'Friendly Disrespect' for Market

It's been refreshing to see the General Motors workers in Oshawa refusing to submit passively to the dictates of the market.

We've been taught that the market knows best. So workers are supposed to simply accept that market conditions have dictated the closure of their plant, eliminating 2,600 jobs. (The company's signed commitment to keep the Oshawa truck plant operating is supposed to count for nothing, when the market speaks.)

Some 180,000 manufacturing jobs have been lost in Canada in the past two years while the federal government stood by doing nothing.

Such wilful impotence wasn't always the norm. In the 1930s, the brilliant British economist John Maynard Keynes figured out that the marketplace isn't the all-perfect instrument it's cracked up to be, and it's sometimes necessary for government to intervene.

That insight effectively solved the Depression.

Such interventionist thinking was also behind the 1965 Canada-U.S. Auto Pact. Rather than leaving it to manufacturers to decide where cars should be produced, the Auto Pact imposed "domestic content" requirements ensuring jobs for auto workers on both sides of the border. (Essentially, for every car sold in Canada, one had to be produced here.)

Within five years, the production of assembled vehicles in Canada had doubled, driving up employment in the auto industry and spurring economic growth throughout the country.

But starting in the 1980s, neo-conservatives revived the notion that decisions should be left to the market. In that spirit, the North American Free Trade Agreement ruled out "domestic content" requirements and the World Trade Organization outlawed the Auto Pact.

So pervasive is this market orthodoxy today that it's easy to lose sight of the fact that it's just one school of economic thought, not a set of immutable laws.

Even Donald Macdonald, who headed the 1980s royal commission that endorsed Canada's move to a more market-oriented approach to trade, described the conversion as requiring a "leap of faith."

And nations that now urgently insist other nations abide by strict market rules haven't always played by those rules themselves.

Nobel prize-winning economist Joseph Stiglitz notes that both the United States and Britain defied market orthodoxy by using strong measures to protect their domestic industries in the early stages of their development.

Only after their industries were internationally competitive did these countries become advocates of "free market" economics, vigorously preventing others from using the protectionist strategies that had worked so well for them.

It would make sense for Canada to press for a new auto pact with countries like Japan, China and Korea, requiring their auto makers to build as many cars here as they sell here.

What stands in the way is the same rigid thinking that blocked innovative action in the 1930s.

We should take inspiration from Keynes. "The future holds in store for us far more wealth and economic freedom and possibilities of personal life than the past has ever offered," he wrote in the depths of the Depression, when the established order stood firm against government intervention. "There is no reason why we should not feel ourselves free to be bold ... to try the possibilities of things.

"And over against us, standing in the path," Keynes continued, "there is nothing but a few old gentlemen tightly buttoned up in their frock coats, who only need to be treated with a little friendly disrespect and bowled over like ninepins."

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