Couchiching Online
nav button nav button nav button nav button nav button nav button
History Table of Contents
1998 Summer Conference
Summer Conference 1998
Rethinking Canada for the 21st Century

Global Challenges: What global forces will affect Canada
over the next generation?


Mr. Courchene, do you think that in light of trade flows in a north-south direction, transfer of power — both upwards and downwards — coupled with the unfeasibility of a special status option, a con-federalism is workable formula for Canada?

Also, Mr. Cook, what lessons can we draw from Europe’s retreat from a confederacy to a more tighter arrangement?

Courchene: Just having spent three months in Europe, there are some aspects of con-federalism that actually do appeal to me. But it would be a major change for us because we’re the most centralized country in the world in the sense that there’s no formal role for the provinces at the centre.

Con-federalism would mean governance by the provinces. I think what’s happening is a couple of things.

First of all, each of the provinces are starting to develop their own economic visions of how they place themselves in North America.

In that sense, the powers are going down on the economic sphere. What I’ve been wrestling with in the book and I’m not yet decided is we may have to flip around the whole BNA Act. Some of the economic powers that went to Ottawa should go the provinces; some, but not all, of the social policies — like child poverty. Maybe that should be a federal thing; maybe move that up. I think that’s a more straightforward approach than con-federalism.

But there’s no question that my preferred options for designing the social union, which is an inter-provincial accord, or pact, with Ottawa does go some way toward co-determination. It’s not exactly formal confederation, but I think we’re heading in that direction.

Cook: Europe is a confederacy, obviously, of nation states. Which other nation state would we join? Not the one next door to us.

Canadians are very reluctant members of NAFTA. We’ve just had the issue of MMT and the extent to which there has been a surrender of sovereignly in the Free Trade Agreement and then in NAFTA. This obviously irks a lot of Canadians.

So, I don’t think anybody here is in a mood to do what the Europeans have done; that is to have a supranational body that sort of dictates policy to you in a lot of areas; domestic legislation in terms of rules and regulations, in terms of how much the French government can give to Air France, because one of the aims of Europe is to create a single market. Is it unfair for this government to subsidize its national airline, because that’s unfair to all national airlines.

That degree of pooling of sovereignty between nation states is special to Europe. Obviously it comes out of European history. We have an entirely different history and background.

Mr. Martin was asked last night about the notion of a Canadian dollar, whether we will have a distinct national currency in 2026. It seems to me we will, just because I can’t envisage who we would otherwise be sharing a currency with, whereas that’s not true in Europe.

*     *     *

What specific mechanisms would you recommend for regulating international markets?

Culpeper: My understanding of Mr. Martin’s two initiatives was [that one was] to create an international centre of Toronto to foster better regulation in countries, such as the Asian countries, of their domestic market.

The second one is more ambitious. He’s been talking to his peers around the world, including the G-7, to create a sort of infrastructure for reciprocal supervision and monitoring.

Again, the focus as I understand it, is very much of a national focus; what the national authorities are doing and what the national markets are doing.

I think what both of these initiatives miss out on and what you’re getting at in your question is there’s an absence of regulation of international flows across, of cross-border flows, the kind that would make it difficult or expensive for investors to pursue speculative activities.

But, unless you’ve got a critical mass of the G-7 countries to endorse this, it’s not going to go anywhere. So, failing that, you are in the short-run stuck with other kinds of instruments.

I would suggest there are things that can be done to oversee the activities of hedge funds and the banks.

A very interesting thing came out of the IMF interim committee in the spring on which Mr. Martin served. Basically what this group of 24 finance ministers said was that more needs to be done to shift the cost of these financial crises on to some of the private investors.

That’s fine, but the question is how?

Where is the evidence that tools are being fashioned in order to make the banks indulging in these kinds of the short-term loans pay? I don’t see it.

Cook: The short answer to it, how do we regulate international capital, is we don’t know, nor does anybody else — providing we’re going to have sovereign countries.

You get into situations, for example, like the IMF telling the Thai government for a long time ahead of last year’s crisis that they were running into an international payments problem and that they should take certain measures in terms of domestic austerity to offset that. And the Thais didn’t react.

The extent of the IMF’s authority is that they cannot then intrude within a national jurisdiction and say, you have to do this, you have to have a tough budget. They can only do it obviously with a grant of money which happens after the crisis is apparent to everybody.

So, I think for as long as you’ve got national sovereignty in those areas and for as long as national sovereignty extends in terms of taxing and in terms of the operations of things like hedge funds, I don’t see how you can do it. Either you go after one hedge fund and obviously they move from one jurisdiction to another; move their central operations. And there are always places that will provide the necessary incentives in order to encourage that.

Courchene: This is part of the problem when you get something that is ultra-mobile. It’s very hard to regulate it. And there’s no supranational state to do that.

And so what Mr. Martin and his colleagues

are trying to do is what I’ve been arguing on the domestic side, is create some new instruments to combat the challenge they have to come to grips with because of the changing nature of the system.

I think the larger issue is how do we make capital bear some of the taxes? You’ve got to create a new international order and maybe — only part of this is only going to come from this initiative Mr. Martin is spearheading. But I think at some point we’ve got to de-hedgemonize capital.

*     *     *

In an environment of the kind that has been described where capital is mobile, labour is mobile and will move to the most competitive environment and, in particular will move away from an environment where your taxing in order to redistribute or taxing in order to do things that are informed by your political values, but which

may not have an economic benefit, how do you do that? What mechanism do you need? I’m thinking particularly of Canada, where we are not moving in a direction of regional government. How will we be able to continue to invest in things that we believe in even if they’re not going to produce an economic return?

Courchene: In my view, social policy is indistinguishable from economic policy. I think the social policy activists should adopt the rhetoric of the economics guy because it’s easy to get money for an oil well. You call it depreciation investment tax credit. When you get to social policy I’d be talking about transfer. It doesn’t sell well. But that’s a tax credit, that’s investment. Capital does depreciate. Use the same rhetoric , get the same money as the guys on the real side of the economy.

That’s a pointer for the social side to get better lobbying.

The problem with a highly-mobile society is that if you try to over-regulate in some social areas business will move out. And you won’t have enough money to pay for it. So, at that point you need either an inter-provincial agreement so everybody adopts it, or you need to transfer that power upwards.

That’s part of the problem with being a global economy.

The other part of the problem, which I think is quite serious now; it’s serious in Germany, in Australia and all federal systems, is that we look at equalization. But equalization is typically viewed within the context of a closed economy. So, we give the amount of revenues in Nova Scotia such as they’re the same per capita revenues as Ontario. We make it equal east-west. But in the process we make Ontario less competitive with Michigan.

At some point we have to learn how to integrate the east-west transfer system with the north-south trading system. I think we haven’t made much progress on that and I think, on occasion, that would bring the federal government to a bit more of a role in the redistributive side. That’s part of my switching around.

The allocator side probably has to go down to the bottom, but who really cares much because most of these things are going to operate in have got international agreements that everybody’s signing onto so that international markets will take care of mining and all that sort of stuff.

Social policy and institutions are the real issue for the 21st century and what you talked about is an externality that has to be handled some way or another, whether through inter-provincial co-operation or a federal takeover.

Culpeper: I just wanted to say I think we have some adding up problems, where on the one hand we want to remain competitive in terms of our tax regime, but on the other hand we want to invest in human capital and social programs. Something has got to give. It seems to me it’s really at the international level that agreement has to be reached.

Something really interesting has been happening at the OECD over the past few years among finance ministers. They’re talking about the need to try and stem tax competition, this inexorable need to be competitive in terms of tax which ultimately leads to a mug’s game; it’s a lose-lose situation. Everyone’s reducing taxes to become more competitive, but ultimately who’s going to pay for the social program.

You can only address that kind of haemorrhage through collective action; through organizations like the OECD where the governments do agree. They get together and say this is a basic minimum below which we will not reduce our taxes, otherwise, we won’t be able to do what we must do as government to discharge our responsibilities to people.

Cook: More a comment on what Roy [Culpeper] is saying. While there is this effort going on, even within the European Union it’s pretty difficult to make it happen.

The EU has been proposing for numbers of years a common tax on savings. And the British always vetoed this under the Tories and now they sort of half went along with it.

Luxemburg certainly doesn’t want it and the Brits are concerned it will affect the position of the City of London, the financial centre. So, even when you’re talking about a uniform tax in that area amongst this group, which is supposedly a consensual group, it’s been going on for 15 years and there’s been no resolution. It’s very difficult.

*     *     *

The important part of the global revolution surely is technology. Take an example of smart cards. With smart cards the velocity of money is going to increase rapidly. Your also going to get other channels in terms of smart cards; it’s not only money. You could also get TTC tokens, or Aeroplan points.

You could end up with some sort of barter system, where I give you two TTC tokens and you could give me 1,000 Aeroplan points and the tax man never came between us.

What are the governance implications for all the levels of government?

Courchene: If you ever find the answer, nobody wants it more than the Finance Minister.

As the economy goes towards a higher degree of information we don’t really know how to tax it. So, we’ve got a problem there. The Bank of Canada is worried about this and they’ve actually taken a lead role in some of the European commissions trying to figure out what E cash is, what it might do to the money supply and so is the Inspector of Banks.

But you’ve got a regulatory problem. How do you monitor people on the Internet? Do you still have deposit insurance on the Internet if your using cash?

And, as you pointed out, you’ve got the barter problem. This is a part of the information revolution that challenges the government.

I think the people working on this in Canada are very capable. And they’ve been writing some of the lead reports for Europe. But this is a problem that not a single nation can handle.

*     *     *

Mr. Martin last night mentioned the costs associated with the clean up from the oil spill caused by the Exxon Valdez. Does [corporate] accountability mean that a corporation will incur the real cost of what their producing and, if so, how would you go about it?

Culpeper: This is a difficult problem and we tried to come to grips with it in our Canadian Development Report 98.

It operates on several levels. Corporations can’t do this single-handed; governments have a role, shareholders have a role, citizens have a role, consumers have a role.

What we all should be groping towards is a system where corporations accept that part of the cost of doing business has to be some of these so-called external impacts; impacts which don’t necessarily reflect on the balance sheet and are not necessarily accepted by corporations as the cost of doing business.

If you think domestic law and domestic regulations, we’ve evolved as societies and we’ve put in place frameworks which basically tell businesses that this the minimum expected if you operate in Canada. Minimum wages, for example.

The principle is well established, but the question is how you do that on an international basis? And that’s the really difficult part.

Now with larger corporations with market power, I think there’s the possibility of developing a sort ethic of codes of conduct and so forth that larger corporations would see [as being] in their interest to adhere to. But in order to make that stick I think what is needed is an independent and objective verification process, much as we have the financial auditing profession now to ensure that corporations say they want to do, or intend to do, is what they actual do.

In Canada there are a lot of companies that have done a lot of interesting and worthwhile things. We mention this in our report; companies like Noranda, Falconbridge, Inco to a certain extent, Bata, Placer Dome. Some of these companies have also done some rather reprehensible things, as well.

But the issue is where are the good practices out there and how can you internalize them and make them part of the accepted way of doing business.

I think the real problem comes [from competitive markets]. When you’re in a competitive market you have much less leeway in which to undertake these kinds of initiatives because you’re always looking over your should at what competitors are doing. You’re much more inclined to cut corners and not to go the distance in terms of corporate responsibility and accountability.

There’s something fundamentally problematic about competitive economies and in that respect if your going to move from less to more accountability it’s crucial to have governance systems, whether at the national level or international level, in place to put rules and regulations in place and to enforce them.

And perhaps what we need to do is look more to organizations like the ILO, the International Labour Organization, to monitor and enforce labour standards around the world.

They’ve been in existence 80 years now, but they still do a pretty poor job and I think in the 21st century it would be an overdue project to reform, or renew, the ILO to make them an agency with teeth that can actually enforce labour standards and conditions and make them improve throughout the world.

Cook: I think corporate accountability has been more developed in Europe more than anywhere else. As a result you sort of get a counter problem, which is that when you mandate very strict conditions in terms hiring and firing people, the obligations of the employer in terms of social welfare costs and pensions and that kind of thing, then obviously you add tremendously to the cost of doing business.

This, of course, is a particular European problem. Also you don’t really help the process of employment, because if it’s difficult to hire and fire, then nobody gets hired because nobody’s been fired and no new jobs really are being created.

I think that has become a problem. Obviously there is this balance. The European perception — and the Canadian perception is a little bit the same on this — [is] that the Americans have gone to far in relaxing standards on corporations in terms of their obligations to their work force. But, in doing so, they’ve created obviously a full employment economy and extremely competitive economy.

To what extent do we go down that route? To what extent is it necessary in the interest obviously of employment growth and giving opportunities, particularly, to young people. It’s always the young people who suffer from that kind of situation.

In terms of other things, corporate accountability in the areas like the environment, which you mention, seems to me a proper matter of law, of bringing in the right laws and of companies then insuring themselves against risk and that is the way to proceed. And that largely is the way it has worked out. So, I don’t think there are tremendous issues there in terms of accountability.

*     *     *

The word globalization is one most people around the world have been to some degree comfortable with as a part of our vocabulary. But the concept of global governance is one that strikes terror into the hearts of many countries around the world.

Mr. Cook, in your scenario 2020 do you see some form of increased attention being given to global governance? I’m thinking particularly in some kind of international regime that has teeth in it from areas as diverse as environment, drug trafficking, human rights and currency speculation.

What form might that governance take? We have a raging debate right now about the differences in governance between the UN system and the Bretton Woods system.

Finally, what is Canada’s view going to be to submitting itself to global governance in some form?

Cook: Canada’s view is that we’ll be kicking and screaming all the way. And I’m sure that is the view everywhere.

It seems to that global government or governance comes along in very ad hoc ways. Suddenly we perceive there to be a problem, as we now in relation to the Asian crisis. So Mr. Martin and his colleagues are meeting with the IMF and saying we’ve got to get early warning systems in place and get more teeth into an organization like the IMF, which is supposed to warn us all of the direction that things are going in.

And we have other arrangements, for example, in the environmental area that have come out of Rio de Janeiro and Kyoto, where developed countries have made certain commitments which are going to be very difficult for them to keep, [and] from which developing countries, for the time being, are exempted.

For example, look at an issue like global warming, within the 2020 framework. The developing countries are going to be producing half the world’s greenhouse gas emissions in the year 2020 given the industrialization path that China, India and Brazil are on; at which point how can they any longer be exempt from what the Kyoto Declaration wants to do — to put some cap on this.

It seems to me when we get into an emergency we get a sort of international reaction to it, otherwise we don’t get that. I think we’re going to have emergencies, particularly in the environmental area. We’re going to run into a lot of problems with this, because it is uncontrolled. We’re acting on it at the 11th hour and in many cases were really not acting on it, we’re just signing declarations and doing nothing.

The other area we’ve all talked about is the question of regulating capital markets. How many international crises do we have to have in order to think we’ve got to do something about this. And then what do we do? At the moment, nobody knows. But if we get Asia crisis number two and that turns into global crisis as a result of it, then plainly our minds will concentrate on that and we may get some initiative in that area.

Surely, one must question whether ad hocery is a good way to develop public policy?

Cook: It’s all politics, isn’t it! You can’t expect politicians to react unless there’s something to react to, which is always an emergency.

*     *     *

Mr. Cook, considering China’s problems and the current natural disaster, would you say it’s inevitable that they are going to devalue?

Cook: I’m borrowing something from an investment conference I was at recently, which was addressed by somebody from China and also somebody from Hong Kong. They talked about [how] the Chinese aren’t devaluing, but they’re doing everything but devaluating.

I guess what they’re doing is subsidizing a lot of industrial output, which is not perhaps competitive at a certain level.

I think a few weeks ago you had a Chinese shipyard saying to the London Financial Times that at this level we can’t compete against South Korea — South Korea’s had this big devaluation.

We haven’t yet and obviously the Chinese are not as productive as the South Koreans and they haven’t made as [much] investment in their shipyards.

I think the whole thing — and this is not a new idea — really hinges on Japan. If Japan has a substantial forced devaluation of the yen, then the South Koreans will be the next to say we must devalue. In which case our Chinese shipyard owner will be in even more dire straits, as indeed will be the whole industrial sector in China and so you will then get a Chinese devaluation.

If you get that, then the Hong Kong government can no longer maintain the peg to the U..S. dollar. Then it spreads outward and you get a return to a situation of competitive devaluations in Asia, which is what we had last year. There will be a second round of all those things, which would have an impact in terms of trade and corporate performance in the West and on things like the stock market and the Canadian dollar. So, we all have to hope and Pray that doesn’t happen.

Culpeper: This doesn’t have to be inevitable as it sometimes sounds. I think the immediate solution is to effect a solution to what‘s happened to Indonesia, Korea and Thailand to stop the hemorrhaging.

The rupiah has devalued something like 80 per cent in the period of a year. Just imagine if instead of a 65-cent [Canadian] dollar, we have a 20-cent dollar.

That’s what the Indonesians are looking at and it’s completely untenable. And everyone agrees that the markets have overshot. So, I think if we can go to Plan A and make it work and rehabilitate the currencies of the worst-affected markets in the region then the temptation for the Chinese to devalue would be much less.

*     *     *

Dr. Culpeper. In your remarks it sounded like you didn’t seem to like the idea of the big banks to be able to insulate themselves by primarily lending on a short-term basis to some the developing countries.

Is there not a responsibility on the part of the domestic governments in these countries to put in place some effective regulatory environment that makes their country a desirable destination for long-term investment capital?

In light of the efforts to bring about effective international regulation to provide early warnings, what do you see as the role of the domestic government in these situations — prior to there being a crisis?

Culpeper: The problem with the Asian countries was that, in fact, they were too desirable a location for investors. Everyone rushed in and that engendered a chain of events, including what economists call real appreciation of their currencies which subsequently led to the fall and collapse of those currencies.

Yes, your right, there are things that domestic and national governments can and should do.

I think the best model is provided by what Chile has done and Colombia in South America. What they have done is put in place reserve requirements. Any money flowing into the country for a year or less is subjected to a 30 per cent withholding tax, which is not returned if you liquidate your position before the end of the year.

That’s pretty expensive business. If you stay longer, it’s far cheaper.

I think this is the kind of thing national governments can and should do.

There have been other approaches, which have been harder to enforce. Malaysia, for example, has adopted a regime which basically prohibited domestic borrowers from borrowing offshore, increasing their international exposure and liability. That’s more sort of a quantitative, rather than a market based approach. But at the end of the day it serves the purpose in reducing the amount of debt that you build up and the vulnerability that you have.

At the end of the day you still have look at ways the international creditors can share in the cost of the crisis. That’s what we don’t have and I think what needs to be done is to look at the way loan agreements are written, so that it’s quite clear if you are lending short-term that you might be subjected to not getting your money back — at least not immediately and in entirety.

*     *     *

Dr. Culpeper, I just want to stress that one of the most striking aspects of globalization over the past few years is how Canada and how other countries of the G-7 have been able to enlarge their sense of concern from worrying about prosperity of citizens within our countries to really embracing a sense of community with citizens that are most distant, much more poorer in the global family.

So when Mexicans ran into some trouble in 1994, Canada was there almost instantly with over $1 billion to help get them through it. When Asian countries ran into problems 14 months ago, largely I would submit because of the lack of democracy and a market economy with their own countries, we, the G-7, a few others were there with $123 billion.

And over the last month a few more billion to help Russia. I think the Russian bill is up to about $75 billion now.

The question is, if you abolish the G-7 where does the leadership come from? Who’s going to mobilize the money to do those things?

Culpeper: I have problems with some of your assumptions.

The money that’s gone into Mexico and the Asian countries, one can argue this is money that’s really coming back to the North and bailing out the banks and the creditors who put themselves at risk.

What’s it doing for the poor in Indonesia?

There’s still an incredible poverty rate in Mexico. Mexico’s poverty rate in the mid 1990s was still at the level it was at the beginning of the 1980s.

I heard someone from the U.K. treasury say a few weeks that the G-7 itself does need to expand the ambit of its discourse, to bring in representatives, or counterparts, from the developing countries because I don’t think they can continue to assume that the conclusions they reach and the decisions they make are necessarily going to be the right ones.

Certainly one way of doing that is to widen the scope of discussion to include those countries. The G-22 experiment that President

Clinton stands behind — I’m going to watch that with interest because they may be a more appropriate kind of forum for these global issues.

*     *     *

If we’re going to talk about Canada in the next century, quite clearly Canada is going to be conditioned by the kind of governing structures that exist in the world at that time.

I would like to know whether, in fact, the panel agrees with [the earlier questioner’s view on ad hocery].

If we are going to have decide the way in which the world is going to work and there are two opposite concepts. One is, in fact, ad hocery — muddle through — and work it out. The other one is the more clearly thought out but rigid structures that have perhaps been set up in the European Commission, which Peter Cook mentioned, or the OECD Roy Culpeper talked about.

In terms of ad hocery I’m somewhere with Tom Courchene.

The one problem with the European Commission is, of course, the anti-democratic aspect of it. Nobody votes for the European Commission and I know, sitting with my colleagues from the other European countries, the pall that comes over the room when the European Commission comes in the room and sits down at those particular meetings.

The fact is that you have a non-elected, appointed body — some relationship to the European Parliament, which is of dubious power, basically dictating to the democratic-elected governments what’s going on.

I think there’s a problem.

That’s one example.

Second example. The OECD. I’m very knowledgeable about the taxation commission, but let’s understand what happens.

And this was the problem with the MAI (multilateral agreement on investment). The OECD is essentially an organization — a think tank — restricted primarily to a select number of countries, not representative; peopled primarily by bureaucrats who negotiate agreements largely unrelated to the dictates of the democratically-elected governments.

That doesn’t mean that’s the way it should be, but if we made a mistake on the MAI the reason it was never sold — not only in Canada but in any other country — [was] because nobody knew what was going on.

And, so what happens — which is why I think the reference to the WTO [World Trade Organization] in the MAI [case] makes more sense.

So, you have that kind of structure, or you have the other one which is in fact the ad hoc structure.

Let me give you an example; the Canadian initiative that’s been referred to in terms of banking oversight. If what we did was to go to the countries of the world and say, because of what’s happened in Asia and what happened in Mexico we are going to set up tomorrow a huge bureaucracy which is going to oversee the banks within your countries.

Immediately most of the Asian countries , as an example, Latin American countries, would say: what this really means is the SEC or some equivalent is coming and it would not work.

What we have suggested is, in fact, a peer review process which essentially says, look Malaysia your banking supervisors will be supervised by somebody — for the sake of discussion — from Brazil, Canada and Belgium; Canada, you will be periodically be supervised by somebody from Malaysia, the Philippines and Germany.

In other words, a peer review process so that, in fact, what your setting up is not an international bureaucracy dominated by one or two of the major countries but a peer review process where people can feel comfortable.

International publicity will, in fact, bring countries to bear.

I think there are two very different kinds of international governance that flows from those two concepts.

My question is, how do the panel [members] see us going?

Cook: I’m no defender of the European system and I agree that it is anti-democratic in many respects, but just to deal with that point.

What the Europeans have put in place is a commission which initiates and has an executive, but also supervising that and through the medium of these great European summits that happen every six months a consultation in terms the leaders of the individual countries, and at lesser between all the ministers of the countries, so were the commission to come up with an initiative in any area there is a reference to the politicians of the 15 member countries.

And in many areas majority voting is obviously becoming more important because there are so many countries.

In a lot of areas, such as taxation policy, there has to be unanimity. So, in a sense, one country can veto any initiative put forward.

That’s a little aside from the main points being made.

I think at it comes logically out of what I was saying, that Canada should go for global institutions — whether these are formal or informal — because over the next few years we will see obviously a diminution of Canadian influence in the world. But we’re still a very influential country and to the extent it seems that we can affect things internationally we can do it through sensible initiatives on the international scene, such as the land mines thing, such as the banking supervision thing you mentioned.

So, I think it’s in Canada’s interest to do that. It seems to be the great problem with that kind of thing is that it largely has to be informal and, therefore, rather unsatisfactory because we have a country to the south that has a sort of fiscal hatred of global institutions.

Unless you’re going to suddenly have the Republican Party voted out of both houses of Congress, I don’t see how you’re ever going to promote internationalism through existing global institutions and new global institutions. They just don’t want to have anything to do with that and they don’t want to fund the IMF, for example.

That’s a big problem. I don’t think the Americans would go along with that. Obviously Mr. Martin knows the Americans better than I do, but I think that would be a major, major problem.

Courchene: I like Peter’s answer, but I don’t think he’s right about the European Commission. I really don’t think they’re ever going to close that loop. I don’t think they want a powerful Parliament. There’s very little left to sovereignty if you do that.

They’ve got a single currency, all the directives are coming down in terms of how your life is organized on business and social policy. What’s left for national governments? And the answer is the commission. That is the role of the national governments. If you turn it [over] to the European Parliament and give them too much power you could have a whole southern core of people having a majority and forcing things on France.

So, I don’t think they’ll ever complete the federalism you’re talking about. They’re quite happy where they’re going. It’s going to work well up to a point.

The other point I’ve been wrestling with is there’s another way to close this governance thing and that’s to bring citizens to bear at the international level. I’d call it Larry King Live international.

The tobacco companies are being taken to court across the world; trademarks can get blown away of diminished in value. In Canada, the good burgers of upstate New York prevented Quebec Hydro from building a dam. The Germans had a major impact on B.C. lumber and Brigitte Bardot has been controlling our sealing for two decades.

Citizens do matter. I see some sort of environmentalism at large here, where groups of like-minded citizens working on the Internet are going to start to amass an incredible power base that will spread around the system.

The computer, don’t forget, took down the Soviet Union. They couldn’t handle it. The only people who predicted it were the Rand Corporation, which understood the power of the machine.

Culpeper: I think the question Mr. Martin puts is the right question and the one I started off with: it’s how do you democratize the global economy?

It’s going to take more than Larry King Live and a lot more than the Internet, although media and the Internet can be useful vehicles.

I think it has to involve ordinary citizenry, it has to involve the Parliamentarians.

In the course of my work I encounter more disgruntled Parliamentarians who get elected to represent their constituents and find they are completely powerless when they get to Ottawa in the face of international organizations like the IMF and The World Bank, or even in the face of the Cabinet.

I think its crucial to do the hard work and the gumption that’s required to bring citizens to bear to discuss the NAFTAs the EMUs and the MAI.

The MAI didn’t have the developing countries around the table when it was discussed in the OECD. Of course, it’s the right place to have it in the WTO, but do we stop there because that’s only the first step towards democratizing the discussion.

Unless we’re looking at democratizing the process of economic reform and the kinds of programs that are put in place in countries in crisis, then we’re falling far, far short of the mark.

I’ll just give you a simply example of how this plays out in Canada.

Every year there’s a team of IMF officials who come to visit and they sit with Mr. Martin, his officials and the Bank of Canada. It’s called Article Four consultation. But it’s held almost entirely off the record and there’s an Internet publication that comes out afterward called the Public Information Notice.

What I’ve suggested to various people is that this whole process of dialogue with the IMF needs to be opened up. The Article Four process should be one in which the citizenry is involved. We should be meeting not only our own personal representative to the IMF, but the staff people who come and write reports on Canada and tell us its time we tightened up our monetary policy and increased interest rates.

I don’t think it’s adequate to have those kinds of mechanisms without citizen input and public discussion.

That’s the direction we need to move in.