Kellogg's Response To Hurtig, Laxer, And Mathews

Hurtig says that the argument in "After Left Nationalism" "sets up a number of straw men and then proceeds to knock them down". Laxer agrees, claiming for instance that "left nationalists have never argued that Canada is a third world country."

Let's start with the latter point. In 1975 in the pages of This Magazine, Tim Draimin and Jamie Swift put Canada in the same economic category as Iran. In 1981, Philip Ehrensaft and Warwick Armstrong ­ in an essay included in Moscovitch and Drover's Inequality­ placed Canada with a group of five "dominated economies" that included Uruguay. In 1986, in his widely circulated Not for Export, Glen Williams argued that the structure of Canada's exports and imports, distorted by the country's relationship with the United States, "leaves us squarely in the company of Brazil and India." I could go on. The left nationalist paradigm has been so hegemonic in Canadian political economy that it is not difficult to find authors who have at various times compared Canada¹s economic situation to that of a Third World Country. One aspect of the political economy portion of my argument is to argue that this is wrong, that it is inaccurate and misleading to see Canada as in any way comparable in its situation in the world economy to countries like Iran, Uruguay, Brazil, or India. In fact, quite the contrary ­ Canada is a well-established member of the very small group of countries which are at the top of the imperialist world system. This, of course is why Canada is a member of the G8 and of the Quadrilateral group which (attempts) to dominate the WTO.

Further, even when the analogy with the Third World is less explicit, it is embedded in the left nationalist analysis. The dependency literature developed to deal with dominated, underdeveloped societies. It cited as a key aspect of this underdevelopment the truncation of an indigenous manufacturing sector and the development of a trade pattern of dependency ­ with raw material exports from the Third World being traded for finished manufactured goods from the First World. Is it not the case that the editors of Canadian Dimension, in their recent restatement of left nationalism, argued that dependency on the US had left Canada with a resource-based economy? Is it not the case that many, many authors have argued that the very structure of Canada¹s export trade reveals the country as a "hinterland" economy, one that exports raw material in exchange for finished manufactured goods built abroad? And is it not then, reasonable, to examine the veracity of these views by actually considering the facts? The graphs that I put forward on these matters are relatively simple, and in my view, compelling. They do not critique "straw men" but rather the "hewer of wood and drawer of water" image of the Canadian economy, painted by now two generations of Canadian political economists. It is an image that is quite simply wrong.

Hurtig makes a more substantial point challenging the assessment made in "After Left Nationalism" of the changing face of US control of the economy. He acknowledges that US control began to decline in the 1970s. He attributes that decline to the implementation of the Foreign Investment Review Agency. He sees the increasing levels of US control in the 1990s as a function of the implementation of the FTA. He is placing, I would argue, far too much emphasis on the economic impacts of various federal policy initiatives. The changing structure of the Canadian economy is being shaped by forces much more powerful than the Canadian state. But his outline of the facts is essentially correct. He, finally, acknowledges that toward the end of the 1990s, US control again began to "turn down". But he argues "when the reports for 2000 and 2001 are published his [Kellogg's] "turning down" will have to be revised to "rapidly increasing".

It is possible that the 2000 and 2001 reports will show an increase in US ownership. This does not alter the fundamentals of the case. "After Left Nationalism" offered charts showing an almost quarter century of decline in US ownership as a contrast to the oft-repeated claims that US control of the Canadian economy was following an inexorably upward trajectory. Further, even if 2000 and 2001 figures do show a return to increasing US control, this would not alter the essential thrust of the argument. The left nationalist dependency paradigm was wrong in the 1960s, when levels of US control of the economy were dramatically increasing. Left nationalism assumed that foreign ownership in an advanced capitalist economy like Canada's was at least partially analogous in its effects to foreign ownership of the economies of Third World countries. This has clearly not been the case. The Canadian left nationalist political economy tradition was narrowly fixated on the issue of foreign ownership, and this blinded it to the key dynamics driving the Canadian economy.

At the end of his reply, Hurtig reveals a similarly narrow fixation on foreign control that is shockingly out of touch with reality. He says that "After Left Nationalism" ignores the "rapid increases in foreign ownership and control in Canada by countries in the European Union and Asia". But where is the evidence for these "rapid increases"? European control of the Canadian economy, as a percentage of operating revenue, stood at 5.32 per cent per cent in 1988. In 1999, it was virtually unchanged at 5.39 per cent. As a percentage of profit, the figures are 6.43 per cent and 6.24 per cent. The spectre of "Asian control" is similarly a mirage. It is so low that it only figures into the "Other" category of the Statistics Canada database. And "Other" control" of the Canadian economy, as a percentage of operating revenue, was 3.01 per cent in 1988 and 3.78 per cent in 1999. As a percentage of profits it was 3.07 per cent in 1988 and just 2.48 per cent in 1999. There is no evidence at all of the "rapid increases" of European and Asian control claimed by Hurtig.

The point of the critique of dependency developed by Andre Gunder Frank and others was to show the way in which imperialist domination led to economic and social underdevelopment. And of course there are times when foreign domination retards development. The British control of Quebec, from conquest in 1759 until well into the 19th century ­ was a case in point. British political control of what had been "New France" was consolidated by an alliance between the British state and sections of the local Quebec elite ­ notably, the Church hierarchy and the big landowners. This had the effect of "freezing" into place archaic class relations in the countryside. The over-long preservation of the seigneurial system delayed the development of capitalist agriculture in the province, slowing down the development of farm productivity, culminating in an outbreak of famine in the 1830s and mass migration of Québécois peasants to the United States. That is a classic example of what Frank and others called dependency and underdevelopment.

It is in circumstances like that ­ where political control by a foreign power retards social, economic and political development in a society ­ that nationalism erupts as a mass, political force. And since in these circumstances it is directed against colonial domination, nationalism can have a progressive, democratic dynamic.

But this picture of dependency and underdevelopment does not fit the modern Canadian reality in the slightest. Social and economic development in Canada shows no signs of underdevelopment. There are many ways of showing this. In 2002, for instance, measured in purchasing power parities, Canada¹s gross output per person was $29,400, ninth largest in the world. Contrast that with Iran at $7,000, Uruguay at $7,800, Brazil at $7,600 and India at $2,540, to pick just a few countries that are in a clearly different economic ballpark than Canada. The "purchasing power parity" measuring stick has its uses, but one of its effects is to "shrink" the statistical gap between rich and poor countries. The reality of life in Brazil is in fact even harsher in comparison to life in Canada than the gap in PPPs would here indicate. Sometimes non-economic measures are more useful than economic ones as measures of development. Infant mortality, for instance, is another important measure of development. At 4.88 per 1,000 live births, Canada ranks behind Japan (3.30), Germany (4.23) and France (4.37), ahead of the UK (5.28), Italy (6.19) and the US (6.75) and far ahead of places like Russia (19.51), Mexico (23.68) and Brazil (31.74). By all traditional development measures, Canada is one of the most developed economies in the world system. To immigrants of Canada from India, Pakistan, and elsewhere in the Third World, this point is quite obvious, without recourse to the use of statistics.

This is, of course, not to say that Canada has no social and economic problems. Unemployment has stayed high, even in the context of an economic recovery. There are growing levels of inequality and homelessness. Entire regions have been devastated by the decline and, in some cases, collapse of traditional extractive industries. There are recurring crises of "overproduction" that result in spasmodic episodes of bankruptcies and layoffs. But these problems are not rooted in dependency, but in capitalism. Canada, like the US, France, Germany and the other advanced capitalist nations ­ is riven with the terrible contradictions endemic to a market economy.

2) The coming "tune-up" of the American economy

Necessarily an analysis of the Canadian economy must be carried out in conjunction with one of the US economy. Both Laxer and Hurtig make a great deal about the US boom in the 1990s and its impact on Canada-US relations. Some of what they say I have no argument with. By many criteria, the US economy outperformed the Canadian in the 1990s. But as Mathews pointed out in his contribution to the debate, one has to be very careful with statistics. "After Left Nationalism", presented at the CPSA conference in Halifax 2003, was actually one half of an analysis, the other half being "Contradictions of the American war economy", a dissection of the current state of the US economy (presented on a panel at the Society for Socialist Studies Conference, also in Halifax 2003, and forthcoming in the annual Marxism http://www.socialist.ca). The essence of that argument was that the 1990s US boom was in many ways illusory. The gap that opened up between the US and Canada in the 1990s was more apparent than real.

The US boom was sustained on a mountain of debt that was hidden for a decade under the paper values of a stock market gone mad. Instability abroad led to great waves of money pouring into the US economy, regardless of its internal economic fundamentals. The collapse of the Japanese stock market in the early 1990s, the depression that hit Mexico in the mid-1990s, the collapse of the South-east Asian economies in the late 1990s ­ all of these led investors to flee areas of instability, and pour their money into what they saw as the one safe haven in the world, the United States.

This injection of foreign money sent US stocks soaring to ridiculous heights, allowing corporations to continue investing in spite of massive and growing debt loads. The influx of foreign money ­ in conjunction with the near-monopoly position held by the US dollar as the principal foreign reserve currency in the world economy ­ allowed the US to do what no other nation in the world could do. It ran a massive and growing trade deficit and did not see its currency collapse. In fact, the US dollar defied gravity, and gained in strength throughout the decade. This allowed Alan Greenspan to ratchet down interest rates to very low levels, something that in other countries would have led to a run on the currency. Low interest rates were like octane to an old Chevy in need of a tune-up. Growth could continue in spite of mounting levels of debt ­ for a while. But like the Chevy, there will come a time when the long delayed "tune-up" can no longer be postponed. The "tune-up" of the American economy will be one of the big stories of the first part of the 21st century.

This "paper boom" (to borrow a term coined by Jim Stanford) did have an impact. Economic growth in the US was higher than in Canada (and Europe and Japan). The high dollar (and the consequently low and weak Canadian dollar) did create an environment where Canadian assets could be picked up on the cheap, for a few years reversing more than 20 years of declining levels of US control. But this US advantage, it is increasingly clear, was temporary and built on sand. The stock market collapse of 2000, a trade deficit that is now approaching half a trillion dollars, a federal government deficit, that if measured the way the Canadian government measures its own, would be almost three quarters of a trillion dollars ­ all of these are exposing the weaknesses hidden by the illusory US economic boom of the 1990s. We saw some of this illusory growth go up in smoke with the spectacular bankruptcies at Enron and WorldCom. These, and the sudden collapse of the US dollar earlier this year ­ when measured against both the Euro and the Canadian dollar ­ are harbingers of economic difficulties to come, a story that will have many implications for Canada.

Laxer's treatment of the 1990s is very revealing, and very puzzling. He actually identifies exactly the same phenomenon outlined in "Why the left needs to abandon Canadian nationalism". The 1990s saw a tremendous shift in Canada¹s Foreign Direct Investment (FDI) profile. Canadian outbound FDI or Direct Investment Abroad grew while FDI "inbound" into Canada decreased, a shift in Canada's "net" direct investment position. The argument in "Why the left needs to abandon Canadian nationalism" was that this was bringing to light something that had been hidden in the statistics for decades. Canada has long been a player in the Foreign Direct Investment game, and now as a net exporter of capital, its profile as an imperialist power is increasingly transparent.

Laxer's statistics are quite similar, but his conclusions are very different. He sees the relative decline of US Foreign Direct Investment into Canada, and the steady increase of Canadian direct investment abroad, not as signs of Canada's increasingly aggressive stance abroad, but as effects, again, of dependency on the US. But a sine qua non of the left nationalist literature has been the central role of inbound FDI. It was Kari Levitt who almost 40 years ago fingered high levels of inbound FDI as the central mechanism by which Canada was being ground down into a position of a neo-colony. Laxer agrees that FDI relative to Canadian direct investment abroad has steadily decreased in the Canadian economy. From 1997 on, Canada has been a net exporter of capital. But Laxer, argues that too is a sign of dependency. This is extremely confusing. According to Laxer (following Levitt and many others), when inbound FDI outpaces Canadian direct investment abroad ­ this is a sign of dependency ­ not just any sign, but the principal mechanism through which dependency is constructed. But according to Laxer, when this is reversed, and Canada¹s direct investment abroad exceeds inbound FDI ­ when Canada is a net exporter of capital ­ this is also a sign of dependency. Laxer is trying to have his FDI cake and eat it too. His argument is completely incoherent.

Hurtig deals with the export of capital argument differently. He says that it's not really Canadian. According to Hurtig "much of this so-called 'Canadian' investment is not Canadian at all but represents foreign corporations in Canada investing abroad." "Much" is, however, not a very precise term. Because it is also true that "much" of it involves completely Canadian corporations involving themselves in everyday, advanced capitalist Foreign Direct Investment ­ the export of capital that is the one of the key hallmarks of imperialist countries. As this is being written, the very Canadian Manulife has just acquired the very American John Han*censored* Financial Services in a $15 billion deal that leaves Manulife as North America's second largest life insurance corporation. In any case, the central question is not the nationality of those engaging in the export of capital game from within the borders of Canada, but the fact that corporations in the Canadian economy are players in this game. The export of capital is characteristic of the advanced capitalist (and hence imperialist) states that dominate the world economy. Put it the other way around. The impoverished, dominated states do not engage in this game. Canada does. It is now a net exporter of capital. Canadian Foreign Direct Investment is now a growing issue for other countries in the world system to deal with. Surely this is important as an aspect of our understanding of Canada¹s place in the world economy.

To the extent that Hurtig admits that there is all-Canadian capital going abroad, he dismisses it saying that much of it involves mergers and acquisitions by Canada¹s banks. It is not clear why this is relevant to the argument. There is a long history of banking capital¹s intimate relationship with industrial capital. Particularly in the context of an American economy floating on a sea of debt, control of US financial institutions is actually not a bad strategic position if one of the long term objectives is to acquire a chunk of the US economy.

3) Solidarity with the America of resistance

Let us shift to the terrain of political strategy. Ultimately, this debate, ­like all political debates, is only useful to the extent it translates into action. How will we act to challenge the capitalist monster that is attacking our economy, our lives, our planet? Here, it is worth getting rid of some red herrings. Laxer implies that my analysis would lead me not to oppose capitalist trade deals and to insist that working people have no interest in combating transnational corporations. In 1940 such an analysis, he argues, would have led me to "convince French workers that they had no interest in resisting the Nazi takeover of their country".

Let us deal with these serious charges in reverse order. First ­both papers Laxer is critiquing are rooted in the internationalist Marxist tradition. Many Marxists, internationalist to their bones, ­ fought and died opposing the rise of fascism in Europe, including the Nazi takeover of France. Second,­ of course working people have an interest in challenging transnational corporations ­ whatever their nationality. The point is that they have an interest in resisting all transnationals, American and Canadian (and there are, as Laxer knows, many Canadian-based transnational corporations). Third,­ Marxist internationalism is rooted in opposition to capitalism and hence opposition to capitalist trade deals, whether their initials be WTO, the FTAA or NAFTA. Opposition to them on a class and internationalist basis follows from a consistent analysis of the Canadian capitalist system in the context of the global economy. These "trade" deals should really be called privatization deals, deregulation deals, or anti-union deals. That is their essence-- opening up an unbridled assault on the living and working conditions of ordinary people in the name of corporate profits. Canadian workers have an interest in combating this neoliberal corporate agenda ­ as do their American sisters and brothers.

And in this regard, considerable progress has been made in the anti-capitalist movement, precisely because the movement is less tainted with nationalism and is more clearly internationalist than it was in the 1980s. In the fight against the FTA in both Canada and the US, nationalist anti-Mexican rhetoric, promoted by sections of the labour leaderships in both countries, was all too prevalent. It has been a huge step forward that this politics of division ­ pitting Canadian workers against Mexican workers ­ has increasingly been replaced by the politics of solidarity -- Canadian, US and Mexican workers standing together against job cuts in all three countries.

There are many areas where people on different sides of this debate will find common ground. There is a corporate assault on wages. There is a corporate assault on health care. There is a corporate assault on the environment. We all agree that these must be opposed.

But Laxer, Hurtig and Mathews invoke nationalism as the vehicle that should carry this opposition. Laxer in particular, sings Canada's praises. Canada has no death penalty. Canada has better medicare than the US. Canada stayed out of the 2003 Iraq war. These are all true. But there is another Canada. The highest rate of suicide in the world exists among teenagers living on native reserves in Canada. Canada has detained without charge 21 Pakistani and South Asian men as alleged "terrorists" with no evidence and in violation of due process. Canada helped to bomb Yugoslavia, Afghanistan, and in 1991, Iraq. Canadian troops tortured and killed Shidane Arone in Somalia. Canada¹s Talisman sided with a brutal regime in Sudan. In 1970, the Canadian government drew Richard Nixon's admiration by imposing martial law on Quebec and detaining hundreds of socialists, trade unionists and Quebec nationalists on completely trumped up charges. There are aspects of Canada that must be defended, of course. But there are many others that we must oppose. There are absolutely no grounds to argue that the "good" aspects of Canada are those that are Canadian and the "bad" are those that are American. To be a consistent social activist in this country, you have to hate the Canada that kills Somali teenagers, hate the Canada that condemns its Aboriginal people to Third World living conditions, hate the Canada that engages in blatant racial profiling and illegal detention.

Being a Canadian nationalist is a hindrance to a consistent left and progressive stance, not a help. And when Robin Mathews makes a list of "good" nationalists that includes Jacques Chirac,­ it makes one shudder. Chirac is a Tory of the worst sort, the man who oversaw the restarting of French nuclear testing in the South Pacific. French nationalism is no more progressive now than it was when it was used to wage war on Algeria and Vietnam.

And just as there is another Canada, there is also another America. It is a caricature to paint the US as if it is a monolithic imperialist bloc. It is a class-divided society with a long history of mass movements against capitalism, oppression and imperialism, a history that is centrally important for social activists in Canada. Millions of American workers in the 1930s occupied their factories, beginning the movement for industrial unions. Had they not done so, industrial unions in Canada would be much weaker than they are today. American students and workers in the 1950s and 1960s launched the great civil rights movement. On its backs, rose the Black Power Movement and the magnificent movement against the war in Vietnam. Canada's radicalization in the 1960s and 1970s would have been incomparably weaker without these developments. Yes, Canadian courts have upheld the right of lesbians and gays to marry. But where did the modern lesbian and gay rights movement begin? In Stonewall, in New York, in the United States of America, in 1969. Without the magnificent courage of the American gay men who hurled garbage cans and bricks to defend themselves from the police, without the 37 lesbians and gay men who went on to form the Gay Liberation Front, where would our struggle for lesbian and gay rights be in Canada? And of course, the modern anti-capitalist movement did not begin in Windsor and Quebec City. It began in Seattle in 1999, with American Teamsters, Steelworkers and Longshore workers challenging the WTO ­in solidarity with anti-capitalists, environmentalists and activists from the US and many countries around the world, including Canada and Mexico.

That other America is our ally,­ the America of resistance. That America of resistance will be on the streets, hundreds of thousands strong, on October 25 as anti-war activists surround the Pentagon. The place of social activists in Canada is side by side with our American sisters and brothers against the imperialism and the capitalist system that crushes us all. This internationalist perspective is far more fruitful as a starting point for resistance than the Canadian nationalism offered us by Hurtig, Laxer and Mathews.

----

The debate so far:
Paul Kellogg's Cornflakes by Robin Mathews
Why the Left Needs to Abandon Canadian Nationalism by Paul Kellogg
Mel Hurtig's response to Paul Kellogg
The Fight for Sovereignty by James Laxer
The Necessity of Canadian Nationalism and Left Directions by Robin Mathews

Other: CDM rebuttal to Kellogg's Why the Left needs to abandon Canadian nationalism
The debate that went before: Paul Kellogg and Canadian Dimension

Note: Mel Hurtig James Laxer Robin Mathews Why the left needs to a... After Left Nationalism:... http://www.socialist.ca Paul Kellogg's Cornflak... Why the Left Needs to A... Mel Hurtig's response t... The Fight for Sovereign... The Necessity of Canadi... CDM rebuttal to Kellogg... The debate that went be...