Canada’s on the wrong side of the big issues

TORONTO—One of America’s top bankers, Jamie Dimon, chair of JP Morgan Chase & Co., warns that “this may be the most dangerous time the world has seen in decades.” These are not idle words. Pointing not only to the difficult adjustments costs that have yet to come from the toxic combination of high interest rates, high debt levels and reduced liquidity in financial markets, Dimon also bases his alarming message to the risks from war in Ukraine, the crisis in Israel and Gaza, and other threats with their potentially “far-reaching impacts on energy and food markets, global trade and geopolitical relationships.” Dimon’s concerns were also evident at the recent IMF-World Bank annual meetings in Morocco. IMF managing director Kristalina Georgieva bluntly warned that “what we are experiencing is a fundamental shift from a period relative stability, low rates, and low inflation to a period of high rates, high inflation, and much greater uncertainty. And this comes as disasters become far more frequent and more extreme, and geopolitical tensions make global cooperation far harder.” What this means, she said, is that “we are entering a new danger zone—a world that is more fragmented, more fragile, and more prone to shocks that can quickly knock countries off course—and often through no fault of their own.” The world economy faces a period of low growth. “Policy-makers,” she warned, “have an incredibly narrow path to walk—there is no room for missteps. Get it wrong and the challenges of the present could mutate into worse problems: prolonged low growth, entrenched inflation, or even sovereign debt crises with the risk of contagion.” As it is, nearly 60 per cent of low-income countries and more than 25 per cent of emerging market countries are at risk of debt distress. Similar warnings came from Ajay Banga, president of the World Bank. “We are living with alarming challenges, but at a time of intensifying polarization and extremes,” he said. “Beneath the surface, a growing mistrust is pulling the Global North and South apart, complicating the prospect of progress.” But “the Global South’s frustration is understandable. In many ways they are paying the price for the prosperity of others.” Calling for a new playbook where the needs of the Global South carry greater weight in global governance, Banga warned of the dangers from high unemployment in these countries. “Without a job—or the hope of one—human despair turns to anger. In those moments people grasp for any hand that offers a way out. Those costs can deliver irreparable harm on a society—or—on entire generations.” As an example, he cited World Bank analysis which projects that over the next 10 years, 1.1 billion young people across the Global South will become working-age adults—yet in the same period, World Bank projections show only 325 million new jobs. Meanwhile, the shift to highly protectionist policies, some of which are clearly in contravention of world-trading rules, poses a serious threat to the global economy, slowing growth, adding to inflation, and damaging the economic conditions and prospects in many developing countries, as well as weakening the potential for innovation and productivity. Ngozi Okonjo-Iweala, director-general of the World Trade Organization, said WTO research shows that “if the world splits into two separate economic blocs, the resulting reduction in international trade and the loss of productivity from specialization and scale economics would reduce real incomes over the long term by at least five per cent on average from the current trend. The output losses would be far greater than those caused by the 2008-2009 global financial crisis.” And low-income nations would see real-income losses drop by as much as 12 per cent, which would be a massive blow to their economic prospects. A key rationale for near-shoring or friend-shoring is that it would lead to more secure supply chains. But “large-scale reshoring could backfire by making supply chains less, not more, resilient,” she contended. “Negative supply shocks are likely to be more frequent in the years ahead as drought, heat waves, and flooding wreak havoc with production and transport. Closing the door to trade would increase countries’ exposure to such shocks. In contrast, a reglobalized world economy would offer countries more outside supply options and thus more resilience.” Friend-shoring is no panacea, Okonjo-Iweala argues. “Whenever someone proposes ‘friend-shoring,’ I always ask, ‘Who is a friend?’" Canadian taxpayers are putting up tens of billions of dollars in subsidies to attract investment and jobs to counter America First policies of the Biden administration, while Canadian investment and jobs are being relocated to the U.S. to get around increasingly restrictive Buy America rules. “Trade tensions can arise even among allies,” Okonjo-Iweala reminds us. For German Chancellor Olaf Scholz, “the world is facing a Zeitenwende: an epochal tectonic shift” in a new multipolar world where “different countries and models of government are competing for power and influence.” Scholz warns we must “avoid the temptation to once again divide the world into blocs. This means making every effort to build new partnerships, pragmatically and without ideological blinders. In today’s densely interconnected world, the goal of advancing peace, prosperity, and human freedom calls for a different mindset and different tools.” Where is Canada? Largely on the wrong side of the big issues. The reality is that the Western-dominated system of global governance created after the Second World War, and the long period of economic progress it generated, no longer works. A new global system is needed, but one where the West has less of a voice, and where China, India and the Global South have a much bigger say. It is either that or a much more dangerous world. Canada is a minor player in this debate. If we had pride in our country and its place in the world, we would be leading the way in the transition to a new global order, just as we played critical roles in designing the post-war system in 1945. But this time we are on the wrong side of history, more worried about pleasing the United States than in working for something better. David Crane can be reached at crane@interlog.com. The Hill Times

Canada’s on the wrong side of the big issues

If we had pride in our country and its place in the world, we would be leading the way in the transition to a new global order, just as we played key roles in designing the postwar system in 1945. But we're more worried about pleasing the U.S. than in working for something better.

Peru and Canada: a strong and expanding bilateral relationship

Misinformation: the other epidemic

Construction price shocks a familiar tale, says letter writer

U.S. election results offer a lesson for all parties

The world changed on Nov. 5

Canada’s trying to fight inflation and restore economic growth through rear-view mirror policies

Break-up of world economy into competing blocs poses huge risk to human society

The G7 can no longer call the shots

Avoid the zombie thinking of major cuts to federal spending

Canada’s been on easy street for too long

News

Get free news updates

Opinion

Submit a guest opinion article

resources

Advertise

subscribe

get help

Get free news updates

Submit a guest opinion article

Canada’s on the wrong side of the big issues

If we had pride in our country and its place in the world, we would be leading the way in the transition to a new global order, just as we played key roles in designing the postwar system in 1945. But we're more worried about pleasing the U.S. than in working for something better.

Get The Weekend Point of View Newsletter