It’s perhaps easiest to see what’s going on if we think of Tony Valeri as a kind of canary.
The Liberal Member of Parliament and former parliamentary secretary to Paul Martin is being lowered down the mine shaft to see if it’s safe for more senior Liberals to follow.
It seems that Valeri is being trotted out to test Canadian public sentiment about further integration with the United States.
Valeri is arguing for a customs union with the U.S., suggesting the idea represents a bold new way of thinking. “We must not be afraid to think outside the box,” he told a recent gathering in Hamilton.
Now, perhaps I misunderstand the popular expression “thinking outside the box.” I had taken it to mean thinking in an unorthodox fashion, being willing to step outside the bounds of established thought.
But the direction of established thinking — particularly after September 11 — has been to integrate Canada more completely with the U.S.
Just how is it that Mr. Valeri is “thinking outside the box?” He seems deep enough inside the box to be sharing space with U.S. President George Bush.
Meanwhile, some commentators on the right want to push things even further and adopt the U.S. dollar. (And while we’re at it, why not also the flag and pledge of allegiance?)
Brian Lee Crowley, head of the Atlantic Institute of Market Studies, asked in a CBC commentary last week how long we are willing to pay the price of having a separate dollar.
The implication is that having our own dollar is hurting our economic interests. This notion leaves the impression that, while adopting the U.S. dollar might compromise our sovereignty, it would assure us a U.S.-style standard of living.
I guess then we can assume that Ecuador, Panama, El Salvador, Liberia and East Timor — all countries that have adopted the U.S. dollar — are soon to enjoy the same standard of living as the United States.
No doubt we can expect to see a brain drain of talented Canadians to these once underdeveloped countries, where lifestyles will begin to look more like those on TV sitcoms.
In fact, as these nations have discovered, adopting the U.S. dollar may be fun and easy, something that you can do right in your own home, but it does nothing to guarantee a higher standard of living.
”What is never clarified is the question of what rate do we would adopt the U.S.dollar at,” says Roy Culpeper, head of the North-South Institute in Ottawa. Culpeper notes this omission leaves the impression we would all just trade in our Canadian money for an equivalent number of U.S. dollars.
On the contrary, one Canadian dollar would likely be traded in for about 0.6 per cent of a U.S. one. Someone earning a Canadian salary of $100,000 a year would suddenly find herself earning about US$60,000. It’s hard to see how that makes us better off.
The reason our dollar has slipped so low, Culpeper argues, is largely due to distortions created by a world of free-flowing capital.
In the giant gambling casino of international currency markets, the value of a nation’s currency is largely set by movements of speculative capital in and out of its borders — movements that have little to do with the real value of a nation’s goods.
This helps explain why The Economist magazine recently identified twenty-eight out of thirty-one national currencies — including Canada’s — as being undervalued in terms of their true purchasing power.
There is a certain irony in our dollar hitting record lows these days, after we’ve jumped through every conceivable hoop to adjust our economic policies to meet the whims of international investors, offering up smaller government, lower taxes and low inflation.
Seems it doesn’t make much difference. After all, our dollar actually peaked in the mid-1970s, when we still believed in strong public programs, a progressive tax system and fighting unemployment as well as inflation.
One could almost muster an argument for being less focused on kowtowing to international investors. But better not stray too far outside the box.
What adopting the U.S. dollar would do is restrict our manoeuvring room as a country. Without the Bank of Canada, we wouldn’t have the option of lowering interest rates to help us through a recession.
Instead, it would be like the days of the gold standard; if world prices for our export commodities declined, our only option would be to reduce real wages in Canada — a brutal option, as Britain discovered in the 1920s.
But then again, some on the right long for this sort of “discipline” to be imposed on Canadian workers by international financial markets.
Certainly, it would be naive to believe the United States would give us a role in shaping its monetary policy, any more than Federal Reserve chair Alan Greenspan now checks with his counterparts in Ecuador, El Salvador, Panama and Liberia before announcing changes in U.S. interest rates.
There would be another effect from adopting the American dollar — it would put even more pressure on us to adopt U.S.-style tax and spending policies.
The double whammy of labour discipline and convergence with U.S. policies certainly explains why some on the right are so keen about the idea. It’s just a faster route to remaking Canada more strictly along market lines.
And that, one can be sure, is thinking very much inside the box.