CANADA'S NEW-FOUND MORAL AUTHORITY

With global markets tanking and unemployment soaring, Canadians are
pinching their pennies. But as National Post contributors have
explained in a week-long series ending today, economic doom and gloom
has its upside.

In the present economic context, austerity means more savings, more
investment and less elective spending on consumable or depreciating
assets. It is not as grim a regime as a diet, which requires
self-denial. Savings, investment and the growth associated with each
can be a good deal more and durably satisfying than prodigious
consumption. Where a diet --and, in most cases, austerity -- are the
consequences of one's excesses, in Canada, austerity will have little
to do with Canadian public policy errors or bad public spending habits.

Canadian leaders since Brian Mulroney -- and especially Paul Martin,
(one of the outstanding finance ministers in the country's
history)--and successive governors of the Bank of Canada, have all
shown commendable fiscal prudence. Not so in the United States. The
U. S. government, under both parties in the Congress and the
administration, deliberately eliminated private savings by reducing
interest rates and facilitating home ownership with uncommercial
mortgages and encouragements to consumption generally.

Canada has as high a percentage of family home ownership as the
United States without recourse to financial leger de main. When
serious financial problems eventually arose, not only the U. S.
banking systems, but those of Britain, France and many other advanced
countries, were severely shaken, but not Canada's. No Canadian bank
has needed or asked for a bail-out. Stephen Harper and Jim Flaherty
had no reason to know how serious a problem non-performing mortgages
would be in the United States and elsewhere, and how they could affect Canada.

Since the core of the Canadian economy is extracting and exporting
natural resources, the recession has entered through the back door of
declining demand for our base metals, forest products and even
energy. Essentially, Canada need not do much more than roll back
natural-resources production by about 10%, and assure that the social
safety net is strengthened to provide adequate assistance to everyone
in need of it.

The fact that austerity is imposed on us by the gluttony of others
rather than by our own impetuosity makes it more irritating but less
humbling. As Canada enters this crisis with clean hands, it has an
opportunity for moral suasion as well as bargain buying. We have the
opportunity to use the credibility accumulated by the economic common
sense of successive governments to play a larger role in
international economic policy making, and to use accumulated wealth
to buy back foreign assets in Canada and to invest advantageously in
foreign countries.

The federal government should, with the co-operation of the provinces
and the private sector, establish a fund for acquiring chunks of
Canadian industry from voluntary but perhaps hard-pressed foreign
vendors, for redistribution, by sale or proration to Canadians.

Instead of playing footsie with Castro and Chavez as it has, Canada
should play a distinct role in Pan-American affairs by advocating the
extension of the North American Free Trade Area (NAFTA), to all
politically compatible states in the Americas; and the systematic
pursuit of the return of the cheap manufacturing industry from the
Far East to the Americas. This could be worked together with the
problem of under-documented immigration in the United States, as
migrant workers could be more generously accommodated there, or
retained in Mexico, as those industries are repatriated to the
Americas to employ them.

We should explore a common currency zone to embrace most of the
Americas and Japan, with possibilities for further expansion. Because
Japan is ageing quickly and has national debt worth 180% of GDP,
(more than twice the corresponding figure for either the United
States or Canada), currency equivalences would have to be calculated
carefully. But the present large U. S. trade and debt imbalances
would be largely and painlessly absorbed into the America-Pacific
currency zone.

Canada should assist Mexico and other countries in convincing the
United States to abandon its catastrophic war on drugs. Apart from
its domestic consequences -- a trillion dollars spent, two million
people imprisoned, while over US$25-billion of illegal drugs enter
the United States from Mexico each year, and are in more plentiful
supply and at lower cost than when this so-called war began -- other
countries, especially Mexico, are being torn to pieces. Mexico
suffered 6,000 drug-war deaths last year, and the drug gangs number
up to half a division of warriors each, with armoured vehicles,
rocket-propelled grenades, howitzers and drug-delivery submersibles.

It is an illustration of the mad, presumptuous egotism that can be a
permutation of American effusion and optimism that it imagines it is
the duty of other countries to stop the production of drugs, rather
than of the United States to reduce internal demand or at least
prevent importation. Such huge volumes of illegal drugs could not
possibly enter the United States without the collusion of many
corrupt U. S. officials; nor if the U. S. armed forces, and not just
a hodge-podge of Homeland Security agencies, were conducting this "war."

The United States has fallen into the sloppy habit of declaring
"wars" rather cavalierly and then pressuring others to fight the
battles for them. In this one sense, it is emulating the Muslim jihad
and fatwa.

There are absurdly severe sentences for marijuana use, and up to life
imprisonment for growing 1,000 plants, yet marijuana is the largest
cash crop in California and 40% of Americans are marijuana users at some point.

This is nonsense, a caricature of witless American self-importance
and a worse fiasco than Prohibition, which didn't significantly
reduce alcoholism but delivered the liquor and beer and wine
industries into the hands of the underworld.

Canada is uniquely placed to tell the United States, in a hemispheric
context, that if it wants to reduce domestic drug use, it should try
the same methods that it and many other countries have used to reduce
tobacco consumption, and in any case, should stop asserting
disintegrating pressures on other countries.

Canada does not want to become a busybody, and austerity does not
usually translate into hectoring neighbours, but as I wrote here last
week, eventually the Americas are going to have to group more closely
together to counteract economic growth in China and India with a
larger market. This hemisphere's strategic objective should be to
approach a level of unity that keeps us well ahead, by all relevant
indicators, of India and China, with a comparable population.

Contrary to the claims of alarmists, this should not be difficult, as
China's restriction of procreation to one child per couple, and the
terrible complexities of Indian sociology, will prevent those
countries from approaching the social cohesion or economic
efficiency, much less the wealth in natural resources, of this
hemisphere any time soon.

Canada's credibility has risen in these travails, and the United
States should become accustomed to negotiating with allies and not
just raising a flag and expecting everyone to follow. This kind of
austerity could be both useful and satisfying. And for individuals,
watching positive bank and investment account balances grow can be
more pleasing than watching assets, often bought with borrowed money,
depreciate.