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The great economic debate Canada needs and is failing to conduct

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The global economy is undergoing a dramatic transformation, the greatest since the decline of the British Empire as the world's leading economic power. At their peril, politically active Canadians are failing to analyze the transformation and its consequences for Canada.

With the political stage in the United States dominated by the sputtering Obama administration and the ever more extravagant behaviour of the Tea Party movement, insufficient attention is being paid to the underlying reality that the United States is in decline as an economic power. No matter how well or how badly the decline of the U.S. is managed -- and this will matter -- the shift to a new global economic order is underway.

Meanwhile in Canada, the Harper government, with little coherent opposition from the parties that hold the majority of seats in the House of Commons, is proceeding to tighten Canada's economic ties with the United States. During the period of parliamentary prorogation, the Conservative government extended the right of U.S. firms to bid on provincial and municipal contracts in Canada in the most significant extension of NAFTA since the trade deal began in 1994. The step was taken by the Harper government to enable Canadian firms to bid on the tail end of contract offerings at the state level in the U.S. under Washington stimulus spending plan. (In an earlier post, I critiqued the Harper government's initiative.)

Now the Harper government has signaled that it soon plans to open the door to a massive influx of foreign investment and foreign control in the areas of telecommunications and the mass media.

The Harper government's strategy is to end stimulus spending, keep taxes low for the wealthy and for corporations and to seek the fuller integration of the Canadian and U.S. economies.

What are the Liberals and the NDP doing?

Not much.

They criticize the Harper government initiatives by going after their peripheral details. What they have not done is to attack them at their very centre. They have not explained what needs to be explained -- that the course Canada is now on will be catastrophic for the Canadian people in coming decades.

If you step back from the debates on Parliament Hill and take in the wider reality, it is overwhelmingly apparent that massive change is coming in the global economy.

Take for instance the recent attack on American economic policies by China's Premier Wen Jiabao. Wen took sharp aim at Washington, saying that the U.S. is failing to rebuild its own economy and to maintain the value of the dollar. China, whose foreign reserves exceeded $2.4 trillion at the end of 2009, held nearly $900 billion of those reserves in dollar-denominated U.S. government Treasury Bills. What Beijing fears is that the U.S. is engaged in policies that will sharply reduce the value of the dollar and that this will not only slash the value of the Treasury Bills China holds, it will close off much of the U.S. market to Chinese exports.

Last year, Chinese officials speculated that the epoch in which the U.S. dollar serves as the world's reserve currency is coming to an end.

The current warnings from the Chinese government could force up interest rates on U.S. Treasury Bills and that would worsen the already perilous fiscal crisis in which the U.S. government finds itself.

In my view, China's relationship with the United States is bound to change with Chinese wages rising and the American ability to import on the same scale as in the past falling.

It's part of the transition of the global economy that our politicians are failing to debate. A future generation of Canadians will be bound to ask what they Hell our leaders were doing. Their anger will more likely be directed at the centrists and left-wingers who should have known better, and did nothing, than at the ideological conservatives who insisted on going down with the U.S. Ship in which they believed so deeply.

In the rest of this post, I'm including an excerpt from my book Beyond the Bubble: Imagining a New Canadian Economy, published by Between the Lines Publishing in November.

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