As we listen to the Conservative talking point that we can't do anything on climate change unless we're totally in sync with the Americans, because we risk putting ourselves at a competitive disadvantage, risk jobs, etc., isn't it worthwhile to consider that Canada, as a sovereign nation, often times gets it right on matters of economic policy when we pursue the opposite course to the U.S.? We have a major precedent staring us in the face, the success of our financial industry that Conservatives, ironically, love to tout, as Harper did in Davos last week.
Here's what Paul Krugman wrote this weekend on Canada avoiding the financial meltdown that plagued other G7 countries over the past year and a half:
So what’s Canada’s secret? Regulation, regulation, regulation. Much stricter limits on leverage, much stricter limits on unconventional mortgages, and an independent consumer protection agency for borrowers.He followed up that blog item with a column today, "Good and Boring." The Canadian banks that wanted to merge in the 90s at a time when "across the world, financial engineering was in vogue and light-touch regulation seemed a prerequisite for success," in order to better compete with American counterparts were denied permission and came out of the financial maelstrom quite healthy in the end. In other words, we courageously, at the government level, took the opposite tack to what the Americans were doing, keeping a higher degree of regulation on our industry and it paid off in the long run. One could argue that the limitations in the Canadian financial system were a competitive disadvantage for Canadian entities as opposed to their American and other counterparts. As Krugman writes:
There’s no question that in recent years these restrictions meant fewer opportunities for bankers to come up with clever ideas than would have been available if Canada had emulated America’s deregulatory zeal. But that, it turns out, was all to the good.Canada pursued its own, made-in-Canada policy due to our own circumstances and we have been better off for it.
If you review this Financial Times piece on the issue, "What Toronto can teach New York and London," you pick up this notion of the "cultural" factor that pervades our financial institution governance. In this industry, we're more risk averse, we're more small "c" conservative - which would be reflected in the high value placed on good public deficit management in Canada in political debate over the past decade plus - and egalitarian. The point, that the governance regimes we choose should recognize what makes us unique, what Canada needs, in any given policy area and we should be comfortable with that. It works.
The article goes on to highlight the structure we have in our financial industry, we have had centralized rules, of a federal (obviously) nature:
Mark Carney at the Bank of Canada cited those same three rules, and this nearly word-perfect unanimity between the two speaks to a fourth, structural advantage – Canada’s uncomplicated and well co-ordinated regulatory framework. This consists of the central bank, which is responsible for the stability of the overall system; the superintendent, responsible for the stability of the financial institutions; a consumer protection agency, which looks out for individuals; and the finance ministry which sets the broad rules on ownership of financial institutions and the design of financial products such as mortgages and tax-deferred investment vehicles. The four actors meet regularly. As a result, says Robert Palter, director at McKinsey in Toronto, “there are no gaps.”This is not necessarily as easy on the environmental front, but it's instructive.
Not that these specific values and structures will necessarily easily translate over into other public policy pursuits such as our environmental policy, for example. Environmental policy will apply to a much wider span of industries, beyond a highly profitable financial services sector.
But the larger point is that unique, Canadian-driven cultural and national considerations have stood us well when we decide what avenues to pursue, here the blinking example being the financial services sector. We should be guided by the success we have obviously had. Looking at the Americans wrestling with any given political issue and with corporate money looking to exert an even greater degree of control over their policies, it's not an optimal position for Canada to take, that we'll piggyback on whatever they do environmentally.
A made-in-Canada solution, culturally unique, and reflective of what we need and citizens desire, that's what we should be doing on climate change. It goes without saying, the Harper government doesn't seem to get that.
Update (6:00 p.m.): From email, don't we know it:
Made in Canada by the Liberals, Paul Martin squashed the bank mergers in '98. I'll bet my last timbit that, had he been in power in the '90s, Harper would have been fine with bank mergers.AECL, Nortel...the record suggests that would be true.