Archive for January, 2012

Decline of the American Empire?

January 31, 2012

When two respected American journalists of different political leanings, David Brooks of the New York Times and E.J.Dionne of the Washington Post, agree that the main issue of the 2012 presidential campaign is about how to avoid national decline, Canada needs to pay attention. The US is Canada’s largest trading partner and foreign investor. (The comments were made on PBS’ Lehrer News Hour, Jan. 27, 2012.)

From a front row seat in Canada on political and economic events in the US, the viewer sees the following prospect for or evidence of decline:

1. Large twin US deficits, fiscal and trade related which will require some combination of expenditure cuts and tax increases. These will be strongly resisted by supporters of both political parties, making it difficult to enact necessary policies, thereby leading to prolonged critical conditions.

2. Persistent high unemployment has followed the downturn starting in 2008. Measures proposed to promote employment in the US manufacturing sector may not help that much, as the US economy is now 90% a service economy, and needs to adjust to this change (as does Canada).

3. An estimated 11 million illegal immigrants exist in a country with 12 million unemployed. If the illegals were removed, many industries such as agriculture, construction, tourism and other services would be hard hit. If the unemployed were willing to take the jobs of illegals, perhaps after some retraining, the problem might be alleviated. This possibility is seldom discussed.

4. A population whose composition is changing with a growing percentage of Hispanics and Asians at the expense of Afro-Americans and whites, plus a population which is ageing. Both will require domestic adjustments, and some form of multicultural policy.

5. Growing income inequality due to high earnings by a small percentage of the population and a tax structure which favours the rich. This has given rise to a so-far disorganized “occupy Wall Street” movement. It could evolve into something more serious. In the past, major instances of social unrest have resulted from the poor confronting the rich.

6. A party system in Congress which seems unable to reach compromises on things as basic as raising the debt ceiling so that the government can pay its existing bills. At the moment Congress appears to be dysfunctional.

7. A campaign amongst candidates for the Republican presidential nomination which at times borders on farce, and would likely be considered as such by outsiders if conducted in a developing country. These candidates are providing much ammunition to their Democratic opponents, so that when the time comes to direct their fire outwards, the nomination battle may have been suicidal for the party.

8. The best TV news program, the Daily Show, is broadcast on the Comedy Channel, where each night brings news of fresh disasters.

9. A decision to cut the US defense budget at a time when there are considerable military problems especially in Afghanistan, the Middle East and North Africa. The US remains the sole world superpower, but the cost of maintaining this position is onerous at a time when there are serious domestic economic problems. Its military budget of $687bn in 2010 is 4.7% of US GDP, and equal to the combined budgets of the next 20 countries. Among these, only Saudi Arabia, the UAE and Israel have a higher percentage figure. Canada’s military budget is $20bn, 3% of the US total and 1.7% of Canada’s GDP. Like many other countries, Canada has sheltered under the US military umbrella, allowing the US to provide the global police force. It can no longer afford to do so, thus military budget cuts with consequences for global security.

10. A combination of corruption and inept management has occurred in banking and other financial markets. The conviction of Bernie Madoff marks an extreme case, but there are plenty of other examples in the US and elsewhere. Blatant cases of corruption leading to losses incurred by pension funds could provide further reasons for social unrest.

11. A tax system where corporate lobbyists write the tax code which favours the rich at the expense of the middle class. The Democratic candidate for the 2012 Senate seat in Massachusetts, Elizabeth Warren, reports that 30 large US companies pay more for lobbying than they do in taxes.

The foregoing list reflects observations made by American commentators, and provides a pessimistic prognosis for the US. Events could turn around quickly and may be of little current or historical import. On the other hand, there are examples of other superpowers, which have risen and fallen in fairly short order from a combination of internal and external forces.

Comparing British and American decline

The British Empire was once a superpower. It was named an empire rather than a superpower, although for a period prior to 1914 it appeared to rule the global roost. It was overtaken by the bipolar world of the US and the USSR after WW2, until the fall of the Berlin wall in 1989. This was followed by the demise of the USSR and its division into Russia and a number of states leaving the US as the sole superpower. Today that US appears in a weakened if not terminal condition, thus the suggestion of decline.

In comparing the decline of the British Empire with the US as a superpower, there are a number of differences to note. One is that the Britain ruled a saltwater empire spread throughout the world which became increasingly costly to administer and protect. The US grew first as a group of 13 colonies which revolted against British rule, then acquired lands in North America from the French, Spanish, Mexicans and Russians to form a unified state, in many ways the equivalent of an empire. Its possession of overseas colonies was much more limited than in the case of the British Empire. This is one of the reasons why the nature of the decline of the two empires differs.

Some of the conditions leading to the decline of the British Empire, which may be found in the current decline of the US as a superpower are the following:

1. The foreign debts accumulated by the UK during WW1, WW2 and the early postwar years almost bankrupted the country, forcing austerity at home similar to that experienced through domestic wartime rationing.

2. Britain’s financial ability to maintain its armed forces and overseas possessions was weakened, leading to independence granted to a number of countries and related acts suggesting decolonization. Previous colonies often became members of the British Commonwealth, a club with no imperial control mechanisms.

3. The US used its financial leverage to press for colonial independence from the UK for countries like India. The US’ own previous revolt against what it perceived to be unacceptable treatment by Britain lead it to support those in the same position in the 20th century. Americans with Irish ancestry, for example, strongly supported independence for British colonies.

4. The formation and operation of the GATT after 1943 weakened the trade preferences which Britain had with its dominions and colonies, and subjected it to increased global competition. The foreign investments (assets) which Britain had earlier owned were used to help pay off its foreign held national debt incurred during two world wars.

5. In 1956, British armed forces in alliance with France and Israel were unable to secure the Suez Canal after its takeover by President Nasser of Egypt. Later, it had more success during the Falklands war.

6. At the end of WW2, Britain had a substantial blue water navy but found it hard to finance it in peacetime. At the time of the 1982 war with Argentina over the Falkland Islands, South Georgia and the Sandwich Islands, the UK was barely able to muster a group of ships and planes to defeat, at a great distance, fairly weak military opponents. While having professionally trained armed forces, the UK has not sustained the military dominance it once had.

Economic conditions in the UK following WW1 and WW2, including the depression of the interwar years weakened the country’s ability to administer and protect it imperial interests. It had spent its accumulated assets and was faced with strong political forces favouring decolonization, strongly promoted by its wartime ally the US; it certainly received no help from the USSR which was in the process of building its own empire.

In short time frame, the British Empire dissolved geographically after WW2, although its impact lives on in language, legal and political institutions, customs and other cultural attributes like certain sports. Also, citizens of different parts of the empire have migrated both to the mother country as well as to other parts of the former empire. There are reported to be more Maltese in Australia than there are in Malta.

Conclusion

It will be at least 50 years from now before historians will be able to start assessing whether the American empire is currently in decline. However reviewing current events in the US and globally suggests to me that this may be the case.
A more optimistic forecast is that technological developments are shortly to occur, and the US will be at the forefront of these changes. See “The Coming Tech-led Boom,” by Mark Mills and Julio Ottino, Wall Street Journal, Jan. 30, 2012.

The century since the start of WW1 has seen enormous global political changes with the rise and fall of what were once considered great powers. More such changes are likely to occur probably associated with Asia. Lessons taken from the demise of the British Empire especially in the economic sphere may well apply to the USA today.

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Churchill’s Empire – A Review

January 24, 2012

Churchill’s Empire – The World That Made Him and the World He Made by Richard Toye (Macmillan 2010).

The British Empire can be viewed from numerous angles, as can Winston Churchill. Combining the two, narrows the topic to the life span of Churchill from 1874 to 1965. There remains much material to cover. Richard Toye does it thoroughly and lucidly using material from debates, biographies, newspapers and other media files. The reader learns not only what Churchill said and thought, but what others said about his views and policies on the Empire including those of Americans, Russians, and leaders in different parts of the world.

This is an impressive study, well researched and presented guiding the reader through the main issues of Churchill and the Empire while in and out of office. I am no scholar of either Churchill or the British Empire but I hope I am an informed lay reader of the related issues.

While following Professor Toye’s description of Churchill’s career from family to schooling to military service, which he combined with journalism in a manner not possible today, I learned as much if not more about how the Empire evolved over this period as I did about Churchill. Before he entered the House of Commons, Churchill fought and reported from Afghanistan, the Sudan and from South Africa during the Boer War, where he escaped after being captured.

One striking aspect is how bilateral relations between Britain and parts of the empire affected its relationship elsewhere. For example, in WW2, Australia was asked to provide troops to fight in Western Europe, when it was concerned about defending itself against attack from Japan. It had to rely on the promise of help from Britain, which in the case of Singapore was not forthcoming when the Japanese army arrived. Other parts of the Empire also provided troops and aid which meant that Britain was indebted to them in different ways.

Britain’s relations with the US both before and after it entered WW2 were conditioned by US pressure to end imperial trade preferences and to grant self-government to India and other colonies. In order to receive wartime loans from the US, Britain had to accept terms or wording that would pressure it to give independence to dominions and colonies in the postwar period.

Ireland is another example of where Britain’s relationship had to be managed because of Ireland’s decision to remain neutral during WW2.
Churchill was involved in promoting these and many other policies which affected Britain’s foreign and domestic relations. At home he often faced opposition due to differing views on the costs and benefits of the Empire.

Professor Toye not only describes what motivated Churchill based on his own writings but what others, who saw him close-up, thought. What struck me was the complexity of imperial politics due in part to it being a salt water empire spread around the world, expensive to manage and defend. Other empires like China, Russia, the Habsburg and Ottoman empires tended to be connected by land. Most of the British Empire was not. But this did mean that Britain developed a first rate navy, telegraphic and wireless communications and diplomatic skills which facilitated its management.

Churchill was intimately involved in imperial policies at different times including as Undersecretary for the Colonies when he switched from the Tories to Liberals in 1908, and Colonial Secretary in 1922, as well as many other cabinet positions held throughout his career. For me Professor Toye has provided value-added to an understanding of Churchill, and how the empire was managed, as well as a look at what parts of imperial history are relevant to understanding the world in the 21st century.

Now and Then – Empire and Globalization

January 21, 2012

I was born in England in 1934, migrated to Canada in 1955 and have lived there except for short periods abroad to teach and study in the UK, the US and Australia, as well as visits to a number of countries which were part of the British Empire now called by some the anglosphere. Common elements of the anglosphere are use of the English language, parliamentary institutions, the rule of law, human and property rights, and certain sports, clothing and customs.

Looking back two things strike me, first, many aspects of the British Empire are embedded and recognizable in the world today, and many things which are in vogue today from migration to social media had their counterparts in former times, or “everything old is new again.” Whether conditions today are better or worse than in the past is a judgment call.

The same is true when narrowing the focus to assess the impact of the British Empire. There are beneficial aspects to its legacy, and there are horror stories associated with famines, slavery and the miscarriage of justice. Each can make an evaluation. I am inclined to give it a positive rating, in the light of what I consider a reasonable set of counterfactual of conditions of what might have happened in its absence. This is implied, as one might expect, in a British Home Office Citizenship booklet (Dec. 2004) which states that “For many indigenous peoples in Africa and elsewhere the British Empire often brought more regular, acceptable and impartial systems of law and order than many had experienced under their own rulers.”

What might the counterfactual have been? In India, the French might have colonized the region. In Africa, European powers other than the British might have occupied different parts, the Dutch or Germans perhaps in southern Africa, the Italians in East Africa. And in North America, the French, Spanish or Mexicans might have settled in different parts of the continent; possibly the Russians would have moved southwards from Alaska. The alternatives are numerous with some more probable than others. But it is unlikely that, after Vasco da Gama sailed east in 1492 and others crossed the Atlantic around the same time, those areas colonized by the British would have remained unaltered in these earlier years of globalization.

Globalization

The term globalization is frequently used as describing a new phenomenon. Historian John Darwin gives it a broader meaning, as a process characterized by the growth of global “connectedness” which has been going on for a long time. He summarizes globalization as: – [the following six points are paraphrased from Darwin, “After Tamerlane, The Global History of Empire,” (Penguin, 2007), 7-8]:

1. The growth of a single global market.
2. The interaction between states that may be distant but whose interests are global not regional.
3. The interpenetration of cultures by global media.
4. Large scale migrations and the establishment of diasporas.
5. Change from the 1945-89 bipolar age to the predominance (at present) of a single power.
6. The economic resurgence of India and China.

Of concern for nations today is the trade in goods and services, investment, short and long term, the crossborder movement of people and the existence of local diasporas, the transmission of information of all types – political, cultural, criminal etc., environmental and security concerns that cross borders, and the relationship of states to major players such as the US, China, Russia and other countries which can affect a nation’s economic and political security.

British Empire and Globalization

The British Empire was a major part of this process of globalization, especially for the 450 years from about 1500, leaving behind a footprint which can be seen today, some in unlikely places. The obvious places to look are North America, the Indian sub-continent and Africa with a focus on the US, Ireland, Canada, India, Pakistan, Bangladesh, Sri Lanka, Myanmar, Singapore, Malaysia, Borneo, Australia, New Zealand, Egypt, South Africa and parts of East and West Africa.

Some of the less likely places, those which in the past were not coloured red on maps of the world, include Russia, the Middle East, Japan and South America, but Bernard Porter shows that these too were touched by the empire. Britain had a formal empire covering those parts of the world which it administered or governed, and an informal empire where trade and investment were major areas of interest, for example in parts of South America and China. The opium trade, for example, lead to the control of Chinese ports.

The Arab Spring and Empire

Consider one aspect of globalization today, the events connected with the Arab Spring in the areas surrounding the Mediterranean, especially the North African countries on the southern shore, and at the eastern end, Syria, Lebanon, Israel, Palestine, Jordan and extending to Iran and Iraq. Since the establishment of the East India Company in 1600 and trade with India, Britain has been involved in this region.

For example, Britain has had a long standing interest in Egypt because of its location on the trade route to India, both before and after the Suez Canal was opened in 1869. One place to start is with the French loss of their North American colonies, Quebec and Louisiana. Napoleon then tried to enlarge French imperial influence in India and around the Indian Ocean. In 1798, he invaded Egypt with 40,000 troops and defeated the Egyptians on land. However in the same year Nelson destroyed the French fleet at Aboukir Bay known as the Battle of the Nile. Three years later, British and Indian troops captured Cairo ending Napoleon’s ambitions in this area. The finale came with Nelson’s defeat of the French and Spanish fleets at Trafalgar in 1805, and the army at Waterloo in 1815.

Subsequently, at various times, Russia also posed a threat to trade with India, forcing Britain in 1882 to make Egypt a British protectorate which lasted until 1952. In order to prevent Russia threatening the Indian trade route, Britain fought three costly wars with Afghanistan in 1838-42, 1878-80 and in 1919, and in the Crimea, 1853- 56, in order to block Russia’s southward expansion. The Crimean War pitted the Russian empire against the combined British, French and declining Ottoman Empires.

Thus, by WW1, Britain had fought in a number of different places around the Middle East in defense of its empire. After the war, Britain received a League of Nations mandate to control Iraq which it held until the country received independence in 1932. At the same time, Britain received a mandate to administer Transjordan, an area roughly covering today’s Jordan, Israel the Palestinian West Bank and Ghaza. Jordan received independence in 1946 and Israel in 1948, the latter after fighting between British troops and Jewish settlers. France obtained a similar League of Nations mandate to control Syria and Lebanon as protectorates from 1920, ending in 1936. The boundaries drawn up by the League of Nations delineate the geographical areas where conflict occurs today.

Another imperial vestige relates to petroleum resources. Once the British navy changed from coal to oil after 1911, the Middle East and especially Iran became of strategic interest. Fearful that Iran would ally itself with Germany, Britain and the USSR invaded Iran in 1941 in order to maintain access to the petroleum supplies. In 1951, the Iranian prime minister was assassinated and his successor nationalized the country’s oil industry and reserves. With the aid of the US in 1953, the British deposed Mosaddeqh, the prime minister of the democratically elected government. A subsequent coup saw the Iranian government becoming independent again in 1979. Current (2012) events in Iran result in part from the size of Iran’s oil reserves and the world’s growing demand for energy including petroleum.

In sum, while a case can be made for identifying a footprint of the empire today in the anglosphere of the UK, Ireland, USA, Canada, Australia and New Zealand as well as in the Indian subcontinent, it also exists elsewhere. Earlier imperial actions have influenced the boundaries, alliances, institutions and culture of some of the countries at the forefront of the Arab Spring.

Thinking about 2012 and beyond

January 2, 2012

As always, there is a wide gap between the political and economic events forecast by experts for the coming year and what actually happens. (Dan Gardner, columnist for Ottawa Citizen, Dec 28, 2011, p. A15, discusses this). Philip Tetlock, originally from UBC and now Professor of Psychology at the Wharton School, has studied political and economic forecasting and finds that many so-called experts do significantly worse than those making random guesses about the future. This does not deter publications like the Economist and daily newspapers publishing predictions for the coming year. Seldom do they alert readers to the inaccuracy of previous forecasts.

Combine this with the observation of Raquel Fernandez, economist at NYU, that at least as far as economists are concerned, they don’t know what they are talking about, although they are quite good at how in general to think about the issues.

“Economists essentially have a sophisticated lack of understanding of economics, especially macroeconomics. I know it sounds ridiculous. But the reason why I tell people they should study economics is not so they’ll know something at the end—because I don’t think we know much—but because we’re good at thinking. Economics teaches you to think things through…. You have to think about the ramifications of policies in the short run, the medium run, and the long run. Economists think they’re good at doing that, but they’re good at doing that in the sense that they can write down a model that will help them think about it—not in terms of empirically knowing what the answers are. And we have gotten so enamored of thinking things through that the fact that we don’t know anything needs to bother us more. So, yes, it’s true that the average guy on the street doesn’t understand economics, and it’s also true that we don’t understand economics. We just have a more sophisticated lack of understanding than the guy on the street.”

Read one of the many forecasts for world economic and political events for 2012 but don’t spend too much time memorizing them, although it is useful to consider what issues they discuss and what parts of the world may be affected. For these and other reasons, I resist from making any forecast for the New Year, but suggest a number of factors which condition my thinking about the future, now more so than in the past.

1. Are nations sovereign?

There are now almost 200 countries in the world which consider themselves sovereign nations. They vary enormously in geographic size, size of population, GDP per capita, language used and many other variables. It is increasingly meaningless to put small nations like Singapore, Vanuatu and Mongolia in the same league as Russia, China and the USA. In hockey and other sports there are different leagues for teams of different skill levels. Each plays by a similar set of rules but there is little point in having a bantam league team play a national hockey league team. The point is that we should recognize that national sovereignty is not a standard which can be respected equally with regard to all nations and the things they do. It never has been and never will be.

2. Should population size be limited?

Some issues receive overwhelming public attention like the environment while others like global and country population size are ignored. For me, the most remarkable change in the past 50 years is world population growth. In the 1950s the world population was 2.5bn. Today it is over 7bn, forecast to rise to over 9bn in the next few decades. For centuries up to 1900, it was estimated to be around 1 billion. Much of what occurs politically and economically in and between countries has a demographic dimension. If Canada today had a population of 14 million, the 1951 total, instead of today’s 34 million, its political and economic issues would be vastly different. And yet no one, except the Population Institute of Canada, talks about this. Other countries like Japan have managed to limit population growth, or allow it to grow more slowly, such as the Scandinavian countries and still seem to survive, although their problems may differ from those where population is increasing much faster. Public discourse declines to talk about controlling population growth because of the uncomfortable issues raised, but this may be a necessary way to control some of the negative aspects of growth. Jared Diamond in “Collapse” notes that those societies which survived had an active program to limit population growth.

3. Is immigration the only solution to an ageing population?

The answer is no based on the adjustments made in countries which already have to consider this issue. Immigration brings in skilled and unskilled persons some of whom are young, but it also brings in family members who are already older and will find it less easy to adapt to modern Canadian society. The same is true for many of the refugees brought into Canada. With an ageing population, adjustments have to be made, but there are alternatives to increased immigration. People can work longer in full and part-time jobs; wages can be raised to attract people to work longer; and capital can be substituted for labour in many but not all occupations. In wartime Britain, the labour force was increased markedly by the employment of women in factories and on the land while men joined the forces. Today women represent a much larger share of the regular labour force but there is still room to increase their participation with the appropriate incentives.

4. The relevance of the counterfactual

Much economic and political analysis is directed at analyzing the impact of certain actions such as lower taxes, the introduction of renewable energy technology, or the invasion of Iraq. People offer different answers because they assume different alternative conditions which would have taken place in the absence of the tax break, energy source or invasion – that is the counterfactual or comparative set of circumstances. For example, when unemployment remains high after a fiscal stimulus by the federal government, some will argue that the stimulus did not work. Others may conclude that without the stimulus unemployment would be higher still. Some argue the Iraq invasion has been a disaster. What would conditions now be like if the Saddam regime was still in power? Look for the assumed counterfactual before deciding which provides the more appropriate analysis.

5. How different are government and private corporations?

Often the two are described as different ways of managing economic activity. They are different but often have similarities. Consider the British East India Company chartered in 1600. It was funded privately but received a mandate from the Crown (the government) to engage in certain commercial activities on the Indian subcontinent. At the same time it had governmental powers to administer the areas where it did business and a private security (military) force to provide protection. It was a commercial-governmental hybrid for the region where it operated. The company also allowed its employees to do business on their own account as well as for the company. Today, politicians and bureaucrats may do this but are not supposed to, and may get their knuckles rapped if caught. Currently, we have government organizations which provide services like museums, rail, bus and air travel, and the operation of highways, some are corporations which have joint government and private ownership, and some which are entirely privately owned but may be the recipients of large government contracts as in the case of planes, trains, ships and construction projects. The distinction between public and private enterprises and the implications thereof are often not clear.

6. What’s the matter with the CBC?

A main problem is the method of financing with a mix of government funding and commercial advertising revenue. The BBC in the UK (but not abroad) and the Australian Broadcasting Corporation (ABC) are funded entirely by the government and do not compete with private broadcasters for advertising. CBC television competes with private broadcasters and to do so buys programs which attract audiences. Some of these like Coronation Street and Jeopardy are not Canadian programs and there is no reason why these could not be bought and shown by private broadcasters. Check the primetime weekly schedule for CBC TV and see how many programs constitute Canadian content.

7. How new are social media?

An insightful Economist article (Dec.17, 2011) shows that “everything old is new again” by describing how social media worked for Martin Luther in 1517 to debate his 95 Theses. Luther was appalled by the actions of the Catholic clergy in raising money – “the pious defrauding of the faithful” – to provide a building fund so the Pope could repair St Peter’s Basilica in Rome. The Pope’s sidekick, Tetzel, a Dominican friar, raised money by selling indulgences saying “As soon as the coin in the coffer rings so the soul from purgatory springs.” The debate had a wide audience reached through pamphleteering with publication in German as opposed to Latin thus assuring a larger audience. The Pope used Latin. Within 14 days of publication, the Theses were spread throughout Germany shaking the foundations of Catholicism and promoting the emergence of Protestantism.

8. Outsourcing and non-tradeable goods

Outsourcing is another word to describe the extent and nature of vertical integration. Firms either produce inputs themselves or buy inputs from other firms. The former involves internalizing production (vertical integration within the firm), the latter is vertical integration by outsourcing to other firms. Firms have always done this where goods and services are not available locally. Alcan has to outsource its bauxite from Jamaica and Australia, cars manufactured in Canada import parts from Japan and China. Because of falling transportation and communications costs, it is now easier to outsource abroad more goods and services, especially where production is labour intensive and wages abroad are lower.

Some products cannot easily be outsourced such as haircuts, restaurant meals, construction projects and medical services. These tend to be non-tradeable goods and are ones where there will remain opportunities for employment even in higher wage economies. Skilled jobs will also performed in higher wage locations.

9. The Retail Sector

The retail sector provides a look at changing times. Canada increasingly consists of big box stores which are more like warehouses (Costco, Ikea, Chapters) than shops where you expect to receive service. Consumers reduce their time shopping either by shopping online with mail or courier delivery, or searching online for items and then visiting the warehouse stores to take delivery. The new stores opening in our local neighbourhood are food, restaurant and coffee shop related or providing non-tradeable services like hair dressers, fitness salons and massage parlours. The consumer saves time and through the internet better information about the quality of products to be bought.

10. Corruption

Economists and others point to political and financial corruption among leaders in developing countries. With the known cases of financial mismanagement in developed countries since 2008, this seems highly selective criticism. Where to begin? Taxpayers in Greece and Italy are known to evade paying taxes; Madoff is one of many names of financiers involved in theft; at home, Conrad Black was jailed for minor mischief, at least compared with Madoffian dimensions. The list is long and raises the question as to whether corruption is as endemic in developed countries as it is in developing countries, and how to address it.

11. The future

Looking forward, I think it may take another 5-10 years to work off the present obesity of deficits and debt. Unlike the 1930s, when the recession ended with a world war, unemployed men joined the military and women went to work in factories and on the land. Consumers were encouraged to save by buying Victory Bonds, which they cashed in at the end of the war and used to buy the clothing and consumer durables which were not available during wartime. Instead of a postwar recession, there was fairly steady growth for the next few decades. Today, fortunately, there is less prospect for a war but consumers and governments are heavily in debt and so unable to provide a needed stimulus, although corporations do have substantial savings. In the early 1990s, the rising Canadian government debt due to budget deficits was addressed by cuts in program expenditures, but what really saved the day was rising tax revenues due to the GST and economic growth at home and abroad. A problem today is that Canada’s major trading partners in the USA, Europe, Japan and China are also experiencing slower growth and will not provide much of a stimulus. This time is different.