Choice of Goals

The lesson has not been missed by Mr. Gordon. Political sovereignty is not compatible with branch-plant status: the greater the foreign ownership and control of enterprise, the lesser the freedom of choice in political as well as economic matters.

It will be argued, that in the contemporary world in which innovation in technology and in business organization is the critical factor in the capacity to produce goods and services, the “branch-plant” nature of Canada’s economic structure may prove in the long-run, to involve material loss as well as a threat to the unity and the independence of the country.

It is unfortunate that the blinkers which are imposed on the mind of the professional by the categories of his discipline, largely deprive us of the skill and knowledge which economists could otherwise bring to the discussion of the problems posed by massive direct foreign investment. Under the ex-officio Deanship of Professor Harry Johnson, an eminent Canadian economist who has made his spiritual and physical home at Chicago and the London School of Economics, the profession has used its considerable influence to stress the desirability and inevitability of further and faster economic integration with the American economy. Using the apparatus of standard economic textbooks, they argue the case for the unrestricted free flow of goods, capital and people between the two countries. The profession, by and large, has opted for “continentalism” and has condemned what is called “economic nationalism.

The former, it is said. provides the “rational” solution; the latter by implication. is a view held by people who are incapable of logical thinking, having no training in economics or suffering from some form of xenophobia. The profession invites us to believe that the Canadian government can always employ legislative means to compel foreign companies operating in Canada – however powerful – to act in accordance with the wishes and interests of the country. They claim that there is no particular reason why the presence of American corporations here should be permitted to influence Canadian government policy in internal or foreign relations. It is strange that so naive a view should have gained such widespread acceptance among such individuals of high intelligence, many of whom are further­ more in deep moral opposition to some of the actions of the government of the United States, particularly in Vietnam.

The mind of the professional economist has, by and large, been warped by dwelling too long in a wilderness of textbook categories. Here no landmarks exist. Economic transactors such as “the firm”, “the consumer”, “the entrepreneur”, “the market” or “the government” are abstractions without specific institutional form. Policy conclusions are derived from models which do not fit the conditions for which the policies are recommended. In the resulting confusion the economists have pre-empted the word ‘rational” to describe policies which maximize the total market value of goods and services; which employ the classical methods of freeing markets for goods, capital and labour, and which rely on” Keynesian” fiscal and monetary instruments to ensure that total monetary demand is neither too high nor too low.

In point of fact, a policy is rational only if it employs the most efficient and effective means to achieve a given set of goals, whatever these may be. If the gals of Canadians include their desire to remain distinctively Canadian in North America and to feel that they control their destiny, then this must be accepted as no less a reality than their desire to enjoy a North American standard of living. A rational economic policy may thus have to sacrifice immediate material advantage for the present and future viability of the nation as a political unit. Similarly, if the social goals of French Canada include the desire to feel “Maître Chez Nous” in Quebec. Then a rational Canadian policy must take cognizance of that fact. The same applies to the aims and aspirations of any nation wishing to remain outside of the Inter-American system as that is now popularly conceived.

To point out that Canadians may have to pay a price for the survival of Canada as a nation state is both legitimate and useful. We have referred to the interview of Walter Gordon. The other distinguished Canadian to be interviewed by the same journal, was Kenneth MacNaught, Professor of American history at the University of Toronto. In referring to Canada’s economists. he said:

“Of all the bits of specialist advice about our future, surely that which says we should not worry about the uncontrolled growth of American investment is the most fatuous. Like earlier advocates of commercial union (with the United States), some economists today say we should forget our nationalism and opt only for economic efficiency…”

“No country, says Madison, will long remain stable where the government does not serve the interests of the principal owners of property. Well, the principal owners of our productive property are now the American corporations. The evidence of this is over­ whelming and flows almost daily from the Bureau of Statistics.”

The conclusion which follows is clear. In the words of Professor MacNaught, if Canadians wish to be ab le to choose that which they like, and reject that which they don’t like, “they are going to have to recover control of the major sectors of their economy, and they are going to have to re-assert very loudly the supremacy of politics over economics”.

It is no accident that concern over the eventual consequences of branch plant has been articulated by politicians, historians, political scientists, journalists, philosophers – even accountants like Walter Gordon, but rarely by economists.