POL382 March 28th.docx

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12 Apr 2012

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POL382 March 28th, 2012
Economic Sovereignty & Gov’t Responsibility: In Globalization Emptying Out Our
- basic but imp issues affected by global issues/events/markets
- political system is making promises can’t keep – re job security, mortgage interest
rates, etc. which is a major issue in democracy
- we live in a global economy w/ a lot shaped outside our borders
o YET Canada is country where democracy DOES matter & changes can be
made; we have more control over our destiny than most other countries in
the world
o Which may be most imp differentiation
Democracy & Globalization
- “Nat’l democracy & deep globalization are incompatible”
- “When globalization collides w/ democratic politics, the smart $ bets on politics”
- from Dani Rodrik reading
- what does it actually mean?
- Gov’ts are going to defend their own sovereignty, which comes before economics
- Sovereignty = capacity to compel, to sezie an asset & run it (extreme form of politics
trumping economics)
- Claim here is that political systems have capacity to coerce -> they set the rules, so
w/ choice b/n losing control or seizing economy, will obviously choose the latter
- Why is it smart to bet on politics over globalization?
- Control = key word here
- Fundamental thing re democracy v simple: ppl want to have sense that not play
things of vast impersonal forces outside their forces
- Being Canadian is largely abt control, that we control our destiny somehow &
collectively have pwr to determine what happens to/in our lives & to/in our country
- Economy drives the things that matter most to us: pension, job, healthcare
- Rodrik says bet on politics b/c globalization not just driven by laws of market, b/c
ppl want to control those laws -> political fact
- Then question becomes: how much control is actually possible?
- But the idea of control is what politics is all about
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- When politicians say they can do something about high unemployment #s
structured by forces beyond control of domestic Canadian politics, how accurate is
o This is the connection b/n globalization & democracy need to look at
- other reading discusses “external constitution”
o the bilateral & multilateral trade agmts that Canada has entered into (ie
NAFTA, WTO) which commit Canada to free trade
- what’s not to like abt open markets?
o To the benefit of US companies over Canadian & some uncompetitive sectors
of the Canadian domestic economy; but has also been good for some parts of
the economy
Although again has helped concentrate wealth in a smaller sector of
society; economy has grown but the share of the growth the broader
middle class & lower has been stuck since the 1980s
- Has it been good for our politics? Has it reduced our capacity as a country to protect
our procurement market?
o Procurement market = gov’t purchasing; 1 of key levers of gov’t policy = “buy
Hugely significant in favouring domestic products/markets or not; in
buying Canadian or not
Free trade can reduce ability of gov’t to do so
The External Constitution?
- Commodity Prices
o Ie Oil/gas prices set internationally
- Exchange Rates
o As commodity prices go so do exchange rates
o As commodity prices increase, value of Canadian $ increases
o So increase in oil is good for AB, bad for ON b/c ON’s economy (ie
manufacturing cars) heavily dependent on Can $ being slightly lower than US
o Canada is a petro-currency
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o Minute peg currency to commodity prices clobber central Canadian economy
dependent on a 70 cent dollar
o Tfe economic pwr has shifted to the west, to SK & AB & w/ it political pwr
o These are the big forces which determine v imp things
- Interest Rates
- Trouble is no party has a plan to deal w/ these imp factors (mostly b/c can’t) &
Conservatives just embrace them, say “welcome to globalization! There’s nothing we
can do!”
TINA: There is no alternative
- have to keep markets open
o Smoot Holly: piece of protectionist legislation intro’d in US in 1931 as a
response to catastrophic depression, idea was let’s close off US market to
foreign goods to save US market
o Consequence was every other economy put up protectionist barriers
o Tried to put fences around their economies which made every aspect of
depression worse
o From that experience has come conviction that free trade better than locking
o So we’re stuck w/ it, but if stuck w/ it, only so much gov’t can do
- keep taxes low
o to keep business here; lose locational advantage
o taxation helps the pros here, the public goods, but if it’s too high in favour of
those it’ll be too high for businesses
o keeping taxation low to keep jobs, but high enough to attract & maintain the
- keep deficits under control
o if pile up deficit basically hand control over economy over to the foreign
o ie Spain, Greece, Ireland -> political systems which have lost control of
o deficits are fundamentally political issue: do you control your own economy?
- don’t try to pick winners
o if use public $ to help market competitors compete, then they’re not fully
competitive -> fine balance b/n helping someone get started & holding them
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