From the end of the Great Depression to the 1970s, Western nations have typically promoted the development of the welfare state. In this respect, countries, such as Canada, have sought to establish a wide range of social policies that include health care, welfare, pensions, unemployment insurance and education, which, in many cases, have been universally available. This, of course, has also come to represent just one part of Canada’s rich cultural identity. This happened to occur when Canada was experiencing rather robust economic growth. In short, employment was relatively high.
However, since the 1970s, a number of important developments have led to a dramatic change in terms of what is offered by the state in these areas. Central to this was the fact that the 1970s and much of the 1980s reflect important differences with respect to economic fortunes. That is, robust economic activity and continued growth, which characterised most of the post-World War Two years, was replaced by stagnation and recession. If anything, this eroded the ability of governments to offer the number and level of services that had been made available previously.
This time has also coincided with increasing globalisation, which has placed an emphasis on cost control in the public as well as the private sector. The end result, of course, has not only been an attack on the welfare state, but also changes in the structure of employment. In a general sense, this means that the topic of globalisation and its impact on the nations of the world, their economies and their societies are issues that have received a great deal of attention in recent years.
Evidently factors such as shifting demographics, the rapid spread of technology and the development of international markets have contributed to a significant amount of change in a relatively short period of time. However, for Canadians, perhaps a more important issue is what can be expected for a country such as Canada in terms of employment and social policy, as well as related issues such as unions and their activities, which include collective bargaining.
In effect, a significant difference exists between a situation where employment opportunities can be expected to improve within a global business environment and a situation where employment can be expected to deteriorate. At the same time, the emergence of a global economy, which involves the development of free trade that is itself characterised by the unimpeded movement of goods, people and capital across borders, can result in significant if not fundamental changes to social, political and economic structures. This, of course, can mean that unions might find themselves functioning within a radically restructured environment.
With this in mind, the purpose of this paper will be to examine the impact on social policy concerning the movement towards more globalized structures of production. Also, the specific case of Canada will be considered. It will be hypothesised that the emergence of the global economy threatens social policies in this country. Central to this is the notion that firms have an increasing ability to get up and go elsewhere due to the existence of free trade agreements. Hence, a central part of analysing the impact of the emerging global economy in Canada and the effect of international constraints on social policies relates to the understanding that globalisation is a process or a development that is currently in progress. Subsequently, this analysis will focus on the extent to which Canada has been affected by globalisation through its involvement in free trade through the Canada-U.S. Free Trade Agreement (FTA) as well as the North American Free Trade Agreement (NAFTA). The analysis will also include what can be expected to develop in the future as globalisation proceeds.
A survey of the literature reveals that specific forces of change are responsible for the present development of globalisation. MacLaren (1994) notes that central to this process or development is technological change, especially in communications, which has transformed international business (p. 89). But, while this reflects an issue that has faced society for many years, the significance of this issue at the current time has to do with the fact that is has intensified in terms of both complexity and speed. In effect, technological innovations, such as the microchip and the satellite, are “…enabling low-cost additions to product variety, by lowering the cost advantages of long production runs and increasing the ease with which production processes can be subdivided to achieve standardization … of some components while adding to the diversity of final products” (Helliwell, 1989, p. S74).
Furthermore, and perhaps more importantly, it would appear that the development of a new global order has affected the capacity of individual states to control their national economies and social agenda. Central to this is the understanding that economic, political and cultural boundaries coincide to a lesser degree than they ever have in the past. In essence, as Adler (1994) notes, globalisation has meant that national borders “…no longer define nor, to an increasing extent, even affect the patterns and limits of economic activity” (p. 29). At the same time, political boundaries have remained, by definition, coincident with the borders of individual states. The significance of this is that to “…the extent that political jurisdictions fail to encompass economic space, nationally legislated regulations fail to affect economic activity in any significant way” (Adler, 1994, p. 29).
Also, corporations have developed transnational structures to the point that they are able to address worldwide societal issues but they lack to mandate to accomplish such a task (Adler, 1994, p. 31). Hence, within the developing global business environment, Canada has experienced what many, if not all, other states have experienced. Perhaps more importantly, this would seem to be something that has defined the meaning of globalisation. That is, national state powers have become “…increasingly transcended with the emergence of an independent international economic sphere; and the consequent growing loss of national sovereignty over social reform and government policy began to become replaced by the imperatives of global markets” (Teeple, 1995, p. 53).
Canada has typically been a country that has emphasised the importance of its social safety net. In this respect, the establishment of an advanced welfare state has been an important aspect of Canada’s Second National Policy which sought to build a new economy and society that was based on the industrial model (Tomblin, 1995, p. 43). During the post-war years, Canadians have enjoyed a level of prosperity and the development of a welfare state that has few rivals in the Western world. Interestingly enough, this provides the background for what can be described as an extremely aggressive attack on the welfare state as globalisation has proceeded.
As a result, we find a situation in which the social policies have much to lose and little to gain when faced with the conservative agenda of the Mulroney Conservative government during the 1980s. Interestingly enough, this has continued with Chretien Liberal government:
“While in opposition the Liberals were harsh critics of the Conservatives for their one-sided focus on fiscal restraint to the neglect of social, environmental, cultural, and employment policy. But upon assuming office the Liberals became even more committed to deficit reduction, cutting much further and fater than their Conservative predecessors. The chief victims of budget cuts have been fiscal transfers to the provinces for social welfare, health, and post-secondary education, the federal (un)employment insurance program, and the federal public service” (McBride and Shields, 1997, p. 13).
In total, this represented an almost continual and, in many respects, complete assault on Canadian social service programmes.
At this point, it is important to recognise that this was happening while Canada has been brought into a global trade environment. This, of course, refers to the FTA as well as NAFTA. Interestingly enough, it is unlikely that these agreements will affect Canada’s social policy and culture directly. That is, “…existing Canadian social security programs, because they are made generally available and are ‘broadly based effort to alleviate poverty and redistribute income,’ are unlikely to be classified as subsidies under the free trade agreements…” (McBride and Shields, 1997, p. 168).
But, such agreements can have significant indirect effects. For example, for “…the creation of new public services, such as child care or auto insurance, under both FTA and NAFTA, foreign corporations have the right to claim compensation for loss of potential earnings” (McBride and Shields, 1997, p. 168). Also, one of the greatest threats to Canadian social policy comes from the pressure that exists to develop “…a ‘level playing field.’ “Because Canada is more dependent upon the U.S. economy than the United States is on it, and because public intervention in the economy is higher north of the border, the pressure to harmonize is upon Canada to move closer to the underdeveloped U.S. model” (McBride and Shields, 1997, p. 168).
Hence, the end result that critics of NAFTA have feared is the erosion of Canada’s social programs from the perspective of the user, which will obviously cut across economic lines. In short, those who can afford services in a privatised environment will get them while those who can't afford them won’t. Also, Canada would be less able to promote or even protect its cultural identity. In a more general sense, "…free trade tends to favour those who control the factors of trade” (Chodos et al., 1993, p. 174).
It is important to note that this seems to reflect the simple fact that “…great political power … flows from overweening economic might. In the framing of railway policy in the 1870s or in the selling of the Free Trade Agreement in the 1980s, it is no exaggeration to say that the economic elite dictated the political agenda” (Resnick, 1994, p. 107). However, perhaps the most significant part of this is that this process is far from being complete.
In conclusion, it is evident that the development of globalisation as well as the conservative agenda of Canadian governments since the 1980s resulted in an attack on social policy, culture and the welfare state. The primary cause of globalisation has been technological change, especially in communications, which has transformed international business. Also, this change has intensified in terms of both complexity and speed. More specifically, technological innovations, such as the microchip and the satellite, have significantly lowered the cost of longer production runs. This has made distance less of a factor within markets. Also, the extent to which the world seems to have become much smaller would seem to be the most important characteristics of the globalisation process and the emergence of the global economy. Furthermore, this has coincided with the emergence of an increasingly independent economic environment. Subsequently, a major result has been an increasing loss of national sovereignty in areas such as social reform and government policy as well as the increasing significance of issues that pertain to global markets such as profit maximisation and cost control.
This also reflects the understanding that there has been a belief on the part of Western governments that the welfare state, which had grown almost continuously during the post-World War Two years, had become too large. This was linked to the economic realities that a country such as Canada faced concerning economic stagnation, recession and rising deficits. In effect, not only was this attacked fuelled by fundamental principles associated with the conservative agenda, but also the economic demands that were placed upon the governments at this time, which can be linked to an increasingly competitive and global environment.
In short, Canada seems to represent a situation in which its social policy and welfare state had nothing to gain and much to lose. The post-war years had seen the development of an extensive Canadian welfare state recent governments have focused towards reducing the size of this in an attempt to control expenditures, debt and deficit. Subsequently, substantial cutbacks were implemented and eligibility requirements were tightened considerably as the Canadian welfare state was reduced in a way that had never been seen in the entire history of the nation. The government had a relatively free hand in deciding what to do with social service programmes in the face of record-setting levels of debt. Also, even though very little was diverted towards dealing with this problem, this existed as a good opportunity to make changes to Canadian social policy and the welfare state.
Perhaps more importantly, there is reason to expect that these effects will accumulate as globalisation proceeds. If a major force behind the attack on Canadian social policy and culture through NAFTA is the further difference that exists between Canada and Mexico, then this will continue to gain momentum as countries with less developed social policy than either the U.S. or Mexico are included. Globalisation will open Canada up competitively to virtually all other countries in the world and this will provided additional international constraints.
The significance of this for the impact that can be expected on social policy and culture is that the luxury and expense of maintaining Canadian social policy, or even promoting or promoting Canadian culture, will not allow for effective competition within such an environment. The end result, of course, will be an increasingly negative impact on Canadian social policy and culture as globalisation proceeds and efforts are made to bring the nation towards what has been described as a “level playing field.” Unfortunately, in such a situation, level invariably or ultimately refers to the lowest common denominator. This has been the major international constraint that has been imposed on Canadian social policy.
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