“...Two systems are before the world...One looks to pauperism, ignorance, depopulation and barbarism; the other to increasing wealth, comfort, intelligence, combination of action, and civilization. One looks toward universal war; the other to universal peace. One is the English system; the other we may be proud to call the American system, for it is the only one ever devised the tendency of which was that of elevating while equalizing the condition of man throughout the world.”
—Henry C. Carey, Harmony of Interests 1851
The legacy of Canada lies between two poles: the American and the British.Today these two antagonistic systems are best characterized by, on the one hand, Lyndon LaRouche and the Franklin Roosevelt tradition; and on the other, by the gross avarice and parasitism of the London-spawned hedge funds, predominantly centered in the British Cayman Islands. It is the hedge fund, the cancer of the financial system, which is at the center of the now trembling global derivatives bubble, the greatest speculative bubble in recorded history, measured not in hundreds of billions, but hundreds of trillions.
This system, of usury, of people sacrificed to support the weight of unpayable debts, of no restrictions but those imposed by financial power; this system, which if continued will ruin civilization for generations to come, must be terminated and replaced with the American System, which recognizes the only source of economic wealth to be the human mind, in those creative powers which allow us to increase our power in and over nature. This distinction, between man and beast, is the central issue of economics. Economies which fail to recognize this principled difference must inevitably collapse; such was the case during the period of the Great Depression, when almost every Western nation, {except the United States of Franklin Roosevelt,} was dominated by fascist or pro-fascist governments. War was and is the inevitable result of the British System, known today as Globalization. Canada must choose one or the other, there is no room for vacillation any longer.
Destiny Is Knocking
The international financial system burns, Allan Greenspan confesses to his own lifelong incompetence, and European pundits use the much feared “D” word; meanwhile the intellectual and political leadership of Canada seems to be increasingly frozen in time, gape-mouthed and speechless, unless they are blathering nonsense about the continuing prosperity of Canada’s economy, the low unemployment rate, or the rising value of the dollar. If any reporting of the crisis does creep into the media it is universally described as being isolated to the United States, or to Europe, or to a particular sector of the financial system, as if the roaring forest fire was simply the statistical accumulation of countless individually (and coincidentally of course) burning trees.
In these times of shameless acts, of folly, incompetence and denial, Canada has reached a physical-economic boundary condition frighteningly akin to the state of collapse in America. Our infrastructure is approaching the point of failure, farms and small industrial enterprises are disappearing, the productive sector has been in recession for years, while the “booming” sectors of banking, insurance, retail and real estate have begun to “boom” in a different way. Several reports on the actual state of the Canadian economy have been issued in the past months, disconcertingly at variance to the blithe forecasts of the Finance Minister.
Thus, as will be demonstrated below, Canada is faced with an existential question, a question most have wished in earnest to avoid; yet, for the sake of our posterity the time has arrived that it be acknowledged. Too long have we neglected our national destiny: {to build a great continental nation}; not to haplessly carve out a strip of ground, stretched precariously along the U.S. border, and neglect our great hinterland! Certainly not to squat on our haunches and praise ourselves for so efficiently wasting the future’s patrimony! Have we so utterly forgotten the names of our proud and patriotic forebears? The names of those who built our cities, farms and industries, laid our railroads, or constructed the vital canals of the east? Will we bow to our British colonial past, or look up to a future free of divide and conquer games, played between English and French, or east and west?
Up to this time most Canadians have felt reasonably insulated from the distant rumblings of economic tumult, assured by our banks that Canada’s financial institutions had not been dangerously exposed to the “toxic waste” of the U.S. subprime mortgage sector. However, as this article is being written, the Canadian Imperial Bank of Commerce (CIBC) announced the firing of CIBC World Markets CEO Brian Shaw and the head of the unit’s risk operations, Kenneth Kilgour. The departure of the two executives was preceded by revelations that CIBC, the stock price of which has plunged by 30% since September, has as much as $9 billion, and possibly more than $10 billion, worth of subprime exposure, much of which is hedged with failing bond insurers such as ACA Capital. Analysts at the bank acknowledge that CIBC could handle as much as $3 billion in losses, but beyond that the bank will be essentially insolvent. The Bank of Canada has asserted that it will do whatever is necessary to defend the private banking sector, which is far more concentrated than even the U.S. financial system. For Canada, the failure of a major bank, of which there are only five, would mean chaos.
Another threat on the horizon is the $130 billion of Asset Backed Commercial Paper which Canada’s banks sponsor and for which they provide liquidity support. $35 billion of these derivatives consist of indirectly sponsored “non-bank” ABCP while another $81 billion is directly sponsored by the banks. According to the Bank of Canada’s December 2007 {Financial System Review} the majority of the “non-bank” ABCP is derived from highly speculative CDOs, an international market in the many trillions of dollars which is ripe to explode.
Perhaps the greatest threat to Canada’s economy is its massive dependence upon exporting to the U.S. economy, which accounts for as much as 45% of Canada’s GDP. As the collapse of the United States accelerates, more and more sectors of Canada’s economy are slammed with job losses, plant shutdowns, and recession. In the October 2007 {Economic Statement} issued by the Ministry of Finance, the government acknowledged that almost the entirety of Canada’s productive sector was already in recession – the worst being the auto sector – and had been since at least 2005. The loss of manufacturing jobs in Canada, between November 2002 and July 2007, has totalled 288,300, as much as 12-13% of the total manufacturing base, an utter disaster when considered in light of the imminent infrastructure crisis facing the nation.
The Infrastructure Crisis
In November 2007 the Federation of Canadian Municipalities issued a devastating report entitled {Danger Ahead: The Coming Collapse of Canada’s Municipal Infrastructure}, which grabbed headlines around the country at the time. It was long recognized that Canada’s cities were floundering amid increasing costs and economic commitments, while at the same time being unable to run deficits or win adequate additional funds from the Federal or Provincial governments. Over the past fifteen years both the Liberal and Conservative governments have lauded themselves for their wise and scrupulous management of the economy, reducing our national debt by tens of billions, balancing the budget every year, and often posting astonishing surpluses, which the Conservatives have used as an excuse to grant extensive tax cuts. What was not explained to the overawed and credulous public was that in order to achieve such wonderful objectives we have gutted investment into the very systems upon which we depend to survive. The cities, faced with rising costs and no new sources of revenue, cut into their capital budgets, which, as explained in the FCM-McGill report, “do not face the same immediate pressures as operating expenditures, making capital investments easier to delay.”
As a function of the rejection of the Franklin Roosevelt paradigm and the open-armed embrace of the “post-industrial” and increasingly “post-human” utopia of the Information Age, Canada’s economy has reached the point at which municipalities alone require an immediate infusion of {at least $123 billion} to resuscitate and replace old infrastructure, in addition to {at least $115 billion} to expand existing infrastructure systems to meet the demands of the population (fu1). It is to be emphasized that this infrastructure deficit, so-called, is proportionally either on par with or worse than the American Society of Civil Engineering’s assessment of the U.S. economy, it’s 2005 “Report Card on U.S. Infrastructure”, {which placed America’s infrastructure deficit at a staggering $1.65 trillion} (EIR’s own estimates place the actual infrastructure investment necessary in the several trillions of dollars).
The report states that, “across Canada, municipal infrastructure has reached the breaking point. Most was built between the 1950s and 1970s, and much of it is due for replacement. Given the municipalities’ already strained fiscal situation, we are rapidly approaching a tipping point on the infrastructure deficit, one that will seriously harm both our quality of life and our competiveness and productivity.” The report continues, “between 1955 and 1977, new investment in infrastructure grew by 4.8 per cent annually. This was a period of intense capital investment that closely matched Canada’s population growth and rate of urbanization. This period stands in stark contrast to the 1978 to 2000 period, when new investment grew on average by just 0.1 per cent per year.”
Clearly seen behind these numbers is the shift away from successful American System policies, inspired by the actions of Franklin D. Roosevelt, and toward increasingly radical monetarist policies, typified by Federal Reserve Chairman Paul Volker’s “controlled disintegration” of the U.S. productive base, initiated with the bludgeoning inflicted upon the economies of the West between 1979 and 1981. From 2000 onward municipal capital spending rose significantly, averaging 7.5 per cent, but the report warns that, “this recent growth in infrastructure spending should not be considered a solution to the infrastructure deficit. ...this increase in investment has not met the annual rehabilitation needs of existing capital stock, or alleviated the backlog of maintenance and rehabilitation that accumulated over the [past] decade.”
To further emphasize the extent of the crisis, the report proceeds to reveal that “only about 41 per cent of Canadian infrastructure is 40 years old or less. The age of 31 per cent of the assets is between 40 and 80 years, while the remaining 28 per cent is more than 80 years old. [It was] found that Canada has used up about 79 per cent of the total service life of its public infrastructure. Moreover, it should be noted that infrastructure deterioration accelerates with age.” The report closes by asserting that “the results of the 2007 FCM-McGill survey point to a single, inescapable conclusion: that much of our municipal infrastructure is past its service life and near collapse.”
Where is the Government?
Considering the above, it would seem reasonable to ask ourselves what the position of the Canadian government is on this issue. The government has answered. Conservative Finance Minister Jim Flaherty, when questioned on the FCM-McGill report, in a widely covered response, told reporters that “we're not in the pothole business in the government of Canada.” The Finance Minister continued, claiming that the cities should stop “whining” and “do their job.”
At the same time, Flaherty boasted of a $33 billion infrastructure fund, which the Conservative government introduced in the 2007 Budget; however, despite his vaunting about the largest infrastructure fund “in modern times,” the truth of the matter is far from grand. The $33 billion is to be spent over a period of seven years; and, according to Calgary Mayor David Bronconnier, the deal includes a score of pre-existing funding agreements, “repackaged” for optical effect. When questioned by this writer, several Conservative Members of Parliament insisted that this fund was exactly what was needed to solve the infrastructure crisis; yet, as it turns out, the country will be fortunate if this fund merely slows the rate of depreciation and collapse! So much for the government’s forceful action on this most vital of matters. In addition to this, the $33 billion fund is premised upon the forecast of continued budget surpluses in the coming years, which, considering the international maelstrom in the financial markets and the rate of collapse of the planet’s physical economy, is a wishful proposition at best.
The government’s response to these criticisms would be to declare that it is also taking steps, as indicated in the 2007 Budget, to ensure that Canada becomes “a leader in public-private partnerships.” The Budget indicates that the public-private partnership models for Canada are “world leaders in promoting and engaging public-private partnerships.” On the one hand, the bankrupt, eviscerated and collapsing economy of the United Kingdom, and on the other, Australia, which “enjoys one of the most developed P3 markets worldwide,” but is now in the greatest fresh water crisis in its history, due to that nation’s failure to build the necessary water-management systems! Regardless, the PPP model is already doomed, since the “credit crunch,” which became a “liquidity crisis,” but was really a “solvency crisis” of the entire system, has demonstrated that, when even the giant hedge fund Blackstone fails to raise sufficient cash for a puny $1.8 billion leveraged buy-out, there is no money to be had!
Canada Needs A Capital Budget
As the international crisis deepens, it becomes transparently clear that the world economy is doomed to a long and deep collapse; a collapse without end, that is, unless governments cast aside their foolish adherence to British System policies of free trade, monetarism and laissez-faire economics. It is once again time for Canadians, and peoples of all nations, to resume the upward march of progress, tied as it is to American System policies. It is also time for Canadians to revisit their own history, for despite the insistence of today’s free market ideologues, Canada was not built because of British policies or free trade! In fact, it was built in spite of the British, with the same ideas and policies which transformed the United States into the great nation which it became under the guidance of leaders such as John Quincy Adams, Abraham Lincoln and later Franklin Roosevelt.
Capital budgeting and national banking are the means now at our disposal to ensure that the physical economy is developed appropriately, as emphasized by Lyndon LaRouche in numerous locations. In Canada, as in the United States, the government has the power to create money, money which can be used to develop the physical economy, creating productive jobs and improving the productivity of the entire population. Neoliberal economists and financiers may scream in denial at this assertion, yet these same hypocrites will not hesitate to throw trillions of dollars into the black hole that is their now bankrupt financial system.
The American System is the means by which we, as a nation, will be able to solve the looming physical-economic boundary conditions which are being expressed through the collapse of municipal infrastructure. The model of FDR’s Reconstruction Finance Corporation (RFC) is instructive. Through the RFC Roosevelt financed the Tennessee Valley Authority, the rural electrification of the United States, and the building of other great projects around the country. Similarly, the Bank of Canada, {which is wholly owned by the Government}, played a crucial role in financing the construction of the St. Lawrence Seaway in the 1950s, one of the most important infrastructure projects in our nation’s history, the economic and financial gains derived from which are beyond all reckoning. Or consider the government’s role in the late 19th century, {under the influence of the protectionist National Policy}, of financing the construction of two continental railways, industrializing the country and settling the west; if the government had not taken up this challenge, western Canada would today not exist, and nor would Canada today have one of the highest living standards in the world.
The Canadian government, using its power to create money, can capitalize a federal institution, new or previously existing, such as an Infrastructure Development Bank, which can then be the lending facility for billions of dollars’ worth of projects, with low interest rates and reasonable terms of repayment. The revenues generated by the bank can then become new capital for lending. In this fashion, with prudent management and cooperation, we can build ourselves out of the crisis, borrowing from ourselves, and paying ourselves back. Our sovereignty is preserved, the General Welfare is promoted, our posterity is assured, and the people will be happy and industrious.
Unless Canada breaks from the accepted way of doing things, and stops capitulating to the City of London and the City’s Canadian financier allies, Canada has no future. The population of the country, at its present standard of living, will not be sustained, and under a general breakdown of the international order, it is uncertain that the nation could maintain its integrity. The British Empire was erected and sustained on the corpses of those who allowed themselves to be drawn into self-destructive conflicts, who fell into British cultural or geopolitical traps. Canada has been managed since 1763 primarily by turning the population against itself, thus ensuring that the people remain weak, divided and preoccupied: a country easily controlled and predictable, like today’s drug or cyber-culture addict.
To reiterate the point: money is the tool of government, government is not the tool of money; no nation is sovereign if it does not control its currency. Should our current batch of ne’er-do-wells in Ottawa fail to understand this difference, and to understand that the purpose of government is to aid the people’s intellectual and moral development, there is little hope for Canada’s once bright future; however, if they take the advice of Lyndon LaRouche and the Canadian LaRouche Youth Movement, Canada will become a great nation, and realize the promise of past generations.
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