t fully foresee that successful companies in the West would actually abandon their historic partnerships and move to those parts of the world offering cheap labour”
On the contrary, governments and economic leaders did believe that firms would move jobs to lower cost jurisdictions. Moreover, Mike Moffatt has written at length about what’s happened to manufacturing jobs in Canada. The main driver behind job losses in Canadian manufacturing is better technology. Check out this chart on GDP per unit of energy, a measure of how efficiently we are producing goods and services.We are producing much more for each unit of energy, which is a relatively good thing. As Mike observes, this is no comfort to folks who have lost their jobs in manufacturing here in Canada. But it’s the truth.
- “While the middle-class in Brazil, India or China increase significantly, in North America we are headed in the opposite direction. Our standard of living has remained stagnant, with no sign of increase.”
This is the part of the argument that bothers me the most and is the most surprising to me. First of all, our standard of living in Canada, as measured by Gross National Income per capita, has increased by 24% since 1995 to $24,737 in 2010. Compare that to GNI per capita of $4,530 (Brazil), $2,355 (China) and $811 (India).
Glen has dedicated a lot of his time to South Sudan and he knows firsthand the abject poverty people experience all over the world simply through the accident of where they were born. From a humanitarian perspective, I would like to see the GNI per capita continue to increase in Brazil, China and India. I certainly like the trends in the chart showing the percentage of people living on $2 a day or less in Brazil, China, India and Canada. You will notice that Canada doesn’t even show up on the graph. If the cost of lifting literally hundreds of millions of people out of abject poverty is some pressure on the Canadian middle class, I’m fine with that.
Despite these objections to his general argument, there are two areas where Glen and I likely agree.
First, our failure to price the full cost of oil encourages the distant production and international shipment of goods. A global carbon tax regime would better account for the real costs of oil consumption. It would also be very likely to reduce the extent of globalization within the trade regime that we have already negotiated.
Second, very wealthy countries with high and rising GNI per capita, like Canada, could do a better job of redistributing income. I believe a basic income supplement that brings all Canadians above the low income cut-off (LICO), with a tax back rate that minimizes disincentives to work, would be a good policy to adopt here in Canada. If it requires a modest increase in consumption or income taxes, I’m fine with that.
We are suffering through a very tumultuous economy in the past few years and it has hit some people much harder than others. And there are no shortage of real problems here in Canada and the wider world to address. But I believe our institutions of governance, at the local, provincial, national and international levels, continue to serve us well, and I remain optimistic about the future.