How the Iraq War Weakened the USA: Lessons for Canada

1 09 2010

“The Real Cost of the War in Iraq: What seven years of fighting has done to American society”  is  the title of a recent article by historian Anne Applebaum.  She enumerates the obvious and non-so-obvious ways in which the war reduced American power, such as increasing the price of America’s oil imports. I think that her list in incomplete, but it is still a good article.

I thought that this bit of the piece is particularly relevant to Canadians:

America’s ability to organize a coalition has also suffered. Participation in the Iraq war cost Tony Blair his reputation and the Spanish government an election. After an initial surge of support, the Iraqi occupation proved unpopular even in countries where America is popular, such as Italy and Poland. Almost no country that participated in the conflict derived any economic or diplomatic benefits from doing so. None received special U.S. favors—not even Georgia, which sent 2,000 soldiers and received precisely zero U.S. support during its military conflict with Russia.

Canada got precisely nothing from the US for sending a similarly sized contingent to Afghanistan. Zero, zilch, nada.   It is true that the US has, so far, refrained from cancelling NAFTA, but Mexico’s NAFTA privileges also got extended as well, even though President Vincente Fox was a vociferous opponent of the Iraq War. Perhaps if the US were had  a parliamentary regime instead of a congressional one, there would be more commercial rewards for being an obedient ally, but under the current arrangement American economic diplomacy doesn’t seem to be connected to its military alliances.

It is clear that subservience to the US doesn’t pay. I’m not a Canadian nationalist, I’m a realist.  Sometimes subservience to our big powerful neighbour may be the practical thing to do, so philosophically I wouldn’t be opposed to offering up a token contribution of troops as a way of generating goodwill in Washington, provided it translates into some tangible benefit. Call me a poodle by convenience. But US foreign policy isn’t coherent. Canada wisely opted out of the Vietnam War and that had zero impact on our trade relations with the US.  British people now get fingerprinted when entering the United States, even though Tony Blair was a cheerleader for the US. Being a poodle isn’t terribly lucrative nowadays. This is one of the reasons why people in the British Conservative Party are now distancing themselves from the United States and no longer fond of the “special relationship”. See here.

Canadians should honour the memory of Jean Chrétien, who kept us out of the Iraq War. Lest we forget.

The cost of the Iraq War has been estimated at $900 billion. One of the broad lessons of economic history is that a country should hold down the proportion of money it spends on its military to an absolute minimum. In the business history field there is a big debate about why United States rather than European companies were able to dominate the world economy for much of the twentieth century. There is a general agreement that by say, 1920 or so, the United States had clearly overtaken the western Europeans in many technical and economic fields. American living standards were higher than those in the UK, the first industrial nation. By 1950, the approximate peak of US relative power, roughly half of the world’s economic output took place in the USA.  Why was this the case? Why do we drink Coca-Cola, an American invention and watch Hollywood films rather than consume equivalent European brands?

Scholars have provided a whole catalogue of reasons for the rise of US business. Some scholars argue that the slightly different form of company organization adopted in the US was the key to success. Other suggests that American culture is somewhat more supportive of entrepreneurs than British or German culture. Such explanations overlook the fact that Europeans periodically slaughtered each other and wasted vast sums on their militaries. Europe’s nationalists also ruined that continent’s economy by drawing tariff frontiers across it.  The US, in contrast, fought few wars and was one big common market. It did fight the Civil War, which was costly, but it only lasted a few years. The Indian Wars lasted a long time, but they were cheap to fight because they were fought against neolithic peoples.  Traditionally, the US was very skeptical of foreign wars. It did get involve in the two world wars, but only reluctantly and after great provocation. Millions voted with their feet in favour of the anti-militarism of the United States– hence Ellis Island.

Until two generations ago, Americans heeded the advice offered by George Washington in his 1796 farewell address:

avoid the necessity of those overgrown military establishments which, under any form of government, are inauspicious to liberty, and which are to be regarded as particularly hostile to republican liberty…

As a very important source of strength and security, cherish public credit. One method of preserving it is to use it as sparingly as possible, avoiding occasions of expense by cultivating peace, but remembering also that timely..

Observe good faith and justice towards all nations; cultivate peace and harmony with all. Religion and morality enjoin this conduct; and can it be, that good policy does not equally enjoin it – It will be worthy of a free, enlightened, and at no distant period, a great nation, to give to mankind the magnanimous and too novel example of a people always guided by an exalted justice and benevolence.

The great rule of conduct for us in regard to foreign nations is in extending our commercial relations, to have with them as little political connection as possible.

Good advice, by George.

Flash forward to 2010. The European Union, which is home of many of the companies that rival American ones, is fast demilitarizing itself. France and Sweden are just two of the countries which have abolished conscription in the last few years. Most Europeans were totally against the Iraq and Afghanistan wars and have punished politicians who supported them. European countries are cutting spending on their militaries. France is closing military bases in its former colonies in Africa. It no longer wants to pay for the luxury of pretending to be a great power. American firms and households, in contrast, have to shoulder the burden of the imperial ambitions of the Washington elite. The EU countries do, of course, have a lot of problems. For one thing, they squander an obscene amount of money on agricultural subsidies.  There are too many regulations that make it hard to hire young people. But you can say this about them– they are cutting spending on their militaries and are making it easier for people and goods to move around the EU. Historians should not make predictions, but if I had to bet money on whether the USA or the EU will be an economic superpower in 50 or 75 years, right now I would go with the EU, since they are getting the deep fundamentals right. As Canadians, we need to ask why Canada’s trade talks with the EU are stalled. Needless to say, we should be negotiating free trade agreements with other regions of the world as well– anything to reduce our dependence on the nation to our south. Sadly, progress on the proposed deal, called the Comprehensive Economic and Trade Agreement has been slow, in part because the government of Ontario has been foolishly obstructing the negotiations.

Applebaum failed to list one of the less obvious costs of the war in Iraq– loss of trust in government by the American people.  The discovery that there were no WMDs in Iraq had a devastating impact on Americans’ trust in their rulers. A recent poll found that only 21% of Americans believe that the US government has “the consent of the governed”. That is a shockingly low figure for an industrialized democracy.

I mention this point because I follow the literature on social trust and transparency. The basic message of much of this literature is that if people in a country think that their government has lied to them in the past, they will be distrustful of all politicians and all government agencies, from the Post Office to the local town council. I suspect that the rise of the Tea Party in the US and the revival of the old paranoid style in US politics  had something to do with the Iraq War, which has created a crisis of legitimacy in the United States.  Most Americans seem to think that George Bush lied his ass off about WMDs. It is not surprising that many of them think that Obama is also lying when he says that he is not a Muslim. This distrust can carry over into other areas of life– people makes folks less likely to trust their local cop, their doctor, and the random stranger they encounter in the street.

Another cost of the war is the intensification of anti-Muslim sentiment in the US, which had already been exacerbated since 9-11. Even though the leadership of the US has said repeatedly that the US is not at war against Islam, many Americans do not seem to have grasped the fine distinction between Islam and al-Qaeda.  It now appears that some in the US wish to imitate the Swiss minaret ban, since there are campaigns against mosque construction in New York (the famous Ground Zero mosque), Tennessee, and elsewhere. Needless to say, the crusade against mosques in the United States is being reported in the Muslim World, thereby reinforcing suspicions that the US is anti-Muslim. What a great strategy for winning hearts and minds.

Canadians should not gloat about the problems in the United States, since a strong, prosperous, tolerant, and cohesive United States is in our national interest. The Tea Party is a characterized by an intense and somewhat vicious nationalism, so I shudder to think what a Tea Party controlled congress might do to NAFTA.  However, if the US does continue to careen down the road towards an unhealthy amalgam of militarism, nationalism, religious intolerance and sectarianism, there may be a silver lining to the cloud for Canada. Rather than shoulder the burden of US imperialism and militarism, American companies and individuals may elect to move to quiet, peaceful Canada. The tax rates between Canada and the United States are pretty similar– the big difference is that in Canada your taxes buys healthcare for your workforce, while in the US it goes into aircraft carriers and the space shuttle and the like.

AbitibiBowater, Danny Williams, NAFTA, and the Future of Canadian Federalism

25 02 2010

The Grand Falls Pulp and Paper Mill as it Appeared in the 1950s

The inside of the mill

AbitibiBowater has filed a $500-million free trade complaint over the expropriation of some of its resource assets by the Newfoundland and Labrador government. In 2008, the company announced it was shutting down a pulp and paper mill in Grand Falls. Newfoundland’s Premier, Danny Williams then announced that it was going to nationalize the mill. Danny Williams was then dubbed Danny Chavez by the media, a somewhat inaccurate comparison with the leftwing and anti-American leader of Venezuela, Hugo Chavez.

Danny Williams

The company, which was incorporated in Delaware, announced that it was going to sue the provincial government under a provision of NAFTA that protects the property rights of American and Mexican firms in Canada. For the benefit of US readers, I should point out that Canada’s constitution does not protect property rights. In Canada, the theory is that all property is the gift of the Crown (i.e., the government) and can be taken back if needs be.

To make the politics of this case even more complex, the government of Quebec is now considering buying a stake in AbitibiBowater, which is now bankrupt and in court protection. The governments of Newfoundland and Quebec have never been able to get along. There is bad blood going back to a border dispute in Labrador.

I don’t think that Williams was right to expropriate AbitibiBowater’s assets without fair compensation. Seizing the asset in this way may discourage future foreign investment in the province. However, one thing about this story really disturbs me as a constitutional historian. The federal government, which had nothing to do with the provincial government’s seizure of the mill, yet it is Ottawa rather than the provincial government is being sued by the company.

The apparent thinking is that the federal government has a responsibility to foreign nations to control sub-national units. The problem with this is that management of Crown land and property and civil rights are clearly a matter of provincial jurisdiction. If the federal government can gain control over matters of provincial jurisdiction simply by signing a treaty with a foreign power, the authority of the province’s will be eroded. This is a case with momentous implications for Canadian federalism.

In the late 1930s, the JCPC, which was then Canada’s highest court of appeal was called upon to rule on the constitutionality of the Bennett New Deal, a package of federal legislation that dealt with matters previously considered to be provincial. Louis St-Laurent (see left), the future Prime Minister who was the federal government’s lawyer in this case argued that the federal government had acquired the right to legislate in this field by virtue of Canada being a member of the League of Nations, an organization that had set standards regarding working conditions. St-Laurent concocted an argument based on section 132 of the British North America Act, which gives the federal parliament authority to implement imperial treaties, in this case the labour aspects of the 1919 Treaty of Versailles.

In 1937, this argument was, essentially laughed out of court by the law lords of the Privy Council. Actually, what Lord Atkin said was that the mere assumption by Ottawa of an international obligation under a treaty did not alter the distribution of powers in the Constitution. Atkin said : “While the ship of state now sails on larger ventures and into foreign waters she still retains the watertight compartments which are an essential part of her original structure.” For the ruling see here.

One wonders how the Supreme Court of Canada would rule on a case in which the federal government claimed authority over a provincial matter by virtue of the NAFTA treaty.

As far as I can tell, no observer in the media has commented on the possible implications of this case for the constitutionality of federal policy under a future climate-change treaty. However, the connection between s. 132 of the constitution and the Kyoto Accord has been discussed by Chris Kukucha, a political science professor in Alberta.  Many in Alberta have argued that Canada’s decision to sign the Kyoto Protocol was unconstitutional because only the provinces have the power to limit greenhouse gas emissions and to sign agreements related to them.

North American Currency Union

26 10 2009

The Globe and Mail has published a lengthy essay by Konrad Yakabuski on North American currency union. This piece, like of all of Mr Yakabuski‘s articles, is distinguished by clear writing, careful analysis, and very thorough research.

Yakabuski outlines a very compelling economic case for currency union. However, I suspect that any concrete proposal for a currency union would be derailed by nationalist opposition in Canada, Mexico, and the United States. Nationalist sentiment would trump economic logic. In fact, I think that we Canadian forget just how much anti-NAFTA sentiment there is in the USA. Consider Lou Dobbs:

The New GM and the Redefinition of Nafta

1 06 2009

We now know who will control the equity of the new General Motors. Ownership will be divided as follows.

60 per cent U.S. government.

12.5 per cent The Canadian and Ontario governments.

17.5 per cent United Auto Workers.

10 per cent Unsecured bondholders.

0 per cent Existing GM shareholders.

0 per cent– government of Mexico.

I’m wondering what the implications of this arrangement for Nafta are. During the 1990s, Canadians got used to the idea that North America consists of three countries, not just Canada and the United States. These three countries shared an integrated automotive market. (The three amigos summit, an annual meeting of the leaders of the three nations, was premised on the  idea that North America really was part of North America). Mexico lacks even a token stake in the new, reorganized GM. The symbolism is striking. Moreover, because the Mexican government hasn’t a seat at the table, it will be powerless to prevent manufacturing jobs from being repatriated back to the USA by the new, more politicized management of GM. (Canadian governments acquired an equity stake largely to avoid such job losses– I don’t know if it will work. Americans are, sadly very nationalistic. When push comes to shove, they may well prefer to save jobs in Michigan at the expense of non-Americans in Ontario).