THE CLAIRE FOSS JOURNAL


CANADA AT PERIL


A Vision for an Independant Canada - an Address to The Canadian Conference on Unity, Sovereignty and Prosperity

December - 2002

Transcript of Paul Hellyer's speech in three parts:

Canada at Peril
Canada at the Crossroads
A Vision for Canada
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Canada at Peril

Thirty-five years ago I would have scoffed at the idea that I would ever make a speech like this. It would have been beyond my imagination at the time. We lived in an imperfect but nevertheless progressive world. Capital, labour and government worked together in acceptable harmony to expand the good life in all directions; and the two superpowers kept each other in check.

All that has changed, and for the worse. Instead of moving forward, we are moving backward. Rich people are getting richer at the expense of the poor and the middle class. Rich countries are getting richer at the expense of poor countries. Public services that we once took for granted are being eroded. There are more people unemployed, and people who have jobs are often subject to so much stress that the joy of working has gone from their lives.

At the same time they are apprehensive about the future and have lost faith in both their leaders and institutions. Why has all this happened when not so long ago the future looked so bright? In a word it is because we have been badly served by our leaders and institutions – our parliament, our Bank of Canada, our universities, our private banks, our media, and by what Lewis Lapham, editor of Harper’s magazine, calls our “Permanent Government”.

The result of all this is that we are losing our country – literally – and losing our democracy in the process. To make matters worse we are losing our innocence internationally.

To begin, we were duped about the Free Trade Agreement. I must admit that I thought it was about trade because that is what our government and media told us. But when I finally read the text, I realized that it was primarily about investment. The Americans wanted access to our industries and resources – especially our oil, natural gas and, soon, our water.

The U.S. insisted on the insertion into the treaty of a “national treatment” clause which is their license to buy Canada for 65 cents on the dollar. And they have been doing just that.

Since the treaty was signed, about 13,000 Canadian companies have been sold to foreigners – the majority to our cousins south of the border. And the size and pace of the transactions is increasing. We are now losing about five or six companies a day.

Worse, and foreboding, candidates for the Liberal Party leadership have warned us that the foreign ownership restrictions will come off transportation, telecommunications, and “even the banks”. Goodbye Air Canada, goodbye Bell Canada, goodbye banks. There will be nothing left of this country but an empty shell which means it will literally be Goodbye Canada.

Apologists for the FTA point to the huge increase in trade with the U.S. since the FTA was signed. But this is one more case where figures lie and liars figure. The bulk of the increased trade has been in two categories – automobiles and parts, and energy. The first was due the Auto Pact, which was protectionism at its best. The second is due to the insatiable demand for energy south of the border. Neither has anything to do with the FTA or NAFTA.

In fact, one of the governments own studies indicates that only 9 percent of the increase in trade is due to the treaties. The balance, apart from the two items I mentioned, is due to the low Canadian dollar.

The bottom line is that our living standards have fallen consistently behind the Americans since 1989 when the FTA came into effect. Our GDP per capita fell from 86% of the U.S. level in 1989 to 79% in 2000; and we have more children below the poverty line now than we had then. So why in heaven’s name would we want to increase our economic integration further.

It would be wrong to say that all of our misery has been due to the FTA and NAFTA. The Bank of Canada deserves much of the blame. In 1974 the Bank adopted the ideas of Milton Friedman and his colleagues at the University of Chicago. It has been downhill ever since.

Friedman’s ideas have been foisted on countries everywhere by the International Monetary Fund and the World Bank. The two of them have succeeded in destroying one economy after another, while undermining democracy and eroding peoples rights to govern their own affairs.

They cover their tracks by referring to the “unquestioned benefits of globalization”. But this is a lie, which is being repeated over and over again by the naïve and the miseducated. You need only look at the data to find the truth.

If you compare the data for the years 1949-1973 with the period 1974-1998 – the 25 years after Friedmanism was adopted by central banks – you will see the dismal results. In Canada the average increase in GDP dropped by 43 percent while unemployment increased by 90 percent.

The data for Australia are comparable and that for the U.S. not too different. But it is the world data which are most thoroughly depressing. For the years 1950-1973 the average annual compound growth rate of per capita GDP was 2.9 percent. From 1973 to 1995 it was down to a disastrous 1.1 percent – more than a 50% reduction. So when you see pictures of under-nourished children, or read about the millions who cannot afford to go to school, or even the homeless people in Montreal and Toronto, there is a reason for it. That reason is bad economic theory, resulting in bad economic management.

Not only is production down but the distribution of wealth has changed. In 1974 there were no food banks in Canada, not one. Today there are 615 food banks plus 2,213 agencies helping hungry people across the country. And then it was very rare to see someone sleeping on the street. But not today.

Nor is the situation going to improve if we pursue globalization and unrestricted capitalism as presently being rammed down our throats by our political, corporate and academic leaders.

Our universities, too, are letting us down. Some have yielded to the temptation to restrict academic freedom in deference to corporate favours. One can at least understand the pressure when government funding is restricted. But the whole impossible equation can be traced back to their economics departments which are responsible for the Canadian and world malaise.

It is now more than 200 years since the industrial revolution and the dismal science has not yet designed a system that works satisfactorily. They call the latest fad neo-classical economics. That is a misnomer. It should be called retro-classical economics because it is the same old pre-depression boom-bust system – the one that gave us 45 recessions and depressions in two centuries – and none of them necessary, in my opinion. The root cause has been the banking system.

We have been badly served by our private banks. They bought up the brokerage houses. Then they bought the trust companies in order to eliminate competition in hours of operation, interest rates and service. Now they want to merge and reduce competition and consumer choice even further.

People who say we shouldn’t worry because the foreign banks will provide competition don’t really understand the monetary system, and why and how we have to change it. They don’t understand what money is and where it comes from. Most people think the pot of money is limited – that it must be backed by gold, or something tangible. Not true.

Graham Towers, the first and brightest of Bank of Canada governors said: “Money is just a book entry”. If he were alive today he would say “money is just a computer entry”, which most of it is. Our money supply grows about $30 billion a year at the tap of a computer key by the private banks. The Bank of Canada prints a small amount on fine paper. But who prints or creates the money makes a world of difference. Whoever creates the money has both the power and the profit.

I am a child of the Great Depression and consequently have a long perspective. In 1938 there were no jobs in Canada. None. The following year World War II came along and soon everyone was working. They were either in the armed forces, or building factories or making munitions.

You may ask: “How could this be financed? Where did they get the money?” Well the Bank of Canada printed it. That’s right, they PRINTED it! The money the Bank of Canada printed was used to buy government bonds. The government paid the Bank of Canada interest on the bonds and the Bank gave it back to the government as dividends because we the people own the Bank. So the net cost of borrowing was less than one percent, just the cost of administration deducted.

The government spent the money into circulation and it wound up in the private banks where it became what the economists called “high-powered money”. That was the monetary base which allowed the private banks to create more credit which they could lend to people to build factories, buy war bonds and so on.

In effect, we had a system where the money-creation function was shared between the government, through the Bank of Canada, and the private banks. This was the system that got us out of the Great Depression, helped finance World War II, and helped finance the post-war infrastructure including the St. Lawrence Seaway, the Trans-Canada Highway, our great new airports as well as help lay the foundation for our extensive social safety net. It was the system that gave us the best twenty-five years of the 20th century.

But all that changed in 1974 when the Bank of Canada changed systems and adopted the ideas of Milton Friedman which included getting governments out of the business of creating money. It gave back to private banks the virtual monopoly they had in the bad old depression days. Is it any wonder that things have gone wrong.

To understand why they have gone wrong you have to understand that banks create money out of thin air. Most people can’t believe that; but they do. Graham Towers said: “Banks manufacture money the same way steel companies manufacture steel. That is their business.”

The way the system works is this. If you want to buy a car for $30,000 you go to your banker for a loan. You are asked for collateral which could be stocks and bonds, a second mortgage on your house or cottage, or the co-signature of a rich friend or relative.

Once satisfied, you will be asked to sign a note for $30,000 repayable with interest. As soon as the note is signed, your banker taps some computer keys and presto - $30,000 appears as a credit in your account which you can use to go out and buy your car. Seconds earlier that money did not exist. It was created out of thin air.

Bankers would like you to believe that the money they lend to you today is what someone else deposited yesterday. But that is a myth. Each time a new loan is made the money is created and the total money supply is increased. Unfortunately the economy only grows when the money supply grows, which means someone has to keep borrowing – governments, business, or individuals.

Our governments have had to borrow large sums from private banks even though the federal government owns the patent. Last year we, the poor taxpayers, paid our banks more than four billion dollars interest on bonds and T-bills that the banks bought with money they created out of thin air. With all that money going for interest it’s no wonder that there isn’t enough left over for health care and education.

Allowing private banks to create 95% of the new money every year is the reason our system is unstable. They create it all as debt on which interest has to be paid. So the debt just keeps growing like a balloon until the burden becomes too great to carry. Then it like a balloon with a pin struck in it, and the system goes into another recession.

The only way to solve our economic problems both nationally and internationally is to change the banking system. We have to revert to a system more like the one we had from 1939 to 1974.

In 1997, I had the highly respected Ottawa economic forecasting firm, Informetrica, do some studies to show what would be possible if we had learned from experience and used the Bank of Canada intelligently to help solve our problems as an alternative to the 1995 cut and slash budget which dealt a major blow to everything we had built up in the post-war period.

The studies showed that with a modest injection of government-created money, unemployment could be reduced from 9 percent to 4 percent, the GST could be eliminated without replacing it with another tax, and the budget could be balanced – all within four years due to increased economic growth. There was no need to slash expenditures for health care, education, the environment, the arts, the armed forces and just about everything else.

These results were so startling that Informetrica agreed to a joint press conference. The media was there, but they didn’t print one word about it. They treated the story the same way they treat other great issues of our day. You would think that they would have first reported the findings and then put their best investigative reporters on the trail with instructions not to quit until they were convinced that the good news was fact or fiction.

Regrettably the media have developed an appetite for spin, whether from the Prime Minister’s office, the White House, or the Fraser Institute. So when U.S. Secretary of State Colin Powell came to Canada for the purpose of convincing us that we face the same dangers as the U.S., our media played the game with blazing headlines citing the White House spin. It is all part of a massive propaganda war.

If we are somewhere on Osama bin Laden’s hit list it is because we are fast becoming an American colony. For years we have been a lap dog for U.S. trade policy, which is good for multinational corporations but harmful to 95 percent of the worlds’ population. Now we are becoming an adjunct to U.S. foreign policy and every step we take in that direction increases the risk to us.

Canada at the Crossroads

Canada is at a crossroad. We are being urged by people on both sides of the border to adopt further economic and military integration with the U.S. If we continue on this path we will wind up as the 51st U.S. state. It will be inevitable.

Now I ask you: “Do you want Canada to become the 51st U.S. state?”

To move in that direction would mean adopting U.S. standards and values. We would be further caught up in what I call a culture of instant Greedification. Ten years ago U.S. chief executive officers earned 40 times as much as the average salary of their employees. Today they earn 1,000 times as much. Is there any word stronger than greed?

Further integration would also mean endorsing U.S. foreign policy. And that, in my opinion, would be a disaster. It is trite to say that the tragic events of 9/11 2001 changed the world forever. It certainly changed the meaning of some important words.

Terrorism, for example, which had previously been regarded as an acceptable use of force short of war, when used by the U.S. or by others on its behalf, was re-designated as “evil” when used against the U.S. on his home territory by people it had previously helped to train and finance.

The word “freedom”, too, has undergone a transformation. It has long been once of Canada’s and America’s proudest traditions and our southern cousins lustily sing about “the land of the free and the home of the brave”. But freedom no longer means freedom for all, including freedom from arbitrary arrest. Now it is freedom for those citizens who are not on some arbitrary suspect list. The rule of law has been replaced by the rule of men – a way of life previously associated with totalitarian regimes.

Along with the changes in rules and principles has come a change in spending priorities. The U.S. Congress has approved a massive increase in spending for the tools of war and death under the thinly disguised excuse of fighting a war against terrorism. One is reminded of Mike Moore’s cynical observation that there are more than 11,000 Americans killed by guns every year – about three times as many as died on that awful day in September 2001. What about a war against guns?

One cannot escape the conclusion that the U.S. is firmly in the iron grip of the military-industrial complex that General Dwight Eisenhower warned us about half a century ago. And having conquered the U.S., this same military-industrial complex wants to extend its iron grip to encompass the whole globe by any means whatever, including plans to put weapons of mass destruction in space. Canadians must ask themselves if that is a policy we want to buy into.

So when a respected historian like Jack Granatstein says we have to spend much more on the military and that we have no choice other than to march to the American drum, we have to examine the premise. It is true that we have to spend a lot more on the military. That is the price of sovereignty. It is also the price of 30 years of neglect.

But when Granatstein and others suggest that we have no choice but to go along with U.S. policies, I disagree l00 percent. Of course we have a choice. For the first time since Word War II we do have a choice because Canada and the U.S. do not have a common enemy.

The U.S. is not open to military attack by anyone. To suggest otherwise is absurd. Just ask yourself who could attack North America now that the Soviet Union is no longer a threat? The answer is no-one. So U.S. determination to build up Northern Command is the kind of absurdity military men are famous for.

It is even more ridiculous for Canada to be part of it. Even the North American Aerospace Command is an anachronism, and we should withdraw from it while offering our U.S. cousins total cooperation in any of the technical matters that might be affected as a result. It would be even more foolish for us to send naval and army officers to Colorado Springs to be under Northern Command. That would make us complicit, first in Star Wars, and later in putting weapons of mass destruction in space – an idea so repugnant that it is too awful to contemplate.

Instead, as Congressman Kucinich would like, we should be leading the world in calling for an international treaty to ban weapons in space along the same lines as we did with land mines. At least that would be consistent with Canadian values as opposed to Pentagon values.

A very practical reason for distancing ourselves from U.S. policy is that their war on terrorism is some kind of insanity, and it is doomed to fail. Osama bin Laden made it very clear that the attacks on New York and Washington were in direct retaliation for U.S. meddling in the Middle East. But instead of learning from the disaster of 9/11 2001, the U.S. administration is resolutely determined to add fuel to the fire of hate.

Anyone who thinks U.S. determination to remove Saddam Hussein is about weapons of mass destruction is someone who still believes in the tooth fairy. The objectives are oil and geopolitics. And it will be perceived that way by young Muslim extremists who are not subject to brainwashing by the English-language press.

Consequently the war on terrorism will fail. The United States Air Force can bomb the hell out of people, but it can’t bomb the hate out of people.

Most of the world’s problems relate to basic morality. If the U.S. really wanted to win the war on terrorism it would have to do a 180 degree about-turn. It would have to end its plan for world economic domination using tools like the IMF, the World Bank, and the World Trade Organization back-stopped by U.S. military might. It would have to change the banking system, reduce the leverage of private banks and use the benefits to pay off Third World and developing country debt so the peoples of those impoverished countries would have a ray of hope. They would have to reduce defence spending and help launch a ten year war on poverty and ill-health on a global basis to stop the death of 34,000 innocent people a day, 365 days a year, through ill-health and starvation. And finally they would have to stop trying to micro-manage everybody else’s business and let each country develop its own economic and value systems.

But a country in the iron grip of an all-powerful military-industrial complex will insist on staying the course until real disaster strikes. So Canada should cut bait and demonstrate to the world that there is a better way which offers genuine hope of a better life for all, except the excessively greedy.

A Vision for Canada

We have to begin by abrogating NAFTA and getting rid of the infamous “national treatment” clause before it is too late, and we lose control of our country completely. Of course the Americans won’t like it. They don’t like anyone outside the U.S. standing up for their own rights. But the U.S. did not hesitate to abrogate the Anti-Ballistic Missile Treaty when they thought it was in their national interest. Similarly we should give 6 month’s notice to abrogate NAFTA because it is in our national interest. In its place we should negotiate a “fair trade” agreement that would be good for both countries without leaving the “for sale” sign on ours.

Then, we should take back our monetary sovereignty without which there is no real hope for a just society. By using the Bank of Canada intelligently we can rebuild our domestic economy and become less vulnerable to the trading whims of others while solving most of the major problems standing in the way of a high quality of life.

I have been urging that the money-creation function be shared 50/50 between the people of Canada, through the bank we own, and the privately-owned banks. That would leave them enough capacity to support the growth and expansion of Canadian-owned businesses so they can compete in domestic and world markets. This is what they should be doing with their licence to print money.

At the same time the government of Canada would have about $15 billion additional revenue each year to share with the provinces and municipalities. There would be enough money for each level of government to meet its needs without passing the buck to someone else.

At the top of the list, of course, is health care. It appears to require an additional $5 billion a year in order to cope with urgent needs, expanded coverage and shorter queues. With 88% of Canadians opposed to higher taxes to pay the bill, it is just a pipe dream to believe that our system can be adequately sustained without monetary reform.

Another urgent requirement is for education. No qualified student should be denied access to post-secondary education due to high tuition fees. No doubt $2 billion a year would go a long way toward getting tuition fees back down to reasonable levels.

Another project close to my heart is affordable housing. The extent of homelessness in Canada is a national disgrace. Any wealthy civilized country should be able to afford a roof over the head of its citizens. Certainly a cold country like Canada should. Two billion a year for housing would soon make a dent in a seemingly intractable problem.

Closely allied, of course, is municipal infrastructure and public transportation. Old sewers and water-mains are in need in replacement. Unsafe water purification plants have to be upgraded. Worn out buses and subway cars have to be replaced. It all costs money. Perhaps an extra $2 billion a year would help.

And how about a Kyoto transformation fund. It is going to cost money to reduce greenhouse gases. And we all have to pay a share. But a fund to help make the transformation less painless would ease fears and increase enthusiasm for a program to become a world leader in alternate energy sources. No doubt a billion a year would help a lot.

Finally, our beleaguered armed forces are desperately in need of help. They were in great shape when I left them 35 years ago. But for reasons which I don’t have time to explain now, and totally unrelated to the policies I introduced in the 1960s, they have been run into the ground. Thirty years of under-funding has taken a dreadful toll to the point where they are flying helicopters and transport aircraft bought on my watch. Both should have been replaced years ago. An extra three billion a year won’t solve all the problems, but it will help.

If you have been counting you will know that these items alone would eat up the total $15 billion in extra revenue. But there is more good news to add. Undertaking all of these essential expenditures would reduce the unemployment rate, increase the GDP, and provide governments at all levels with additional tax revenues that would be available for other priorities of all kinds including tax reduction and debt retirement. It’s a win-win situation.

Would it be inflationary? Absolutely not! As any economist will tell you, it is the total amount of money that is created which determines prices – not who prints it.

If Canada decided to move in this direction now it would begin the most exciting time in its whole history. Business would be humming. Jobs would be available. The quality of life would improve significantly. Those of us who have come here from many lands to share this great country with its aboriginal peoples would find many new and rewarding challenges. And more people would want to come here from elsewhere including the United States where tens of thousands of thinking Americans may want to escape the iron hand of a plutocracy interested in nothing but the advancement of the elite class.

Sir Wilfred Laurier predicted that the 20th century would belong to Canada. Due to incredible mismanagement, and bickering amongst ourselves, we didn’t make it. But his prophecy could come true this century if we begin to write history by making it happen. We can prove to the world that people of different race, language and religion can work together for the common good. We can show the world that there is more than one way to do things – and the Canadian way may be worth looking at as a model to adopt or adapt.

So, if I may paraphrase the late General Charles de Gaulle, Long Live Canada, Vive le Canada libre.

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