The Lost Massey Lectures (36 page)

When David Ricardo formulated his doctrine of comparative advantage, he was writing about trade between sovereign and independent nations, each choosing its own areas of specialization. He was not talking about trade between a motherland and its colonies where the size of the home markets and the direction of investment made the colony a supplier to the needs of the heartland. This was not trade but rather an in-house transfer of resources. In an imperial federation, the colonies and dependencies have no room to pursue the balanced growth of their own economies. Their role is to consolidate and strengthen the empire by undertaking those patterns of development that will converge with the needs and objectives of the empire.

If one wants to create a world economy, one does it in the Soviet manner. One creates a bloc, a collection of nations and peoples ruled over and dominated by a powerful state. The centre is supreme and imperial and all the rest are satellites. Then, and only then, can one speak of a collective world, a world economy in which the factors and resources of all the member nations are integrated in the pursuit of one set of goals, the goals of the governing bloc. The cohesion of the bloc is effective when the goals of the satellites—balanced growth, as an example—are sacrificed to the imperial aims of the bloc itself. Then the supreme power in the heartland can speak of combining the labour of some members, the minerals and petroleum resources of another, with the technology and capital of the centre to produce an optimum output geared to heartland objectives—world domination or whatever. In such an integrated economy, East or West, we can be
certain of two results—the subordination of consumer interests in all parts of the bloc (including the dominant centre), and the vulnerability and dependence of the satellite members as their own specialized contributions to bloc production creates imbalance and distortion at home.

Within the Soviet world economy, the nation-state, as an independent political unit free to choose its own principal directions, no longer exists. The argument in 1983 seems to be, at least in the current Washington orthodoxy, that a similar cohesion must be assented to, if not imposed, in the West. The emphasis is tilting from the alliance outlook, all for one and one for all, to the imperial view—all for one and the one
is
all.

Economists who speak of a new world economy are thinking of the world, or the Western part of it, as one vast production line, turning out so many machines or gallons of paint or whatever. It is international production, using “the capital of one nation, the land of another, the labour of a third.” The economic region is not a nation but the world itself.

The same people generally think of themselves as the core, the heartland, with all the rest a periphery. American economists, in particular, who describe the concept of international production as a breakthrough replacing classical (Ricardian) trade theory and salute it as a profound insight of great intellectual power forget, or do not know, that the Soviet bloc has been organized in this fashion since the days of the first five-year plan. Canadians, of course, see nothing new in all this, since Great Britain organized her colonies in this fashion and, at least since 1854, the United States has so regarded Canada as its economic appendage.

Extending the Monroe Doctrine to cover Europe and Japan made the commitment to the policies of international production and a supranational allocation of resources seem as natural as the night following the day. The result would be an economy of the
Western world via the restoration of the hegemony of the United States. This unified conception of the world is not an economic arrangement of production, consumption, and distribution patterns designed to satisfy the varying needs and objectives of nations in differing circumstances, but rather an arbitrary and ruthless imposition of productive processes geared to securing nuclear supremacy and undisputed world dominance as the first and major objective of a tightly controlled Western bloc.

Efficiency in international (or national) production of anything is easy. Settle on what it is that you want to produce and then produce it. The economic problems do not lie in the production process. They surface later in the exchange process, in the market place, in the consumption and consequent distribution of incomes arising from the particular production if it is consumed. The pattern of production in a market economy is dictated by the adding up of the choices of consumers, which, being infinitely varied, do not admit of less than numberless producing units—from family units and selfless communities willing to work for no reward or very little, the growing informal (bartering-services) economy espoused by the Vanier Institute, to the local, provincial, regional, and national markets that integrate the myriad decisions to exchange and the even greater number of decisions not to exchange.

In a world-command economy, which is not a market economy, the organization of production and consumption obviously lends itself to international production. Nuclear missiles come to mind. But in this instance, production may be divided between a Soviet bloc and a United States bloc. Surely, according to the logic of the one-world economists, the two should then get together and meld their technology, resources, capital, and labour and produce at optimum efficiency, say, fifty thousand nuclear missiles. Since this production is its own consumption, they could
each take twenty-five thousand missiles home, to do with as they will, so long as they leave the rest of us with the freedom to look after our own problems of poverty, unemployment, inflation, and pollution of the environment.

To withstand the Soviet might, it is not necessary for the nations of the West to regroup themselves into provinces within a great United States empire and so become the very thing that we despise. Yet there are many in the corridors of power in Washington who bitterly regret the decline in the capacity of the United States to control and direct the course of political and economic change, as it was able to do in the two decades following the Second World War.

The following lectures were recorded prior to the United States intervention in Grenada. The circumstances surrounding the invasion make clear that the United States has little faith or confidence in alliance systems (and even in some allies) and is in fact determined to play a role that emphasizes its power, both military and economic, to control events—and this with or without the consent of members of the alliance.

To have power is to use it. The sources of United States power are the nuclear force, a market well in excess of three trillion dollars, and a veto power over
IMF
decisions on the granting of loans and credits to nations.

The nuclear umbrella is of incalculable benefit to Europe and important to Japan. Canada would be severely damaged by even a partial closing of the American market to our goods. The less affluent nations, living with the burden of monstrous debts and interest repayments, depend on U.S. good will as they plead their case for further loans. These are strong cards, and, in the game of power politics, there should be little doubt that the United States can and will play them.

The view from Washington holds that the policies of the
nation-states of the West
must
conform to the needs of global security as defined by the United States. The use of such terms as “alliances,” “participation,” and “interdependence” has been abandoned as foolish rhetoric that influences no one. The remaining nation-states of the Western alliance, therefore, face the double challenge of maintaining their own sovereignty and independence in face-to-face confrontation with their dominating partner while, at the same time, making clear to the Soviet bloc that there is in this diversity the real strength that comes from knowing that freedom is worth defending and that it will be defended at all costs.

Twenty-two years ago a director of a large Swiss bank gave me his view of Canada as seen from his boardroom in Geneva. “Your country is all but faceless,” he said gently, describing our passivity and inertia in the face of American initiatives.

Later, in the rather long discussion, he mused, “You do have cards of your own to play, if you would only act instead of being always acted upon. After all, if the United States cannot get along with Canada, who can they get along with?”

If we do not want to live in the bipolar world of perpetual confrontation, we, as a people, should say so—loud and clear.

P
ROFESSOR
E
RIC
K
IERANS
Department of Economics,
Dalhousie University,
Halifax, Nova Scotia.

The theme of these lectures reflects an anxiety for the continued freedom and independence of the constitutionally governed nation-states. In 1983, military security demands the close collaboration of the nations of the West, but does it require the formation of a totalitarian bloc to match the satellitic cohesion of the Soviets? Secondly, given the increasing pressure for ever-greater levels of economic integration, how much freedom will nation-states have to set their own objectives and to choose their particular policy instruments and institutions?

Military security in a nuclear age and the alleged efficiency of economic interdependence are the arguments used to force the industrial nations of the West along the road to political unification. At Williamsburg, Virginia, the seven leading industrial nations put their stamp of approval on American defence proposals as well as the U.S. program to promote the convergence of the economic policies and performance of the group.

The meaning of Williamsburg is quite simply that the global community has arrived and that the industrial nations of the West are transforming themselves into a superbloc to match the cohesion and forced unity of the members of the Warsaw Pact.
NATO
, the
OECD
, the
IMF
, and
GATT
are organizations without authority or the power to make decisions. Making recommendations, searching for consensus, dialogue and debate—the time for all this is past. Government of the Western world, under the hegemony of the United States, is a distinct possibility by 1990.

The summit statement on arms control of May 29, 1983,
¹
agreed to by all seven nations, contained the following declaration: “the security of our countries is indivisible and must be approached on a global basis.” President Reagan, in supporting the declaration, effectively extended the protection of the Monroe Doctrine from North, Central, and South America to Europe and Japan. With this single sentence, the industrial nations of the West became a single, homogeneous bloc, and the six members underlined their gratitude for and submission to the absolute dominance of the United States by agreeing to “proceed with the planned deployment of the U.S. systems (Cruise and Pershing II) in Europe at the end of 1983”—unless the Soviet Union agrees to meaningful and constructive concessions in the negotiations on strategic weapons, intermediate-range nuclear missiles, and chemical weapons.

Confirming the objective “to maintain sufficient military strength to deter any attack, to counter any threat, and to ensure the peace,” the conference studied the American proposals for the integration of the national economies and the convergence of economic policies. Military strength depends on productive power, and the optimization of productive power requires the clear recognition of the bloc's priorities, the organization, acquisition, and development of the resources of all the members, and
the allocation and budgeting of the total resources for maximum efficiency and output.

Ignoring the desire of each nation to retain as much freedom as possible in setting its own priorities and the policies necessary to the resolution of its particular problems, the conference placed the needs of the bloc itself ahead of the requirements of the merging members. “East-West economic relations should be compatible with our security interests,” states the declaration,
²
thus placing a large question mark on the future of European-Soviet trade, though not necessarily on American grain exports.

The path to economic unification is spelled out in an annex detailing the necessary “near-term policy actions leading to convergence of economic conditions in the medium term.”

In the realm of monetary policy, all nations are agreed on a “disciplined non-inflationary growth of monetary aggregates and appropriate interest rates,” a clear assumption that the relative position of the members is in equilibrium.

The nations will pursue a deflationary fiscal policy by exercising restraint over government spending, by reducing structural budget deficits, and by keeping in mind the impact of tax and expenditure policies on interest rates and economic growth. Since the seven members are also expected to increase their support of
NATO
and military expenditures, it is clear that the interests of consumers are being subordinated to the objectives of the military union.

Just as restrictive of national freedom to make one's own choices as the monetary and fiscal packages is the agreement to pursue greater stability of exchange rates and policies of convergence and co-ordinated intervention in exchange markets. This attempt to introduce a 1983 version of the Bretton Woods monetary system is bound to fail for the same reason that Bretton Woods failed. One cannot packet together nations of unequal size,
resource wealth, and productive power except under military and economic pressures.

It is sensible to agree that for some purposes, such as military security in this nuclear era, nations must join in collaboration and alliance. It is a question, however, if the creation of a supranational bloc on the same model as the Soviet system is called for. Internalizing all military power in a single high command would be the surrender of the very values and traditions that we cherish, the freedom to choose the principal directions of national life. For military security inevitably demands the integrated economic community, and this adds up to the loss of national autonomy. Countries that have no control over their monetary system, their tax and expenditure policies, and their exchange rates are not sovereign.