Thomas Walkom's editorial confirms the point I made a few days ago: governments that pursue trade for trade's sake can, and often do, promote exports at the cost of economic efficiency. Walkom writes about the Canadian government's three-legged policy of eliminating deficits, defending the dollar and promoting trade. Just as success on the first leg is being celebrated the other two legs are being kicked out from under. One of the ironies of Canada's economic policy is that unquestioning faith in this new path has led the government to tear down the old safeguards. For two decades, unemployment insurance played an important role in stabilizing Canada's economy. But it also played the increasingly troublesome role of distorting economic activity and inhibiting adjustment. The 1996 Employment Insurance reforms nominally sought to deal with the distortions. But those same distortions are paradoxically central to Canada's trade promotion policy. They are politically too hot to handle. The reforms tried to "work around" the problem of preserving unofficial subsidies to export industries. They also tried to take advantage of popular prejudices against the unemployed in a cynical effort to "leverage" structural adjustments to industry. The theory? Starve out the workers and the inefficient industries will eventually have to adjust in order to attract a labour force. This is not Swiftian satire, folks. This is the explicit rationale given by one of the main architects of the EI policy, Alice Nakamura. So the 1996 reforms amounted to an exercise in shifting the blame and blaming the victims. Many of the economically distorting features of UI have been painstakingly preserved in EI, but the stabilizing features of UI have been gutted. Today, 33.6% of Canada's unemployed receive EI, compared to 90% in 1990. The odds are Canada's economy will be going into a recession some time in the next six months. Official economists who predict only a "moderate slowing of growth" as a result of the Asian crisis are simply denying the role that financial speculation has played in recent growth. The bull market of the 1990s is dead, d-e-a-d dead. The financial markets don't have to crash to stop being an engine of growth. All they have to do is stand still. The "fundamentals" are high personal debt loads, long term declines in real incomes for working people and global overcapacity. Economic growth is now between a rock (financial speculation) and a hard place (effective demand). The extent of the economic slowdown will be exagerated in Canada because of the government's emphasis on trade and its self-imposed destabilization. Perhaps it was no mistake that the new U.S. border control legislation included tighter restrictions on entry from Canada. Regards, Tom Walker ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ knoW Ware Communications Vancouver, B.C., CANADA [EMAIL PROTECTED] (604) 688-8296 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The TimeWork Web: http://www.vcn.bc.ca/timework/
