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Canada’s Economic Collapse and Social Crisis: Class War and the College Crisis, Part 5
By: Andrew Gavin Marshall
What are the Spending Priorities of the Government?
In the debate raging over increased costs of tuition in Quebec, increased debt loads of the federal and provincial governments, the need to reduce costs – impose “fiscal austerity” – and find “solutions” to these problems, very little context is given. As students fight back against increased fees, the counter argument simply states that people must pay for their education, that governments must reduce their deficits, and therefore, cuts in spending and increases in tuition are necessary, though undesirable. But how necessary are they? Where is the government putting its money?
The question really comes down to one of priorities and approach. What are the spending priorities of the government, for people in need or for the benefit of the rich? What is the government’s approach to spending in terms of addressing a major social and economic crisis, to treat symptoms or address the cause? A great deal is revealed about the moral, ethical and humanitarian considerations of a state in terms of how and where it spends its money. Canada is no exception.
First, let’s start with Canada’s debt. In October of 2011, it was reported that Canada’s combined federal and provincial debt equaled roughly $1.1 trillion. This raised calls from the business community in Canada stating that, “It’s time for governments across Canada to get more serious about controlling and reducing debt.” In other words: time for fiscal austerity! (i.e., cutting social spending and increasing costs and taxes) This debt load amounts to roughly 58% of government GDP (that is, 58% of yearly tax revenues), as opposed to Greece, with a debt-to-GDP ratio of 160%.
An interesting issue to note is that the Bank of Canada (Canada’s central bank) was created in 1934 as a private bank, and it was transformed into a government-owned bank in 1938, and was then able to lend to the government without interest, and thus, “the Bank is ultimately owned by the people of Canada.” The job of the Bank is to manage monetary policy, by issuing the currency and setting interest rates. Canada had a unique central bank, as most other central banks were founded and maintained as private banks (responsible to private shareholders), such as the Bank of England (1694), the Bank of France (1801), and the Federal Reserve Bank of the United States (1913). It was responsible for financing Canada’s war machine during World War II, railways, the St. Lawrence seaway, the TransCanada Highway, schools, hospitals, healthcare, pensions, and social security, all with no interest attached. Between 1940 and 1974, Canada had a national debt below $18 billion. In 1974, all of this changed as Canada sunk into its neoliberal abyss, when private banks (the “big five” in Canada) essentially took over the function of lending to the government, and at high interest rates, with Canada paying over $61 billion per year on interest to private banks alone. Between 1981 and 1995, the Canadian government collected $619 billion in income tax, but because the debt was owed to private banks, instead of being interest-free with the Bank of Canada, during that same period of time, the Canadian government paid the private banks $428 billion in interest payments.
Interest payments on Canada’s debt account for roughly 15% of Canada’s revenues. Statistics Canada provides information up until 2009 on the Canadian government’s expenditures and revenues. In 2009, the federal government’s expenditures amounted to $243 billion, with $26 billion spent on health care, $88 billion on social services, $5.8 billion on education, and $18.6 billion on debt charges.
So, while cuts are being made to social programs and education (fiscal austerity), they are increasing dramatically to the military, defense, and police. In 2000, Canada spent $10 billion on defense, and that rose to $21.8 billion in 2011. In 2008, Canada’s Conservative government set out a plan to increase defense spending over the following 20 years, setting the goal at $490 billion in total defense spending over that period. Included in the plans are the purchase of 65 F-35 fighter jets from Lockheed Martin, the American war profiteering corporation, to a possible dollar amount of $30 billion or more. So there is money for the war machine, to support an increasingly imperialistic foreign policy, and as the ever-present appendage lap-dog to the American Empire to the south.
And since Canada has its lowest crime rate since the 1970s, naturally the ever-pragmatic Conservative government is seeking to rapidly accelerate the construction of prisons and expansion of police forces. The government’s proposed changes to the criminal system seek to “create a flood of Canadians into the prison system.” The government identified prisons, police, and the purposely-Orwellian classification of “public safety” as the biggest winners in increased budget allocations for 2011, seeking to build more prisons and hire hundreds more police officers. At the same time, the government is slashing benefits to seniors and old-age pensioners. According to the Parliamentary Budget Office, prison costs are expected to rise from $4.4 billion in 2011 to $9.5 billion in 2015-16. When the Conservatives came to power in 2006, prison costs amounted to $1.6 billion per year. So while the government spends billions on corporate tax cuts, fighter jets, police and prisons, it is simultaneously planning on cutting spending for old age pensioners and social security programs.
As the government cuts between 11-22,000 federal public sector jobs, the Canadian Forces (military), RCMP (police), and the overall ‘national security’ establishment will not suffer such cuts, and in fact, will gain employees. Ultimately, under the plans of the Conservative government, between 60,000 and 70,000 jobs could vanish across the country to implement $8 billion in spending cuts.
While spending on health care exceeded $200 billion in 2011, it amounted to $5,800 per person in Canada. While this system – of what is often called ‘socialized healthcare’ – is portrayed by Americans as costly and wasteful, it is far cheaper than the American corporatized – or privatized – health “care” system. The average spending on health care for OECD countries – as a percentage of GDP – is 9.5%: Canada spent 11.4% of its GDP on healthcare in 2009, compared to the United States, which spent 17.4% of its GDP on healthcare; with the Netherlands spending at 12% of GDP, France at 11.8% and Germany at 11.6%. In terms of spending per capita (that is, the cost of healthcare spread out evenly to each individual within the country), Canada spends $4,363 (U.S. dollars) per person on healthcare, with the OECD average at $3,223, and compared to the United States at $7,960 per capita. The irony here, of course, is that a for-profit health system is far more costly than a ‘socialized’ healthcare system, despite the common claims to the contrary.
So naturally, the Federal Government, in the midst of – and on the precipice of a far greater – economic crisis, decides that the best courses of action are to increase unemployment by firing tens of thousands of people, reduce social spending so that they are left with less support in their newfound poverty, and continue to privatize everything. Of course, this inevitably leads to social unrest, protests, even rebellion. Quebec is a great example, as it seems that the anti-tuition strikes and protests are getting more dramatic with each passing week. As the reality of our situation settles in over the course of the next year and years, the protests and resistance will exacerbate and grow nation-wide (along with the development of similar movements around the world). Thus, we may properly understand the impetus of the government to increase spending on police, the military, “public safety” (national security/police state) and prisons: as typical state responses to social crises, throw money at the systems, structures and institutions of oppression so that when the people begin to rise up, the state may have the force available to push them down, oppress them, and imprison them.
The Government of Quebec, which is doubling tuition costs over the next five years, has a current debt of $184 billion or 55.5% of GDP. Quebec’s current budget, released in March of 2012, projects spending of $70.9 billion, with 42.5% of the budget allocated to healthcare and social services, 22.5% on education and culture, 11.6% on debt servicing, 3.5% on families and seniors, and 19.9% on “other.” Total expenditures on education, leisure, and sports amount to less than $16 billion, with $1.3 billion being allocated to Quebec’s corporations, $5 billion going to manufacturing, while $8.2 billion of the budget is going to pay the interest on the debt. Meanwhile, the government was announcing major investments in mining, aiming to produce a surplus, with $1 billion in investments in mining and hydrocarbon industries, as part of Quebec’s ‘Plan Nord,’ The Plan includes the creation of Resources Québec, a new Crown corporation that will oversee a $1.2-billion equity portfolio, designed to “help develop the north and exploit the province’s abundant mineral resources.” The government, in turn, is expecting $4 billion in mining royalties over the next decade. The forestry, tourism, and agribusiness industries are also getting support from the government, creating partnerships between big business, government, and unions. Quebec provides a great deal of corporate welfare. In 2007, Quebec ranked first among Canadian provinces in how much corporate welfare was doled out, at $6 billion, followed by Ontario at $2.1 billion, Alberta at $1.2 billion, and British Columbia at over $1 billion. So, there’s no more money for education, but there’s plenty of money to throw at multi-billion dollar corporations.
For all the screaming and wailing governments engage in over the costs of social programs and benefits for the public, there’s very little discussion over the expenditures of governments which go to corporations, not to mention, tax cuts. Beginning in 2000, under Prime Minister Jean Chrétien, the Canadian federal government began implementing massive corporate tax cuts, which “allowed Canadian companies to amass some $477 billion in cash reserves,” with corporate taxes going from 28% in 2000, to 21% when the Conservatives came to power in 2006, to 15% at the beginning of 2012. While the tax cuts were supposedly to encourage job creation, in reality, the cuts “allowed companies to hoard cash, pay out larger dividends to shareholders and beef up executive salaries.” For each percentage point in a decrease of corporate taxes, the federal government loses $2 billion in potential revenue. Thus, the total loss from the new tax cuts amounts to $26 billion. A report from the Canadian Labour Congress explained, “The government has been borrowing money to pay for its corporate tax giveaways. Now, to pay for tax breaks, the government is planning to make massive cuts to public services, such as meat inspection, that are essential to Canadians.”
So while students, seniors, and the poor suffer, Canadian corporations are doing marvelously well. Reports from Statistics Canada show that Canadian corporations are “sitting on more than $583 billion in Canadian currency and deposits, and more than $276 billion in foreign currency.” The cash reserves of these companies have climbed 27.3% since 2007, back when Canada’s economy was “booming,” and 9% of the increase in reserves was since last year. Not including financial corporations and banks, Canadian companies saw their cash reserves increase by $33 billion in the last quarter of 2011. While Canadian household debt has doubled since 1990, corporate taxes have been cut almost in half in the same amount of time. Canadian provinces have been lowering corporate taxes as well. Back in 2000, Canada’s combined federal and provincial corporate tax rate was the highest of the OECD countries, at 43%. Today, it’s around the world average of 26%. So while Canadian corporations sit on hundreds of billions of unused dollars, the Canadian government is continuing to give them more money to put in their bank accounts, which then reduces the government budget by billions each year, and the Canadian people are then expected to pay for this corporate welfare through reduced social services, loss of public sector jobs, increased tuition costs and increased debt.
Corporate welfare is dolled out by provincial governments as well. In 2011, the Province of Quebec and Quebec City each provided $200 million to build a new hockey arena for a for-profit hockey team. Ontario is also a corporate welfare haven, as between 2003 and 2005, the province gave $422 million to GM, Ford, Toyota and Chrysler, and in 2009, the province participated in a Canada-Ontario $15.3 billion bailout of GM and Chrysler. The last year that government statistics are available, in 2008, Ontario spent $2.7 billion on corporate welfare, while Quebec spent $6 billion. Between 1991 and 2009, the government of Ontario gave $27.7 billion in tax dollars to corporations. Meanwhile, the Government of Quebec increased taxes in 2010, and the provincial sales tax increased by 2% since then, along with an increased gas tax, and of course, tuition increases.
This system is, by definition, corporatist. A corporatist system (alternatively referred to as “corporate socialism” or “economic fascism”) is one in which profit is privatized and risk is socialized. In other words, the state ensures that corporations profit and become more powerful and dominant, while the people have to foot the bill and suffer for it. As Benito Mussolini reportedly stated, “Fascism should more appropriately be called corporatism, for it is the merger of state and corporate power.” It is no surprise then, that as the state becomes more supportive to the suckling-pig-like-corporate cancers of our society, they also become more oppressive and totalitarian. The very circumstances demand it.
The Big Five Banks Declare War on the People
In early March of 2012, it was reported that Canada’s big five banks (Royal Bank, CIBC, TD, Scotiabank, Bank of Montreal) have recorded “sky-high profits” of $7 billion in the first quarter alone (from November 2011 to January 2012), an average increase of 5.8% since last year. Much of the profits, especially for CIBC, “were mostly due to higher volumes of personal and commercial loans,” or, in other words: debt for people and corporations. Canadian banks are, on the whole, doing better than ever. They are consistently rated as the “world’s soundest” banks by the World Economic Forum, and are even adding some jobs, while U.S. banks cut theirs.
A recent report released by CIBC stated that corporate Canada is as “fit as a fiddle,” as “a health check on Canada’s corporate sector shows businesses across the country passing with flying colours.” In fact, according to economists from CIBC, Canada’s corporate sector has never been better. The major indices of corporate ‘health’ are: “debt-to-equity ratios, cash to credit ratios, profit margins, returns on equity, returns on capital.” The economists concluded that, “even with public sector retrenchment under way, and indications that consumers may not have the same appetite to spend as earlier in the recovery, corporate Canada could be positioned to pick up the mantle and drive economic growth in the years ahead.” So naturally while Canada’s corporations are as “fit as a fiddle” and the public at large is dominated by debt, the government – both federal and provincial – seek to extend more benefits to corporations (tax cuts and state subsidies), while extending hardships to the majority of Canadians (increased taxes, reduced social spending, increased costs). Again, it’s about priorities.
The banking sector in Canada itself is becoming two-tiered, where the big five banks are vacating the inner cities, and so-called “fringe banks” are becoming the choice banks for poor and low-income Canadians. Professor Jerry Buckland wrote that, “There is something ethically troublesome about a situation where low-income people are paying high fees for low-quality services and middle-income people are paying low fees for high-quality services.” Unexpected fees, bad banking hours, lack of ID, and other constraints have pushed lower income groups away from the big five and toward the ‘fringe banks’ which also charge big fees but are more accessible. However, the combination of the big five leaving the inner cities and the fringe banks charging high fees and interest rates, “exacerbate poverty and create a two-tiered banking system.”
Canada’s big five banks are rolling in money. CIBC reported $835 million in profits for the first quarter, up 9.4% from last year; Royal Bank reported first quarter profits of $1.86 billion; TD Bank had profits of $1.48 billion; Scotiabank had first quarter profits of $1.44 billion, a 15.2% increase from last year; and the Bank of Montreal recorded profits of $1.11 billion, up 34.5% from last year.
So why are Canada’s banks doing so well? It’s simple: because people are in debt, and getting deeper into debt. As the Globe and Mail reported, “Mortgages and credit card spending have fuelled bank profits for years.” So now what? Well, Royal Bank of Canada and TD both announced in March of 2012 that they will begin to increase their interest rates on mortgages, which means that they are seeking to further sap the wealth and deflate the future potential of the average Canadian household. But the increase in interest rates will increase bank profits, so it’s a good thing for Royal Bank and TD, never mind that it’s bad for everyone else. The other major Canadian banks will likely follow suit in raising their interest rates. The chief economist at TD Bank estimated that, “more than one million Canadian households, or about 10 per cent of those that currently have debt, will have to devote 40 per cent or more of their income to making their monthly debt payments if rates rise by two-to-three points to more normal levels.”
A Bubble Waiting to Burst?
So what is the Canadian mortgage and housing market doing? Well, it’s replicating the disaster seen in the United States just prior to the 2008 crash. Canada’s banking regulator, the Office of the Superintendent of Financial Institutions warned that Canadian banks were offering mortgages very similar to the U.S. subprime loans and that these pose an “emerging risk” to Canadian banks. Now the regulator didn’t just come out and say this, because that might be helpful. Instead, this information was released to Bloomberg news via a Freedom of Information law request, which revealed that Canadian mortgages “have some similarities to non-prime loans in the U.S. retail lending market.” In 2009, Canada’s housing market began to soar with record-low interest rates on mortgages. This is one of the primary reasons why Bank of Canada governor (and former Goldman Sachs executive) Mark Carney warned that household debt is the greatest threat to Canada’s economic stability.
The state of the Canadian population is abysmal. The average debt for a Canadian household is over $100,000, and the average Canadian household spends 150% of their income. This means that for every $1,000 earned, $1,500 is owed. These debt figures are primarily made up of mortgages, but also student debt, credit card debt, and other lines of credit. A 2011 report indicated that, “17,400 households were behind in their mortgage payments by three or more months in 2010, up by 50 per cent since the recession began. Credit card delinquencies and bankruptcy rates also remain higher than before the recession.”
In March of 2012, the Bank of Canada warned that household debt “remains the biggest domestic risk” to Canada’s economy. While part of the Bank’s role is to set interest rates, it has kept interest rates very low (at 1%) in order to encourage lending (and indeed, families have become more indebted as a result). Yet, the Bank says, interest rates will have to rise eventually. Economists at Canada’s major banks (CIBC, RBC, BMO, TD, and ScotiaBank) naturally support such an inevitability, as one BMO economist stated, “while rates are unlikely to increase in the near term, the next move is more likely to be up rather than down, and could well emerge sooner than we currently anticipate.” The chief economist at CIBC stated that, “markets will pick up on the slightly improved change in tone on the economy, and might move forward the implied date for the first rate hike.” This translates into: the economy is doing well for the big banks, therefore they will demand higher interest rates on debts, and plunge the Canadian population into poverty; the “invisible hand of the free market” in action.
The Canadian housing market is in a major bubble, “with a run-up in prices, high ownership rates and overbuilding.” A majority of Canadian mortgages are financed through the Canada Mortgage and Housing Corporation (CMHC), the equivalent of Fannie Mae and Freddie Mac in the United States (which both went bust in the 2008 crash). The CMHC has an outstanding balance of $132 billion in mortgage-backed securities, $202 billion in Canada Mortgage Bonds, and last year issued a debt of $41.3 billion (compared to $6.5 billion in 2001). The big five banks generally provide the remaining mortgages (again, just like in the U.S.). A spokeswoman for the Canadian Bankers Association, however, reassured those who somehow still trust bankers that Canadian banks “carefully manage risk in their mortgage portfolios.” Home sales are increasing – another indication of the growing bubble – by 9.5% last year alone, while home prices increased by 7.2%. CIBC reported that Canadian homes are overvalued (that is, their prices are artificially inflated) by 10%, and the heads of the Bank of Montreal and Royal Bank both warned in late 2011 that, “condominium markets in Toronto and Vancouver are at risk of correction,” which is to say, a crash.
The problem is especially large in Vancouver, which was recently rated as the most expensive city to live in across North America, followed Los Angeles and New York. Vancouver is now the 37th most expensive city in the world, whereas just last year it was ranked as 72nd. The average price for a detached bungalow in Vancouver increased by 17% from the previous year to $1.02 million. The average cost of a condominium in Vancouver rose 5.1% to $513,500 and the “average priced home in Vancouver is now 11.2 times the average family income, a figure many economists call unsustainable.” In certain areas of Vancouver, such as Richmond, West Vancouver and the West End, housing prices have soared nearly 80% in the past five years, and 27% just in the past year alone. This has been raising fears of a housing bubble in Vancouver, and indeed it should be.
In January of 2012, Bank of Canada governor warned – in very subtle and vague terms – that Canada’s property market is “probably overvalued,” meaning that it is heavily overvalued. Canadian Finance Minister Jim Flaherty also hinted that something is rotten in the state of Denmark, stating, “We watch the housing market carefully and we are prepared to intervene if necessary.” So is it a bubble? Yes! In fact, the Bank of Nova Scotia recently reported that, “At 13 years and counting, Canada’s current housing boom is one of the longest-lasting in the world.” The price of Canadian homes has increased by over 85% since 1998, with a slight stagnant period in 2008, and then continued to rise in 2009, growing by a further 20%. It is no coincidence that household debt has increased as well, with the debt burden of Canadian families at 153% of their income, which is “almost as much debt as American households had at the peak of their bubble.” In fact, the Economist magazine estimated that the Canadian housing market is overvalued by more than 70% (which is to say, it’s probably much higher than that). One of the major American banks, Merrill Lynch, issued a report indicating that the Canadian housing market is rife with “overvaluation, speculation and over supply.” According to an international survey of housing affordability, Vancouver is the second-least affordable city in the world.
It seems that 2012 will be the year the housing market bubble begins to pop, with the economy slowing down, unemployment rising, and job creation has virtually stalled, according to CIBC, which explained that, “the job market is currently weaker than any non- recessionary period.” Canada is not alone, of course, as the United States and Ireland were just the beginning. It is expected that the U.K., Australia, Belgium, France, New Zealand, Spain, and Sweden are all set to follow suit. Within Canada, however, British Columbia and Ontario will be the most affected. But don’t worry, the Canadian banking sector will survive the pop, because it is actually the Canadian government which owns 75% of the mortgages, meaning that this will then pass to Canadian taxpayers, not the poor disadvantaged millionaire and billionaire bankers. Besides, the risk they have will probably be bailed out by our government. As our Finance Minister stated, “we are prepared to intervene if necessary,” which means that they will take all the bad debts of the banks, and then hand them to YOU.
An economist at the Bank of Montreal said not to worry, however, because Canada’s housing market isn’t a bubble, “it’s a balloon,” and therefore, she predicted, “Canada’s housing market is expected to deflate slowly rather than pop.” The argument, however, is one based upon faith: faith that the banks won’t increase interest rates by too much, faith that Canadian household debt won’t inflict as much harm as American household debt, and faith that one can compete in verbal and mental gymnastics in such a way as to convincingly refer to a bubble as a “balloon.” It should be noted that up until the burst of the American housing bubble, all the major players were denying that a bubble even existed.
Patti Croft, a recently retired chief economist from the Royal Bank of Canada warned the Canadian Parliament in January of 2012 that, “the risk of a housing bubble was among Canada’s biggest issues.” The Bank of Canada’s extremely low interest rate (of 1%) has stimulated this growth, just as the Federal Reserve in the United States helped stimulate the housing bubble there through historically low interest rates. The result of such low rates is an excess of speculative actions in the housing market, driving prices up. Croft warned that, “the greater concern is the looming housing bubble that we see, particularly in cities like Toronto and Vancouver, because I think that is where the speculative excesses lie.”
In March, TD Bank warned that Canada’s housing bubble posed a “clear and present danger” to Canada’s economy, and singled out Vancouver as “the market with the greatest risk of a housing price correction.” The effects of the bubble are already evident, as British Columbia is increasingly losing people who are moving to other provinces due to the high cost of living.
It should be noted that, even though this housing bubble in Canada has been inflated since the late 1990s, it is only being talked about, admitted as even existing (though some make absurd claims about magical “balloons”), and acknowledged NOW. This is dangerous. The fact that it is now being acknowledged by top banks, the finance minister, the Bank of Canada and other major international organizations and banks, implies that they are now preparing for it to burst, and are thus positioning themselves to profit from the coming collapse. Remember, this is not a strange idea: during the housing bubble collapse in the United States, all the big banks which helped create it then bet against the market and profited off of its collapse, not to mention, they were then rewarded by the federal government with trillions of dollars in bailouts for their outstanding accomplishments in causing the crisis in the first place. Criminals are rewarded, and victims are punished. That is for a simple reason: government is organized crime.
Canada’s youth are in a major crisis. The youth unemployment rate in Canada is at 14.7%, compared to an overall unemployment rate of 7.4%, with 27,000 less jobs for young Canadians than last year. As one economist explained, “In addition to the fact that youths are facing competition from their own age cohorts, they are now facing competition from people who just lost their jobs during the recession and have 20 years of experience in the workforce.” Further, the economist added, “the whole process of trying to get to where you wanted to be when you got out of university takes years longer than it used to. Taking a lower wage than you were initially expecting has significant repercussions for your long-term career.” A one percent increase in unemployment rates leads to a six-to-seven percent decrease in salary, and thus, “It can take anywhere from 10 upwards to 15 years to close that gap of reduced wages. So your lifetime earnings are substantially lower, for the simple fact that you graduated at the wrong time.” The real rates of unemployed are actually much higher than the stated 14% “because a lot of young people aren’t collecting Unemployment Insurance or welfare.” Thus, it is 14% of Canadian youths who are on Unemployment Insurance or welfare, and the statistics don’t include the rest of the unemployed youth population of Canada.
As for the net unemployment rate of Canadians at 7.4%, this too is misleading, because the statistics don’t include the number of Canadians who have simply given up on the job search, amounting to 38,000 Canadians in the past year. The province of Manitoba created 600 new jobs in 2011, while cutting 10,000 jobs in the same amount of time. The Canadian economy has cut 37,000 jobs just since October of 2011, and it’s only going to get worse. While there are 27,000 less jobs for Canadian youth than there were last year, this number grows to 300,000 less jobs for youth than there were in 2008.
The Canadian federal budget, released in late March, set out the government’s priorities for the coming year. Students and youth, who are among the most in need of help, were basically left out of the budget, naturally, since they are not multinational corporations, bankers, or billionaires. What money is going to schools is marked for industry-related research (i.e., a corporate subsidy), and as Finance Minister Jim Flaherty explained, “The plan’s measures focus on the drivers of growth: innovation, business investment, people’s education and skills that will fuel the new wave of job creation.” Again, it’s important to note that when politicians use the terms “jobs” or “job creation,” what they actually mean is “profit” and “profit creation,” invariably for corporations and banks. In regards to education:
The Conservatives placed a clear emphasis on partnerships between businesses and universities when it came to research funding: among their plans, they intend to dedicate $14 million over two years to double the Industrial Research and Development Internship Program, which currently supports 1,000 graduate students in conducting research at private-sector firms.
While the Canadian government announced funding of “$500 million over five years to support modernization of research infrastructure on campuses through the Canada Foundation for Innovation,” as well as through other research granting councils, the funding will actually be reallocated from other areas of education financing, what are deemed “lower-priority programs,” which means that they do not directly support corporate or industrial profit-making potential. The government will also cut 19,200 jobs from the public sector.
The federal government’s budget estimates a $5.2 billion cut in spending, as well as increasing the limit on Old Age Security from 65 to 67, meaning that older people will have to work longer before getting any benefits. That will give the government just enough time to steal everyone’s pension and hand them to corporations before the people actually need them. So while the government cuts social spending, ignores the needs of Canada’s youth, and fires tens of thousands of workers – this is what economists call “fiscal austerity” – it simultaneously is increasing its spending and support to Canada’s corporations (who are already as “fit as a fiddle”), with “direct spending and incentives to help firms expand, invest and export, as well as measures designed to shed some of the shackles on their growth.” The chief economist at TD Bank stated, “They are trying to create a favourable environment in which businesses can grow.” So while the government provides a meager $50 million to help students find jobs, it hands out billions to corporations. The increased funding for research at universities is also specifically designed to produce products to go onto the market; so again, education funding is being further railroaded into merging business and higher education.
These moves are obviously not taken on the initiative of government alone, but are lobbied for by the corporate and financial elite, whether directly through interest groups, or indirectly through think tanks. The Canadian Council of Chief Executives (CCCE) – formerly the Business Council on National Issues (BCNI) – is an interest group made up of the top 150 CEOs in Canada, and which directly lobbies the government to serve their interests. They played a major role in the efforts to create NAFTA and to pursue the agenda of North American integration, as well as a plethora of other free trade deals. However, their “interests” extend beyond trade, and they seek to lobby the government to serve their interests across the whole society.
The current President and CEO of the CCCE is John P. Manley, former Deputy Prime Minister of Canada, former Minister of Finance, Industry, and Foreign Affairs. He was the co-chair of a Council on Foreign Relations Task Force on the Future of North America (which set the agenda for the Security and Prosperity Partnership and North American integration). He is also on the board of directors of CIBC and a number of other corporations and non-profits. The Vice Chairman of the board of directors of the CCCE is of course, Paul Desmarais Jr. (of the powerful Desmarais family, who essentially OWN Canada’s politicians and Prime Ministers), and other board members include: William A. Downe, CEO of BMO Financial Group; Gordon Nixon, CEO of Royal Bank of Canada; and a number of other leading corporate executives.
The CEOs of the following companies and business organizations are all represented in the CCCE: Air Canada, Astral Media, Barrick Gold Corporation, BCE Inc and Bell Canada, BMO Financial group, BNP Paribas (Canada), Bombardier, the Canadian Chamber of Commerce, Canadian Manufacturers and Exporters, Canadian Oil Sands Limited, Canadian Pacific Railway, Canfor Corporation, Cargill Limited, Chevron Canada, CIBC, CN, Deloitte & Touche LLP, Desjardins Group, Dow Chemical Canada, E.I. du Pont Canada Company, Encana Corporation, Ford Motor Company of Canada, GE Canada, GlaxoSmithKline, the Great-West Life Assurance Company, HSBC Bank Canada, Hudson’s Bay Company, IBM Canada, Imperial Oil Limited, Manulife Financial Corporation, McCain Foods Limited, Microsoft Canada, National Bank of Canada, Pfizer Canada, Power Corporation of Canada, Power Financial Corporation, Royal Bank of Canada, Scotiabank, SNC-Lavalin Group, Standard Life Assurance Company, Sun Life Financial, Suncor Energy, TD Bank Group, TELUS, TransCanada Corporation, The Woodbridge Company Limited, among many others.
Back in October of 2010, John Manley spoke to the Association of Universities and Colleges of Canada on the issue of making Canada “a leader in the knowledge economy.” Manley stated that Canada needed to ensure that “more of our academic discoveries successfully ‘cross the chasm’ to commercial success,” referring to the need to market what is done in university laboratories. Manley stated that, “there is a need for closer collaboration between post-secondary education institutions and the business community,” as, he explained: “Business-university collaboration is key to Canada’s ability to compete more effectively, to enhance our quality of life and to provide better opportunities for tomorrow’s graduates.” Manley elaborated:
All of us have an interest in achieving stronger partnerships between post-secondary institutions and the private sector, and in overcoming the barriers to commercialization of university research – barriers ranging from “hard” issues of funding and intellectual property ownership, to less tangible considerations such as differences in expectations, culture and behaviour between academia and the private sector.
With the release of the Canadian federal budget for 2012, the CCCE of course praised the budget as “taking steps to promote job creation and business investment.” John Manley stated, “By restraining the growth in public spending, reducing regulatory overlap, improving Canada’s immigration system and enhancing support for business-driven research, the government is helping to build a stronger and more competitive Canadian economy.”
Economists from Canada’s major banks had a good deal to say about the budget. Economists from TD Bank explained that, “When combined, the various measures included in today’s budget are aimed at improving productivity and boosting private sector growth, at a time when public spending is being constrained,” and that, of course, this is a good thing. An economist at CIBC praised “the path towards fiscal balance,” as “the 2012 budget was as much about Canada’s longer term prospects as it was about squeezing spending.” Economists at the National Bank of Canada praised the budget’s decision to raise the old age security pension eligibility from 65 to 67 years, “While it is a step in the right direction, it could have been implemented earlier.” Economists at Royal Bank of Canada stated that the Canadian government “has delivered on its promise of guiding the Canadian economy towards improved fiscal performance in what are generally difficult economic times globally.” Meanwhile, the National Pensioner and Senior Citizens Federation declared that, “Today’s budget tabled by Finance Minister Flaherty confirmed the worst for our children and grandchildren… This government has attacked the retirement security of future generations as it looks years ahead for dollars to finance other priorities… There was nothing for seniors, not even a discarded penny for the poorest living in poverty.”
But then, that’s the point, isn’t it? Why would you seek to help the elderly and the poor and needy when you can help the multinational corporations and global banks, and thus, when you leave government, get a secure position on their boards (as John Manley did), and live the rest of your days as a jet-setting, globe-trotting, high-rolling elite? As a politician, you get no personal benefit or profit from supporting or serving the poor or the majority, you must only serve a tiny elite, and then your place is ensured among them.
Make no mistake: Canada’s Big Five Banks, the corporations they control, and the federal and provincial governments, which they collectively OWN, have declared class war on the people of Canada. The agenda is simple: get the population of Canada indebted, which is to say, enslaved; then, increase interest rates, cut social spending, increase unemployment, increase tuition, increase consumer costs, increase taxes, and at the same time, give more support and money to corporations and banks, and decrease their taxes. Then, build prisons, fund the military and the police and the police state apparatus of surveillance and control, so that when the people wake up to the fact that their future is being stolen from them, you can put them in their place: under the boot.
So the question for Canadian is this: will you acknowledge the class war taking place against you, your friends, and your families and fellow brothers and sisters, and then seek to fight back; or, will you continue to go into credit card debt, further into student debt, get mortgages and passively accept subservience to a system which treats you like a slave, sub-human degenerates, and superfluous, that is, useless and expendable. It is a question of passive acceptance of an evil system, or active resistance to forge ahead and creatively construct a humane society. The question is for all; the answer is yours alone.
Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is also Project Manager of The People’s Book Project. He also hosts a weekly podcast show, “Empire, Power, and People,” on BoilingFrogsPost.com.
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Student Strikes, Debt Domination, and Class War in Canada: Class War and the College Crisis, Part 4
By: Andrew Gavin Marshall
There is a process under way in Canada, led by the corporate and financial elite, and directed against the general population, the poor, and the young, intending to provide for the rich and powerful, to punish the poor and steal from the rest, to plunge into poverty, to repress, control, and dominate: this process is called ‘Class War’ and it’s waged by the super-rich against the supposedly superfluous rest. It’s objective is simple: to preserve, protect, and expand the control and domination of the wealthy over the majority.
In Quebec, where the class warfare has taken on a specific assault on the students and youth, there are finally growing signs and actions that the youth are starting to fight back. The provincial government of Quebec – the French-speaking province of Canada – has decided to double the costs of tuition over the next few years. These moves have prompted hundreds of thousands of students across Quebec to go on strike in protest of the increased fees. Since Quebec currently has the lowest tuition costs in Canada for residents, a great deal of the media and commentary on the issue is related to lambasting Quebecers for their concept of “entitlements” and for “complaining” that they have to pay what others pay. The debate is focused around the ‘need’ for the government of Quebec to reduce its debt – balance its budget – framing increased tuition costs as a necessity to be accepted, and when resisted, to dismiss the protesters as unrealistic and petty.
So is it true that Quebec has the lowest tuition fees in Canada? Yes. However, Quebec residents also pay the highest income taxes in all of Canada. One of the major claims by the Quebec government as to why tuition must be increased is the claim that Quebec’s universities are among the most “under-funded” in Canada, and therefore they need to increase their funding so as to increase their “competitiveness.” However, according to the Quebec government itself, total government spending on education (in 2008-2009) amounted to 1.94% of GDP, compared to 1.76% for Ontario, and 1.65% for Canada as a whole. At the same time, total university spending per student in Quebec was at $29,242, compared to $26,383 in Ontario, and $28,846 for Canada as a whole. Thus, Québec’s universities are funded to a greater degree than the rest of Canada, so that argument does not hold weight.
Quebec’s universities are funded more than other Canadian universities, while Quebec residents pay more in taxes than the rest of Canada, so why the increase in tuition? As tuition fees for universities increase, government spending on education decreases. As the Canadian Federation of Students notes:
In the past fifteen years, tuition fees in Canada have grown to become the single largest expense for most university and college students. The dramatic tuition fee increases during this period were the direct result of cuts to public funding for post-secondary education by the federal government and, to a somewhat lesser extent, provincial governments. Public funding currently accounts for an average of approximately 57% of university and college operating funding, down from 84% just two decades ago. During the same period tuition fees have grown from 14% of operating funding to over 34%.
This marks a move “away from a publicly funded model and towards a privatised user fee system,” which has caused “post-secondary education to become unaffordable for many low- and middle-income Canadians.” In the mid-1960s, nearly all of Canada’s university funding was provided by the federal and provincial governments, and tuition fees were either incredibly minimal or non-existent. This process began to change in the early 1980s, with the rise of neoliberalism in the global political economy, which saw moves toward cutting social spending by governments. As government funding decreased, tuition costs rose, and as a result, between the early 1980s and the early 1990s, tuition fees in Canada nearly doubled. In 1995, the Liberal federal government of Canada cut $7 billion in spending for the provinces, leading to “the largest tuition fee increases in Canadian history.” Quebec had, however, resisted the push toward making students pay more, which was taking place in all the other Canadian provinces. In the early 1990s, average undergraduate tuition fees in Canada were $1,464; today the average has more than tripled to $5,138.
So why is this process taking place? Why must government spending on education (and other social programs) be reduced, while personal costs for all of these services be increased? The answer is not in “efficiency” or “balancing budgets,” but rather, in class warfare.
In April of 2007, TD Bank (one of Canada’s ‘big five’ banks which dominate the economy) released a “plan for prosperity” for the province of Quebec, which recommended, among other things, raising the cost of tuition: “by raising tuition fees but focusing on increased financial assistance for those in need, post secondary education (PSE) institutions will be better-positioned to prosper and provide world-class education and research.” In one Canadian province, Nova Scotia, the government hired a former chief economist from the Bank of Montreal, Tim O’Neill, to assess higher education finances, and unsurprisingly, advocated higher tuition fees. Banks, of course, have a major interest in promoting increased tuition costs, because they provide student loans and profit off of the interest on student debt, like some malevolent ever-growing succubus draining the life force and potential of future generations which are doomed to debt slavery. So naturally, our governments take the advice of the banks, because they know whom their real masters are.
It should be noted, as well, that this is not merely a problem in Quebec or Canada. Tens of thousands of students in the United Kingdom are planning a walk out in protest of increasing tuition fees, which “are pricing students out of education.” The Occupy Movement in the United States is moving into universities, as campuses in California experienced demonstrations and protests against “state budget cuts to education and the resulting hikes in tuition.” In Spain, more than 30,000 students took to the streets of Barcelona protesting the ‘austerity cuts’ to education, and were then of course met with state repression. Perhaps most impressive is a mass student movement that has developed in Chile over the past year.
The College Crisis
What is the ‘college crisis’? It’s quite simple: our society is producing more educated, professionalized youths than ever before, who are then graduating into a jobless market, and what’s more, they are graduating with extensive debt. The professional education students receive, in combination with the heavy overbearing debt load and the immense dissatisfaction with the lack of opportunities for them, creates a large, mobile, educated, activated, and very pissed off group of people. This is what is referred to as a ‘poverty of expectations,’ whereby the inculcated expectations of a group or sector of society cannot be met by the society in which they live. In any society, in any period of history, this is a recipe for social unrest, resistance, rebellion, and, potentially, Revolution.
Naturally, the elites of any society fear such a scenario, so they always come up with various methods of managing these increasingly problematic conditions. The solutions, invariably, are always aimed at finding methods and means for undermining the ability and effectiveness of the target group to mobilize and organize for their cause; in this case, students. Cutting education budgets and increasing tuition fees is a very effective means to create more ‘desirable’ conditions for elites. How so? Any form of ‘austerity’ is essentially an act of class war, waged by the upper class against the rest. Austerity means that budgets will be cut and costs will be increased, whether through taxation, direct prices for services and necessities, or more often, both. The stated purpose of ‘austerity measures’ is to reduce debt (spending) and increase profitability (or revenue), with the purported aim of eliminating the debt over time. This is, however, not the true purpose of austerity, and appropriately so, it is never the result. The result is actually to increase debt, and impose a regimen of what amounts to ‘social genocide’: increasing the burden, costs, taxes, and hardships upon the wider population. For the poor, it means despair; for the middle class, it means poverty; and for the rich, it means prosperity and power.
The current crisis stems from developments that took place in the 1960s which saw an increase in activism and engagement among the general population, and especially the youth. Universities were breeding grounds for activism and movements which sought to create social uplift. The elite response to this scenario, in the United States specifically but also across the Western world as a whole, was to declare a “Crisis of Democracy” in which too many people were making too many demands upon the system, in which all forms of authority were under attack, and the legitimacy of those authorities were called into question. Elites of both the left and right saw this acceleration of democratic participation and activism as an assault upon their conception of what “democracy” should be – namely, a state that serves their interests alone. From the right, the U.S. Chamber of Commerce – and from the liberal internationalists, the Trilateral Commission – launched a major national and global attack upon the surge of democratic activism in what the Trilateral Commission referred to as an “excess of democracy.” The result of this attack: neoliberalism and debt. The two documents that were most influential in this attack on democracy were the “Powell Memo” of 1971 sent to the U.S. Chamber of Commerce which outlined a detailed program for how big business could reorganize society for its own interests, and the Trilateral Commission’s 1975 report, “The Crisis of Democracy,” which outlined an elite ideology which saw the problem of society being in an “excess of democracy” and that what is required is to correct the balance in favour of elites and increase apathy and passivity among the population. The Chamber of Commerce represents all the major business interests in the United States, while the Trilateral Commission (founded in 1973 by banker David Rockefeller), represents roughly 350 elites in the areas of academia, finance, business, government, foreign policy, media and foundations from North America, Western Europe, and Japan.
The result of this was to decrease government funding for education, increase tuition and other costs, increase debt for students and the general population as a whole (through credit cards, mortgages, loans, etc.), and to merge higher education and big business: the corporatization and privatization of universities.
As part of this process, knowledge was transformed into ‘capital’ – into ‘knowledge capitalism’ or a ‘knowledge economy.’ Reports from the World Bank and the Organization for Economic Cooperation and Development (OECD) in the 1990s transformed these ideas into a “policy template.” This was to establish “a new coalition between education and industry,” in which “education if reconfigured as a massively undervalued form of knowledge capital that will determine the future of work, the organization of knowledge institutions and the shape of society in the years to come.”
Knowledge was thus defined as an “economic resource” which would give growth to the economy. As such, in the neoliberal era, where all aspects of economic productivity and growth are privatized (purportedly to increase their efficiency and productive capacity as only the “free market” can do), education – or the “knowledge economy” – itself, was destined to be privatized.
Solving the ‘College Crisis’
In February of 2011, it was reported that the average debt for a Canadian family had reached over $100,000, spending 150% of their earnings. Thus, for every $1,000 in after-tax income, the average Canadian family then owes $1,500. The debt figures include mortgages, student loans, credit card debts, and lines of credit. In 1990, the average Canadian family was able to put roughly $8,000 into savings, in 2012, that number was at $2,500. So while the public is constantly told that the ‘recession’ is over, this is simply not true for the general population, though it may appear to be true in the quarterly reports of Canada’s multinational corporations and banks. A 2011 report indicated that, “17,400 households were behind in their mortgage payments by three or more months in 2010, up by 50 per cent since the recession began. Credit card delinquencies and bankruptcy rates also remain higher than before the recession.”
By February of 2012, this rate of income-to-debt had not only failed to improve, but even got slightly worse, hitting a new record. The state for Canadian families is indeed getting worse. More than half of the jobs created since the “end” of the “recession” went to those aged 55 and older, leaving the youth struggling to find jobs, while older workers have to either stay working longer, return from retirement because they can’t survive off of their pensions, and thus, young people are living at home longer and staying in school longer. The slight increases in hourly earnings has not kept up with inflation, and thus amounts to a loss of earnings, and income inequality continues to grow between the super-rich and everyone else.
Mark Carney, Governor of the Bank of Canada (Canada’s central bank), is also Chairman of the Financial Stability Board, run out of the Bank for International Settlements (BIS) in Basel, Switzerland – the central bank to the world’s central banks – and which operates under the auspices of the G20. Carney had previously served as Deputy Governor of the Bank of Canada, the Canadian Department of Finance, and spent thirteen years with Goldman Sachs prior to that.
The Bank of Canada, like all central banks, serves the dominant elite interests of the nation, but also of the international financial elite more broadly. The board of directors of the Bank of Canada includes William Black, former CEO of Maritime Life, who sits on the boards of Dalhousie University, the Shaw Group, Standard Life of Canada, and Nova Scotia Business, Inc.; Philip Deck, CEO of Extuple, Inc. (a technology finance corporation), former managing partner with merchant banking company HSD Partners, and is on the board of a major Canadian think tank, the C.D. Howe Institute; Bonnie DuPont, former Vice President at Enbridge Inc., former director of the Canadian Wheat Board, a current director of agribusiness firm Viterra Inc, UTS, on the board of governors of the University of Calgary, member of the Institute of Corporate Directors, and is past president of the Calgary Petroleum Club; Jock Finlayson, Vice President of the Business Council of British Columbia, former Vice President of the Canadian Council of Chief Executives (an interest group made up of Canada’s top 150 CEOs), and a member of the Canada West Foundation; Daniel Johnson, a director of Bombardier, IGM Financial, Mackenzie Financial Corporation, Investors Group, and former Minister of Industry and Commerce in the Province of Quebec; David Laidley, Chairman Emeritus of Deloitte & Touche LLP, on the boards of Nautilus Indemnity Limited, ProSep Inc., EMCOR Group, Aviva Canada Inc., the Cole Foundation, and on several boards at McGill University. The rest of the directors of the Bank of Canada are almost exclusively businessmen or former government officials (two women in total), and all of them are white; so, naturally, they truly represent the struggling Canadian family.
In March of 2012, the Bank of Canada warned that household debt “remains the biggest domestic risk” to Canada’s economy. While part of the Bank’s role is to set interest rates, it has kept interest rates very low (at 1%) in order to encourage lending (and indeed, families have become more indebted as a result). Yet, the Bank says, interest rates will have to rise eventually. Economists at Canada’s major banks (CIBC, RBC, BMO, TD, and ScotiaBank) naturally support such an inevitability, as one BMO economist stated, “while rates are unlikely to increase in the near term, the next move is more likely to be up rather than down, and could well emerge sooner than we currently anticipate.” The chief economist at CIBC stated that, “markets will pick up on the slightly improved change in tone on the economy, and might move forward the implied date for the first rate hike.” This translates into: the economy is doing well for the big banks, therefore they will demand higher interest rates on debts, and plunge the Canadian population into poverty; the “invisible hand of the free market” in action. Increased interest rates mean increased payments on debts, which means increased suffering for the indebted, who make up the general population.
As the Bank of Canada warns that interest rates will increase, perhaps as soon as this year, the Canadian people – heavily indebted – will suffer immensely and will likely fail to meet their interest payments. Since such a large majority of the debt and interest is in mortgages, this would potentially cause a major housing crisis, which is already at bubble proportions (especially in Vancouver, now the most expensive city to live in within North America), and will drag the middle class and the rest of the Canadian economy down with it. Even TD Bank has said the housing market is over-valued (i.e., artificially inflated), and warned of a coming “correction” (i.e., economic crisis).
As the gap widens between the rich and everyone else in nearly every OECD (Organisation for Economic Cooperation and Development) country, Canada is no exception. The top 10% of Canadian earners make ten times as much as the bottom 10%. The top 1% in Canada saw their share of total income increase from 8.1% in 1980 to 13.3% in 2007, while the top 0.1% saw their share increase from 2% to 5.3%. Tax policies in Canada strengthen the wealth gap. In 1981, the tax rate for the top margin of earners was 43%, and in 2010, it was 29%. As the Secretary General of the OECD stated in December of 2011, “The social contract is starting to unravel in many countries… This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that greater inequality fosters greater social mobility.” Thus, “inequality will continue to rise.”
In a 2008 OECD study, Canada was singled out as one of the countries with the worst rates of widening inequality, stating that, “In the last 10 years, the rich have been getting richer, leaving both middle and poorer income classes behind.” The top 3.8% of Canadian households controlled 66.6% of all financial wealth by 2009, with rates set to increase. As the Conservative government in Canada continues to implement corporate tax cuts, this disparity will increase, with the Harper government providing $60 billion in corporate tax breaks, while maintaining a $30 billion budget deficit (public debt). Despite all the tax cuts for corporations, the money that is not spent on taxes tends to go to shareholders and very little goes toward investments or job creation, meaning that the benefits do not “trickle down,” but rather, as to be expected, trickle up. For Prime Minister Harper’s tax policies and programs, “The higher the income, the bigger the tax break.” The senior economist at the International Trade Union Confederation stated that, “The growing gap between the rich and the rest of us has many causes, including higher remuneration for top earners, much higher profits as a share of the economy, less bargaining power for workers, and less progressive taxes… Conservative tax policies will clearly aggravate the problem.”
The Conference Board of Canada released a study in the fall of 2011 which stated that, “income inequality has been rising more rapidly in Canada than in the U.S. since the mid-1990s,” and on a global scale, “Canada has had the fourth-largest increase in income inequality among its peers.” The President of the Conference Board explained, “Even though the U.S. currently has the largest rich-poor income gap among these countries, the gap in Canada has been rising at a faster rate.”
Among the OECD countries, the one with the highest rates of inequality was none other than the Petri-dish experiment of neoliberalism, Chile, followed by Israel, Italy, Portugal, the U.K., and the United States. While the top 10% of Canadian earners had an average income of $103,500, the bottom 10% had an average annual income of $10,260.
While Canada is often hailed as the most promising nation to come out of the economic-financial crisis of 2008, since its banks were largely left out of the housing derivative market (and thus, were protected), the facts on the ground represent a different reality. As the Economist reported in 2010, of the 31 OECD nations, Canada ranked as the 22nd worst country in terms of child poverty, with one in ten Canadians (roughly 3 million) being poor, 610,000 of them being children. In November of 2010, it was reported that roughly 900,000 Canadians were dependent upon food handouts, a 9% increase from the previous year, with roughly 300,000 homeless people. The majority of the poor are single mothers, immigrants, aboriginal and disabled Canadians. Through the 1980s and 1990s (with the implementation of neolibral policies), welfare payments to these groups were slashed, with British Columbia as the most enthusiastic supporter of exacerbating child poverty, which stood at 10.4% by 2010.
The cost of poverty is quite extensive:
* By 2011, poverty was said to cost the government between $72-86 billion per year;
* In the city of Hamilton, Ontario, there is a 21 year-difference in life expectancy between those who live in high and low-income neighborhoods;
* In March of 2010, nearly 900,000 Canadians had to go to food banks for food, 38% of them being children, an increase of 28% since March of 2008, the “highest level of food bank use ever”;
* In 2010, there were between 150-300,000 “visible” homeless in Canada, with another 900,000 “hidden” homeless, and 1.5 million families in “core housing need” and 3.1 million families in unaffordable housing;
* In 2010, 59% of Canadians (over 20 million Canadians) lived from paycheck to paycheck, “saying they would be in financial difficulty if their paycheque was delayed by a week”;
* In 2009, the average annual income of Canada’s best paid CEOs was $6.6 million, “155 times higher than the average worker’s income ($42,988);
* A third of all income growth in Canada over the past two decades has gone to the richest one percent of Canadians.”
Canada’s Youth: A “Bankrupted Generation”
By January of 2009, Canadian students had a debt to the federal government of over $13 billion, with student loan debt increasing by $1.2 million every day. The Canadian Federation of Students said the obvious answer to this growing crisis was to make education “affordable.” Studies show the effects of student debt, reducing “the ability of new graduates to start families, work in public service careers, invest in other assets, volunteer, or even just take a lower paying job in their own field to get a foot in the door.” On top of the $13 billion owed to the Federal Government, Canadian students owed an additional $5 billion to provincial governments, and the figures do not include debt owed to banks, credit card companies or parents. In short, Canada’s student youth are a “lost generation.”
In September of 2010, the Canadian Council on Learning published a report which indicated that, “students who graduate from college and university with high debt loads are putting off buying a house, having children or investing for the future.” The average debt load of a Canadian university graduate in 2009 was $26,680, and the average debt for college graduates was $13,600. These figures, it should be noted, do not take into account mortgages, credit card debt, lines of credit, or car loans. This represented a doubling in the amount of student debt from 1990, and in 2005, the number of Canadian students needing loans to pay for their education had increased to 57%.
In October of 2011, it was reported that Canadian student debt (to the Federal Government) will surpass $15 billion by 2013, which is the current ceiling set by the government in student loans. Thus, if it reaches the ceiling, the government will no longer (in theory) be able to provide student loans. The solution, according to the Canadian Federation of Students, does not mean eliminating the debt ceiling, which will only make the problem worse, but rather, in reducing the costs of education itself. As the national chairperson of the CFS stated, “The reality is that the job market is grim and students are facing their first interviews with a mortgage-sized debt.” Thus, once they begin work, they do not contribute to the economic growth of the country, but rather merely have to focus on paying interest and repaying debts. The cost of university education in Canada is estimated to be at $60,000, and some studies suggest that this will rise to $140,000 for those born in 2011. The average yearly undergraduate tuition fees were a 4.3% increase from the previous year, reaching $5,366.
In 2011, almost two million Canadians had a student debt totaling $20 billion, and as the chairman of the Canadian Federation of Students stated, “We have an entire generation of people who now more than ever have to complete some form of post-secondary education just to get a job interview, with more than 70% of all new jobs requiring some degree or diploma. We are on the verge of bankrupting a generation before they even enter the workplace.” As job losses continue, and especially as the youth job market continues to decline, the number of full-time students tends to increase, and the availability of part-time work for students continues to decline. A post-secondary education no longer increases a “return on investment” through a lifetime, as it was once assumed. The overall student debt is not the most pressing immediate problem, but rather the “crippling interest rate attached to these government loans” which plunge youth into a deep crisis. So while interest rates are very low (in other lending, as set by the Bank of Canada at 1%), the government is charging 8% interest on student loans. Margaret Johnson, president of Solutions Credit Counselling Service Inc. in Vancouver stated that, “When the loan goes into default, the interest starts to compound. And then you have an absolute nightmare. The average debt I’m seeing is anywhere between $30,000 and $60,000. The payments are so high on some of these loans that the young person cannot live and make a payment. Instead of lowering the interest rate — or eliminating it, which I think is the best solution — the government extended the repayment term to 14 years. The fact that so many loans are in arrears proves this isn’t the answer.”
Some things are worth repeating: the average debt for every Canadian household is over $100,000 and the average debt for a university graduate in Canada is over $26,000; nearly one million Canadians depend upon food banks for their food, poverty and inequality are increasing, homelessness is increasing; the rich are getting richer and everyone else is getting poor or poorer, and there is a horrible job market with few jobs available, let alone available to youth. So the “solution” – we are told – to the supposed “problem” of “competitiveness” in our universities… is to increase the burden, the cost, and the debt of students, families, and the general population; to increase tuition and student debt, to increase interest rates on all debts, and to plunge the population into abject poverty. It seems then, that Canadians, and the Western world in general (as these policies are being pushed throughout the G8 nations on the whole) are about to get a hard lesson in what our countries of the industrialized and supposedly “democratic” north have been doing to the rest of the world (Africa, Asia, Latin America) for decades and, indeed, centuries. What has been done abroad is now coming home to roost.
The conditions, restrictions, programs and policies that our nations have imposed upon Africa, Asia, and Latin America for the past four decades have plunged those countries into poverty, allowed for the unhindered control and extraction of their resources for our corporations, put their nations into the debt of our banks, exploited their populations for cheap labour, and propped up ruthless dictators to repress the people if they ever get wise and want to change their society. While our nations of course continue in their raping and pillaging of the world, now they have also turned their attention – and absolute disregard for humanity – to their domestic populations. The same banks, international institutions, nations, organizations and even individuals who promoted the policies which led to the impoverishment and punishment of much of the world’s population are now telling us that these same policies are the “solutions” to our current crises, just as they told the populations of Africa, Asia, and Latin America. If we listen to these same people, submit to the same policies, and accept the same ideologies which have caused so much destruction and devastation around the world, and expect different results at home, we deserve what we get. Naturally, then, we must stop accepting and consenting to the hegemony and power of our elites and their institutions and ideologies. This means that we have to actively create alternatives, not simply protest against their programs, or demand reforms, rearranging deck chairs on the Titanic. The boat is sinking, it doesn’t matter how it looks on the way down. It’s time for a new system altogether. One cannot demand from others to create a new system, but must actively create it themselves.
In the next part of this series, “Class War and the College Crisis,” I will be discussing the coming economic crisis for Canada, which has thus far been hailed as the “safest” nation emerging from the 2008 “recession,” a myth that will soon be broken. As Canada, and much of the rest of the world, begin their rapid descent into an economic depression, the above-mentioned statistics regarding debt, poverty, and inequality will get worse. As the social and economic crisis deepens, our governments will continue to show in whose interests they truly rule: with batons, tear gas, beatings, mass arrests, detention camps, and the growth and development of a police state surveillance society, our governments will reveal that they rule for bankers, corporations, and oligarchs. The democratic façade will wash away. It is within these circumstances that Canadians, and the wider world in general, must seek to create a true democratic system. First, however, we must recognize and understand the system in which we live for what it is: a State-Capitalist society ruled by a power-mad oligarchy. The next part of this series will be taking a look at what this power-mad oligarchy is doing and will be doing to Canada’s economy and society in the coming years. Here’s a hint: it doesn’t benefit YOU!
Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is also Project Manager of The People’s Book Project. He also hosts a weekly podcast show, “Empire, Power, and People,” on BoilingFrogsPost.com.
 CRA, What are the income tax rates in Canada for 2012? Canada Revenue Agency:
 Finances Québec, “A Fair and Balanced University Funding Plan: To Give Québec the Means to Fulfill its Ambitions,” The Government of Québec, 2011-2012 Budget, page 7.
 CFS, Tuition Fees, The Canadian Federation of Students:
 Press Release, “TD Economics outlines plan for prosperity in Quebec report,” Newswire, 10 April 2007:
 CNW, “Déjà Vu: O’Neill Report Recycles Dated, Discredited Tuition Fee Myths,” Newswire, 17 September 2010:
 Alison Kershaw, “Thousands of students to stage walkout protest,” The Independent, 12 March 2012:
 Carla Rivera and Larry Gordon, “Occupy protests bring small yet intense crowds to state campuses,” Los Angeles Times, 1 March 2012:
 Giles Tremlett, “Fighting breaks out in Barcelona as students protest over education cuts,” The Guardian, 29 February 2012:
 Mark Olssen and Michael A. Peters, “Neoliberalism, Higher Education and the Knowledge Economy: From the Free Market to Knowledge Capitalism,” Journal of Education Policy (Vol. 20, No. 3, May 2005), page 331.
 Ibid, pages 338-339.
 CTV News Staff, “Average Canadian family debt hits $100,000,” CTV News, 17 February 2011:
 Why are Canadian families falling further into debt?, The Globe and Mail, 14 February 2012:
 Tavia Grant, “Financial security ‘elusive’ for many Canadian families,” The Globe and Mail, 22 March 2012: http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/financial-security-elusive-for-many-canadian-families/article2377592/
 Gordon Isfeld, “Bank of Canada says household debt ‘biggest risk’ to economy,” The Leader Post, 9 March 2012:
 John Morrissy, “Household debt a mounting concern as rates appear set to rise,” The Montreal Gazette, 23 March 2012:
 CBC, Wealth gap widens to 30-year high, CBC News, 5 December 2011:
 Les Whittington, “Tax policies may aggravate gap between rich and poor,” Toronto Star, 27 May 2011:
 Tavia Grant, “Income inequality rising quickly in Canada,” The Globe and Mail, 13 September 2011:
 CTV News Staff, “OECD report finds income inequality rising in Canada,” CTV News:
 Poverty in Canada: Mean Streets, The Economist, 25 November 2010:
 CTV News Staff, “Canada Student Loan debt tops $13B, figures show,” CTV News, 21 January 2009:
 CTV News Staff, “Canada Student Loan debt tops $13B, figures show,” CTV News, 21 January 2009:
 CBC, “Student debt limits post-grad options,” CBC News, 22 September 2010:
 QMI Agency, “Student debt doubled over 20 years: Study,” Toronto Sun, 22 September 2010:
 Sharon Singleton, “Action needed on student debt: CFS,” Toronto Sun, 17 October 2011:
 Mary Teresa Bitti, Student debt bankrupting a generation, The Financial Post, 4 June 2011:
Forging a “New World Order” Under a One World Government
Global Power and Global Government: Part 4
Global Research, August 13, 2009
This article is Part 4 in the series, “Global Power and Global Government,” published by Global Research.
Part 1: Global Power and Global Government: Evolution and Revolution of the Central Banking System
The 1990s saw the emergence of what was called the New World Order. This was a term that emerged in the early 1990s to describe a more unipolar world, addressing the collapse of the Soviet Union and the newfound role of the United States as the sole and unchallenged global power. The New World Order was meant to represent a new phase in the global political economy in which world authority rested in one place, and for the time, that place was to be the United States.
This era saw the continual expansion and formation of regional blocs, with the formation of the European Union, the signing of the North American Free Trade Agreement (NAFTA) and the creation of the WTO. The World Trade Organization was officially formed in 1995, as the successor to the General Agreements on Tariffs and Trade (GATT), which was formed in 1944 at the Bretton-Woods Conference. The WTO manages the international liberal trading order.
The first Director-General of the WTO was Peter D. Sutherland, who was previously the director general of GATT, former Attorney General of Ireland, and currently is Chairman of British Petroleum and Goldman Sachs International, as well as being special representative of the United Nations secretary-general for migrations. He is also a member of the board of the Royal Bank of Scotland Group, the Foundation Board of the World Economic Forum, goodwill ambassador to the United Nations Industrial Development Organisation, is a member of the Bilderberg Group, and is European Chairman of the Trilateral Commission, and he was presented with the Robert Schuman Medal for his work on European Integration and the David Rockefeller Award of the Trilateral Commission. Clearly, the WTO was an organ of the western banking elite to be used as a tool in expanding and institutionalizing their control over world trade.
The European Superstate
In 1992, the Maastricht Treaty was signed, which officially formed the European Union in 1993. In 1994, the European Monetary Institute (EMI) was formed, with the European Central Bank (ECB) being formed in 1998, and the single European currency, the Euro, debuting in 1999. In 2004, the European Constitution was to be signed by all 25-member states of the EU, which was a treaty to establish a constitution for the entire European Union.
The Constitution was a move towards creating a European superstate, creating an EU foreign minister, and with it, coordinated foreign policy, with the EU taking over the seat of Britain on the UN Security Council, representing all EU member states, forcing the nations to “actively and unreservedly” follow an EU foreign policy; set out the framework to create an EU defence policy, as an appendage to or separate from NATO; the creation of a European Justice system, with the EU defining “minimum standards in defining offences and setting sentences,” and creates common asylum and immigration policy; and it would also hand over to the EU the power to “ensure co-ordination of economic and employment policies”; and EU law would supercede all law of the member states, thus making the member nations relative to mere provinces within a centralized federal government system.
Vaclav Klaus, President of the Czech Republic, had stated that he feared that the concept of a stronger and more centralized European Union, as “the developments in the E.U. are really dangerous with regard to moving out of a free society and moving more and more toward masterminding control and regulation,” and that, “We [the Czech Republic] spent a half-century under communist eyes. We are more sensitive than some other West Europeans. We feel things, we see things, we touch things that we don’t like. For us, the European Union reminds us of COMECON [Moscow’s organization for economic control of the Soviet bloc].” He elaborated saying that the similarity with COMECON is not ideologically based, but in its structure, “The decisions are made not in your own country. For us who lived through the communist era, this is an issue.”
The Constitution was largely written up by Valéry Giscard d’Estaing, former President of the French Republic from 1974 to 1981. Giscard d’Estaing also happens to be a member of the Bilderberg Group, the Trilateral Commission, and is also a close friend of Henry Kissinger, having co-authored papers with him. In 2005, French and Dutch voters answered the referendums in their countries, in which they rejected the EU Constitution, which required total unanimity in order to pass.
In 2007, a move was undertaken to introduce what was called the Lisbon Treaty, to be approved by all member-states. Giscard d’Estaing wrote an article for the Independent in which he stated that, “The difference between the original Constitution and the present Lisbon Treaty is one of approach, rather than content.” He described the process of creating the Lisbon Treaty: “It was the legal experts for the European Council who were charged with drafting the new text. They have not made any new suggestions. They have taken the original draft constitution, blown it apart into separate elements, and have then attached them, one by one, to existing treaties. The Treaty of Lisbon is thus a catalogue of amendments. It is unpenetrable for the public.” The main difference was that the word “constitution” was removed and banished from the text.
The Telegraph reported that though the Treaty dropped the word “constitution,” it remained the same in “giving the EU the trappings of a global power and cutting national sovereignty.” It contained plans to create an EU President, who “will serve a two and half year term but unlike democratic heads of state he or she will be chosen by Europe’s leaders not by voters” and “will take over key international negotiations from national heads of government.” The Constitution’s “Foreign Minister” becomes the “High Representative,” who “will run a powerful EU diplomatic service and will be more important on the global and European stage than national foreign ministers.” It sets out to create an “Interior Ministry” which will “centralise databases holding fingerprints and DNA,” and “make EU legislation on new police and surveillance powers.” The ability for EU nations to use vetoes will end, and the Treaty “includes a clause hardwiring an EU “legal personality” and ascendancy over national courts.”
One country in Europe has it written into its constitution that it requires a referendum on treaties, and that country is Ireland. In June of 2008, the Irish went to vote on the Treaty of Lisbon, after weeks and months of being badgered by EU politicians and Eurocrats explaining that the Irish “owe” Europe a “Yes” vote because of the benefits the EU had bestowed upon Ireland. History will show, however, that the Irish don’t take kindly to being bossed around and patronized, so when they went to the polls, “No” was on their lips and on their ballots. The Irish thus rejected the Lisbon Treaty.
North American Integration
The Canada-US Free Trade Agreement of 1989, was signed by President George HW Bush and Canadian Prime Minister Brian Mulroney. The FTA had devastating consequences for the people of Canada and the United States, while enriching the corporate and political elite. For example, GDP growth decreased, unemployment increased the most since the Great Depression, and meanwhile, Brian Mulroney entered the corporate world, of which he now sits as a board member of Barrick Gold Corporation, as well as sitting on the International Advisory Board of the Council on Foreign Relations, of which David Rockefeller remains on as Honorary Chairman.
In 1990, the private sector lobbying groups and think tanks began the promotion of the North American Free Trade Agreement (NAFTA) to expand the Canada-US Free Trade Agreement to include Mexico. NAFTA was signed by then Canadian Prime Minister Jean Chrétien, US President George H.W. Bush and Mexican President Carlos Salinas, in 1993, and went into effect in 1994. It was negotiated during a time in which Mexico was undergoing liberal economic reforms, so NAFTA had the effect of cementing those reforms in an “economic constitution for North America.”
David Rockefeller played a role in the push for NAFTA. In 1965, he had founded the Council for Latin America (CLA), which, as he wrote in a 1966 article in Foreign Affairs, was to mobilize private enterprise throughout the hemisphere “to stimulate and support economic integration.” The CLA, David wrote, “provides an effective channel of cooperation between businessmen in the United States and their counterparts in the countries to the south. It also offers a means of continuing communication and consultation with the White House, the State Department and other agencies of our government.”
The CLA later changed its name to the Council of the Americas (CoA) and maintains a very close relationship with the Americas Society, founded at the same time as the CLA, of which David Rockefeller remains to this day as Chairman of both organizations. As David wrote in his autobiography, Memoirs, in the lead up to NAFTA, the Council of the Americas sponsored a Forum of the Americas, which was attended by President George H.W. Bush, which resulted in the call for a “Western Hemisphere free trade area.”
In 1993, David Rockefeller wrote an article for the Wall Street Journal, in the run up to NAFTA, in which he advocated for the signing of NAFTA as essential, describing it as a vital step on the road to fulfilling his life long work, and that, “Everything is in place — after 500 years — to build a true “new world” in the Western Hemisphere,” and further, that “I truly don’t think that “criminal” would be too strong a word to describe an action on our part, such as rejecting Nafta, that would so seriously jeopardize all the good that has been done — and remains to be done.”
In 1994, Mexico entered into a financial crisis, often referred to as the Mexican peso crisis. The 1980s debt crisis, instigated by the Federal Reserve’s interest rate hikes on international loans, caused Mexico to default on its loans. The IMF had to enter the scene with its newly created Structural Adjustment Programs (SAPs) and reform Mexico’s economy along neoliberal economic policies.
In the late 1980s, “the United States accounted for 73 percent of Mexico’s foreign trade,” and when NAFTA came into effect in 1994, it “immediately opened US and Canadian markets to 84 percent of Mexican exports.” Mexico even became a member of the World Trade Organization (WTO). The peso crisis, which began at the end of 1994, with the ascension of Mexican President Zedillo, went into 1995, and the US organized a bailout worth $52 billion. The bailout did not help the Mexican economy, as it was simply funneled into paying back loans to banks, primarily American banks, and the “crisis in 1995 was declared [by the IMF to be] over as soon as the banks and international lenders started to get repaid; but five years after the crisis, workers were just getting back to where they were beforehand.”
In 2002, Robert Pastor, Director of the Center for North American Studies at the American University in Washington, D.C., prepared a report that he presented to the Trilateral Commission meeting of that same year. The report, A North American Community: A Modest Proposal to the Trilateral Commission, advocated a continuation of the policy of “deep integration” in North America, recommending, “a continental plan for infrastructure and transportation, a plan for harmonizing regulatory policies, a customs union, [and] a common currency.” The report advocated the formation of a North American Community and Pastor wrote that, “a majority of the public in all three countries is prepared to join a larger North American country.”
In 2003, prior to Paul Martin becoming Prime Minister of Canada, the Canadian Council of Chief Executives (CCCE), formerly the BCNI, published on their website, a press release in which they, “urged Paul Martin to take the lead in forging a new vision for North America.” Thomas d’Aquino, CEO of the Council, “urged that Mr. Martin champion the idea of a yearly summit of the leaders of Canada, Mexico and the United States in order to give common economic, social and security issues the priority they deserve in a continental, hemispheric and global context.” Among the signatories to this statement were all the Vice Chairmen of the CCCE, including David Emerson, who would go on to join Martin’s Cabinet.
The CCCE then launched the North American Security and Prosperity Initiative, advocating “redefining borders, maximizing regulatory efficiencies, negotiation of a comprehensive resource security pact, reinvigorating the North American defence alliance, and creating a new institutional framework.”
The Independent Task Force on the Future of North America was then launched in 2005, composed of an alliance and joint project between the CCCE in Canada, the Council on Foreign Relations (CFR) in the United States, and the Mexican Council on Foreign Relations in Mexico. A press release was given on March 14, 2005, in which it said, “The chairs and vice-chairs of the Independent Task Force on the Future of North America today issued a statement calling for a North American economic and security community by 2010.”
On March 23, 2005, a mere nine days following the Task Force press release, the leaders of Canada, the US, and Mexico, (Paul Martin, George W. Bush, and Vicente Fox, respectively), announced “the establishment of the Security and Prosperity Partnership of North America,” which constituted a course of “action into a North American framework to confront security and economic challenges.”
Within two months, the Independent Task Force on the Future of North America released their final report, Building a North American Community, proposing the continuation of “deep integration” into the formation of a North American Community, that “applauds the announced ‘Security and Prosperity Partnership of North America,’ but proposes a more ambitious vision of a new community by 2010 and specific recommendations on how to achieve it.”
At the 2006 meeting of the SPP, the creation of a new group was announced, called the North American Competitiveness Council (NACC), made up of corporate leaders from all three countries who produce an annual report and advise the three governments on how to implement the SPP process of “deep integration”. The Secretariat in Canada is the CCCE, and the Secretariat of the group in the US is made up of the US Chamber of Commerce and the Council of the Americas. The Council of the Americas was founded by David Rockefeller, of which he is still Honourary Chairman, and other board members include individuals from J.P. Morgan, Merck, McDonald’s, Ford, the Federal Reserve Bank of New York, General Electric, Chevron, Shell, IBM, ConocoPhillips, Citigroup, Microsoft, Pfizer, Wal-Mart, Exxon, General Motors, Merrill Lynch, Credit Suisse and the US Department of Treasury.
The process of integration is still underway, and the formation of a North American Community is not far off, only to be followed by a North American Union, modeled on the structure of the European Union, with talk of a North American currency being formed in the future, which was even proposed by Canada’s former Governor of the Bank of Canada.
The New World Order in Theory
In a 1997 article of Foreign Affairs, the journal of the Council on Foreign Relations, Anne-Marie Slaughter discussed the theoretical foundations of the New World Order. Building on George HW Bush’s proclamation of a New World Order in 1991, Slaughter wrote that many saw this as “the promise of 1945 fulfilled, a world in which international institutions, led by the United Nations, guaranteed international peace and security with the active support of the world’s major powers.” However, this concept, she explained, was largely infeasible, as “It requires a centralized rule-making authority, a hierarchy of institutions, and universal membership.” Instead, she explains the emergence of what she called a “new medievalism” as opposed to liberal internationalism. “Where liberal internationalists see a need for international rules and institutions to solve states’ problems, the new medievalists proclaim the end of the nation-state,” where “The result is not world government, but global governance. If government denotes the formal exercise of power by established institutions, governance denotes cooperative problem- solving by a changing and often uncertain cast.”
However, Slaughter challenges the assumptions of both the liberal internationalists and the new medievalists, and states that, “The state is not disappearing, it is disaggregating into its separate, functionally distinct parts. These parts—courts, regulatory agencies, executives, and even legislatures—are networking with their counterparts abroad, creating a dense web of relations that constitutes a new, transgovernmental order,” and that, “transgovernmentalism is rapidly becoming the most widespread and effective mode of international governance.” Slaughter was Dean of the Woodrow Wilson School of Public and International Affairs at Princeton University from 2002-2009, is currently Director of Policy Planning for the United States Department of State, and has previously served on the board of the Council on Foreign Relations.
Reconstructing Class Structure Under a World Government
Bank of Canada Governor Mark Carney, a former executive with Goldman Sachs, stated in his speech at the International Economic Forum of the Americas, that, “Globalized product, capital, and labour markets lie at the heart of the New World Order to which we should aspire. However, the next wave of globalization needs to be more firmly grounded and its participants more responsible,” and that, “Within our economies, major stock adjustments in inventories, labour, and capital will be required.” It is worth quoting him at length in saying:
Although global demand and trade levels appear to be approaching bottom, and inventory and labour adjustments have already been substantial, there is still more to come. Unemployment will likely rise further across the G-7, with the sharpest increases still to come in those economies with the least-flexible labour markets. Uncertainty over the employment outlook will weigh on consumption in most major economies for some time. The capital stock adjustment process will take longer, and global investment growth is likely to remain negative well into 2010. This will serve as a significant drag on global growth and can be expected to reduce potential growth in most major economies. [Emphasis added]
In terms of labour adjustments within the New World Order, there are some important and vital factors to take into account. Primary among these concerns is the notion of transnational classes. Capitalism largely functions through class divides, with the ruling class owning the means of production, which, as a class, is subject to its own hierarchy over which those that control and issue currencies preside.
In Western, industrialized nations, there has been a large middle class which thrives on consumption, enriching the upper class bourgeoisie, while the lower class, (or proletariat in Marxist terms), consists of the labour class. In non-western, industrialized nations, generally referred to as the “Third World”, “developing world” or the “Global South” (consisting of Latin America, Africa, and parts of Asia), there is a greater divide in terms in class lines, where there is a ruling class, and a labour class, largely remaining vacant of a vast, educated middle class. Class structures vary from country to country and region to region.
However, in the past several decades, the reality of class structures has been undergoing drastic changes, and with this, the structure of labour has changed. In the past few decades, a concurrent class restructuring has been taking place, in which the middle classes of the world descend into debt bondage while the upper classes of the world have began a process of transnationalizing. What we have witnessed and are witnessing with recent events, is the transnationalization of class structures, and with that, labour forces.
A fascinating theoretical school of thought within the field of Global Political Economy is that of Social Constructivism. Social Constructivists argue that, “The social and political world, including the world of international relations, is not a physical entity or material object that is outside human consciousness. Consequently, the study of international relations must focus on the ideas and beliefs that inform the actors on the international scene as well as the shared understandings between them.” Expanding upon this idea:
The international system is not something ‘out there’ like the solar system. It does not exist on its own. It exists only as an intersubjective awareness among people; in that sense the system is constituted by ideas, not by material forces. It is a human invention or creation not of a physical or material kind but of a purely intellectual and ideational kind. It is a set of ideas, a body of thought, a system of norms, which has been arranged by certain people at a particular time and place.
Examples of socially constructed structures within the global political economy are national borders, as they have no physical line, but are rather formed by a shared understanding between various actors as to where the border is. The nation itself is a social construct, as it has no physical, over-arching form, but is made up of a litany of shared values, ideas, concepts, institutions, beliefs and symbols. Thus, “If the thoughts and ideas that enter into the existence of international relations change, then the system itself will change as well, because the system consists in thoughts and ideas. That is the insight behind the oft-repeated phrase by constructivist Alexander Wendt: ‘anarchy is what states make of it’.”
Class Structure and Social Constructivism
William I. Robinson and Jerry Harris write in Science & Society Journal, that, “One process central to capitalist globalization is transnational class formation, which has proceeded in step with the internationalization of capital and the global integration of national productive structures. Given the transnational integration of national economies, the mobility of capital and the global fragmentation and decentralization of accumulation circuits, class formation is progressively less tied to territoriality.” They argued that a Transnational Capitalist Class (TCC) has emerged, “and that this TCC is a global ruling class. It is a ruling class because it controls the levers of an emergent transnational state apparatus and of global decision making.” This class has no borders, and is composed of the technocratic, media, corporate, banking, social and political elite of the world.
As Jackson and Sorenson point out in relation to social constructivist theory, “If ‘anarchy is what states make of it’ there is nothing inevitable or unchangeable about world politics,” and that, “The existing system is a creation of states and if states change their conceptions of who they are, what their interests are, what they want, etc. then the situation will change accordingly.” As an example, they stated that states could decide “to reduce their sovereignty or even to give up their sovereignty. If that happened there would no longer be an international anarchy as we know it. Instead, there would be a brave new, non-anarchical world – perhaps one in which states were subordinate to a world government.”
As Robinson and Harris explain in their essay, with the rise of the Transnational Capitalist Class (TCC), there is also a rise in the apparatus of a Transnational State (TNS), which is “an emerging network that comprises transformed and externally integrated national states, together with the supranational economic and political forums; it has not yet acquired any centralized institutional form.” Among the economic apparatus of the TNS we see the IMF, World Bank, WTO and regional banks. On the political side we see the Group of 7, Group of 22, United Nations, OECD, and the European Union. This was further accelerated with the Trilateral Commission, “which brought together transnationalized fractions of the business, political, and intellectual elite in North America, Europe, and Japan.” Further, the World Economic Forum has made up an important part of this class, and, I might add, the Bilderberg Group. Robinson and Harris point out that, “Studies on building a global economy and transnational management structures flowed out of think tanks, university centers, and policy planning institutes in core countries.”
The TNS apparatus has been a vital principle of organization and socialization for the transnational class, “as have world class universities, transnationally oriented think tanks, the leading bourgeois foundations, such as Harvard’s School of International Business, the Ford [and Rockefeller] and the Carnegie Foundations, [and] policy planning groups such as the Council on Foreign Relations.” These “elite planning groups are important forums for integrating class groups, developing new initiatives, collective strategies, policies and projects of class rule, and forging consensus and a political culture around these projects.”
Robinson and Harris identify the World Economic Forum as “the most comprehensive transnational planning body of the TCC and the quintessential example of a truly global network binding together the TCC in a transnational civil society.” I would take issue with this, and instead propose the Bilderberg Group, of which they make no mention in their article, as THE quintessential transnational planning body of the TCC, as it is composed of the elite of the elite, totally removed from public scrutiny, and acts as “a secretive global think-tank” of the world’s 130 most powerful individuals.
Many Bilderberg critics will claim that the group acts as a “secret world government” or as the organization “that makes all the key decisions for the world.” However, this is not the case. Bilderberg is simply the most influential planning body, sitting atop a grand hierarchy of various planning bodies and institutions, and is itself a key part of the apparatus of the formation of a Transnational State, but is not, in and of itself, a “world government.” It is a global think tank, which holds the concept of a “world government” in high regard and often works to achieve these ends, but it should not be confused with being the end it seeks.
The economic crisis is perhaps the greatest “opportunity” ever given to the TCC in re-shaping the world order according to their designs, ideals and goals. Through destruction, comes creation; and for these high-placed individuals within the TCC, destruction is itself a form of creation.
In terms of reshaping labour and class structures, the economic crisis provides the ground on which a new global class structure will be built. A major problem for the Transnational Capitalist Class and the formation of a Transnational State, or world government, is the lack of continuity in class structures and labour markets throughout the world. A transnational ruling class, or “Superclass” as David Rothkopf referred to it in his book of the same name (and is, himself, a member of the Superclass), has emerged. It has no borders, yet has built a general continuity and consensus of goals among its members, albeit there are differences and conflicts within the class, but they are based upon the means of achieving the stated ends, rather than on the ends itself. There is not dissent within the ruling class on the aims of achieving a world governing body; the dissent is in how to achieve this, and in terms of what kind of structure, theoretical and philosophical leanings, and political orientation such a government would have.
To achieve these ends, however, all classes must be transnationalized, not simply the ruling class. The ruling class is the first class to be transnationalized, because transnationalization was the goal of the ruling classes based in the powerful Western European nations, (and later in the United States), that started the process of transnationalization or internationalization. Now that there is an established “Superclass” of a transnational composition, the other classes must follow suit. The middle class is targeted for elimination in this sense, because most of the world has no middle class, and to fully integrate and internationalize a middle class, this would require industrialization and development in places such as Africa, and certain places in Asia and Latin America, and would represent a massive threat to the Superclass, as it would be a valve through which much of their wealth and power would escape them. Their goal is not to lose their wealth and power to a transnational middle class, but rather to extinguish the notion of a middle class, and transnationalize a lower, uneducated, labour oriented class, through which they will secure ultimate wealth and power.
The economic crisis serves these ends, as whatever remaining wealth the middle class holds is in the process of being eliminated, and as the crisis progresses, or rather, regresses, and accelerates, the middle classes of the world will suffer, while a great percentage of lower classes of the world, poverty-stricken even prior to the crisis, will suffer the greatest, most probably leading to a massive reduction in population levels, particularly in the “developed” or “Third World” states.
Many would take issue with such a thesis as being an objective of the Transnational Capitalist Class, as capitalism needs a large population, specifically a middle class population, in order to have a market of consumers for their products. Though this is true with how we presently understand the capitalist system and structure, we must also take note that capitalism, itself, is always changing and redefining itself. Through a social constructivist perspective, which I would argue, is very apt in this analysis, such a notion is not inconceivable, as if the capitalist class were to redefine capitalism itself, capitalism itself would change.
It must be addressed that there would be a great many individuals within the TCC or Superclass (Rothkopf estimates the number at 6,000 individuals within the ruling class), who would take issue with eliminating their base for profit making, however, as a total restructuring of the capitalist system and global political economy as a whole is undertaken, the TCC itself is not immune to such drastic and rapid changes itself. In fact, it would be unimaginable to think that it would remain as it currently is.
Rothkopf explains that with 6,000 members of the Superclass, that equals roughly one member of the superclass for every 1 million people in the world. As the composition, class structures, and numbers of the world population drastically alter over the next years and decades, so too will the superclass itself. It too, will be subject to a “cleansing” so to speak, in which the big players will collapse and consolidate many of the smaller players.
The Monetary Structure of a Global Government
A Global Currency
Following the April 2009 G20 Summit, leaders issued a communiqué which set the groundwork for the creation of a global currency to replace the US dollar as the world reserve currency. The communiqué stated that, “We have agreed to support a general SDR allocation which will inject $250bn (£170bn) into the world economy and increase global liquidity.” SDRs, or Special Drawing Rights, are “a synthetic paper currency issued by the International Monetary Fund.” As the Telegraph reported, “the G20 leaders have activated the IMF’s power to create money and begin global “quantitative easing”. In doing so, they are putting a de facto world currency into play. It is outside the control of any sovereign body. Conspiracy theorists will love it.”
In 1988, the Economist featured an article called “Get Ready for the Phoenix,” which said, “THIRTY years from now, Americans, Japanese, Europeans, and people in many other rich countries and some relatively poor ones will probably be paying for their shopping with the same currency. Prices will be quoted not in dollars, yen or D-marks but in, let’s say, the phoenix. The phoenix will be favoured by companies and shoppers because it will be more convenient than today’s national currencies, which by then will seem a quaint cause of much disruption to economic life in the late twentieth century.” The article, written in the wake of the 1987 stock market crash, stated that, “Several more big exchange-rate upsets, a few more stockmarket crashes and probably a slump or two will be needed before politicians are willing to face squarely up to that choice. This points to a muddled sequence of emergency followed by patch-up followed by emergency, stretching out far beyond 2018-except for two things. As time passes, the damage caused by currency instability is gradually going to mount; and the very trends that will make it mount are making the utopia of monetary union feasible.”[emphasis added]
Paul Volcker, former Governor of the Federal Reserve System, said in 2000, that, “If we are to have a truly global economy, a single world currency makes sense,” and a member of the Executive Board of the European Central Bank reaffirmed Volcker’s comment, stating that, “we might one day have a single world currency. Maybe European integration, in the same way as any other regional integration, could be seen as a step towards the ideal situation of a fully integrated world. If and when this world will see the light of day is impossible to say. However, what I can say is that this vision seems as impossible now to most of us as a European monetary union seemed 50 years ago, when the process of European integration started.”
A Central Bank of the World
Jeffrey Garten has written several articles calling for the creation of a global central bank, or a “global fed.” Garten was former Dean of the Yale School of Management, former Undersecretary of Commerce for International Trade in the Clinton administration, previously served on the White House Council on International Economic Policy under the Nixon administration and on the policy planning staffs of Secretaries of State Henry Kissinger and Cyrus Vance of the Ford and Carter administrations, former Managing Director at Lehman Brothers, and is a member of the Council on Foreign Relations.
In 1998, he wrote an article for the New York Times stating that the world “needs a global central bank,” and that, “An independent central bank with responsibility for maintaining global financial stability is the only way out. No one else can do what is needed: inject more money into the system to spur growth, reduce the sky-high debts of emerging markets, and oversee the operations of shaky financial institutions. A global central bank could provide more money to the world economy when it is rapidly losing steam.”
Following the outbreak of the current financial crisis, Garten wrote an article for the Financial Times in which he called for the “establishment of a Global Monetary Authority to oversee markets that have become borderless.” In October of 2008, he wrote an article for Newsweek stating that, “leaders should begin laying the groundwork for establishing a global central bank.” He explained that, “There was a time when the U.S. Federal Reserve played this role [as governing financial authority of the world], as the prime financial institution of the world’s most powerful economy, overseeing the one global currency. But with the growth of capital markets, the rise of currencies like the euro and the emergence of powerful players such as China, the shift of wealth to Asia and the Persian Gulf and, of course, the deep-seated problems in the American economy itself, the Fed no longer has the capability to lead single-handedly.”
Building upon the model of the European Union, the world is being divided into large continental regional blocs, with regional monetary systems and governments. This will make up the managed blocs of a global government, and mark a significant process in the “hard road to world order,” as Richard N. Gardner called it, in which national sovereignty is eroded piece by piece. Regionalism marks the current phase of the move to the formation of a global government. Friedrich List critiqued liberal cosmopolitanism, stating that economic integration had never preceded political integration, however the elites have and are successfully challenging this notion. In the New World Order, economic integration is preceding political integration into a world governance structure.
The European Union began as a series of free trade agreements, became a monetary union, and is in the process of being formed into a single continental superstate. North American integration began with a series of free trade agreements, defense and security agreements, and is in the process of moving towards monetary and bureaucratic integration into a North American Community. A Union and North American superstate are not far in the distance. A North American currency is openly discussed and proposed by leading think tanks, billionaire investors, as well as the Governor of the Bank of Canada. The likely name of such a currency is the Amero.
Meanwhile, globally, markets are heavily integrating. In 2007, it was reported that the European Union and the United States were beginning the process of transatlantic economic integration. In 2008, it was announced that, “Canadian and European officials say they plan to begin negotiating a massive agreement to integrate Canada’s economy with the 27 nations of the European Union,” under “deep economic integration negotiations,” and “The proposed pact would far exceed the scope of older agreements such as NAFTA.” This, essentially, is a means of integrating with the North American Community before the Community is officially formed; an act of pre-emptive integration.
In 2007, the Council on Foreign Relations journal, Foreign Affairs, ran an article titled, “The End of National Currency.” Discussing the volatility of national currencies, the article stated that, “The right course is not to return to a mythical past of monetary sovereignty, with governments controlling local interest and exchange rates in blissful ignorance of the rest of the world. Governments must let go of the fatal notion that nationhood requires them to make and control the money used in their territory. National currencies and global markets simply do not mix; together they make a deadly brew of currency crises and geopolitical tension and create ready pretexts for damaging protectionism. In order to globalize safely, countries should abandon monetary nationalism and abolish unwanted currencies, the source of much of today’s instability.”
Further, “Monetary nationalism is simply incompatible with globalization. It has always been, even if this has only become apparent since the 1970s, when all the world’s governments rendered their currencies intrinsically worthless.” The author states that, “Since economic development outside the process of globalization is no longer possible, countries should abandon monetary nationalism. Governments should replace national currencies with the dollar or the euro or, in the case of Asia, collaborate to produce a new multinational currency over a comparably large and economically diversified area.”
In 2008, the Union of South American Nations (UNASUR) was formed, “a regional body aimed at boosting economic and political integration in the region,” which will “seek a common currency as part of the region’s integration efforts,” as well as a common central bank.
The Gulf Cooperation Council, a regional bloc of Arab Middle Eastern governments, is pursuing economic integration in the form of a common central bank and a common currency. Similarly, there has been much discussion of an Asian Monetary Union and East Asian economic integration, specifically being touted as a solution to the prevention of future economic crises in East Asia like that which hit it in 1997. Integration would be modeled upon the East Asian regional block of ASEAN (Association of Southeast Asian Nations), and in 2008, “ASEAN bank deputy governors and financial deputy ministers have met in Vietnam’s central Da Nang city, discussing issues on the financial and monetary integration and cooperation in the region.” Further, Africa is being organized as a regional bloc under the African Union, and is also pursuing regional economic integration, and has even set the agenda for the creation of a continental African central bank and the formation of a single African currency.
In 2006, the Bank for International Settlements “suggested ditching many national currencies in favour of a small number of formal currency blocks based on the dollar, euro and renminbi or yen.”
Constructing the Political Structure of a Global Government
Strobe Talbott, Deputy Secretary of State in the Clinton administration from 1994 to 2001, is also a member of the Council on Foreign Relations and the Trilateral Commission and is currently President of the Brookings Institution, a prominent US think tank. In 1992, before becoming Deputy Secretary of State, he wrote an article for Time Magazine originally titled, “The Birth of the Global Nation,” which has now, in the Time Magazine archives, been renamed “America Abroad.” In the article, he states that within the next 100 years, “nationhood as we know it will be obsolete; all states will recognize a single, global authority. A phrase briefly fashionable in the mid-20th century — “citizen of the world” — will have assumed real meaning by the end of the 21st.”
Interestingly, Talbott endorses the social constructivist perspective of nation-states and international order, stating that, “All countries are basically social arrangements, accommodations to changing circumstances. No matter how permanent and even sacred they may seem at any one time, in fact they are all artificial and temporary. Through the ages, there has been an overall trend toward larger units claiming sovereignty and, paradoxically, a gradual diminution of how much true sovereignty any one country actually has.”
He explained that empires “were a powerful force for obliterating natural and demographic barriers and forging connections among far-flung parts of the world,” and following that, “Empire eventually yielded to the nation-state,” and that, “The main goal driving the process of political expansion and consolidation was conquest. The big absorbed the small, the strong the weak. National might made international right. Such a world was in a more or less constant state of war.” Talbott states that, “perhaps national sovereignty wasn’t such a great idea after all.”
He continued, saying that, “it has taken the events in our own wondrous and terrible century to clinch the case for world government. With the advent of electricity, radio and air travel, the planet has become smaller than ever, its commercial life freer, its nations more interdependent and its conflicts bloodier.” Further, “Each world war inspired the creation of an international organization, the League of Nations in the 1920s and the United Nations in the ’40s.” He explained, “The plot thickened with the heavy-breathing arrival on the scene of a new species of ideology — expansionist totalitarianism — as perpetrated by the Nazis and the Soviets. It threatened the very idea of democracy and divided the world. [Thus] The advocacy of any kind of world government became highly suspect.” However, as Talbott points out, Soviet expansion led the way for NATO expansion, and “The cold war also saw the European Community pioneer the kind of regional cohesion that may pave the way for globalism.”
On top of that, “the free world formed multilateral financial institutions that depend on member states’ willingness to give up a degree of sovereignty. The International Monetary Fund can virtually dictate fiscal policies, even including how much tax a government should levy on its citizens. The General Agreement on Tariffs and Trade regulates how much duty a nation can charge on imports. These organizations can be seen as the protoministries of trade, finance and development for a united world.” In addressing crises, Talbott wrote that, “Globalization has also contributed to the spread of terrorism, drug trafficking, AIDS and environmental degradation. But because those threats are more than any one nation can cope with on its own, they constitute an incentive for international cooperation.” Thus, out of crisis, comes opportunity; out of chaos comes order.
In prescribing a solution, Talbott postulates that, “The best mechanism for democracy, whether at the level of the multinational state or that of the planet as a whole, is not an all-powerful Leviathan or centralized superstate, but a federation, a union of separate states that allocate certain powers to a central government while retaining many others for themselves.”
In a 1974 issue of Foreign Affairs, Richard N. Gardner wrote about the formation of the New World Order. Gardner, a former American ambassador to the United Nations, Italy and Spain, is also a member of the Trilateral Commission. In his article, The Hard Road to World Order, Gardner wrote that, “The quest for a world structure that secures peace, advances human rights and provides the conditions for economic progress—for what is loosely called world order—has never seemed more frustrating but at the same time strangely hopeful.” He explained that, “few people retain much confidence in the more ambitious strategies for world order that bad wide backing a generation ago—‘world federalism,’ ‘charter review,’ and “world peace through world law’.” Further, “The same considerations suggest the doubtful utility of bolding a [UN] Charter review conference.”
Gardner wrote, “If instant world government, Charter review, and a greatly strengthened International Court do not provide the answers, what hope for progress is there? The answer will not satisfy those who seek simple solutions to complex problems, but it comes down essentially to this: The hope for the foreseeable future lies, not in building up a few ambitious central institutions of universal membership and general jurisdiction as was envisaged at the end of the last war, but rather in the much more decentralized, disorderly and pragmatic process of inventing or adapting institutions of limited jurisdiction and selected membership to deal with specific problems on a case-by-case basis, as the necessity for cooperation is perceived by the relevant nations.”
He then stated, “In short, the “house of world order” will have to be built from the bottom up rather than from the top down. It will look like a great “booming, buzzing confusion,” to use William James’ famous description of reality, but an end run around national sovereignty, eroding it piece by piece, will accomplish much more than the old-fashioned frontal assault.”
In the 2001 issue of Foreign Affairs, Richard Falk and Andrew Strauss wrote an article titled, “Toward Global Parliament.” They wrote that, “International governance is no longer limited to such traditional fare as defining international borders, protecting diplomats, and proscribing the use of force. Many issues of global policy that directly affect citizens are now being shaped by the international system. Workers can lose their jobs as a result of decisions made at the WTO or within regional trade regimes.” In 2006, a UN report stated that, “the nation-state is an old-fashioned concept that has no role to play in a modern globalised world.”
Further, “As with citizen groups, elite business participation in the international system is becoming institutionalized. The best example is the World Economic Forum in Davos, Switzerland. In the 1980s, the WEF transformed itself from an organization devoted to humdrum management issues into a dynamic political forum. Once a year, a thousand of the world s most powerful business executives get together with another thousand of the world’s senior policymakers to participate in a week of roundtables and presentations. The WEF also provides ongoing arenas for discussion and recommendations on shaping global policy.” They continue in explaining that, “The Davos assembly and overlapping networks of corporate elites, such as the International Chamber of Commerce, have been successful in shaping compatible global policies. Their success has come in the expansion of international trade regimes, the modest regulation of capital markets, the dominance of neoliberal market philosophy, and the supportive collaboration of most governments, especially those of rich countries.”
In explaining the purpose of a global parliament, essentially to address the “democratic deficit” created by international organizations, the authors wrote that, “Some business leaders would certainly oppose a global parliament because it would broaden popular decision-making and likely press for transnational regulations. But others are coming to believe that the democratic deficit must be closed by some sort of stakeholder accommodation. After all, many members of the managerial class who were initially hostile to such reform came to realize that the New Deal—or its social-democratic equivalent in Europe—was necessary to save capitalism. Many business leaders today similarly agree that democratization is necessary to make globalization politically acceptable throughout the world.” Essentially, its purpose would be to give globalization “grassroots acceptance and legitimacy.”
David Rothkopf, a scholar at the Carnegie Endowment for International Peace, former Deputy Undersecretary of Commerce for International Trade in the Clinton administration, former managing director of Kissinger and Associates, and a member of the Council on Foreign Relations, recently wrote a book titled, Superclass: The Global Power Elite and the World They are Making. As a member of that “superclass,” his writing should provide a necessary insight into the construction of this “New World Order.” He states that, “In a world of global movements and threats that don’t present their passports at national borders, it is no longer possible for a nation-state acting alone to fulfill its portion of the social contract.” He wrote that, “progress will continue to be made,” however, it will be challenging, because it “undercuts many national and local power structures and cultural concepts that have foundations deep in the bedrock of human civilization, namely the notion of sovereignty.” He further wrote that, “Mechanisms of global governance are more achievable in today’s environment,” and that these mechanisms “are often creative with temporary solutions to urgent problems that cannot wait for the world to embrace a bigger and more controversial idea like real global government.”
Jacques Attali, founder and former President of the European Bank for Reconstruction and Development, and economic adviser to French President Nicholas Sarkozy, interviewed on EuroNews, said that, “either we’re heading towards a world government or we’re going to put national issues first.” The interviewer stated that the idea of world government will frighten many people, to which Attali responded, “Indeed, that’s only to be expected, because it seems like a fantasy. But there is already global authority in many areas,” and that, “even if it’s hard to think of a European government at the moment, which is there, but very weak, Europe can at least press on its experience to the world. If they’re not capable of creating an economic framework along side a political framework, then they’re never going to do it on a global scale. And then the world economic model will break up, and we’ll be back to the Great Depression.”
In December of 2008, the Financial Times published an article titled, “And Now for A World Government,” in which the author, former Bilderberg attendee, Gideon Rachman, wrote that, “for the first time in my life, I think the formation of some sort of world government is plausible,” and that, “A ‘world government’ would involve much more than co-operation between nations. It would be an entity with state-like characteristics, backed by a body of laws. The European Union has already set up a continental government for 27 countries, which could be a model. The EU has a supreme court, a currency, thousands of pages of law, a large civil service and the ability to deploy military force.”
He stated that, “it is increasingly clear that the most difficult issues facing national governments are international in nature: there is global warming, a global financial crisis and a ‘global war on terror’.” He wrote that the European model could “go global” and that a world government “could be done,” as “The financial crisis and climate change are pushing national governments towards global solutions, even in countries such as China and the US that are traditionally fierce guardians of national sovereignty.” He quoted an adviser to French President Nicolas Sarkozy as saying, “Global governance is just a euphemism for global government,” and that the “core of the international financial crisis is that we have global financial markets and no global rule of law.” However, Rachman states that any push towards a global government “will be a painful, slow process.” He then states that a key problem in this push can be explained with an example from the EU, which “has suffered a series of humiliating defeats in referendums, when plans for ‘ever closer union’ have been referred to the voters. In general, the Union has progressed fastest when far-reaching deals have been agreed by technocrats and politicians – and then pushed through without direct reference to the voters. International governance tends to be effective, only when it is anti-democratic. [Emphasis added]”
In November of 2008, the United States National Intelligence Council (NIC), the US intelligence community’s “center for midterm and long-term strategic thinking,” released a report that it produced in collaboration with numerous think tanks, consulting firms, academic institutions and hundreds of other experts, among them are the Atlantic Council of the United States, the Wilson Center, RAND Corporation, the Brookings Institution, American Enterprise Institute, Texas A&M University, the Council on Foreign Relations and Chatham House in London.
Outlining the global trends that the world will be going through up to the year 2025, the report states that the financial crisis “will require long-term efforts to establish a new international system.” It suggests that as the “China-model” for development becomes increasingly attractive, there may be a “decline in democratization” for emerging economies, authoritarian regimes, and “weak democracies frustrated by years of economic underperformance.” Further, the dollar will cease to be the global reserve currency, as there would likely be a “move away from the dollar.”
Further, the dollar will become “something of a first among equals in a basket of currencies by 2025. This could occur suddenly in the wake of a crisis, or gradually with global rebalancing.” The report elaborates on the construction of a new international system, stating that, “By 2025, nation-states will no longer be the only – and often not the most important – actors on the world stage and the ‘international system’ will have morphed to accommodate the new reality. But the transformation will be incomplete and uneven.” Further, it would be “unlikely to see an overarching, comprehensive, unitary approach to global governance. Current trends suggest that global governance in 2025 will be a patchwork of overlapping, often ad hoc and fragmented efforts, with shifting coalitions of member nations, international organizations, social movements, NGOs, philanthropic foundations, and companies.” It also notes that, “Most of the pressing transnational problems – including climate change, regulation of globalized financial markets, migration, failing states, crime networks, etc. – are unlikely to be effectively resolved by the actions of individual nation-states. The need for effective global governance will increase faster than existing mechanisms can respond.”
The report discusses regionalism, and stated that, “Asian regionalism would have global implications, possibly sparking or reinforcing a trend toward three trade and financial clusters that could become quasi-blocs (North America, Europe, and East Asia).” These blocs “would have implications for the ability to achieve future global World Trade Organization agreements and regional clusters could compete in the setting of trans-regional product standards for IT, biotech, nanotech, intellectual property rights, and other ‘new economy’ products.”
In discussing democracy and democratization, the report stated that, “advances are likely to slow and globalization will subject many recently democratized countries to increasing social and economic pressures that could undermine liberal institutions.” This is largely because “the better economic performance of many authoritarian governments could sow doubts among some about democracy as the best form of government. The surveys we consulted indicated that many East Asians put greater emphasis on good management, including increasing standards of livings, than democracy.” Further, “even in many well-established democracies, surveys show growing frustration with the current workings of democratic government and questioning among elites over the ability of democratic governments to take the bold actions necessary to deal rapidly and effectively with the growing number of transnational challenges.” In other words, “well established democracies,” such as those in Western Europe and North America, will, through successive crises (climate, finance, war), erode and replace their democratic systems of government with totalitarian structures that are able to “take the bold actions necessary” to deal with “transnational challenges.”
David Rockefeller wrote in his book, Memoirs, that, “For more than a century ideological extremists at either end of the political spectrum have seized upon well-publicized incidents such as my encounter with Castro to attack the Rockefeller family for the inordinate influence they claim we wield over American political and economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as ‘internationalists’ and of conspiring with others around the world to build a more integrated global political and economic structure–one world, if you will. If that’s the charge, I stand guilty, and I am proud of it.” (Empahsis added) 
The Global Economic Crisis in Context
The current global economic crisis has its roots not in the Bush administration, which is linear and diluted thinking at best, but in the systematic nature of the global capitalist system. Crisis is not separate from capital; crisis is capitalist expansion. In addressing the foundations of the economic crisis, neo-Marxist theory can help explain much of the actions and functions that led to the crisis.
In 2006, Walden Bello wrote an article for Third World Quarterly, in which he explained that, “The crisis of globalisation and over-accumulation is one of the three central crises that are currently eroding US hegemony. The other two are the over-extension of US military power and the crisis of legitimacy of liberal democracy.” He explained that, “Monetary manipulation, via the high interest rate regime initiated by Federal Reserve Chief Paul Volcker in the late 1980s, while directed at fighting inflation, was also geared strategically at channeling global savings to the USA to fuel economic expansion. One key consequence of this momentous move was the Third World debt crisis of the early 1980s, which ended the boom of the economies of the South and led to their resubordination to the Northern capitalist centres.”
The economic foundations of the current crisis were laid in the “Clinton globalist project.” As Bello explained, “The administration embraced globalisation as its ‘Grand Strategy’—that is, its fundamental foreign policy posture towards the world.” Further, “The dominant position of the USA allowed the liberal faction of the US capitalist class to act as a leading edge of a transnational ruling elite in the process of formation—a transnational elite alliance that could act to promote the comprehensive interest of the international capitalist class.”
Bello then explained that, “the dominant dynamic of global capitalism during the Clinton period—one that was the source of its strength as well as its Achilles’ Heel—was not the movement of productive capital but the gyrations of finance capital.” The dominance of finance capital was “a result of the declining profitability of industry brought about by the crisis of overproduction. By 1997 profits in US industry had stopped growing. Financial speculation, or what one might conceptualise as the squeezing of value from already created value, became the most dynamic source of profitability.” This was termed “financialization,” and it had many components that composed its structure and led way for its dominance. Among these were the “Elimination of restrictions dating back to the 1930s that had created a Chinese Wall between investment banking and commercial banking in the USA opened up a new era of rapid consolidation in the US financial sector.”
Specifically, this is in reference to the repealing of the Glass-Steagall Act, put in place in 1933 in response to the actions that created the Great Depression, which undertook banking reforms, specifically those designed to limit speculation. In 1987, the Federal Reserve Board voted to ease regulations under Glass-Steagall, after hearing “proposals from Citicorp, J.P. Morgan and Bankers Trust advocating the loosening of Glass-Steagall restrictions to allow banks to handle several underwriting businesses, including commercial paper, municipal revenue bonds, and mortgage-backed securities.” And, “In August 1987, Alan Greenspan — formerly a director of J.P. Morgan and a proponent of banking deregulation – [became] chairman of the Federal Reserve Board.” In 1989, “the Fed Board approve[d] an application by J.P. Morgan, Chase Manhattan, Bankers Trust, and Citicorp to expand the Glass-Steagall loophole to include dealing in debt and equity securities in addition to municipal securities and commercial paper.” In 1990, “J.P. Morgan [became] the first bank to receive permission from the Federal Reserve to underwrite securities.”
In 1998, the House of Representatives passed “legislation by a vote of 214 to 213 that allow[ed] for the merging of banks, securities firms, and insurance companies into huge financial conglomerates.” And in 1999, “After 12 attempts in 25 years, Congress finally repeal[ed] Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts.”
It was in “the late 1990s, with the stock market surging to unimaginable heights, large banks merging with and swallowing up smaller banks, and a huge increase in banks having transnational branches, Wall Street and its many friends in congress wanted to eliminate the regulations that had been intended to protect investors and stabilize the financial system. Hence the Gramm-Leach-Bliley Act of 1999 repealed key parts of Glass-Steagall and the Bank Holding Act and allowed commercial and investment banks to merge, to offer home mortgage loans, sell securities and stocks, and offer insurance.”
One of the architects of the repeal of Glass-Steagall was Clinton Treasury Secretary Robert Rubin. Rubin spent 26 years with Goldman Sachs before entering the Treasury. Robert Rubin worked closely with Alan Greenspan to oppose the regulation of derivatives, and was backed up by his Deputy Treasury Secretary, Lawrence Summers. Rubin, upon leaving the Treasury, went to work as an executive with Citigroup. Robert Rubin is currently the Co-Chairman of the Council on Foreign Relations. Lawrence Summers was a former Chief Economist for the World Bank before being Deputy Treasury Secretary in the Clinton administration. He then became President of Harvard University, and is now Director of the White House National Economic Council in the Obama administration. The current Treasury Secretary, Timothy Geithner, was former President of the Federal Reserve Bank of New York, and is also a Robert Rubin protégé.
The Clinton years saw the rise of derivatives, which are financial instruments (or contracts), the prices of which are derived from one or more underlying assets, indexes, or other items. The value of a derivative changes as the value of the underlying asset changes. They are used to hedge risks but also as instruments of speculation. Derivatives, “which monetised and traded risk in the exchange of a whole range of commodities,” are a key factor that led to the economic crisis.
Another cause of the crisis was “The creation of massive consumer credit to fuel consumption, with much of the source of this capital coming from foreign investors,” which “created a dangerous gap between the consumers’ debt and their income, opening up the possibility of consumer collapse or default that would carry away both consumers and their creditors.” Further, the stock market’s role in driving growth played a part in paving the way for a financial crisis. “Stock market activity drove, in particular, the so-called technology sector, creating a condition of ‘virtual capitalism’ whose dynamics were based on the expectation of future profitability rather than on current performance, which was the iron rule in the ‘real economy’.”
The Federal Reserve, under Alan Greenspan, initially created the dot-com bubble, providing liquidity for speculation into the stock market and “virtual capitalism,” and when that dot-com bubble burst, as all bubbles do, Greenspan and the Fed created the housing bubble by cutting interests rates and offering more Adjustable Rate Mortgages (AMRs), with Fannie Mae and Freddie Mac encouraging banks to make the high-risk loans.
Speculation had proven itself to be a powerful weapon of finance capital. In the 1990s, this was first exemplified by “a speculative attack on the peso that had investors in panic cashing their pesos for dollars, leading to the devaluation and collapse of the Mexican economy in 1994,” and later in “East Asia in 1997. One hundred billion dollars in speculative capital flooded into the region between 1994 and 1997 as countries liberalised their capital accounts.” This speculative money flowed into real estate and the stock market, which resulted in over-investment, and “Smelling crisis in the air, hedge funds and other speculators targeted the Thai baht, Korean won and other currencies, triggering a massive financial panic that led to the drastic devaluation of these currencies and laid low Asia’s tiger economies. In a few short weeks in the summer of 1997 some $100 billion rushed out of the Asian economies, leading to a drastic reversal of the sizzling growth that had marked those economies in the preceding decade. In less than a month, some 21 million Indonesians and one million Thais found themselves thrust under the poverty line.” This was known as the East Asian Financial Crisis.
This crisis “helped precipitate the Russian financial crisis in 1998, as well as financial troubles in Brazil and Argentina that contributed to the spectacular unraveling of Argentina’s economy in 2001 and 2002, when the economy that had distinguished itself as the most faithful follower of the IMF’s prescriptions of trade and financial liberalisation found itself forced to declare a default on $100 billion of its $140 billion external debt.”
The current crisis is not over. The parallels between the current crisis and the Great Depression are frightening. This trend of building speculative bubbles is reminiscent of the 1920s stock market speculation-driven bubble; built by the Federal Reserve, which eased interest rates, provided liquidity to the banks and actively encouraged speculation. Bubbles that were created then burst.
In 1932, Congressman Louis T. McFadden stated before the Congress that the Federal Reserve banks are not government agencies, but “are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.” Following the creation of the Fed in 1913, Congressman Charles A. Lindbergh said, “From now on, depressions will be scientifically created.” Indeed, he was right. The current crisis, likely leading to a Great Depression, is being used as the primary means through which a global government is being constructed.
In 2007, UK Prime Minister Gordon Brown called for a new world order in reforming the UN, World Bank, IMF and G7. When the bank Bear Stearns collapsed, due to its heavy participation in the mortgage securities market, the Federal Reserve purchased the bank for JP Morgan Chase, whose CEO sits on the board of the New York Federal Reserve Bank. Shortly after this action, a major financial firm released a report saying that banks face a “new world order” of “consolidation and acquisitions.”
In October of 2008, Gordon Brown said that we “must have a new Bretton Woods – building a new international financial architecture for the years ahead.” He continued in saying that, “we must now reform the international financial system around the agreed principles of transparency, integrity, responsibility, good housekeeping and co-operation across borders.” An article in the Telegraph reported that Gordon Brown would want “to see the IMF reformed to become a ‘global central bank’ closely monitoring the international economy and financial system.” In an op-ed for the Washington Post, Gordon Brown wrote that the “new Bretton Woods” should build upon the concept of “global governance.” There were also calls for a “global economic policeman,” perhaps in the form of the Bank for International Settlements (BIS). In November of 2008, it was reported that Baron David de Rothschild “shares most people’s view that there is a new world order. In his opinion, banks will deleverage and there will be a new form of global governance.”
Out of the ashes of the financial crisis, a new world order will emerge in constructing a global government.
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Security and Prosperity Partnership of North America (SPP):
Security and prosperity for whom?
Global Research, March 17, 2008
In March of 2005, the leaders of Canada (Paul Martin), the U.S. (George W. Bush), and Mexico (Vicente Fox) signed an agreement called the Security and Prosperity Partnership of North America (SPP). The SPP is about securing prosperity for a rich elite, while taking what remaining power the people have, through democratic sovereign institutions, and placing that power in a few hands of unelected, unaccountable bureaucrats whose strings are pulled by global corporations and banks. However, in discussing the SPP, we must first go back a little further than 2005 to the origins from which it arose.
The same group that on their own website admits to being the predominant force in Canada behind NAFTA, the Canadian Council of Chief Executives (CCCE) — Canada’s most powerful interest group made up of the CEOs of the 150 largest corporations in Canada, many of which are subsidiaries of foreign, predominantly American, corporations — in January of 2003, issued a press release announcing the creation of their North American Security and Prosperity Initiative. In this, they proposed five main changes to be undertaken in the North American political-economic landscape: “Reinvent borders, maximize regulatory efficiencies, negotiate a comprehensive resource security pact, reinvigorate the North American defense alliance, and create a new institutional framework.”
Several months later, in November of the same year, the CCCE issued a short document titled, “Paul Martin urged to take the lead in forging a new vision for North American cooperation.” In this document, they stated that, “all of the CCCE’s 150 member CEOs are involved in this ambitious two-year initiative,” in which Thomas D’Aquino, president and CEO of the CCCE, “urged that Mr. Martin champion the idea of a yearly summit of the leaders of Canada, Mexico, and the United States in order to give common economic, social, and security issues the priority they deserve in a continental, hemispheric, and global context.”
Apparently, Martin was listening, because one of the signatories of this letter was none other than a vice chairman of the CCCE and then-CEO of Canfor Corporation, Canada’s largest softwood lumber producer, David L. Emerson. Emerson would go on to be Martin’s Minister of Industry.
When the CCCE’s two-year initiative ended, it formed a new task force, called the “Independent Task Force on the Future of North America” in conjunction with the Mexican Council on Foreign Relations and the U.S.’s most powerful think tank, the Council on Foreign Relations (CFR), founded by the Rockefeller and Morgan families in 1921.
This task force released a statement on March 14, 2005 entitled, “Trinational call for a North American economic and security community by 2010.” In the Trinational Call, it was recommended that the North America nations create “a community defined by a common external tariff and an outer security perimeter,” and to “harmonize” the areas of energy, security, education, military, immigration, resources, and the economy.
Nine days after this recommendation was issued, Bush, Martin, and Fox signed the Security and Prosperity Partnership of North America (SPP), and in the joint statement explained it would, “implement common border security and bioprotection [enhanced surveillance] strategies, enhance critical infrastructure protection, implement a common approach to emergency response, implement improvements in aviation and maritime security, combat transnational threats, enhance intelligence partnerships, promote sectoral collaboration in energy, transportation, financial services, technology, and other areas to facilitate business, [and] reduce the costs of trade.” The SPP agreement oversees the creation of SPP “working groups” in each country, which have a mandate of overseeing “harmonization,” or “integration,” in over 300 policy areas.
Two months later, in May of 2005, the Independent Task Force on the Future of North America released a document titled, “Building a North American Community,” of which Canadian Task Force members included D’Aquino, Wendy Dobson, professor at University of Toronto and former president of the C.D. Howe Institute, Allan Gotlieb,(former Canadian Ambassador to the United States as well as being Chairman of the CCCE), and John Manley, former Liberal deputy prime minister.
The report’s recommendations included initiatives to establish “a common security perimeter by 2010, develop a North American Border Pass [North American ID card] with biometric identifiers, expand NORAD into a multi-service defense command,” share intelligence, develop Mexico’s energy resources, “harmonize” areas of energy, education, military, foreign policy, immigration, health, expand “temporary” migrant worker programs, and adopt a common external tariff.
In 2002, based in Montreal, the North American Forum on Integration (NAFI) was formed, which, according to their website, “aims to address the issues raised by North American integration as well as identify new ideas and strategies to reinforce the North American region,” and hold “NAFI organized conferences which brought together government and academic figures as well as business people.” The first conference was held in Montreal in 2003, the second in 2004 in Mexico, of which was stated on the organization’s website: “About 200 participants and conference speakers took part in the conference, [including] former Energy Minister, Mr. Felipe Calderon,” the current President of Mexico.
NAFI later organized a ‘mock’ North American Parliament, called the Triumvirate, which allows 100 Canadian, American, and Mexican university students “to better understand the North American dynamic” — the first of which took place in the Canadian Senate in May of 2005, hosted by the Triumvirate president and former ambassador Raymond Chrétien, the son of Jean Chrétien. Participating Canadian universities included Carleton, McGill, and yes, Simon Fraser University. The board of directors of NAFI includes Stephen Blank, a member of CFR and Robert Pastor, CFR member and co-chair of the Independent Task Force.
In January of 2006, the Council of the Americas and the North American Business Council issued a report titled, “Findings of the Public/Private Sector Dialogue on the Security and Prosperity Partnership of North America,” which called for the establishment of a “North American competitiveness council” to advise governments on the implementation of ‘deep integration.’ The Chairman of the Council of the Americas is former banker David Rockefeller, and top executives from J.P Morgan, Merck & Co., Chevron, McDonald’s, Shell, Citigroup, IBM, Ford, PepsiCo, Microsoft, GE, Pfizer, MetLife, Wal-Mart, Exxon Mobil, Credit Suisse, General Motors, Merrill Lynch, and individuals from the U.S. Department of State.
In March of 2006, a second SPP summit was held, this time with Bush, Fox, and newly elected Canadian Prime Minister Stephen Harper. The press release (which can be found at spp.gov, “Report to Leaders August 2006”) announced the formation of the North American Competitiveness Council (NACC), which “provides a voice and a formal role for the private sector” whose job is to advise the SPP ministers in their respective governments. Current Canadian SPP ministers are Maxime Bernier (Foreign Affairs), Jim Prentice (Industry) and Stockwell Day (Public Safety, ha!).
The NACC is run out of the U.S. Chamber of Commerce and with the Council of the Americas, and is made up of corporate leaders from each of the three countries. In Canada, these corporations include Manulife Financial, Power Corporation of Canada, Ganong Bros. Ltd, Suncor Energy, Canadian National, Linamar Corporation, Bell Canada Enterprises, Home Depot, and the Bank of Nova Scotia. U.S. companies include Campbell Soup, Chevron, Ford, FedEx, GE, GM, Lockheed Martin, Merck, Procter & Gamble, UPS, Wal-Mart, and Whirlpool.
On September 12 to 14, 2006, business and government representatives from the three North American countries met in secret, with no media coverage, at the Banff Springs Hotel and convened the North American Forum. Judicial Watch, a U.S. public watchdog group got declassified government documents through a Freedom of Information Act request and made the documents available on their website. These documents reveal the discussions and membership in the secret meetings. The Canadian co-chair of the meeting was former Alberta premier Peter Lougheed, and Canadian participants included Day, D’Aquino (also a member of the NACC), all NACC corporate representatives, and John Manley. In the released documents, under the forum discussion on “Border Infrastructure and Continental Prosperity,” chaired by John Manley, a startling quote was revealed: “While a vision is appealing, working on the infrastructure might yield more benefit and bring more people on board (‘evolution by stealth’).” What exactly are they evolving by stealth? Oh right, our country.
On the Canadian government’s SPP website, a list of priorities is provided which gives recommendations to be implemented by date, and then tracks their status. Under Aviation Security: “For aviation security purposes, each country has developed, is developing or may develop its own passenger assessment (no-fly) program for use on flights within, to or from that country to ensure that persons who pose a threat to aviation are monitored or denied boarding, within 24 months (June 2007).” On June 18, 2007, Canada instituted our very ‘own’ no-fly list.
On May 8, 2007, The Montreal Gazette reported that “Canada is set to raise its limits on pesticide residues on fruit and vegetables for hundreds of products. The move is part of an effort to harmonize Canadian pesticide rules with those of the United States, which allows higher residue levels for 40 per cent of the pesticides it regulates,” and that “Canadian regulators and their U.S. counterparts have been working to harmonize their pesticide regulations since 1996, as part of the North American Free Trade Agreement. Now the effort is being fast-tracked as an initiative under the Security and Prosperity Partnership.”
The Vancouver Province reported on January 22, 2008, that “B.C. is about to become the first province to use a high-tech driver’s license. For an extra fee, it will enable drivers to cross the border into the U.S. without a passport and still comply with the U.S. Department of Homeland Security concerns,” and that “the enhanced driver’s license or EDL has a radio-frequency identification chip that will broadcast a number linked to a computer database, allowing a border guard to assess data and flag security issues as drivers approach the booth.” Introduced by Gordon Campbell and Stockwell Day, this is the “biometric” card as recommended under the SPP — essentially, a North American ID card.
There is also much discussion of a common currency for North America, often called the “Amero,” much like the euro for the E.U. The Fraser Institute published a paper entitled, “The case for the Amero.” The C.D. Howe Institute followed that with the publication, “From fixing to monetary union: options for North American currency integration.” In May of 2007, as reported by The Globe and Mail, David Dodge, then-governor of the Bank of Canada, said, “North America could one day embrace a euro-style single currency.” The Globe reported in November of 2007 that Stephen Jarislowsky, board member of C.D. Howe, told a parliamentary committee, “Canada should replace its dollar with a North American currency, or peg it to the U.S. greenback.”
The SPP is not about “security” or “prosperity” (except for the very few over the many), but is rather about forming a North American Union. When Vicente Fox recently appeared on The Daily Show, Jon Stewart asked him about NAFTA, of which Fox stated, “NAFTA’s been good. As a matter of fact we should have a new vision, go further, integrating,” and Fox went on to discuss the “solidarity” of the European Union. When asked if he wanted a North American Union, and if it would include Canada, Fox said, “Long term, yes.” On May 16, 2002 Fox spoke at Club 21 in Madrid, and stated, “Eventually, our long-range objective is to establish with the United States, but also with Canada, our other regional partner, an ensemble of connections and institutions similar to those created by the European Union.”
Mussolini has been attributed as once saying, “Fascism should more properly be called corporatism because it is the merger of state and corporate power.” Gandhi once said, “A democrat must be utterly selfless. He must think and dream not in terms of self or party but only of democracy.” So are those behind the SPP listening to, Gandhi or Mussolini?