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Jay Currie

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6/04/2005

Racing to the Top

The fact that a top German politician has resorted to attacking capitalism to win votes tells you just how explosive the next decade in Western Europe could be, as some of these aging, inflexible economies - which have grown used to six-week vacations and unemployment insurance that is almost as good as having a job - become more intimately integrated with Eastern Europe, India and China in a flattening world.

To appreciate just how explosive, come to Bangalore, India, the outsourcing capital of the world. The dirty little secret is that India is taking work from Europe or America not simply because of low wages. It is also because Indians are ready to work harder and can do anything from answering your phone to designing your next airplane or car. They are not racing us to the bottom. They are racing us to the top.
tom friedman, nyt
The situation in France and Germany is fairly pathetic and unlikely to change simply because the politics of those nations have not yet had their Thatcher moment.

Canada has many of the same issues but we also have a more open market and less restrictive labour laws. The blancing act for our own politicians will be to keep Canada competitive in a global marketplace while continuing to be elected or at least in the race.

Where the CPC has really missed the boat is in failing to get away from the whole SSM socon game and into the competitive nation/less government side of politics. Instead Harper is so terrified of annoying the Ontario voters - not to mention the Maritimes - that he insists on supporting the various Liberal give aways rather than simply sticking to the line that Canadian taxes are too high and that this will render us non-competitive in the international marketplace.

In not too many years - say five at most - France is going to have a rather nasty collision with reality. It already has had to effectively ignore the deficit rules of the Euro in order to pay for its relatively unproductive welfare state. The next failure to meet those rules could signal the end of France's participation in the Euro or, and this would be the end of the EU, the refusal of the UK, Ireland, Spain and various other nations to continue to allow funds from the rest of the EU to go to the French agricultural sector.

Canada is not likely to reach the same crisis point any time soon because we are blessed with raw resources, particularily oil and water which are going to command very high prices over the next couple of decades. However, in Canada, the collision may well come when oil producing provinces get fed up shipping money out to provinces which are simply not pulling their weight.

The centrifugal forces in Canada are two fold - cultural and economic. At the moment it seems a very good bet that the culturally distinct province of Quebec, mortally insulted by the Liberals' illegal interventions in the last Referendum will be looking to seperate sooner rather than later. Once a Yes vote has been recorded a negotiation will commence. During that negotiation the other great Canadian cleavage will come to the fore.

At the end of the day Canada will have to restructure and it is the debate over the shape of that restructuring which should be occupying the minds of the federal political parties. So, because Canada is what it is, the single topic which cannot be mentioned is what a Canada with a soverign Quebec would look like.

The folks in Bangalore must be laughing all through their weekly coffee break.