WEDNESDAY NIGHT #1462 – What would Carl have said?

Please see the Invitation
Carl Beigie OWN, our friend, the genesis of Wednesday Night and its guiding spirit through the first two decades, died on Thursday, 4 March.
Given the many years when Carl shared with us his views on assorted budgets – sometimes from wherever he had been ‘locked-up’, we cannot overlook the coincidence of his death and the delivery of the 2010 Budget. Thus, this Wednesday will be dedicated to Carl, what might have been his commentary on the budget and, given his wonderful curiosity about all underlying causes of economic turmoil – or well-being – other events on the world stage.

Following introductions of new guests, Roxane Stanners, Carla Clarke, Clive and Julie Rustin and Peter Perkins’ re-introduction of his father-in-law, Chuck Cogan, Diana read the message received from Kathy Beigie, Carl’s widow in which she explained that Carl had suffered from the rare Binswanger Disease  –  a cruel disease that attacks the brain – and moves very slowly.
I want to thank you for your generous words on Carl’s behalf.  It feels so right to remember him as he was at his best.  Carl struggled with his stroke condition for 9 years and he did it with courage and resolve. To everyone who writes in Carl’s guest book, I thank you. When our family reads all the generous notes, we remember Carl as he was at his best, and it helps us at this sad time.
Thanks to everyone at his loved Wednesday Night.

Peter Trent, one of the earliest Wednesday Nighters, added his tribute to Carl as the spirit and soul of Wednesday Night. He was an economist, but not an economist; he didn’t just ‘ply his trade’ as an economist, he didn’t want to talk about the recondite aspects of economics. He was fascinated by what created an economy, what it could do and what made people tick  … He came from America, but he embraced Canadian values.

Maureen Farrow who “had walked in Carl’s footsteps” as President of the C.D. Howe InstituteI followed him and picked up his legacy – paid a heartfelt tribute to Carl’s influence in creating the balanced view presented by the Institute’s studies – and consequently, the enviable reputation of the C.D. Howe as an organization that embraced facts, not positions. He left a unique legacy to this country one that is not truly appreciated by those whose lives it influenced. He set public policy for the last 30 years in the sense that he not only designed the public policy, but he set an environment under the C.D. Howe halo, which said this is what public policy should be – well researched, well communicated, it should be balanced. And he did that incredibly well with an impressive team. [Thanks to him] the C.D. Howe is one of the few places in the country that is doing truly independent research … funded by the private sector for the public good. He was a great thinker … focused on the structural issues of the country, the challenges we face either from demographics or the amount of debt, the importance of education, competitiveness,  productivity. They are still the same issues today. He was a leader. He hired some very good people. He did a very good job in establishing that Institute. I hope that legacy doesn’t disappear and I don’t think it will because it lives in the C.D. Howe Institute.

The fact of the matter is that it was a Wednesday Night that Carl would have loved.  The room was crowded with old friends and interesting new faces, with a range of interests and areas of expertise from U.S. Intelligence and CIA operations in Afghanistan (think Charlie Wilson’s War) to economics, global governance, U.S. and Canadian politics, to aircraft of every type. There was serious discussion and laughter.

Governance
To a greater or lesser degree, what is happening in Greece (see Wednesday Night #1461 with Kenneth Matziorinis) is happening in the European Union, in the United States and in the world. The world system is falling apart and no-one is in charge.  The same pattern exists everywhere.  All the icons have fallen.  There is a breakdown in the world order, in small and large nations alike, in economics, security and politics, not only in large nations but everywhere. The European Union is especially vulnerable because it is a federation, – but not a political union –  without a central government, in contrast to, for example, Québec or California, whose debts cannot bring down their federal governments.  Curiously, the world is united in coming to the aid of countries that have suffered natural disasters, but falls very short in doing the same for countries that have suffered financial disasters, albeit most if not all such disasters are of their own making. 

The U.S.
In a crisis the bond market tells the policy makers what to do – and there’s a good chance that will happen.

There are those who believe that the economy of the United States has, in fact, been in decline for well over a decade, largely due to the heavy cost burden of medical care.  President Obama has obviously recognized this and the question inevitably arises as to the cause of his inability to pass the necessary legislation through the Congress in which he enjoys a majority.
Parliamentary systems adjust but their system of checks and balances is much more difficult.
A number of Wednesday Nighters strongly support the President, but have considerable unease about the dysfunctional state of democracy in the U.S. Others remind us that it is far too early to cavalierly dismiss the American form of democracy, although they recognize that there are deep-rooted systemic flaws of which the single most important is the Supreme Court decision on campaign financing  which has legitimized the relationship between money and democracy, creating a one-dollar-one-vote situation where powerful political lobbies and affluent groups become more important than the will of the majority. Even foreign corporations can contribute – the Chinese could buy themselves a Congress. Canada is fortunate in having limits on campaign spending.
Some see Obama as a great debater but a less-than-great administrator; some believe that although he has the capacity to lead, he fails to recognize that he has already won the election and so continues to try to please rather than act.  The fact that the short two-year political cycle for Congress means that the politicians are in a constant state of election.  has also been cited as an influence. Then, too, in the case of Medicare legislation, lobbying the electorate directly may be playing an even greater role in stymieing this important legislation.  Curiously, seldom if ever cited in the debate are such relevant health statistics as morbidity and mortality rates of countries with and without universal health care.
The economies of the European Union and that of the United States constitute three-quarters of the world economy and they are both sick. And in the former case, a central bank with no fiscal levers.

The dollar is going higher – is that a good thing?
The stability of the Canadian dollar has made Canada the country in which to invest.  The Canadian dollar will reach parity with its U.S. counterpart at least for a period of time.  When I travel around the world, I never meet anyone who doesn’t like Canada – there is an overwhelming sense that Canada is a good place to have your money. However, a cautionary note was sounded by another Wednesday Night economist who suggests that there could well be another financial dip causing the U.S. dollar to shoot up, as happened last time. Many economists confuse the currency and the flag, feeling that the national currency should be high, but this makes the country uncompetitive.  The Greek crisis has contributed to the reduction of the value of the euro, which is a good thing, because the euro is overvalued; as the euro falls, the European economy will strengthen and become more competitive. And Greece will benefit because it competes for tourism with countries outside the euro zone.  As for Canada, a rise in interest rates as expected by July will not only adversely affect the housing market, with a reduction in housing prices expected over the next two to three years, but more importantly will exacerbate the economic situation, giving rise to the eternal complaint that we are not competitive, while the world may well be engaged in a race to the bottom.

The market
Stock market analysts explain the January to early February sell-off that has abruptly turned around as due to the exhaustion of sellers while buyers continue to seek the perceived advantages of excellent values in a rising market, apparently oblivious of the fact that it is their extended enthusiasm that has caused the continuing boom. The TSX is expected to pass the 13,000 mark in mid-May or mid June.

Intelligence, anti-terrorism and the Middle East
It is known that there are joint American-Pakistani teams operating along the border and it is likely due to this cooperation that Mullah Abdul Ghani Baradar, the suspected Taliban second-in-command, was recently arrested in Karachi.
The close relationship between the CIA and the Pakistani ISI dates back to the 1950s when U-2s took off from the base at Peshawar and continued through the 1980s when it was through the ISI that arms and money were routed to the Taliban for the campaign against the Soviets.
The Middle East is a continuing source of concern.  Those perceived as terrorists in the West and heroes in their own country continue to improve their kill ratio with increasing efficiency and developing war technology, including possibly the use of drones as well as suicide bombers.
U.S. policy in Afghanistan appears to continue to emphasize nation-building, despite all evidence that many Afghanis, Taliban and otherwise, do not want a foreign presence.The current attempt to buy peace by inviting the Taliban leaders to participate in the government of Afghanistan runs counter to American policy which encourages integration of Taliban fighters into Afghan civil society but not the integration of Taliban (Pashtun) leaders into the Kabul government. The Pashtun, representing the largest minority in Afghanistan will not be content to play a minor role.
We tend to see the world in the manner that best serves our own image [The American Syndrome: Seeing the World as We Like It]. Iran’s troubling development of nuclear power is viewed as disastrous by the western world as well it may be, but the current policy of isolation and antagonism does not take into account the changes and struggles within that country and may very well not work for us in the end.  Iran is currently undergoing a painful political transition not unlike that which resulted in the overthrow of the Shah and the probability of Iran attacking Israel remains virtually nil.
Meanwhile, Israel has once again defied the United States by announcing another settlement plan during Vice President Biden’s visit to the country. The U.S. is not likely to react strongly because of the power of the Jewish, pro-Israel lobby, although there are encouraging developments around the increasing influence of J Street PAC  the self-proclaimed  “first and only federal Political Action Committee established to explicitly promote meaningful American leadership to end the Israeli-Palestinian and Israeli-Arab conflicts peacefully and diplomatically.” (Recently Canada has seen the Harper government courting the Jewish vote by, among other things, permitting the junior minister of foreign affairs to announce that “an attack on Israel would be considered an attack on Canada”.)

Despite the gloomy tone of discussions about the world economy and state of governance in the United States and Europe, developments in the Middle East and western Asia, the evening ended on a positive note as several Wednesday Nighters injected notes of optimism about the ability of the world to fix many of its (self-inflicted) problems. As we said at the outset, Carl would have loved this Wednesday Night!

Concluding the evening, Diana drew attention to the large photograph of Carl, brought by Sam Totah, that had presided on the table throughout the evening, and invited those who knew Carl to inscribe the back so that it might be forwarded to his wife, Kathy, as a token of our deep appreciation of Carl’s spirit and presence.

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