From Liberal Continentalism to Neoconservatism

From Liberal
Continentalism to
Neoconservatism:
North American
Free Trade and the
Politics of the
C.D. Howe Institute
ALAN ERNST
A
growing body of literature has focused on the "new
business agenda"and its rise to preeminence within
Canada. This neoconservative economic strategy, it
is argued, breaks with the combination of Keynesianism
and continentalism
which marked Canada's post-war
economic strategy, not to mention the more nationalist industrial policies flirted with by Canadian governments
during the late 1970s and 1980s. William Carroll, for example, links the rise of business activism and neoconservatism to the recomposition of finance capital in Canada
and abroad in the past two decades. The economic and political power of "money capital" - financial and rentier interests with investments in the United States - has grown,
while "productive capital" has been internationalized.!
David Langille also roots the emergence of the new business
agenda in the 1970s. He sees this capitalist offensive crystallized in the Canada-US Free Trade Agreement - as
a response to the profits squeeze forced on capital by a
Studies in Political Economy 39, Autumn 1992
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relatively militant working class and a state which "appeared to be growing beyond its controt.'?
Notwithstanding the differences in these analyses of the
"new business agenda," neither Carroll nor Langille, nor
other observers of Canadian neoconservatism, have systematically traced and examined changes in capitalist
strategies in Canada. Many questions need to be more fully
addressed. To what extent does neoconservatism and the
North American Free Trade Agreement represent a departure
from capital's post-war accumulation strategy? Was there
a marked shift from "liberal continentalism" to neoconservatism, or was there a gradual drift? And, what precisely
composed this transition?
It is always difficult to gauge with precision a change
in the strategic orientations of the capitalist class. One option is to monitor changes in state policies and then suggest
how these reflect the orientation of the dominant capitalist
class. Yet another option, one which is relatively neglected
in Canada, is to trace the history and policy discourse of
"think tanks" closely tied to the leading fractions of capital.
The study of a policy think tank is particularly useful in
tracing the shifts in capital's strategic thinking in the contemporary period, because, as Patricia Marchak notes, corporate funded think tanks have been important in providing
the ideological framework for the restructuring of the global
economy,3 In their work on Canadian parties, Brodie and
Jenson also note the influence of the Economic Council of
Canada, the C.D.Howe Institute, and the Fraser Institute in
proclaiming the new "neoliberal" orthodoxy.f
Given the number of policy institutes vying for capital's
attention with somewhat varying strategies and discourses,
the analysis of the C.D.Howe Institute's policy discourse
undertaken here cannot exclusively reveal the "business
agenda." The C.D;Howe Institute (CDHI), however, has
been one of the most influential think tanks in Canada over
the past few decades. It has existed in different incarnations
since 1958, and therefore offers a longer historical perspective on business thinking than other such institutions.
Moreover, unlike its competitors, the CDHI focuses on
short-term analyses of federal government economic policy.
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It publishes an annual Policy Review and Outlook written
by Institute staff, which provides a detailed and coherent
record of the evolution of its thinking. To help measure
changes in business strategy over the past two decades, and
to give us some indication of where business may be heading
in the 1990s, this paper will focus on the evolution of the
CDHI policy discourse in the area of economic policy, particularly macroeconomic and trade policy, as summarized
in CDHI annual reviews between 1974 and 1991.
It is the contention of this paper that, although some
sections of Canadian capital have always been sympathetic
to continental free trade and free market policies, the changes in the international and Canadian political economies
in the early 1980s gave added support to these views. One
register of this shift is the evolution in the CDHI's policy
discourse from 'liberal continentalism' to 'neoconservatism'.
Liberal continentalism represents the economic strategy underpinning state policy from the 1940s to the early 1970s.
David Wolfe best summarizes this strategy, the components
of which include: the free flow of resources and capital
investment between Canada and the US, tariff protection
for branch plant industry, and macroeconomic policies aimed
at stabilizing employment and managing total demand. While
sceptical about interventionist policies which influence the
direction of investment, liberal continentalism evinces a preference for "liberal" social policies based on actuarial principles, private delivery, and means tests.> The new business
agenda of neoconservatism is characterized by a more explicit and vocal advocacy of free market policies. According
to John Warnock the neoconservative strategy includes: free
trade and the removal of non-tariff barriers to trade; a macroeconomic policy which is focused on tackling inflation
and managing the money supply; and the removal or reduction of "rigidities" within the market, created by government
regulations, state enterprises, and social programs." The changes in CDHI economic policy will be traced below, but
first a brief discussion of the role of policy institutes and
a profile of the C.D. Howe Institute will be presented.
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Policy Institutes, Policy Formation & Neoconservatism
The role of policy institutes in developing capitalist
economic strategies has been most systematically studied
in the United States. In his study of neoconservative
American policy institutes, Joseph Peschek emphasizes their
role in defining problems, shaping public opinion, and helping set the policy agenda. He portrays policy institutes as
"active agents linked to power blocs and policy currents,
reflecting and in turn, shaping ideological shifts and political regroupings in a time of momentous economic transfermarion."? Peschek suggests they perform four roles for their
particular constituency:
(1) they help develop a policy consensus within a class or
class fraction, by facilitating regular meetings or roundtables
between the various business, bureaucratic, and academic leaders
comprising the institute's membership, as well as between institute members and state elites;
(2) they provide a particular analysis of the problems facing
the domestic and international political economy and offer
an alternative policy agenda, which is then disseminated
through institute publications, articles and editorials submitted to news media, media coverage of institute events,
conferences, and so forth;
(3) they provide governments and political parties with
specific and often detailed policy proposals and advice;
(4) they serve as a training ground for prospective political
leaders and policy makers.f
Peschek details how neoconservative institutes such as
the American Enterprise Institute and Heritage Foundation
emerged in the early 1970s in the context of the mounting
international and domestic crises facing US capital. These
think tanks allied with right-wing elements in the Republican Party to articulate and promote neoconservative policies.
In the process they managed to put "corporate liberalism,"
which had dominated the post-war period, on the defensive,
and succeeded in pushing its proponents, such as the prestigious
Brookings Institution and the Democratic Party, to the right.
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In one of the few examinations of the impact of policy
institutes in Canada, Leslie Pal corroborates Peschek's
thesis that the emergence of think tanks is linked to
economic crisis and the desire of business to harness the
interventionist state to its advantage. Pal concludes that
think tanks like the CDHI, Fraser Institute, and Institute
for Research on Public Policy "have enlarged the terms of
political discourse" and "sensitize and organize the perception of public problems" although he notes that "their influence should not be overestlmated."?
Although Peschek and Pal assert the importance of policy
institutes, they do not show precisely where policy institutes
fit into the policy process; nor do they compare their influence on public discourse and policy with that exercised
by political parties or business interest groups. The work
of political scientists, such as Paul Pross and Evert
Lindquist, is helpful in this respect. Pross, in his work on
Canadian interest groups, develops the concept of "policy
community" to describe those whose interest in a particular
policy field may be translated into influence over policy
content. Policy communities consist of a "sub-government"
of state officials and interest group representatives regularly
involved in the making and implementation of policy, as
well as an "attentive public" of external interest groups,
policy institutes, and news media. According to Pross, the
"attentive public" is not at the centre of decision-making,
but it plays a "vital role" in policy development. It puts
forth alternative proposals, new policy approaches, and serves as a "perpetual policy review" process.t?
Lindquist argues that policy institutes can have a forceful
impact on the policy process if they are linked in "advocacy
coalitions" to like-minded interest groups and state officials
in the "sub-government." Lindquist suggests that these
links, particularly to state officials, are stronger during
"regime shifts" when "major failures occur during routine
decision, when incremental decision-making is deadlocked,
or when policy makers re-focus attention to new policy issues."!' He points to the Canadian government's shift to
free trade as one such case.
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Pross and Lindquist suggest, therefore, that the importance of policy institutes must be qualified. Their agenda
setting role is shared with, and contingent on, their links
with other political actors, and their policy influence may
be more episodic than Peschek suggests. As Jane Jenson
reminds us, the ability of a policy institute or "policy current" to shape discourse and influence government is not
class neutral and is not unbounded. The "universe of political discourse" ultimately reflects the specific nature and
history of social relations in a particular social formation.P
This confers an advantage on policy institutes linked to the
dominant class and accounts for the 'unequal structure of
representation' within policy communities.
The C.D. Howe Institute: A Brief Profile Studying a
policy institute such as the C.O. Howe Institute is helpful,
therefore, in tracing the evolution of one strategic orientation
of Canadian capital. The com is the oldest and arguably
the most prestigious of Canadian economic policy institutes.
It was established as the Private Planning Association of
Canada (PPAC) in 1958 and then reconstituted in 1973 as
the C.O. Howe Institute, named after the Liberal "Minister
of Everything" who was the prime mover behind Ottawa's
continentalist economic policies between 1945 and 1957. The
com sees itself as an "independent" research body specializing in short-term analysis of Canadian macroeconomic and
trade policy. However, the Toronto based think tank's membership and philosophy reveal its continentalist pedigree and
scepticism about state intervention and economic nationalism.
The COHI's membership, both past and present, has included a broad cross-section of Canada's corporate elite.
Its membership includes a strong representation from finance
and real estate, transportation and utilities, and resources or
'staples' interests - the dominant sections of Canadian capital according to various political economists.P These interests
have been viewed as the primary proponents and beneficiaries
of Canada's continentalist economic strategy. Manufacturing
interests have typically been less prevalent. Canadian membership in the original organization, the PPAC, was dominated
by the pulp and paper industry, finance and insurance, and
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Howe Institute
representatives of American branch plants.14 Currently the
CDHI has over 300 members, including representatives from
51 of Canada's top 100 firms. Membership on the Board
of Directors is heavily skewed toward what Carroll labels
"money capital." Of the CDHrs twenty eight current Directors, twenty three are senior corporate executives: four from
the banks and insurance companies, nine from resource interests, three from commercial and real estate interests, two
manufacturing executives, and two investment dealers. IS
The early predisposition of the CDHI toward continentalism, and a "pragmatic" but not laissez faire state, is
reflected in its first and only statement of principles, published in its inaugural Policy Review and Outlook in 1974:
(a) the national interest should override regional or sectoral
interests;
(b) Canada's best interests lie in an open and nondiscriminatory international trading environment;
(c) market forces should operate as freely as possible, and
government intervention should supplement, rather than
supplant these forces;
(d) distributional issues involve moral judgments beyond
the scope of the CDm, but distributional decisions have
consequences for incentives, which may distort individual
and group behaviour and the working of market forces, and
(e) economic planning is essential, but "the consequences
of intervention for all sectors of the economy should be
recognized,"16
This is a rather eclectic mix of principles. Some are explicitly neoliberal, while the others can apply as easily to
liberal continentalism or social democracy. As we shall see,
the neoliberal aspects of the CDm became increasingly
prevalent in the late 1970s and early 1980s, as it drifted
toward neoconservatism.
Policy analysis forms the core of the C.D.Howe Institute's
work. The Institute has a staff of approximately six economists,
who are supplemented by external academic and business economists, and occasionally political scientists, for specific projects.
In addition to its annual Policy Review and Outlook, the
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CDHI publishes about ten to fifteen policy studies and commentaries a year on subjects such as monetary policy, inflation, government spending and foreign economic
relations. Although sales of individual publications rarely
exceed two thousand, CDHI publications occasionally
receive wide coverage in the national media.l?
The Institute also maintains three standing committees
which draw from the senior ranks of business and the professions: the Howe Institute Policy Analysis Committee, the
Canadian-American
Committee, and the British-North
American Committee. They serve as sounding boards for
the Institute's research and views and provide opportunities
for CDm members to meet one another as well as colleagues
from other nations. To help publicize its views and discuss
subjects of interest, the CDHI and its committees organize
speaking engagements, and conferences involving business
people and academics from Canada and abroad.
The PPAC and Liberal Continentalism: 1957-1973 To trace
fully the policy thought of the C.D. Howe Institute, it is
necessary to examine the history and liberal continentalist
discourse of its direct antecedents: the Canadian-American
Committee (CAC) and the Private Planning Association of
Canada (PPAC). The CAC, a group of business executives
and a few labour officials from both sides of the border,
was founded in 1957. The CAC's Canadian members, under
chair Robert Fowler, a pulp and paper company executive,
founded the PPAC in 1958. It was co-sponsored by the National Planning Association, an American policy institute.
The Canadian organizations emerged in the midst of the
first challenges to the Liberal government's post-war continentalism. The 1957 "Pipeline Debate," the subsequent
election of the Diefenbaker Conservatives, and the concerns
of the Royal Commission on Canada's Economic Prospects'
(led by Walter Gordon) about growing American ownership
of Canadian industry and resources, all signalled that the
progressive integration of the Canadian economy with that
of the US would not go unchallenged.
The PPAC, however, quickly became known as the
"standard bearer for an open Canadian economy."18 The
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PPAC and its two internal membership committees (the CAC
and the Canadian Trade Committee) sponsored studies
through the 1960s on global trade liberalization
and
Canadian-American economic relations. Although many
studies were contracted out to university academics, occasional consensus policy statements by its two internal
committees give us some sense of PPAC thinking. They
suggest a predisposition toward free trade, scepticism about
statist industrial policies, and an acceptance of Keynesian
macroeconomic policy. As one business journalist noted,
by the late 1960s the PPAC could "take some of the credit
for the fact that free trade - or freer trade - is now a
topic of responsible debate."19
Suspicion of Canadian economic nationalism was apparent in the CAC's founding document, CanadianAmerican Commercial Relations. Emphasizing the benefits
Canada gained from close economic ties with the US, it
warned that policies which opposed the integrationist trend
would mean "further deterioration" in bilateral relations.
The CAC aimed to "seek out and reduce the basic causes
of friction in US/Canadian relations. "20 This meant, by and
large, measures to reduce trade barriers. By 1960, the PPAC
began to sponsor studies to examine Canada's commercial
policy options: continued reliance on GATT to liberalize
trade, bilateral free trade with the United States, or a broader
North Atlantic Free Trade Area encompassing European
states and North America.e!
The circumstances which prompted the PPAC to reconsider Canada's commercial policy were similar to those
which occasioned pressures for free trade in the late 1980s.
First, American protectionism became a problem for Canada
in the late 1950s and early 1960s, as non-tariff barriers were'
imposed on Canadian resources, such as lead, zinc, and
wheat. More importantly, there were fears that the emerging
common market in Europe would eliminate export markets,
particularly if Britain were to join. There was also a concern
that GATT would not fully resolve these problems because
the Kennedy Round talks on multilateral tariff reductions
were bogged down in conflict.22
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In the early 1960s, the Canadian-American Committee
sponsored several studies on Canada-US free trade. The
first, A Canada-United States Free Trade Area: A Survey
of Possible Characteristics, written by American economist
Sperry Lea, assessed the possible geographic scope, commodity coverage, and institutional structure of a trade agreement.23 The second, A Possible Plan for a Canada-United
States Free Trade Arrangement, published in 1965, outlined
a trade plan quite similar to the current Canada-US agreement. It received considerable attention in the Canadian
press and was supported by such notables as the President
of the Toronto Stock Exchange.24
Despite these ongoing studies and their clear preference
for freer trade, PPAC policy statements still maintained a
cautious stance toward Canada-US free trade and the
elimination of Canadian tariffs. A 1963 PPAC statement emphasized that Canada "may be facing a future in which it
would be virtually alone in being denied ...ready access to
large markets." The statement supported the GATT process
for global tariff reductions, but it argued that Europe and
the US should disproportionately reduce their tariffs so that
"Canadian industry [could] confidently adjust to new trading
opportunities. "25 The PPAC further suggested that governments provide financial assistance to help both firms and
workers adjust to increased competition.
A later policy statement by CAC members, which came
on the heels of the controversial 1965 CAC study, was
slightly stronger in its support for trade liberalization. It
urged the Canadian government to initiate discussions with
Britain and the US to explore a broader North Atlantic Free
Trade Area. This statement contended that the Kennedy
Round of tariff reductions fell short of what was necessary
to secure larger markets for Canadian resources and
manufactures. Complete tariff elimination, it argued, was
necessary to secure markets large enough to realize scale
economies for Canadian industry, and to force inefficient
manufacturers to rationalize and specialize their operations
and product lines. The CAC argued that only minimal policy
harmonization would be necessary in a free trade area, although it suggested that some common rules of competition
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might have to be established. The Committee concluded
that Canada and the US shared an interest in increasing
peace and prosperity through freer global trade and, therefore, should jointly approach Britain and other European
countries to forge a free trade agreement in industrial
products and raw materials.26 However, the Committee was
not unanimous. In a dissenting statement, again foreshadowing the 1980s free trade debate, Wallace McCutcheon, a
former Conservative cabinet minister, expressed concerns
that
much of Canadian secondary industry might be adversely affected, some of it quite seriously, by the establishment of a
free trade area...unless special arrangements were developed to
ensure its position in the face of competition from more powerful trade partners.27
To explore the impact of Canadian tariff eliminations on
Canadian industry, the PPAC conducted a twelve volume
research program financed by the Ford Foundation.28 This
series, published between 1967 and 1971, examined the
economic impact of free trade on different industrial sectors
and regions. Although these studies claimed to objectively
assess the impact of free trade, rather than merely "pass
judgment" on it, they generally extolled its benefits for the
Canadian economy. Where they differed was on the type
of free trade arrangement which would offer the most
economic benefit. Some studies recommended a bilateral
free trade agreement; others recommended a broader North
Atlantic area.29 In any case, the PPAC downplayed its advocacy of free trade in the late 1960s, as the Kennedy Round
eventually produced significant reductions in international
tariffs, and rising Canadian nationalism made free trade
more politically untenable.30
Thus, in the late 1960s and early 1970s, the PPAC
directed its attention to other aspects of economic policy,
but its liberal continentalist leanings were still apparent. A
1966 PPA study of the Pearson government's proposed
Canadian Development Corporation found "no evidence on
economic grounds" that a state agency was needed to help
nurture Canadian enterprises.31 Paralleling this conclusion,
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A.E. Safarian published The Performance of Foreign-Owned
Firms in Canada, which rejected economic nationalist
analyses of the impact of foreign ownership on Canadian
industry.32
PPAC studies were consistently critical of policy proposals
which challenged the continentalist economic order; they were
also critical of measures which even modestly challenged the
distribution of power and income within Canada. In 1969-70
the PPAC published several studies on tax policy offering
a measured critique of the progressive reforms proposed by
the Carter Royal Commission on Taxation, and Liberal Finance
Minister Edgar Benson's White Paper on tax reform.33 These
studies acknowledged that Carter's proposed reforms were
"comprehensive and balanced," but concluded that they
were "impractical." Howard Ross, for example, argued that
the economy was "too delicate and complicated" for such
"radical" change. Since radical moves to promote "equity"
could jeopardize economic growth, he suggested that the
reforms promoted by the Royal Commission and in the White
Paper be studied in more detail and be pursued cautiously
and slowly,34
Although the PPAC's predisposition toward free trade
foreshadowed the COHI's advocacy of bilateral free trade
in the mid-1980s, the PPAC differed from its successor in
its assessment of macroeconomic and social policy. The PPAC
paid little specific attention to these fields. Yet several of
the previously discussed trade policy statements and studies
emphasized that freer trade must be accompanied by such
adjustment measures as expanded unemployment insurance
and training assistance for workers and an expansionary full
employment policy.3S
"The Disappearance or the Status Quo": The CDRI and
The Crisis or Liberal Continentalism 1973·1980 In its
early years, PPAC rarely ventured outside Canadian commercial policy research and analysis due to its chronic
shortage of funds. With only a small research staff and
without the means to conduct an ongoing, extensive research
program, it often had to solicit federal government contracts
for short term policy analysis to pay its bills. By the 1970s,
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PPAC President Robert Fowler wanted to widen research
and policy advocacy beyond commercial policy and permanently transform the organization into a short-term policy
analyst of Canadian economic policy. This, he felt, would
fill a gap left by the Economic Council of Canada, which
was mandated to provide "independent" long-term policy
research.36 The PPAC sought permanent funding from the
federal government to perform this role but was turned
down. It finally found sponsorship in the C.D. Howe
Memorial Foundation, a body established in 1961 to commemorate C.D. Howe.37 The Foundation was seeking alternative uses for its $2 million endowment, which had been
used to finance scholarships and a biography of Howe, and
in 1973 it formally merged with the PPAC to form the C.D.
Howe Institute.38
With this infusion of money, the new CDHI was able to
hire permanent research staff and finance ongoing policy
research. An MIT trained economist from a New York trust
company, Carl Beigie, was hired as Executive Director and
a number of young Canadian economists were recruited,
including Judith Maxwell, who later became Chair of the
Economic Council of Canada. In contrast to the PPAC,
which was often content to circulate its often long and technical publications to members and federal MPs, under
Beigie's directorship the com became an active and mediaconscious policy advocate.39 In fact, the mid to late 1970s
was arguably the COHrs most prolific period in terms of
publications, conferences, and seminar appearances. The Institute was widely regarded within the media and business
community as the "highest profile and most productive" of
Canada's think tanks.40
The reconstitution and expansion of the com occurred
in a context of economic upheaval. The early 1970s was
characterized by growing state intervention, labour turmoil,
emerging stagflation and the energy crisis. In Canada, this
was the heyday of economic nationalism and social democratic
thought. Between 1972 and 1974, the Liberal government,
spurred on by NDP pressure, established the Foreign Investment Review Agency, the Canada Development Corporation, and Petro-Canada, and expanded the Unemployment
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Insurance Program. At the same time, growing concerns in
some quarters that government "could no longer manage
the economy" led to the establishment of neoconservative
think tanks like the Fraser Institute and the American
Enterprise Institute.f!
These concerns were reflected in the com's early policy
reviews. The Disappearance of the Status Quo - the highly
symbolic title of the com's first policy review - was a
theme running through com policy analyses in the early
1970s. The Institute maintained that the Canadian and international economies were "going through a transition from
the stable, predictable years of the 1950s to a new status
quo which has yet to be defined." Indeed, com vigourously
contended that "Canada has been entirely too complacent
about its ability to ride out this transition painlessly," and
urged that the time had come to "develop a clear view of
what must be done and then to make some hard choices."42
A survey of com policy reviews during this period suggests, however, that the Institute itself was unable to provide
this clarity of vision. Although Liberal continentalism
remained the dominant element in CORI policy discourse,
one can trace a growing tendency toward neoconservatism
through to the late 1970s. Furthermore, by 1980, one can
identify in com policy discourse a mounting uncertainty
about whether the contradictory mixture of traditional
liberal continentalism and neoconservatism could resolve
Canada's economic ills.
In its inaugural policy reviews, the com rejected both
traditional Keynesian measures and simple monetary constraint as adequate prescriptions for stagflation. It echoed
the emerging belief that governments could no longer spend
their way out of a recession, yet also asserted that government spending cuts would only create mass unemployment.
In the 1974 review, Carl Beigie and Judith Maxwell noted
that
once the economy departs from its stable growth path, there
are many microeconomic problems facing individual sectors of
the economy that cannot be solved by traditional techniques of
demand management. So economic policy must venture into
the unfamiliar realm of specific supply oriented policies.43
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Notably, this stance meant a rejection of such widely
discussed options as wage and price controls (which Canada
was actively considering and would soon implement). The
Institute, however, was certainly not quick to jump onto
the emerging monetarist bandwagon of monetary restraint
and fiscal cutbacks: it rejected monetary restrictions and
unemployment insurance cuts as unfair, emphasizing that
"the country owes them [the unemployed] an adequate income either from UI, manpower allowances or the welfare
system."44
The COHrs supply-side recommendations within this
view remained consistent, however, with the earlier liberal
continentalism of the PPAC. Indeed, the Institute continued
to advocate the pursuit of tariff reductions at home and
abroad through multilateral trade negotiations. The com
argued that this would improve Canada's competitive position by insuring market access for Canadian exports and
forcing the rationalization of Canadian industry. In response
to the federal government's FIRA initiative, the Institute
emphasized the benefits that foreign capital offered in terms
of jobs and investment. It did not explicitly oppose FIRA
but argued that it should have "clear guidelines" which would
encourage investment but still not jeopardize Canadian
sovereignty.45
The 1975 review also questioned some of the new
monetarist theories of unemployment. In a brief analysis of
the 1971 UI reforms, which were assailed by the Right for
their generosity, Judith Maxwell challenged Fraser Institute
economists who argued that UI contributed to high unemployment. She concluded that UI "reinforced trends in
the job market (job dissatisfaction and labour shortages)
but it is wrong to blame the Act for basic imbalances which
have boosted unemployment to such high levels."46
At the same time, however, new doubts were raised about
traditional policy perspectives, and the Institute retreated
from its opposition to wage and price controls and fiscal
restraint. To attack inflation, the focus of COHI discourse
in the late 1970s, it advocated a "cooperative restraint" program of wage and price controls, an end to inflation indexing
to encourage savings and investment, and a "neutral" fiscal
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policy of tax cuts and modest cuts in government spending.47
The following two com policy reviews portray a further
erosion of the modest interventionist stance of liberal continentalism. In 1976, Judith Maxwell, citing Arthur Okun,
the Brookings Institute economist who formalized the
"equality-efficiency trade-off," argued that "rising expectations" were partly behind deteriorating macroeconomic performance:
the rise in personal expectations has escalated to a point where
many Canadians believe their particular claim against society
is not merely a claim but a moral imperative ... The result is
that the standards for reasonable wage and price decisions have
been abandoned.48
Although she viewed the rise in expectations as a response
to the inequities and insecurities caused by inflation, Maxwell concluded that public sector collective bargaining,
which removed market discipline from wage determination,
and free spending, vote-seeking politicians were further exacerbating the wage inflation spiral.
Despite this emerging shift toward neoconservatism, the
COHI's economic analysis in the late 1970s still contained
a blend of both neoconservative and Keynesian policies.
On the one hand, com called for an end to unsuccessful
wage and price controls and strongly advocated "monetary
gradualism": on the other, it emphasized that full employment was still an important goal of economic policy, and
eschewed major cuts in government spending or cuts in the
deficit while unemployment climbed. Nonetheless, the
COHI was moving toward the policies of fiscal restraint
adopted by governments of all political stripes in the 1980s.
The com recommended an evaluation of existing government programs which would weed out obsolete programs,
rationalize those that were wasteful, and consolidate those
with similar purposes or targets. It called for tax cuts, mainly
focusing on regressive sales taxes, but it also recommended
limits on tax incentives for business, which it viewed as
wastefu1.49
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The COHI's cautious shift to neoconservatism in the late
1970s could also be seen in two other policy areas, both
of which became central to Canadian neoconservatism in
the 1980s. In its 1976 Policy Review, the Institute responded
to the Economic Council of Canada's recommendation of
free trade with the United States by suggesting that "greater
openness to international market forces" would increase
Canadian productivity, bind Canadian wage gains to productivity increases, and offer "the most effective alternative to
a growing trend to government intervention."50 However,
the COHI, like the PPAC, did not fully embrace the concept
of bilateral free trade. It ultimately concluded that such an
arrangement was politically unacceptable because it would
entail social dislocation and unemployment.U Similarly,
Judith Maxwell suggested that selective social programs
might be more "efficient" than universal programs.52 But
again, this did not become an integral part of com policy
discourse until the 1980s.
Modest fiscal and monetary restraint were the evident
preoccupations of the com's economic policy discourse
between 1977 and 1980. In contrast to its openly neoconservative competitors like the Fraser Institute, com defended
social programs like unemployment insurance, called for
"innovative" government management rather than radical
cuts in government spending, did not view government deficits
as inherently bad, and was willing to accept public enterprise
and state intervention in the area of regional development. S3
Yet, the COHI also had growing doubts about its "gradualist"
approach to economic policy in the late 1970s. These quandaries were illustrated vividly in a 1977 article by Carl
Beigie, "The Return of Economic Orthodoxy-Will it Work? ,"
which suggested a new departure for the intellectual leader
of the Institute. Beigie attempted to assess the prospects of
policies aiming at gradually restoring "monetary and fiscal
discipline" to the economy. He contended that "gradualist"
programs had failed to overcome structural rigidities posed
by non-discretionary government social programs, rising
energy prices, environmental regulations, and the costs of
providing economic infrastructure. Although he recognized
the economic rationale for many of these rigidities, Beigie
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Studies in Political Economy
concluded that economic stability could only be restored
by "speeding up" fiscal and monetary restraint. This could
be done, of course, by unilateral action. But, Beigie proposed, as an alternative to such a harsh remedy, a selfdescribed "naive" program of "consultation and concertation"
which would convince Canadians of the need to reduce inflation and stimulate investment, and do so without redistributing income to the "rich."S4
In its 1980 policy review, the CDHI reiterated this call
for "negotiated restraint." The forecast recession, however,
meant that some fiscal expansion was needed. It argued
that Canadian governments should invest in capital infrastructure - telecommunications networks and public
works - and skills development, which would "provide a
base for future productivity gains." The mildly stimulative
package, however, should be balanced by efforts to contain
increases in the government deficit. Notably, the CDHI
recommended that universal social programs be pared down
to "tax relief and income assistance only to families who
need [it]" - a measure which was now possible because
computerization "reduced both the stigma and administrative cost" of "selective" programs. 55
Mounting economic turmoil had obviously upset the traditional ground of liberal continentalism. Yet the ambiguities expressed in Beigie's paper and the 1980 policy review reveal
that the CDm had some hesitancy about embracing neoconservatism. The redefining of its corporate identity and policy
discourse was the task set for the 1980s.
Neoconservatism and North American Free Trade: CDRI
in the 1980s The tentative transitions of CDm's economic
policy discourse ultimately were reflected in organizational and
financial turmoil between 1980 and 1982. The CDm had overextended itself with several major research projects in the late
1970s, and it moved from Montreal to Toronto in 1982. Corporate donations also dropped sharply in the early 1980s. This
was partly due to the recession and the departure of "star"
economists like Judith Maxwell, who left in 1980, and Carl
Beigie, who resigned as Director in 1981.56 But more fundamentally, while business dissatisfaction with the CDHI was
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growing, so too was the influence and popularity of the
hard right Fraser Institute, located in Vancouver. Business
critics contended that the CDHI valued "keeping channels
open to government departments more than telling it like
it is" and that it offered politically expedient policy positions.S7 The avowedly free enterprise Fraser Institute, in
contrast, attracted increasing levels of corporate funding
from central Canada in the early 1980s.S8
The CDHI's dilemmas reflected, to some extent, those
which faced the US Brookings Institution in the 1970s.
Brookings had been the "moderate liberal voice of neoKeynesian economics" and an advocate of "mild income
redistribution," but now was pushed into a world view which
affirmed that "markets work, planning can't improve outcomes, full employment breeds unacceptable
inflation ...equality hurts efficiency."S9 Overseeing the rightward
shift of policy advice at the CDHI was new Executive Director Wendy Dobson, who replaced Beigie in 1981. She was
credited with restoring the CDHI's financial footing, although critics also noted that its policy direction "became
predictably oriented to the interests of Canada's business
elite."60
The direction of CDHI policy discourse in the early 1980s
is best represented by its 1983 submission to the Macdonald
Royal Commission on the Economic Union and Development Prospects for Canada. Here the CDHI finally buried
Keynesianism as a guiding principle in its policy analysis.
Pointing to intensified competition and interdependence in
the world economy, it argued that fiscal or monetary
stimulation could no longer restore economic growth. In
fact, an expansionary fiscal policy would only "delay or
prevent adjustment in domestic wages and prices, which
lowers both the competitiveness and the level of employment and output over the medium and long term." Instead
"the central goal of economic policy must be to encourage
adjustment.t's!
As would become all too frequently heard in the 1980s,
the new watchwords guiding economic policy were
flexibility, adjustment, and freer markets. Canada, the CDHI
asserted, could no longer insulate itself from external
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economic shocks, as growth depended on the ability of
markets and economic institutions to adapt to changing
economic conditions.
Economic policies had to be
reoriented toward the loosely defined notion of "adjustment." To some extent, the advocacy of freer international
trade was consistent with the COHI's historic anti-protectionist sentiment, but this discourse was now more clearly
neoconservative and dropped completely the support for
limited state intervention which had always formed a component of liberal continentalism in Canada. Indeed, bilateral
and multi-lateral trade agreements were to be pursued partly
because they would "mak[e] it more difficult to shield the
domestic economy from the effects of change. "62 Subsidies
and assistance to "marginal" industries, supported by the
PPAC in the 1960s, were now rejected. While the COHI
was always skeptical about state enterprise, it now thoroughly rejected their application in "natural monopolies" and
regional development because they were not "flexible enough
for this fast-paced world" and were captives of "domestic
interest groups. "63 The COHI also expressed new concerns
about the impact of the regionally differentiated unemployment insurance system on work incentives and labour
mobility and advised further study of VI's role in economic
adjustment.
Yet, the COHI did not yet endorse the whole package
of neoconservative policies. Sweeping cuts in government
spending and social programs, free trade, and regressive
tax reform, which had become associated with Reagan and
Thatcher were not on its agenda. Notably, it opposed the
1983 Social Credit restraint program in British Columbia,
preferring the more low profile, gradual fiscal cuts exercised
by the Ontario Conservatives. Its recommendations to increase labour market flexibility excluded the Fraser Institute's
"wilder" calls for elimination of minimum wages, attacks
on unions, and drastic cuts in VI. The COHI, however, was
also skeptical of the federal government's "6 and 5" public sector
restraint program. It acknowledged that while this program might
curb inflation in the short term, it also might jeopardize
stable labour relations in the future.64 COHI advocated
more business-labour dialogue to contain wage increases and
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it emphasized the need for governments and business to
spend more on training to address skill shortages and long
term unemployment. It also argued for sector specific income support and retraining policies for workers in declining industries.65
The election of Brian Mulroney in 1984, however, helped
push the COHI toward a harder neoconservative line. Indeed
the themes of the Policy Reviews of the 1980s neatly mirrored the "privatization, de-regulation and free trade" agenda the Tories established for themselves. Significantly, the
Institute's 1985 Review applauded the Conservatives' initial
Economic and Fiscal Statement, which established the new
government's agenda, for "taking into account the worldwide evidence that government intervention has failed to
solve economic problems."66 And the 1986 Review called
on Ottawa to implement an economic strategy to encourage
"risk taking ... investment and innovation" and to "facilitate
rather than obstruct" market-led adjustments in the economy/"
The 1986 Review, moreover, detailed most fully the new
neoconservative economic policy discourse of the CORI
(and was revealingly titled Reorienting the Economy). Three
bold themes stood out: deficit reduction, tax and social program reform, and bilateral free trade with the US. First,
deficit reduction now clearly superseded full employment
as a goal of macroeconomic policy. As in the past, the COHI
promoted cuts in subsidies and tax incentives to business,
but it also urged privatization of state enterprises and the
"reform" of social programs and transfers to the provinces
to cut costs.
The most radical departure in CORI policy thought was
tax and transfer system reform. COHI tax experts advocated
reductions in personal and income tax rates, the elimination
of the Manufacturers' Sales Tax, and the introduction of a
comprehensive value added consumption tax. This shift,
which would disproportionately affect lower and middle income earners, was ostensibly aimed at rewarding entrepreneurship and making Canadian tax rates more competitive
with those in the US.68 The Institute also argued for an
overhaul of income security programs, particularly unemployment insurance and social assistance. Its fIrst major study
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Studies in Political Economy
overhaul of income security programs, particularly unemployment insurance and social assistance. Its first major study
on social policy, Social Policy in the 19908, by Thomas Courchene, called for the reintegration of social policy into the
"economic restructuring and adjustment needs of the
economy,"69 Courchene viewed UI as a major obstacle to
labour market flexibility, and as a significant contributor
to the federal deficit. UI, he argued, was destructive of work
incentives and increased the rate and duration of unemployment. Beginning with the 1986 Policy Review, the com
has since reiterated these conclusions and recommended that
the federal government replace social assistance, UI, and
Family Allowance programs with a plan similar to the Macdonald Commission's proposed Universal Income Security
Program.70 This proposed income supplement scheme would
be targeted to unemployed and low income Canadians, but
would mean lower, shorter term benefits for the unemployed. The Institute also argued that deficit reduction
and economic adjustment could be achieved through reforms
to health care and post-secondary education. It suggested
that "competitive forces," like Health Maintenance Organizations, be introduced to encourage consumer choice
and efficiency in health care. Similarly, the COHI proposed
that grants to the provinces be replaced by direct grant/tax
credits to students and that tuition fees be "decontrolled"
to encourage competition and "excellence" in post-secondary education.U
Free trade was the final and ultimately the most important
plank in the COHI's proposed economic strategy. In contrast
to earlier PPAC-COHI statements, the Institute was unequivocal in its support for bilateral free trade. Beginning
with Richard Lipsey and Murray Smith's influential 1985
study, Taking the Initiative, the CDm declared free trade
to be the only realistic economic policy option open to
Canada. Lipsey and Smith argued that bilateral free trade
was a necessary response to: growing American protectionism, which they saw as unlikely to diminish because of
the mounting US trade deficit; the prospective resurgence
of the European Community as a trading bloc; and the shortcomings of GATT.72 They also restated other traditional
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liberal continentalist justifications for free trade, such as
the small size of Canada's domestic market and the need
to rationalize production by putting pressure on inefficient
manufacturers. A free trade driven rationalization of Canadian
industry, they argued. was now urgent because of intensified
competition from the newly industrializing countries and
growing rivalry among OECD nations in the development
of new technologies.73
Although the CDHI's support for bilateral free trade was
phrased in the traditional liberal continentalist terms, it departed from liberal continentalism in its virtual lack of concern with the impact of lower trade barriers on the national
market. Several CDHI studies attempted to justify CanadaUS free trade, arguing that free trade in itself would not
threaten Canadian economic or cultural sovereignty.74 The
Institute acknowledged. however. that intensified international competition and the increasing mobility of goods.
services, and capital across national borders would put pressure on Canadian wages. social programs, and economic
policies. The logical conclusion, of course, was that free
trade would accelerate these pressures by opening Canada
to the "harsh winds of international competition." and would
eventually lead toward greater international "harmonization"
of wage levels and programs.7S
The CDHI's advocacy of bilateral free trade was linked
to the entrenchment of a neoconservative agenda. Privatization. deregulation. and social program rationalization. all
inextricably linked to free trade. were seen as preconditions
for economic growth. To quote the 1985 Policy Review.
"Deficit reduction and a more flexible competitive cost
structure can create an environment for improved growth,
but access to foreign markets is necessary to provide the
incentive for private sector investment and job creation."76
It suggested that a free trade agreement would help Canada
reach such a "flexible competitive cost structure" once permanent reductions in industrial subsidies, foreign investment restrictions, and other discriminatory economic
nationalist policies were negonated.?? This sharply contrasted with earlier PPAC-CDHI policy positions which
merely frowned upon "protectionist" industrial policies and
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Studies in Political Economy
even tolerated them in less developed regions of Canada.
Even in the case of CDHI's continued emphasis on the need
for special adjustment programs, such as retraining and
mobility grants .for laid off workers, the faith in market
processes was asserted most strongly: these should be strictly limited to industries and communities most vulnerable
to job losses.78
The shift in economic policy strategy by the CDm was
not insignificant politically, for it was with the issue of free
trade that the CDm played its most active political role.
As Bruce Doern and Brian Tomlin point out, the Lipsey
and Smith study, Taking the Initiative, combined with the
lobbying efforts of CDHI Director Wendy Dobson and
Senior Policy Analyst Richard Lipsey in early 1985 were
influential in dispelling the "myths" senior federal Ministers
and bureaucrats maintained about bilateral free trade.79 The
CDHI also played an active part in the private sector International Trade Advisory Committee which advised the
government during the negotiations, and it became an active
and vocal force in the pro-free trade business coalition.80
The CDHI has generally maintained closer ties to the
federal government since the election of Brian Mulroney.
Several Institute staff have received government appointments. For example, Wendy Dobson was an Assistant
Deputy Minister in the Department of Finance between 1987
and 1990, and former CDHI Vice-President Claude Forget
was head of a government inquiry into unemployment insurance in 1986-7.81
Conclusion: After Canada-US Free Trade The CDm has
more recently argued for an extension of the free market
model of state and society entrenched in the Canada-US
Free Trade Agreement. Under the leadership of Maureen
Farrow, President of the CDHI between 1987 and 1989,
and Thomas Kierans, the current President, the CDm has
continued to advocate 'marketizing' measures mentioned in
previous policy reviews: privatization, increased links between business and universities, cuts in unemployment insurance with some funds diverted to training, and the
removal of universality in benefits to families and seniors.
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Ernst/C.D. Howe Institute
The CDHI's agenda for ensuring Canada's status as an
"innovative," "high value added" economy, not surprisingly
hinges upon "the widest possible access to foreign markets,"
and constraints on "the use of strategic trade policies or
subsidies by the major industrial powers - in particular,
the United States."82 The com firmly rejects the "activist
industrial policies" proposed by such bodies as the Ontario
Premiers Council 'and actively supports a North American
Free Trade Agreement involving Mexico. The Institute argues that Canada could make gains from Mexico's "huge
potential market," although Canada's present interest is
primarily defensive - to counter preferential treatment for
Mexico and to avoid a "hub and spoke" model for North
American trade, in which the US has preferential access to
two nations.83
The com has also intervened in the constitutional debate
and called for the application of market principles to federalprovincial relations. Reflecting current economic union
proposals, the COHI has argued for the removal of interprovincial barriers to trade and the "disentanglement" of
federal-provincial fiscal relations. To introduce "efficiency"
into fiscal federalism, the com contends that the level of
government responsible for spending decisions should be
the one responsible for raising taxes. The com suggests,
for example, that tax room for health and welfare be restored
to the provinces, and that the federal government deliver
transfers for post-secondary education directly to individuals in a "deregulated" system of competing public
and private universities and decontrolled tuition fees.84
The evolution of COHI economic policy discourse on
macroeconomic, trade, and social policy suggests Canadian
neoconservatism represents both the logical progression of
Canada's post-war liberal continentalist economic policy,
and a marked shift to an explicitly neoliberal, free marketbased policy. While the benefits of free trade, both multilateral and bilateral, appear as a constant theme in
PPAC-COHI thinking, it has only been unequivocally supported and linked to a neoconservative vision since 1985.
Similarly, the PPAC·COm has been historically opposed
to economic and social policies which alter existing patterns
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Studies in Political Economy
of income distribution and investment. The embrace of
Keynesianism has never been complete in Canada, as David
Wolfe has argued, and neither the PPAC nor the CDHI has
been a vigorous advocate of economic 'fine-tuning'. But
even though monetary gradualism held sway in the late
1970s, the Institute did not explicitly reject Keynesian
economic policy in favour of monetarism and deficit cutting
until 1982. Since then a broader set of neoconservative
policies have become central to its policy discourse: notably
selective, means-tested social policies rather than universal
policies, and policies of deregulation and privatization. If
shifts in CDHI discourse can serve as a guide, 1981-82
appears to have ushered in a sea-change in the strategic
thinking of Canadian business. This period marked the last
gasps of economic nationalist and statist industrial policies,
and the movement of Canadian economic policy to the
Right, following the trend established in Britain and the
US under Thatcher and Reagan. This is where it remains
today.
The CDHI itself has espoused a more "moderate" neoconservatism than its counterparts in the United States and
Britain. In this regard, it resembles the Business Council
on National Issues (BCNI). The CDHI has never defended
inequality and free market individualism on moral or philosophical grounds, preferring the "objective" language of mainstream economics.8S As noted earlier, the CDHI has tended
to offer "politically sensitive" policy proposals. This was
true even in the 1980s. It has combined, for example, regressive tax policy proposals with recommendations to protect
low income earners.
The brand of neoconservatism articulated by the CDHI
and the BCNI, however, represents only one strategic orientation within the Canadian capitalist class. A plethora of
economic policy institutes was established in Canada during
the 1960s and 1970s. The CDHI, along with the Canadian
Tax Foundation, the government supported Economic Council of Canada and the Institute for Research on Public Policy
(IRPP) claim to be "centrist" and are generally perceived
as "moderate supporters of the market system, free trade,
and limited government."86 The IRPP, however, is often
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Ernst/C.D. Howe Institute
considered to be slightly to the left of the others because
of its links to prominent Liberals and the reformist views
expressed in some of its publications.I? As William Carroll
notes, Canadian capital also has supported more extreme
right-wing think tanks like the Fraser Institute. Established
in 1974 to "redirect public attention to the role of competitive markets in providing for the well being of Canada,"
the Fraser Institute articulates an explicitly far right policy
perspective which is extremely critical of state regulation,
the welfare state and trade unions.88 The now defunct
Canadian Institute for Economic Policy posed, in the early
1980s, a Keynesian alternative to neoconservative economic
policies in its advocacy of economic nationalist and statist
industrial policies.89 Only the Canadian Centre for Policy
Alternatives among economic policy think tanks represents
workers and other progressive forces.
A full understanding of Canadian business strategies requires a more comparative historical analysis of the policy
thought and political influence of these institutes. Such a
study would have to carefully delineate their influence on,
and linkages to, business associations and individual corporations. Nonetheless, we have traced one strategic orientation of Canadian capital, as articulated by a policy institute
generally viewed as one of Canada's most influential. The
CDHI serves as an important barometer of Canadian business thinking, both in the past, and in the current free trade
era.
The recent efforts by CDHI, and the political right in
Canada to entrench neoconservative policies in international
trade agreements and national constitutional accords bears
serious watching by the Left in the 1990s. As the CDHI
admitted in its most recent policy review, the challenge for
capital is to allay the "danger that public opinion may be
organized around the need to reverse previous policy directions, regardless of their rationale. "90 The challenge for the
Left, of course, is the construction of an alternative strategy
which can confront the economic logic of globalization and
the disintegration of national economic policies. The political ground is not infertile as is evident in the election of
New Democratic Party governments in three provinces. Yet
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Studies in Political Economy
a great deal of work remains to be done in reconstructing
and developing the economics of a social democracy which
will give control back to workers and their communities.
Notes
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
136
William K. Carroll, "Neoliberalism and the Recomposition of
Finance Capital," Capital and Class 38 (1989), pp. 99-101.
David Langille, "The Business Council on National Issues and the
Canadian State," Studies in Political Economy 24 (1987), pp. 70-71.
M. Patricia Marchak, The Integrated Circus: The New Right and
the Restructuring of Global Marluts (Montreal: McGill-Queen's.
1991), pp. 93-115.
Janine Brodie and Jane Jenson, Crisis, Challenge and Change: Party
and Class in Canada Revisited, (Ottawa: Carleton University, 1988),
p.312.
David Wolfe, "The Canadian State in Comparative Perspective,"
Canadian Review of Sociology and Anthropology 26 (1989), pp.
101, 112-114.
John Warnock, Free Trade and the New Right Agenda (Vancouver:
New Star, 1988), pp. 68-70.
Joseph Peschek, Policy Planning Organizations (Philadelphia:
Temple, 1987), p. 2.
Ibid., pp. 1-37.
Leslie Pal, Public Policy Analysis: An Introduction (Toronto,
Methuen, 1987), pp. 92-4. For another overview of Canadian policy
institutes, see G. Bruce Doem and Richard Phidd, Canadian Public
Policy: Ideas, Structures, Processes (Toronto: Methuen, 1983).
A. Paul Pross, Group Politics and Public Policy (Toronto: Oxford
University, 1986), pp, 99, 149-152.
Evert A. Lindquist, "The Third Community, Policy Inquiry, and
Social Scientists," in Stephen Brooks and Alain Gagnon (eds.), Social Scientists, Policy and the State (New York: Praeger, 1990),
pp. 36, 38, 43.
Jane Jenson, "Gender and Reproduction: Or, Babies and the State,"
Studies in Political Economy 20 (1986), pp. 25-26.
See, for example, Wallace Clement, Continental Corporate Power
(Toronto: Methuen, 1977); Rianne Mahon, The Politics of Industrial
Restructuring: Canadian Textiles (Toronto: University of Toronto,
1984); Carroll, ••Neoliberalism ..•••; and Melissa Clark-Jones, A
Staple State: Canadian Industrial Resources in Cold War, (Toronto:
University of Toronto, 1987).
Canadian-American Committee, Canadian-American Commercial
Relations (Montreal: CAC, 1958), p. 56.
Based on The Globe and Mail Report on Business Magazine, The
Top 1000 Companies (July 1991); and C.D.Howe Institute, Annual
Report 1991 (Toronto: CDRI, 1991).
Carl Beigie and Judith Maxwell (eds). The Disappearance of the
Slalus QKO Policy Review and Outlook 1974, (Montreal: CDHI,
1974), pp. vi-vii.
Ernst/C.D. Howe Institute
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
See. for example. "Big Debt Leaves Ottawa 'few defences'."
Kitchener-Waterloo Record 10 February 1988. p, 3. and a CDm
column on free trade in "Why Not Look at the Facts?" Financial
Post 20 July 1988. p. 12.
"What the Private Planning Association is Today" Monetary Times
Vol. 136 (October 1968). p. 43.
Ibid .• p, 43.
CAC. Canadian-American Commercial Relations ...• pp. 1-3.
The PPAC-CAC studies on Canadian trade policy included: L.D.
Wilgress. The Impact 0/ European Integration on Canada (Montreal:
PPAC. 1962); L.D. Wilgress. Canada's Approach to Trad« Negotiations (Montreal: PPAC. 1963); Sperry Lea. A Canada-US Free Trade
Arrangement: An Evaluation (Montreal: CAC, 1963); CanadianAmerican Committee. A Possible Plan/or a Canada-US Free Trade
Area (Montreal: CAC. 1965); Canadian-American Committee. A
New Trads Strategy/or Canada and the United States (Montreal:
PPAC, 1966).
CAC. Canadian-American Commercial Relations ...• pp. 5-6; and
Sperry Lea. "A Historical Perspective." in Roben Stem. Philip
Trezise. and John Whalley (eds.), Perspectives on a United StatesCanada Free Trade Agreement (Washington: Brookings. 1987), pp.
13-14.
Lea. A Canada- US Free Trade Arrangement ...• pp. 51-55.
On the reaction to this study. see F.H. Soward. "External Affairs
and Defence." John Saywell (ed.), Canadian Annual Review 1965
(Toronto: University of Toronto. 1966). pp. 294-295.
Canadian Trade Committee. Statement on Canadian Commercial
Policy (Montreal: PPAC. 1963). p. 6.
CAC. A New Trade Strategy ...• pp, 12-17.
Ibid .• p. viii.
This research program. edited by PPAC Research Director H. Edward English. was entitled the Atlantic Economic Studies program.
Studies included E.M.Cape et al .• Trade Liberalization and the
Canadian Pulp and Paper Industry (Montreal: PPAC. 1968); H.E.
English, Transatlantic Economic Community: Canadian Perspectives (Montreal: PPAC. 1968); Harry Johnson et al .• Harmonization
0/ National Economic Policies undsr Free Trade (Montreal: PPAC.
1968); Roy Matthews,lndustrial Viability in a Free Trade Economy:
A Program 0/ Adjustment Policies lor Canada (Montreal: PPAC.
1971); and Jacques Singer. Trade Liberalization and the Canadian
Still Industry (Montreal: PPAC. 1969).
For example, the Cape study on the pulp and paper industry favoured
bilateral free trade. while the Singer study on the steel industry
advocated a broader free trade agreement.
Lea, "A Historical Perspective ...•" pp, 20-21.
E.P. Neufeld. The Canadian Development Corporation: An Assessment 0/ the Proposal (Montreal: PPAC. 1966). pp. 18-19.
A.E. Safarian, The Performance of Foreign-Owned Firms in Canada
(Montreal: CAC, 1969). For a critique of Safarian, see Glen Williams. Not for Export: Toward a Political Economy of Canada's
Arrulcd IndlUlrializalioR (Toronto: McClelland and Stewan. 1983).
pp. 146-7.
137
Studies in Political Economy
33.
34.
3S.
36.
37.
38.
39.
40.
41.
42.
43.
44.
4S.
46.
47.
48.
49.
SO.
Sl.
52.
53.
138
See, Canada, Report of the Royal Commission on Taxation (Ottawa,
1966); and, B.J. Benson, Proposals for Tax Reform Prepared by the
Minister of Finance, (Ottawa, 1969). On these tax refonn efforts,
see Leslie MacDonald, "Taxing Comprehensive Income: Power and
Participation in Canadian Politics" (Ph.D, thesis, Carleton University, 1985).
Howard ROil, Our Taxes: Lllsons from Carter and Benson
(Montreal: PPAC, 1971), pp. 37-41.
For example, PPAC, Canadian Trade Committee, Statement pp. 7-9,
and Matthews, Industrial ViabUity...• The one PPAC study which
did examine macroeconomic policy was L.A. Skeoch and David
Smith, Economic Planning: The Relevence of the West European
Experience for Canada (Montreal, PPAC, 1963). This analysis of
Buropean "indicative planning" concluded that Canada might benefit
from a national research body composed of representatives of government, business and labour to help coordinate national economic policy
and stabilize national demand, but rejected the activist industrial
policies pursued by these countries.
Personal Interview, Carl Beigie, Former Executive Director,
C.D.Howe Institute, November, 1988.
Ibid., Also see "Beigie of Howe Research Institute," Canadian Business (March 1973), p. S8.
The biography sponsored by the Foundation was Robert Bothwell
and William Kilbourn, CD. Howe: A Biography (Toronto: McClelland
and Stewart, 1979).
"What the Private Planning Association ...," Monetary Times... p. 4S.
Sheldon Gordon,·"Why HRI is as Influential as It Is," Financial
Post 21 January 1978, p. 8.
Bruce Doem and Richard Phidd, The Politics and Management of
Canadian Economic Policy (Toronto: Macmillan. 1978), pp. S6, 191.
Judith Maxwell, An Agenda for Change Policy Review and Outlook
1977, (Montreal: CDHI, 1977), p. 6.
Beigie and Maxwell (eds.), The Disappearance ..., p. 8. It has been
allned that supply side policies have always been prevalent in Canadian
macroeconomic policy. See Robert Campbell, Grand Illusions: The
Politics of the Keynesian Experience in Canada (peterborough: Broadview, 1987).
Ibid., pp. 40-43.
Ibid., p. 92.
Judith Maxwell (ed.), Restructuring the Incentive System Policy
Review and Outlook 1975, (Montreal: CDHI, 1975), pp. 70, lS7.
Maxwell (ed.), Restructuring ..., p. 31.
Judith Maxwell, Challenges to Complacency Policy Review and
Outlook 1976, (Montreal: CDHI, 1976)~p. 70.
Maxwell, An Agenda , pp. 117-119.
Maxwell, Challenges , pp. 12S·127. The Bconomic Council study
is Economic Council of Canada, Looking Outward: A New Trade
Strategy for Canada (Ottawa: Information Canada, 1975).
Judith Maxwell (ed.), A Time for Realism Policy Review and Outlook 1978. (Montreal: CDHI, 1978), p, S1.
Maxwell. Challengu ..•• p. 18.
Maxwell. A TilM IQr Rcal;"m ..•, pp. 148·157.
Ernst/C.D.
Howe Institute .
54.
Carl Beigie, "The Return of Economic Orthodoxy-Will it Work'}"
Montreal, CDHI, 1977, pp. 40-44.
55.
C.D. Howe Institute, Investing in Our Future Policy Review and
Outlook 1980, (Montreal: CDHI, 1980), pp. 69-73.
56.
Both Beigie and Maxwell left the CDHI to become private consultants.
57.
Alan D. Gray, "'The Howe' Starts to Rebuild: Can Beigie Overhaul
a 'Wishy-Washy' Image'}" Financial Times 20 October 1980, pp.
22,32.
58.
Among the Fraser Institute's more influential studies are: Michael
Walker and Sally Pipes, How Much Tax Do You Really Pay? (Vancouver: Fraser Institute, 1976); Fraser Institute, The Illusion of Wage
and Price Controls: Essays on Inflation, Its Causes, Its Cure (Vancouver: Fraser Institute, 1976); Herbert Grubel et al., Unemployment
Insurance: Global Evidenc« of its Effect on Unemployment (Vancouver: Fraser Institute, 1978); and Fraser Institute, Privatization:
Theory and Practice (Vancouver, Fraser Institute, 1976). For a critique of the Fraser Institute, see Ben Swankey, The Fraser Institute:
. A Socialist Analysis of the Corporate Drive to the Right 2nd edition
(Vancouver: Centre for Socialist Education, 1984).
59.
Robert Kuttner, "Revenge of the Democratic Nerds:' New Republic
22 October 1984, pp. 14-16.
60.
"Economist Dobson has International Outlook:' Financial Post 9
January 1990, p, 14.
61.
Wendy Dobson, Richard Upsey, and Murray Smith, Flexibility as
the Best Protection CDHI Commentary No.5, (November, 1983),
p. 7. Richard Lipsey was Senior Economic Advisor at the Institute
at the time, while Murray Smith was CDHI Senior Policy Analyst.
62.
tsu, p. 11
63.
Ibid., p. 8.
64.
Edward Carmichael and Wendy Dobson, Achieving a Realistic
Recovery Policy Review and Outlook 1983, (Toronto: CDHI, 1983),
pp.52-3.
65.
C.D. Howe Institute, Beyond Recovery: Adjusting to the Future
Policy Review and Outlook 1984, (Toronto: CDHI, 1983), pp. 59,
64-72.
66.
Edward A. Carmichael, Time for Decisions Policy Review and Outlook 1985, (Toronto: CDHI, 1985), p. 2.
67.
Edward A. Carmichael, Reorienting the Canadian Economy Policy
Review and Outlook 1986, (Toronto: CDHI, 1986), pp, 13-14.
68.
Ibid., pp. 74-84.
69.
Thomas Courchene, Social Policy in the 1990s (Toronto: CDHI,
1987), pp. 7-8.
70. tsu; pp. 58-62.
71.
Ibid., p. 83.
72.
Richard Lipsey and Murray Smith, Taking the Initiative: Canada's
Trade Options in a Turbulent World (Toronto: CDHI, 1985), pp.
144-49.
73.
Ibld., p. 178. Despite the urgency of their plea for free trade and
the earlier advocacy of free trade by the PPAC, the CDHI was
relatively late to jump on the Canada-U.S. free trade bandwagon.
As David Langille points out, the BCNI was lobbying for bilateral
139
Studies in Political Economy
74.
7S.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.
140
free trade between 1981 and 1983. It was not until its 1984 Policy
Review. published in late 1983. that CDHI revived bilateral free
trade as a policy option. and not until the Lipsey and Smith study
that free trade was fully embraced by the CDHI. See Langille, "The
Busine •• Council on National Issue •..•••• pp. 66-7; CDHI. Beyond
Recovery ...• pp. 55-6.
CDHI studies promoting Canada-U.S, free trade included: Richard
Lipsey and Robert York. Evaluating the Free Trade Deal (Toronto:
CDHI. 1988); and Richard Lipsey and Murray Smith (eds.), Policy
Harmonization: The Effects of a Canadian-American Free Trade
Area (Toronto: CDHI. 1986).
Richard Lipsey and Murray Smith. "An Overview of Harmonization
Issues." in Lipsey and Smith (ed•.). Policy Harmonization. p. 19.
Carmichael. Time for Decisions ••••p. 65.
Ibid .• pp, 76-8.
Edward Carmichael and Katie Macmillan. Focus on Follow ThrOllgh
Policy Review and Outlook 1988. (Toronto: CDHI. 1988). pp. 80-82.
G.Bruce Doom and Brian Tomlin. Faith and Fear: The Free Trade
Story (Toronto: Stoddart. 1991). pp. 27.
Ibid .• pp. 55.
See Canada. Commission of Inquiry on Unemployment Insurance,
Report (Ottawa. 1986).
Bryne B. Purchase. The Innovative Society: Competitiveness in the
1990s Policy Review and Outlook 1991. (Toronto: CDHI. 1991).
p.42.
'
Ibid .• p. 47.
Ibid .• p. 74-85.
For a brief survey of American and British neo conservative policy
institutes, see Harvey Kaye. "The Use and Abu.e of the Past: The
New Right and the Crisis of History," in Ralph Miliband. Leo
Panitch, and John Saville (eds.), Socialist Register 1987 (London:
Merlin. 1987). pp. 336-45.
Doem and Phidd, Canadian Pllblic Policy ...• pp. 538-542.
tsu; p. 541.
Carroll •••Neoliberalism ...••• pp. 101-102.
Doem and Phidd, Canadian Pllblic Policy ...• p. 541-2.
Purchase. The Innovative Society ...• p, 5.