Graham and Pauly on the Complexity of Global Relations
The 2007-2008 Wilson series of lectures in Canadian History kicked off at McMaster University today. John Weaver, the acting Wilson Chair in Canadian History, has attracted an exciting list of speakers for the coming year. Lou Pauly spoke on ’Globalization, Political Authority and the Prevention of Systemic Financial Crises.’ He followed Angela Graham who, less than 24 hours prior to her doctoral defense, provided an engaging look at Canadian Foreign Policy towards the People’s Republic China between the Second World War and recognition in 1970.
After providing a brief overview of Chinese international relations following the Second World War, Graham’s framing question was why Canada, who tended to follow US lead, seemed to pursue a different foreign policy with regard to the PRC. Her topic seems a popular one these days after the success of Margaret Macmillan’s Nixon in China and Robert Wright’s Three days in Havana. Graham contends that Canada engaged in a constant process of evaluation of recognition following the Second World War but did not actively pursue recognition as it had more to lose in relations with allies than to gain from formal recognition of the PRC. Following the devastating Great Leap Forward, Canada enjoyed a financial windfall from substantial grain sales during an international glut. In a position of financial gain and weakening American opposition to recognition, Canada was able to carefully negotiate recognition that did not formally support PRC claims on Taiwan.
This recognition provided a model for other countries’ (including the US) terms of recognition.
One is left wondering whether Canadian recognition was to just get wider access to Chinese trade agreements before Americans?
Lou Pauly’s paper "Globalization, Political Authority and the Prevention of Systemic Financial Crises: The European Case in Comparative Perspective" questions the overarching question of how nation states deal with a legitimacy solidly stemming from sovereignty and national autonomy in a global economy that is increasing integrated and relies on cross-national co-operation for its sustainability. More directly, he is asking what is going on with the current credit crisis? How severe is it? What can be done and more importantly, what ‘should’ b done?
Dr.Pauly’s talk, was scintillating, brilliant and chilling. He was able to contextualize the financial tremors of the past few weeks and use them as a sandbox in which to prose some very serious questions. Pauly logically asks whether our current system is sustainable, give the huge imbalance between capital importers and capital exporters. he argues that according to economic principles, capital should be flowing to where is can get the highest return, but instead it is being fed by the dominant consumer engine of the Unites States. Not uniquely he charges that if the US was a third world country, the IMF would have stepped in decades ago. Nonetheless he argues that players isn the world today are motivated to perpetuate the current system, which raises his second question: is perpetuation of this system just and right? This is of course a more complex question and far harder to answer. What Dr. Pauly suggests is that as we speak, Canada and the Bank of England find themselves arrayed against Germany and France over this question. The Germans and French have publicly affirmed that they believe that they should immediately bail out any failing institution, stabilize the system and then deal with the subsequent fallout. The British and Canadian position is that it is just this guarantee that will lead financial institutions to assume even riskier investment vehicles armed with the knowledge they will not be allowed to fail.
Efficient markets depend on stable confidence generating means. Stabilization required tools for crisis management and resolution. When they are in place, they also work towards crisis prevention.Canadians, he asserts are lucky to be able take the moral high ground.This wasn’t so clear 6 weeks ago, when there were fears of failure of the CIBC. Now that that’s passed, Canada is in a position to assume this ground. Is it possible that the Bank of England and Canada are riding on the backs of the Germans and French, letting them handle the bail out that calmed the markets by flooding them with liquidity? How have the British succeeded for so long? Is Britain one big offshore market?
The bottom line for Pauly seems to be the surface appearance and the behind the scenes deeper currents. On the superficial level, appeals are made to nationalism and the pretense of regional interests. Below the surface, connection are made that ensure that alow for co-operation and greater financial integration between global institutions.